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A Lost Generation but Renewed Hope: Oregon's Pension Crisis and the Road to Reform

Like a number of other states, Oregon has been hampered in its pension reform efforts since 1996 by its state supreme court’s embrace of the “California Rule,” a doctrine arising, in Oregon’s case, from a misunderstanding of federal Contract Clause precedent. Under the misreading, states such as Oregon have been restricted from reducing pension benefits for government employees once they have been hired, even for work that lies in the future and may not be performed for decades and even where the benefit promises carried no time commitment. The Oregon Supreme Court has recently abandoned this position. However, it has been using its mid-1990s adoption of the rule as a means of suppressing the application of a set of state constitutional provisions designed to rein in pension spending, as well as later legislation aimed at drawing back some measure of unjustifiable pension-authority largesse in the late 1990s. The court must act swiftly now to reverse this legal position, revive Oregon’s constitutional provisions, and permit legislative action that will undo the consequences of the court’s long-term error. In the relative energy and foresight of its political branches and the belated but genuine recognition of error by the state court, Oregon can be a national beacon and guide sister states through the morass of pension reform.