(The video in this story is from May, 2019, a proposal by Gov. Brown to tap into the kicker to lower the PERS deficit.)
Public employee unions representing Oregon state workers have negotiated new contracts that would provide pay increases of up to 15% over the next two-year budget period.
The proposed contracts include both step increases and cost of living increases in each of the next two years.
It also has a negative impact reducing the unfunded Public Employees Retirement System liability now in excess of $20 billion.
Union officials say the wage increases are necessary to maintain Oregon’s competitiveness in attracting employees after recent wage growth in the private sector. However, the Oregonian/OregonLive reports most recent state salary survey suggests that state employees’ total compensation, which includes benefits, is already competitive.
The contracts still must be voted upon by union members and receive final approval by state lawmakers.
Gov. Kate Brown’s office echoed the unions’ sentiments, saying the tentative agreement was a reflection of her commitment to make the State of Oregon a competitive employer, particularly for employees who work in foster care, transportation, public safety, and health service professions.
“Since the recession first hit Oregon over a decade ago, state employees have been asked to take low or no COLAs,” said Kate Kondayen, a spokeswoman for Brown. “Now that the economy is strong, we owe it to these hard-working individuals, and the Oregonians who rely on the services they provide, to help make up ground that was lost.
The contracts’ step increases in each of the next two years would average 4.7%. Steps are automatic pay increases that come with longevity in a job. It also includes the addition of a new top step, which would give employees who topped out at their job classification a 4.7% pay increase. Those increases would mostly go to older Tier 1 and Tier 2 employees.
The contracts also include cost-of-living increases of 2.15% in 2019 and 3% in 2020. Those are bigger increases than in the workers’ previous two-year contract -- and higher than the average annual increase of 1.4% over the last decade.
The cost-of-living increases compare to an inflation rate of 2.7% in the 13-state West Region over the last year, according to the federal Bureau of Labor Statistics. State economists predict it will remain near that level during the next two years.
Overall, the state workers’ wage increases would average up to 7.2% annually. Meanwhile, Oregon’s Office of Economic Analysis forecasts average annual statewide wage growth, including inflation, of 3.7% in 2019 and 4.2% in 2020. Economist Josh Lehner said wage growth has been running between 3% and 4% during the last four years.
There was no increase in healthcare premiums for employees.
Melissa Unger, executive director of the SEIU 503, the state’s largest public employee union, said the pay hikes would help state workers catch up with wage growth in the private sector during the last several years.
“If you look at private employment wage growth in Oregon, we have not been competitive,” she said.
The state’s latest salary survey, issued at the end of 2018, concluded that it was a competitive employer, with total compensation, on average, at 97.5% of market. That falls within the 95% to 105% range the state considers competitive.
The pay raises create bigger pension benefits and higher liabilities for the PERS system, the Oregonian reported. The higher pay compounds in the future years and gets rolled into the system’s standard retirement formula.
The increases are more than double the 3.5% annual wage growth that PERS assumes for public employees, the Oregonian reported.