When Roseburg city budget talks begin next month, city officials will face a $600,000 problem: how to address a dramatic increase in the cost of retirement benefits.
For the Roseburg School District, the price tag is even higher. It anticipates a $2 million increase in payments to the Public Employees Retirement System.
The school district’s chief operations officer, Cheryl Northam, believes there are better ways to spend that money.
“How much cooler would it be to take that $2 million and put more teachers in the classroom?” she said.
Oregon’s public agencies face mounting costs to compensate for a shortfall in pension funds caused by the 2008 stock market crash. Oregon lawmakers are considering ways to lower costs by lowering planned cost-of-living increases. Public employee unions oppose lowering benefits.
In the meantime, public agencies are budgeting for steep increases in pension obligations. Roseburg City Manager Lance Colley said that will mean raising revenue, cutting services or dipping into reserves.
Many proposals are on the table in the Legislature, including one from Gov. John Kitzhaber, that could reduce the size of the problem. Kitzhaber wants to reduce cost-of-living increases on pension benefits in excess of $24,000 a year. More than 30 other PERS-related bills have been introduced, most from Republican legislators.
Kitzhaber’s plan would save the state an estimated $865 million in the next biennium. Another bill by the Democratic co-chairs of the House and Senate Joint Ways and Means Committee would preserve more cost-of-living adjustments and delay some $350 million in contributions to PERS for two years. Their plan would save $805 million next biennium, but half as much as Kitzhaber’s plan in the following biennium. Republicans have ridiculed it as “PERS light.”
Colley has been dealing with PERS for many years. He was the city’s finance director before taking a job as the Roseburg School District’s chief operations officer. He returned to manage the city in October.
He said the PERS system was nearly 100 percent funded in 2007. The crash in 2008 changed that. Statewide, PERS lost 27 percent of its value that year, dropping from $64.9 billion to $45.8 billion.
Losses are being felt now as local governments are forced to pay more into the system.
Whatever changes to PERS payouts come out of Salem, Colley said one thing is certain. Unions representing public employees will challenge them in court. Colley said in past litigation, the unions have argued prior benefit formulas approved by the Legislature constitute a binding contract — a claim that has won only partial acceptance from the courts.
The Roseburg School District currently pays 22 percent of its payroll into the PERS system. Next year, that could be 30 percent, Northam said.
A $2 million increase in pension payments would be more than four times the amount the district estimates it could save by closing an elementary school.
The district hopes to receive $2 million to $4 million more than it receives from the state’s current two-year budget. The first $2 million could be soaked up by PERS.
“Every dollar lost is a dollar we can’t use to provide services to our students,” Northam said.
Colley puts responsibility for the PERS shortfall on state lawmakers. While public employees unions have fought to keep higher retirement payments, Colley said he believes individual retirees should not be blamed for the current crisis.
“Public employees didn’t create the problem with PERS. They are the beneficiaries, but it’s not their fault,” Colley said.
Colley said he hopes a reasonable solution will emerge at the state level.
“As an employer, I want to have a good, cost-effective retirement system for every employee. I don’t want one that costs too much, and I don’t want one that costs too little,” Colley said.
• You can reach reporter Carisa Cegavske at 541-957-4213 or firstname.lastname@example.org.