Booming investments nearly wipe out expected public pension cost increase

A good investment year has drastically reduced the expected public pension rate increase for 2023-25 to less than a percentage point, a welcome update for school districts. 

The Public Employees Retirement System Board heard some good financial news Monday morning. Milliman, the state’s actuary, reported PERS investments earned a 20.1% return in 2021, far exceeding expectations even as recently as September. 

That inflow meant the estimated unfunded actuarial liability plunged from $28 billion to $20 billion. PERS uses a “rate collar” to prevent sudden spikes or drops with market gyrations, but PERS’ improved funding status promises a flattening of PERS rates ahead.

Milliman estimates the collared base employer rate for 2023-25 will go up 0.9 percentage point to 25.5%. The average rate is expected to be flat when employer side accounts, which also did well last year, are factored in. 

For years, soaring PERS costs have dragged alarming funding amounts away from classroom spending. In 2019, the Oregon Legislature passed PERS changes that led to an average 4 percentage point decrease for 2021-23, but schools will still pay roughly $1.26 billion into the PERS Fund this biennium. 

System-average rates for 2023-25, including for school districts, will be presented in July and the employer rates are delivered in September. The final rates will depend heavily on census data still to come, and individual employers’ workforce makeup. 

- Jake Arnold, OSBA
jarnold@osba.org