Early numbers indicate government institutions may pay 40 percent more In the wake of the latest bad news about the state employee pension fund, local governments and school districts are still waiting for information on what the newest numbers mean to them.
Figures released last week showed that the Public Employee Retirement System is expected to be more than $9.7 billion in debt, and that public employers could pay 40 percent more in payroll contributions to help make up the shortfall. But the particular rate increases for each individual government body won't be announced until next month.
"There are so many things up in the air right now ... until it pans out, we're in 'wait and see,'" said Gearhart City Administrator Dennis McNally.
According to Milliman U.S.A., the accounting firm calculating the PERS numbers, employer contributions to PERS will have to increase from an average of 11.2 percent of total payroll to 15.56 in order to maintain the retirement benefits guaranteed to almost 300,000 current and retired public employees. Workers pay 6 percent of their salaries into the PERS system, but most employers pick up that portion as well.
Every government's PERS rate is different, and so will be the increases that are imposed. But they will undoubtedly mean added costs for local governments and schools already struggling with tight budgets.
John Snyder, finance director for the city of Astoria, said if the city's PERS rate were to rise by the estimated 4 percent, that would translate to an $80,000 increase on top of the $332,330 the city is paying this budget year. Coupled with a "very small" cost-of-living raise for employees, the city's total PERS payments could total as much as $420,000, he said, but stressed that those figures are only rough estimates at this point until the individual rate increases are announced. The city's total budget for 2002-03 is $16.14 million.
The PERS rate increase could translate into more service reductions, City Manager Dan Bartlett said.
The boost in PERS rates equals at least one employee for the city of Cannon Beach, where City Manager Helen Westbrook said the increase would cost an estimated $50,000 more per year, based on the projected numbers. The city has a workforce of 30.
Clatsop County Finance Director Mike Robison said he can't make any accurate estimates about the actual costs to the county until the updated rate estimates are released next month.
"PERS can't even give me exact information" on the types of retirement accounts held by the county's 238 employees, which will also influence the contribution rate, he said.
The county paid about $1.24 million to PERS in 2001. Under the increase forecast by the PERS accountants, that amount could be more than $300,000 higher.
Last year the county commissioners voted to use $1.7 million from the county's share of state timber revenue to pay off its PERS liability, only to find out soon after that the debt had grown larger.
Since then, the PERS board has instituted rules that make it less advantageous to make such lump-sum payments and is instead passing on the cost through the increased payroll contributions.
The county set aside $1.37 million in state timber dollars in the current budget specifically to help cover some of its PERS liability.
Some local school districts had hoped to pay off some of their PERS obligation through a 20-year bond, according to Astoria School District Superintendent Larry McMacken, but the bond sale is currently on hold. The schools employ from 27 for the Jewell School District to 300 for Astoria, all covered by PERS.
A big factor in pegging individual rates is the proportion of new and long-term employees, and the types of retirement accounts they hold, Robison said. The system guarantees a minimum 8 percent investment return for employees hired before 1996, so-called "Tier 1" employees. "Tier 2" staff, those hired since 1996, do not enjoy that guarantee.
The outcome of ongoing PERS court proceedings factor into the uncertainty, said Gearhart's McNally.
"We all know something needs to be done. These rates can't keep going up out of control," he sad.
Gearhart has eight city employees, all of whom are on PERS.
"Usually before the budget cycle we'll have a fairly decent idea of what the rate will be so we can budget accordingly," McNally said.
Port of Astoria Executive Director Peter Gearin the PERS fiasco is a looming problem, but it's too early to tell exactly what impact it may have on Port finances. "Part of the problem is we don't know yet," he said.
Seaside is one of roughly only 10 municipalities in the state that are not on the PERS system, City Manager Mark Winstanley said.
"At this point we're not impacted by what's happening to PERS," he said. "We have the flexibility of being able to manage our funds because we control the plan."
Seaside's plan is administrated by Pacific Life Insurance Co. The city left PERS more than 18 years ago.
Reporters Brad Bolchunos, Jennifer Collins, Ben Romano and Andrew Adams contributed to this story.