Oregon's public pension system was back in the spotlight this week as lawmakers zeroed in on possible reforms.

A legislative panel started slogging through an array of ideas, weighing the potential savings, constitutionality and fairness of several bills introduced by this year's PERS reformer-in-chief, Sen. Tim Knopp of Bend.

Each of the measures would cut benefits under the Public Employees Retirement System to shore up a $22 billion funding deficit and head off looming cost increases for cities, counties, school districts and other public employers. Yet it's unclear whether any will make it out of the Senate Workforce Committee, much less through the full legislature and the governor's office.

Public employee unions are staunchly opposed to all of the bills.

Nevertheless, the concepts are getting some airtime, and could ultimately become important chips in any end-of-session deal to plug the state's $1.6 billion budget deficit.

Knopp said the committee would need to have a PERS bill put together in three weeks, and that he and the committee chair, Kathleen Taylor, D-Portland, "need to sit down with leadership and see what's possible."

"We probably won't get everything we want, but I'm committed to moving forward in a bipartisan way," he said.

At Wednesday's hearing, Taylor cautioned members that if multiple measures were passed, interplay between them could eliminate some of the forecast savings. And Sen. Laurie Monnes Anderson, a Gresham Democrat, emphasized that many of the bills would undercut benefits for newer employees while leaving those of Tier 1 members - those hired before January 1996 and who comprise nearly two-thirds of the system's unfunded liability -- largely unscathed.

"Tier One just needs to die off," she quipped.

Steve Rodeman, the director of PERS, also noted that the changes in the legislation would only apply to future service, not retroactively.

Here are the main reform measures discussed Wednesday in Salem, how they work, their estimated savings and the legislative counsel's analysis of their legality.

Senate Bill 559

What it does: Bases the "final average salary" used in benefits calculations on highest five years of service instead of three.

How it works: Benefits under the PERS full formula are currently calculated by multiplying a member's years of service by their final average salary and a percentage factor set by statute. The premise is that a five-year average will lower the salary amount used in the formula and lower benefits.

Savings: It would reduce employer contribution rates by 0.65 percent of payroll. Systemwide, that is about $130 million per biennium.

Legality: Legal if applied only to service accrued after the law goes into effect, according to legislative counsel.

Senate Bill 560

What it does: Caps the final average salary used in the benefits formula at $100,000. Redirects a member's 6 percent retirement contribution from a supplemental retirement account into the pension fund.

How it works: Call this the Bellotti fix, or more accurately, the Delashaw fix. It limits the use of massive salaries in retirement calculations, which generate huge payouts for folks like former Oregon Ducks football coach Mike Bellotti or retired OHSU neurosurgeon Johnny Delashaw, the two top beneficiaries of PERS.

There's already an inflation-indexed federal cap for public employees hired after 1996. This year it's $270,000. But the lower cap would drastically cut that, affecting highly paid managers today and possibly a greater swath of employees in the future as inflation pushes average salaries closer to the $100,000 mark (it's about $72,000 today).

The second measure would direct an employee's required 6 percent contributions into the pension fund and away from from the supplemental retirement account that belongs to the employee today. This would offset the required contributions from employers.

Legality: The five-year average is probably legal if applied only to benefits accrued after the law takes effect, according to legislative counsel. But its not clear what salary figure would be applied to service accrued before the law takes effect, if a member continues to work for the state and ends up with a much higher average salary in the future.

Redirecting future employee contributions also appears legal, state lawyers believe, though public employees could argue that this money is being used to pay for liabilities accrued for past service, and is thus unconstitutional. The savings could also disappear in collective bargaining.

Savings: Systemwide, the salary limit could reduce employer contribution rates by 2.85 percent of payroll, or about $570 million per biennium. But it depends on whether it ended up being applied to past or future service - or both.

The redirection of members' 6 percent required contributions could offset employers costs by a similar percentage of payroll, or nearly $1.2 billion every two years. It would not reduce overall liabilities in the system, however.

Discussion: The redirection of employee contributions wouldn't change members' pension benefits, but would eliminate future contributions to their individual accounts, reducing that balance and any associated investment earnings.

Senate Bill 560-2

What it does: Reduces multipliers used in PERS benefit calculations.

How it works: Tier 1 and Tier 2 employees - those hired between Jan. 1, 1996 to Aug. 28, 2003 -- currently receive 1.67 percent of their final average salary for every year they work (it's 2 percent for police, fire and legislators), while Tier 3 -- anyone hired after Aug. 29, 2003 -- receive 1.5 percent (1.8 percent for police, fire and legislators). This measure would reduce those multipliers to 1 percent of final average salary for general service employees and 1.2 percent for police, fire and legislators. After a 30-year career, for example, a Tier 3 employee could expect a pension benefit equal to 30 percent of final salary, versus 45 percent under the current system.

Legality: Appears to be legal if only applied to service performed after the law takes effect, according to legislative counsel.

Savings: Slices the employer contribution by 2.55 percent of payroll, which translates to more than $500 million per biennium.

Senate Bill 560-3

What it does: Lowers the interest rate used to calculate members' annuities under the money match formula.

How it works: When an employee retires under money match, the state doubles the balance in the member's account, which includes pre-2003 employee contributions and the associated investment earnings. Members can choose a lump-sum payout or convert the balance into a monthly annuity. Most choose the annuity, because PERS calculates it assuming a member's remaining account balance continues to earn the system's assumed earnings rate - currently 7.5 percent -- as it is drawn down during retirement. That's quite a deal, especially when it comes on top of doubling the employee's account balance. Compared with an annuity purchased in the private sector, which might pay 3 to 4 percent interest, it can bump a member's benefits by more than 40 percent.

Legality: Unclear. It could fly if applied solely to benefits accrued in the future, according to legislative counsel. But the system uses the assumed earnings rate as its financial Swiss army knife, and decoupling it from benefits calculations could be considered unreasonable and illegal.

Savings: Could reduce employer contribution rates by 0.8 percent of payroll. Systemwide, that adds up to about $160 million per biennium.

Discussion: This change would apply only to a limited and fast-shrinking pool of Tier 1 folks who have substantial balances in their employee pension accounts and would see their most generous benefit under money match. As such, it could incent a wave of retirements among older employees as they look to get out before the change is made.

Senate Bill 560-4

What is does: Excludes lump sum, unused vacation and unused paid leave accrued after Jan. 1, 2018 from the definition of salary for Tier 1 and Tier 2 benefit calculations.

How it works: This is commonly seen as an anti-spiking provision, preventing employees from inflating their pensions with vacation and sick leave. It would affect Tier 1 and Tier 2 members only, because Tier 3 members don't get this benefit.

Legality: Appears to be legal if applied only to benefits accrued in the future, according to legislative counsel.

Savings: Legislative analysts estimate that this would reduce employer contribution rates by 0.6 percent of payroll, or about $120 million per biennium.

Senate Bill 560-5

What it does: For employees hired after the law takes effect, it would raise the retirement age from 65 to 67 for general service employees and school employees, and eliminate the option of retiring with 30 years of service at age 58. It also would change the early retirement age from 55 to 57 for non-police and fire employees hired after 2003.

Legality: Since it applies only to employees hired after the bill is passed into law, legislative counsel sees no legal problem.

Savings: No actuarial analysis has been completed. Perhaps minimal.

-Ted Sickinger

503-221-8505; @tedsickinger