Kotek: Use 'kicker' to reduce PERS costs

Oregon House Speaker says the 2019 Oregon Legislature should divert the projected income tax rebate to reduce state pension premium increases.

Oregon House Speaker Tina Kotek has publicly proposed diverting next year's projected "kicker" income tax rebates to pay down the unfunded liability of the state's Public Employee Retirement System, providing relief to governments faced with increasing pension payments.

"We have a PERS liability problem. We have a $26 billion legacy debt that we have to pay. The kicker is in the $800 million range. If we take it and pay down some of the debt, we will relieve some of the pressure on school districts and other govenrments," Kotek said while delivering the keynote address at the annual Year in Review luncheon of the Columbia Corridor Association at the Embassy Suites Hotel near the Portland International Airport.

The kicker refunds a proportional share of income taxes if Oregon collects just 2 percent or more above what state economists predicted the two-year budgets were approved. According to Kotek, the diversion would require a bipartisan vote of the 2019 Oregon Legislature, which starts next month. It would have to be approved by a two-thirds vote of both chambers, which is 40 of the 60 Oregon House members and 20 of the 30 state senators. Democrats like Kotek will only control three-fifths of each chamber when the upcoming session starts.

Kotek made the proposal while speaking about the budget proposed by Oregon Gov. Kate Brown. It requires legislators to raise an additional $2 billion to fully fund all of its programs. Business leaders at the Oregon Leadership Summit on Monday said they would only be willing to support tax increases if state pension and health care costs are contained.

"We have to have a revenue reform discussion and we have to have a PERS pension discussion," said Kotek, adding that she did not know if $2 billion was the "right" amount for taxes to be increased to support the additional education and health care spending in Brown's proposed budget. Kotek said a special joint House and Senate school committee she appointed with Oregon Senate President Peter Courtney last year would propose a detailed revenue and spending plan during the upcoming session.

Several association members said the $2 billion figure was too high, especially considering the state is already collecting a record amount of revenue because of the strong economy. Kotek responded that the state's schools have historically been underfunded, in large part because Oregon does not have a sales tax, and the strong economy presents an opportunity to address such problems as the persistently low high school graduation rate.

Kotek also strongly supported the resumption of talks between Oregon and Washington legislators about replacing the inadequate and aging I-5 bridge over the Columbia River, a priority of the association. She said legislators on transportation committees in both states are scheduled to meet together to discuss the bridge on Tuesday, Dec. 11, for the first time since work on the Columbia River Crossing bridge replacement project ended several years ago. Republicans in the Washington State Senate refused to fund the project after it had already been approved by the Oregon Legislature, causing a bitter split that has taken years to heal. Several Washington, Clark County and Vancouver elected officials have recently taken the lead to revive the project, saying the congestion at the bridge is harming the economies of both states.

"We're not going to revisit the CRC, but we're going to move forward," said Kotek.

The Columbia Corridor Association is a membership group that represents and advocates for mostly commercial and industrial businesses along the west bank of the Willamette River in North Portland. Among other issues, it has long lobbied for transportation improvements to make the movement of freight more reliable, including shipments between Oregon and Washington across the Columbia River. The association has also supported the cleanup of the Columbia Slough and other environmental projects in the corridor.

Kotek represents House District 44, which includes much of the Columbia Corridor.

The Portland Tribune editorial board endorsed diverting the kicker rebate to pay down the PERS debt on Dec. 6. You can read the editorial here.