Oregon schools get some relief from rising retirement costs amid tough budget season
The Oregon Public Employees Retirement System, or PERS, building in Tigard, Ore., on Sunday, Jan. 6, 2019. (Bryan M. Vance / OPB)
In a budget season rife with cuts and constraints, school districts have some good news.
The Oregon Public Employees Retirement System, known as PERS, has announced a reduction in pension contribution rates for K-12 school districts.
Agency leaders said the one-time move will provide much-needed budget relief to districts across the state for the 2025-27 biennium.
'Thanks to the support of Gov. Kotek and the Legislature,' Oregon PERS Director Kevin Olineck said, 'we were able to recalculate employer contribution rates and deliver real, measurable cost reductions for our school employers.'
School districts, large and small, are facing another year of multi-million-dollar budget deficits. And they were expecting a big hit from PERS.
Back in the fall, school leaders learned that the increase in PERS costs in the upcoming biennium was going to be more than Gov. Tina Kotek's initial budget increase for the State School Fund. In other words, despite her investing more in education, that money would be wiped out quickly by the rising costs of Oregon's retirement system.
But in December, Kotek doubled the proposed increase in K-12 spending, which more than offset the PERS increase.
Lawmakers further reduced the costs this spring by passing Senate Bill 849. The bill, introduced by Kotek at the request of PERS officials, changes how the state retirement agency distributes money from its School Districts Unfunded Liability Fund. That brought down the estimated retirement costs for schools from $670 million to just over $500 million.
The changes from the bill reduce some of the burden on school districts to absorb rising retirement costs. Contribution rates for school employers will drop 1.68 percentage points as a result, reducing costs by about 6% over the next biennium. For school districts, this translates into $168 million in savings statewide — money that can now be used for other needs.
It's not certain yet how these rates will continue or change for school districts in the next biennium. Analysts are already expecting an increase in 2027-29, followed by a significant decrease.
But for now, the change is significant for local districts.
In Portland Public Schools, for example, this change is expected to pay for dozens of teachers. That's a welcome development considering the state's largest school district had a $40 million budget gap when approving its budget for next school year.
'[This bill] is estimated to reduce our expenditures in one year (by) about $7.6 million, which is equivalent to about 50 teaching positions,' explained Michelle Morrison, chief financial officer for PPS, when giving testimony to lawmakers in April.
'As you are aware, the School District Liability Fund has been kind of sitting and unable to offset our costs actively in the moment,' she said to lawmakers. 'So, this is an excellent opportunity, while those rate increases are significant, to put those dollars to work.'
The Oregon School Employees Association, AFT-Oregon, the Oregon School Boards Association and the Coalition of Oregon School Administrators were among the supporters of the bill. It passed with only four dissenting votes in the Oregon Senate and unanimously out of the Oregon House.
Louis De Sitter with the Oregon Education Association spoke to that in his testimony.
'I think the bipartisan nature of the bill,' he said, 'and the fact that both management and labor are so supportive of this, is indicative of a really good process, and a bill that we do believe will have a big impact for our districts across the state.'
This article was originally published by Oregon Public Broadcasting.
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