Why Bend Has A Projected Budget Shortfall

The City of Bend has told its citizens that the City has a projected budget shortfall over the next six years and that the shortfall may result in reduced police and fire protection.  That six year shortfall, originally projected at $21,000,000, has been reduced to approximately $17,000,000 as a result of employee layoffs.  For Bend, the only option within its control to reduce expenses is to lay off employees which, in turn, reduces the services that the City provides to its citizens. 

The reason Bend has a projected budget deficit is due to its decision to make the payment of employee retirement and healthcare benefits to the City’s highest spending priority.  Those payments must be made before police and fire protection services are provided and if there is not enough money to pay for both, employee benefit payments will be maintained and service will be reduced.  During the six year budget deficit period, the City will pay over $70,000,000 for employee retirement and health care benefits,  over four times the amount of the projected deficit.  The City leaders have decided that employee benefits are more important than public safety. 

Retirement benefits are given priority by a state law that was enacted by the 1989 legislature.  Ninety percent of the 1989 legislators were PERS members.  Bend has joined PERS and, as a result,  it is required to pay an employer’s  contribution to PERS.  The City is not required by law to also pay the employees’ PERS contributions for the employees, but it has decided to do so.  Once that decision was made,  payment of the employees’ contribution received the City’s highest spending priority.     

Healthcare benefits are given priority by contracts that the City negotiates with its employees.  During those negotiations, the City’s non-management employees are represented by their unions and the people of Bend, who are required to pay those healthcare benefits, are primarily represented  by City management employees.  Those management employees will receive the same healthcare benefits that the union employees will receive.   The healthcare benefits are negotiated by public employees negotiating with other public employees.  The people who are required to pay for those benefits have no meaningful representation in that negotiation process. 

While Bend is correct when it say that the budget deficit may result in reduced police and fire protection for the people, that statement gives no indication of why that will happen.   What the City should say is that the budget shortfall will reduce police and fire protection  because the City’s first priority is to maintain employee benefits.  If the City employees paid their own employee PERS contributions and if they paid 12% of the health insurance premiums the City is currently paying, Bend would have no deficit, no employees would be laid off and City services  would be maintained.

When employee benefits are negotiated, the City and the people of Bend must be represented by persons who are not public employees.   The public employees are adequately represented by their unions.  The City Council should appoint a committee of private citizens to do the negotiating.  City management employees should participate in that process as technical advisors, but only in a nonvoting capacity.


About Dan Re

I am an attorney who has lived in Bend and practiced law since 1981. In educating myself about the Oregon Public Employees Retirement System (PERS), I was shocked at how the PERS laws were changed by the legislature, once legislators were allowed to join PERS in 1971, 26 years after PERS was first created. Those changes personally benefitted the legislators who made them at the direct financial expense of the people they were elected to represent. That is wrong and I intend to change it. In 2009, I started a non-profit 501(c)(4) corporation, In RE The People, Inc., for the purpose of informing concerned citizens of what happened regarding PERS and other issues of social and civic importance. I then created this blog to further that objective.
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