S&P: Oregon Court’s Pension Ruling Could Weaken Debt and Liability Score

LOS ANGELES — An Oregon State Supreme Court ruling has overturned a significant element of pension reform, Standard & Poor's said.

"Oregon's pension reform movement suffered a setback on April 30 when the state supreme court overturned a significant feature of the state's 2013 pension reform legislation," analysts wrote May 1.

In its most recent review, Standard & Poor's assigned a 1.7 debt and liability profile score to Oregon on its four-point scale.

"Assuming that roughly 50% of the increased Public Employees Retirement System liability falls to the state, our score related to its funded ratio could weaken somewhat," analysts said.

"Nevertheless, holding other factors constant, the state's overall indicative score would remain consistent with its current AA-plus rating."

In particular, the court ruled that the state could not reduce cost-of-living adjustments on benefits employees had earned prior to the enactment of the reform legislation, analysts said.

The reform legislation was estimated to have reduced the PERS total unfunded actuarial accrued liability by as much as $5 billion, with much of the reduction coming as a result of the lower COLAs.

As a consequence of the ruling, beneficiaries would see a restoration of 2% annual COLAs.

The higher expected COLAs would add back to the state's UAAL, triggering higher employer contributions to the pension system, including from the state government. Because contribution rates for the 2015-2017 biennium have already been set, the budgetary effects from increased contributions won't be felt until the 2017-2019 biennium.

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