The PERS Board made it official Friday: Most school districts’ rates will be 1.68 percentage points lower for 2025-27 than when they were announced in October.
“It’s a pure win,” said Carol Samuels, Piper Sandler & Co. managing director of public finance and an expert on the Public Employees Retirement System.
Education advocates worked with PERS staff and legislators to rush a bill to put an unused pot of money to work and give school districts a much-needed break.
The Legislature created the School Districts Unfunded Liability Fund as part of PERS reforms in 2018. As of January, the fund had $167 million. The fund had never paid any money out, and most of the fund’s revenue sources had phased out in 2023.
The money was slated to be reabsorbed to pay down the fund’s unfunded liability, which was $24 billion as of the most recent rate-setting valuation. The $167 million would have been a drop in the bucket with minimal effect on districts’ rates.
With Gov. Tina Kotek’s support, PERS staff brought forward a bill to allow the funds to be used more flexibly. Education advocates suggested the money could best be used to give districts immediate relief on their 2025-27 rates.
PERS rates for the next biennium were revealed in October with an average rate increase of 1.4 percentage points, but for some districts the increase is going to be much steeper.
Individual district rates vary wildly, from practically nothing to almost a third of payroll depending on a district’s staff characteristics and whether it has side account investments. Side accounts have performed poorly recently, leading to huge sticker shocks for some.
Senate Bill 849 was devised to apply the $167 million to all districts’ liability for 2025-27, an estimated $2.27 billion in total, lowering nearly everyone’s rate.
The Legislature had to move quickly, though, because the bill had to pass and be signed by the governor in time for the PERS Board to adopt the rate changes on May 30, its last meeting before the 2025-27 rates go into effect July 1.
The adoption at the meeting was a relatively quick and easy affair with new rates published, but it teed up another question the board will have to answer.
The PERS rate process includes a “collar” that keeps the rate from swinging too wildly higher or lower when there are big changes in PERS’ liability. The PERS Board, likely at its July meeting, will have to decide if the base rate for the collar for 2027-29 uses the rate before or after rates were reset by SB 849.
Potentially, districts could see SB 849 continue to hold rates down, or there could be an extra jump when the rate resets to before the application of the one-time money.
Samuels cautioned that school districts should be using this respite to set aside money for the likely increases coming.
– Jake Arnold, OSBA
[email protected]
