Brown proposes sweeping investment plan to stabilize schools’ PERS rates
Friday, April 12, 2019
Gov. Kate Brown proposed Friday creating a more than $2.5 billion side account to stabilize school district pension rates at 2019-21 levels.
Brown’s Public Employees Retirement System plan would tap most of the kicker rebate and some of the workers' compensation insurance fund reserves to seed the account, as well as redirecting some smaller state flows of money. It would also call on public employees to share in pension contributions.
Brown told a packed hearing for the Joint Committee on Ways and Means Capital Construction Subcommittee that solving the PERS problem required shared responsibility. Subcommittee members include many of the Legislature’s leaders, including Senate President Peter Courtney and House Speaker Tina Kotek.
Brown’s presentation featured examples of school districts’ cost increases.
“If we don’t stabilize PERS rates for schools, more teachers will lose their jobs,” she said.
Brown acknowledged that her proposals would be politically challenging and unpopular with some. She said she was open to other sources of funding but one way or another the PERS unfunded liability had to be dealt with while Oregon was still in an upbeat economy.
“Our crisis is just over the horizon,” she said. “We can see it coming, and we must do something about it this session.”
The PERS unfunded liability has climbed to more than $26 billion, and school districts’ PERS costs have more than doubled since 2015-17. Average school district PERS rates for 2019-21 will be 29% before side account offsets.
Brown said the Student Success Fund was not an option for addressing PERS rates. The Joint Committee on Student Success is trying to increase Oregon revenue by $2 billion per budget period.
The committee aims to create a dedicated revenue stream that could only be used for specific school programs that support student learning. PERS couldn't touch the money, but rising PERS costs would still reduce State School Fund dollars available for classrooms, leading to cuts in programs or staff.
Rising school district PERS costs would equal about a quarter of the new money in 2021-23 and more than half of it by 2029-31, according to the Oregon Business Plan, an economic development forum.
Tax opponents say raising new education money for it to be gobbled up by soaring PERS rates is unappealing, but with or without new money, PERS gets its bite and the question becomes how much will be left for classrooms.
Business advocates have tried to tie increased education funding to PERS cost containment, but education advocates say it's not an all-or-nothing question.
“They are two different issues,” said OSBA Legislative Services Director Lori Sattenspiel. “We need them both.”
OSBA has pressed for cost containment and revenue reform this session.
“To get our hands on this issue of $26 billion in unfunded liability, everyone is going to have to share the pain,” said OSBA Executive Director Jim Green.
Green praised Brown for showing bold leadership on PERS.
“The governor is taking a creative approach to offset schools’ PERS costs so that money schools receive from new education investments actually goes to good outcomes for kids,” he said.