PERS Board approves rates: $335 million increase for schools
October 6, 2016
Oregon school districts and hundreds of other public employers now have the final word on their financial contributions to their employees’ retirement fund following the PERS Board’s approval Friday of new two-year rates that take effect July 1.
The new rates mean significant cost increases for every school district. And it’s almost certain that the increase will be one of many as the state wrestles with a growing unfunded liability that’s now at around $22 billion.
“This is just the beginning of the increases that will come over the next three biennia,” said Carol Samuels, managing director of the public finance consulting firm Piper Jaffray and an expert on the Oregon Public Employees Retirement System.
The increases had long been expected. But it wasn’t until this week that the PERS Board released each district’s specific increases, which are based on a complex actuarial formula. Those increases are broken into three rates: one for PERS Tier 1 and Tier 2 employees and retirees; a second, lower rate increase for Oregon Public Service Retirement Plan (OPSRP) members; and a third for a small number of law enforcement personnel in OPSRP who work in or are retired from school districts.
In the case of Portland Public Schools, officials from the state’s largest district officials estimate the new assessments will take an $8.2 to $8.5 million chunk out of the general fund budget.
Overall, districts face a cumulative $335 million increase in costs next biennium, which by some estimates equates to hiring about 2,000 new teachers. The total cost to education in the 2017-19 biennium will be $910 million. State agencies will see their PERS rates go up by $260 million and other public employers face $290 million in rate increases.
Rate increases vary widely among the state’s 197 districts. Some maintain separate their own side accounts that help cushion the blow of state cost increases. But those hardest hit will be are districts with minimal savings, declining enrollment that reduces their state support, and costly union contracts.
Matt Larrabee, principal at the actuarial consulting firm Milliman Inc., said employers will receive notice and a detailed description of their new rates in about two weeks.
“People want to see what their rates are and the circumstances that affected their individual rate,” he said. “We try to educate them that this is not the last one. In four years it will look pretty much like this one, if not worse.”
Click here for the 2017-19 Employer Rate Summary and the Summary of PERS Employer Contribution Rates report.