Public Employees Retirement System rates appear to be creeping up again, bad news for school district budgets.
The PERS Board will hear a report from Milliman, the state’s actuary, on Friday, Feb. 2. According to the agenda released Monday, the average collared base employer rate will increase 1.4 percentage points to 27% for 2025-27.
Sharie Lewis, Parkrose business services operations director, said that even though she has been preparing for an increase, it will hit the district’s already short budget hard. Lewis said a 1.4 percentage point increase translates into almost an additional $1 million of the Portland district’s budget, or enough to pay for about seven teaching positions.
The public employees pension system will claim an estimated $1.3 billion from school districts’ 2023-25 budgets. For roughly a decade starting in 2011, schools struggled with massive increases that roughly doubled the rate over that time. Big stock market investment returns and legislative reforms have flattened the trajectory since 2021, with roughly a percentage point average increase for schools in 2023.
Lewis said although the increases aren’t as big, they are getting harder to swallow because districts have been forced to tighten their belts so much.
“It’s extremely uncomfortable because districts don’t have a margin of error,” she said. “There’s nothing to play with.”
PERS pays workers out of returns on investments and money from employers. If the investments don’t make as much money as expected, employers must pay more to make up the difference.
PERS’ 2023 investment returns went up 6% in 2023, according to early analysis, but that still fell short of the 6.9% target, known as the assumed rate of return. Couple that with recent salary increases, and public employers must pay more.
Milliman is still parsing the data, including changes in employer payrolls. Milliman’s official rate recommendations, which the board usually adopts in the fall, will be published for the July 26 board meeting.
Individual employer rates will be calculated later in the year. School districts’ individual rates vary wildly, from less than 5% of payroll to more than 27%, depending on employees’ PERS status and the presence of side accounts to pay down debt.
Milliman computes multiple rates using different criteria. The collared base rate is calculated with rate “collars” that prevent the rate from shifting too rapidly up or down with market swings. The base rate doesn’t include side investments’ effects.
– Jake Arnold, OSBA
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