Oregon Gov. Kate Brown has signed into law a bill that establishes two funds to help the state’s schools and other public employers cover growing public pension costs.
One of the funds would receive the majority of the money, as much as several hundred million dollars by some estimates, which would be deposited with Oregon’s Public Employees Retirement System (OPERS) in a pooled side account for school districts. That account would be invested along with existing pension assets, and gradually drawn down to reduce pension contributions required by the school districts.
The second, smaller fund is intended to get Oregon public employers to use their own resources to make extra one-time contributions to the pension fund, which the state would then match at $0.25 on the dollar as an incentive. That money would go into individual employers’ side accounts at OPERS, and would be invested with existing pension sets, and gradually drawn down to reduce the employers’ contributions. Approximately 900 employers participate in OPERS.
The funds will be capitalized with $140 million in new revenues, according to The Oregonian. Approximately $115 million of that money would go to the school side account, while the remaining $25 million would capitalize the employer incentive fund.
The new law originated from a task force Brown appointed last year to investigate ways the state could reduce OPERS’ unfunded actuarial liability of $25 billion by $5 billion over five years. Some of the proposed actions by the task force can be seen in the new law, which would establish an employer incentive fund for contributing to OPERS side accounts.
The bill will use various sources for capitalizing the school pool, and the employer incentive fund, such as proceeds from marijuana tax, lottery revenue, debt collection, capital gains taxes, estate taxes, lawsuit settlements not dedicated to a specific purpose, and interest from the unclaimed property account within the Common School Fund.
The bill passed through the Senate unanimously, and by a more than 2-1 margin in the state’s House of Representatives.
According to the Oregon School Boards Association (OSBA), the costs to OPERS for public employers, including school districts, are expected to keep climbing for at least the next few budget cycles. It also said that average OPERS rates are nearly 15% of payroll, and the average is expected to climb to more than 25% of payroll by the 2023.