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Cost of PERS to rise $885M

Associated Press

Published on August 2, 2016 9:26AM


PORTLAND — The cost of Oregon’s public pension system will increase about $885 million over the next two years, a higher increase than was previously expected.

The new costs are 10 percent higher than previously forecast and 44 percent above the $2 billion per biennium that public employers are currently paying, The Oregonian reported.

The Public Employees Retirement System on Friday released an updated valuation of the pension fund’s assets and liabilities that suggests the system’s investment returns have lagged far behind the system’s assumed rate of 7.5 percent. The fund currently has an unfunded liability of $21.8 billion or about 71 cents in assets for every dollar of liabilities.

PERS resets public employers’ required payments every two years to pay down any deficit and return the fund to a fully funded status over a 20-year period.

At the meeting Friday, an actuary said that even if PERS investments reached their assumed returns of 7.5 percent, contribution rates will have to go up by about 4 percent of payroll in 2017, 2019 and 2021, putting contributions to the system at about $4.5 billion in 2021 compared with $2 billion in the current biennium.

John Thomas, a Eugene benefits consultant who chairs the PERS Board, said a spike in returns isn’t going to solve the problem in the long term.

“It’s a systemic problem,” he said. “Everything is predicated on a linear 7.5 percent investment return, and that has not been sustainable. It’s a whole different paradigm to what we’ve been used to in the past.”

The shortfall leaves school districts facing a $335 million increase in costs next biennium, which some Republican lawmakers have equated to hiring 2,000 new teachers.

“Unsustainable and escalating PERS costs will not lead to reducing class sizes, adding school days, or making our communities safer,” Senate Republican Leader Ted Ferrioli of John Day said in a news release sent out Friday. “We need fair and constitutional PERS solutions that reduce costs, ensure the long-term stability of the system to protect retirees, and allow for investments in education.”

State agencies will see their PERS bill increase by $260 million, and other public employers will have $290 million in new expenses.

Republican lawmakers have compiled a list of money-saving pension reforms, but Gov. Kate Brown and Democratic lawmakers did not take up any of the proposals in the 2015 legislative session or this year’s short session.

The PERS Board will send employers their new rates in September. The rates will take effect July 1.



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