Public employer pension rates will drop for 2021-23, according to the latest estimate. Lower rates means more of a school district's budget can go to helping students.
Public Employees Retirement System cost controls are having their intended effect of flattening once-soaring rates. A 2019 stock market booming beyond even recent expectations has improved the already rosy outlook.
The average Public Employees Retirement System net rate will fall 0.7 percentage point from the 2019-21 rate to 17.6%, according to information released Tuesday. Milliman, the state’s actuary, will report the latest financials to the PERS board Friday.
“It’s a big deal to us to not have an increase in the next biennium,” said Michelle Morrison, Hillsboro School District chief financial officer.
Soaring PERS rates have been eating into Oregon school district budgets, devouring $1.3 billion for 2019-21, more than double what it cost for 2015-17.
For Hillsboro, a 1% change in rates represents the difference of about $1 million either going into classrooms or into debt service, Morrison said.
The board agenda packet did not include school district projections. The September report projected the school rate pool lower than the statewide average.
The 2019 Legislature’s PERS cost containment efforts, an OSBA priority, will lower statewide rates an average of 5.4 percentage points through a longer debt payback period and redirecting some employee contributions to pay off debt, according to estimates.
Employees are challenging the redirect in court. The PERS board has said that if the courts overturn the provision, it will increase rates immediately, about 1.3 percentage points.
A healthy stock market also strengthened PERS’ financial standing. PERS investment returns soared 13.6% in 2019, well above the 7.2% assumed return and making up for a lackluster 2018, according to Milliman’s updated valuation estimates. With 2019’s big returns, PERS’ estimated debt fell to $24.1 billion and the funded status rose to 73%, not including side accounts.
In 2019, the Legislature created a $100 million Employee Incentive Fund to match side account deposits, which help lower employer rates. School districts’ rates vary widely depending on side account offsets and which level of PERS benefits their staff are due.
PERS Senior Policy Director Marjorie Taylor cautions that although these preliminary estimates have been pretty on target in the past, nothing is certain until the July valuation report.
“We still need Milliman to do the official work,” she said. “It’s a good gauge.”
Employer-specific rates will be revealed in the fall.