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Why Oregon Public Employee Unions Overplayed their Hand

City of Detroit Chapter 9 Bankruptcy Filing — Why Oregon Public Employee Unions Overplayed their Hand

Oregon Public Employee Unions should heed the lessons from the recent City of Detroit bankruptcy filing.  There are approximately seven other municipal bankruptcy cases at various stages in the bankruptcy courts.  Chapter 9 of the Bankruptcy Code requires a state to authorize local governments to use Chapter 9.  Other than drainage districts, Oregon has not authorized political subdivisions to file bankruptcy.

While Oregon’s unfunded public pension liabilities are not at Detroit’s level, they are unsustainable under any objective standard.  The burden of paying too much to public employees has been a wealth transfer from the remaining Oregon taxpayers.  This wealth transfer from Oregon’s taxpayers to public employees has taken place while Oregon has dropped from 22nd to 33rd per-person income in the Nation.

The Oregon public education system, infrastructure, social services and other public services will continue to deteriorate if this wealth transfer does not stop.  This deterioration has been so unnecessary. These unfunded liabilities could have been controlled if the Oregon Legislature had put responsible laws in place.  By a mixture of government accounting rules and unrealistic investment assumptions, Oregon Legislators have conspired with public employee unions to exclude the true cost of public-employee post-retirement benefits from their financial budgets and quietly placed an unsustainable burden on future generations of taxpayers.  Oregon’s public employee unions control the Oregon Legislature.  Despite a continuous deterioration of the public education system, infrastructure, social services and other public services, these unions would not agree to reasonable modifications to PERS in the last Legislative Session.  The unions are confident they can stop any legislation that would authorize local governments to seek debt relief, including public pension liability relief, under Chapter 9 of the Bankruptcy Code.

While it is true that we have yet to see the confirmation of a Plan of Adjustment (Plan of Reorganization in Ch. 11 Lingo) that alters a local government’s pension liabilities, the better answer is that we will see it.  While no one likes to “lose one’s money,” it would seem that responsible public employee union leaders would realize that “they do not have all the marbles.”

This wealth transfer, the arrogance of the union leaders, and the abuse of their control over the Oregon Legislature will bring together enough citizens to pass an initiative that will authorize local governments in Oregon to use Chapter 9 of the Bankruptcy Code.