Average PERS rates projected to go down

Public pension rates are expected to go down for 2021-23, but that is not necessarily a good thing.

The average collared base school district rate is projected to drop 4.05 percentage points to 24.88%, according to Public Employees Retirement System figures released Friday.

The PERS Board will meet July 31 to hear from Milliman, the state’s actuary, on the 2019 valuation that sets the rates for the next biennium. The board can still make decisions that affect how rates are calculated, and individual district rates won’t be released until the fall.

Carol Samuels, Piper Sandler & Co. public finance managing director, warns the rate reduction is not all good news.

For starters, the rates are based on the PERS fund’s value as of Dec. 31, 2019. The stock market boomed in 2019, but it has fallen in 2020 and the economic forecast for the next few years is grim.

This sets up a situation where public agencies are paying less into the fund as its value is stagnating and it needs higher payments, increasing the unfunded liability.

“If rates go down in the face of a market downturn, it just means that future rates will be much higher than they otherwise would be,” Samuels said.

The rate reduction also relies on changes related to 2019’s Senate Bill 1049, a PERS reform package. Some of those moves are being challenged in court, where they could be reversed, raising school districts’ rates. School districts would be prudent to set funds aside for that contingency, Samuels said.

If the average rates hold, school districts’ total 2021-23 contribution will fall by $60 million to $1.28 billion. The fund’s unfunded actuarial liability, excluding side accounts, will fall $2.4 billion to $24.6 billion.

- Jake Arnold, OSBA
jarnold@osba.org