The John Day School District in eastern Oregon is facing a significant increase in its required contributions to the Public Employees Retirement System (PERS) in July, amounting to more than 14% of its payroll costs. This $900,000 increase is almost 10% of its general fund budget and will likely surpass any funding increases from the state for schools. As a result, the school board has authorized potential cuts to protect programs for students.
The PERS rate increases are due to factors including poor investment performance, payroll growth exceeding assumptions, and the expiration of side accounts created by public employers from 2003 to 2008. These side accounts, used to offset pension costs, are now shrinking due to investment underperformance, leading to higher PERS rates for employers like schools and districts.
In the upcoming biennium, school districts such as Gladstone, Salem-Keizer, and Beaverton are facing steep rate increases, with significant impacts on their budgets. Legislators are considering options to mitigate the financial burden, such as using the state’s budget reserves or diverting funds to reduce the overall deficit. However, finding equitable solutions to address the PERS rate shock remains a challenge.
Employers are encouraged to make new side account deposits with PERS to lower their rates, but many may not have the resources to do so. The PERS Board is anticipating additional rate increases in the 2025-27 biennium, putting more pressure on employers. The looming financial challenges are causing alarm among stakeholders, with a need for thoughtful and sustainable solutions to address the growing costs.
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