Why the Student Success Act Is Only Half the Battle

We wrote last week that rising pension costs could “gobble up” much of the Student Success Act’s new revenue, but that’s not quite right.

If passed, HB 3427 will invest $1 billion a year in public education. What it won’t do is solve the bigger fiscal crisis that’s threatening all public services, from filling potholes to operating schools.

That fiscal crisis is primarily caused by the Public Employee Retirement System (PERS), aka the pension obligations that Oregon owes to teachers, police officers, firefighters, and other public employees. 

In the 1960s and ’70s, the state made generous promises to these workers that have proven extremely expensive to keep.

Oregon has since brought its pension promises down to size for new employees, but the Oregon Supreme Court has ruled that it can’t scale back its obligations to existing retirees.

As a result, PERS costs are rising year after year, and public employers are spending an ever-greater share of their budget fulfilling past PERS obligations, rather than maintaining or expanding current services.

That’s the elephant in the room here. Despite this $1 billion a year investment in education, the state’s fiscal crisis could soon become so large that almost all government agencies, including schools, will be forced to make cuts anyway.

All that’s to say, if you believe in the need to invest in schools, the Student Success Act is a good first step. But if lawmakers spend too much time patting themselves on the back (instead of dealing with our PERS pickle), no one’s going to be happy with the outcome.

P.S. On Friday, we also overstated the impact of the bill’s local tax preemption clause. As drafted, the bill would prevent local governments from passing commercial activities taxes, but other types of business taxes would still be fair game.