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Retirement expenses could hurt schools Economic downturn cuts into PERS funding as retirement costs soar in the county's districts By DAMIAN MANN Mail Tribune Already taking it on the chin from round after round of budget cuts, Jackson County schools reacted with dismay that they might have to pay $4.6 million more in retirement benefits in 2003. Every school district in the county is looking at slashing budgets this year, and the estimated hikes in retirement expenses could spell more lost jobs. "We're telling people, 'Sorry you're not going to have a job because were going to have to pay $627,104 to pay for other peoples' retirement,' " said Vicki Robinson, business services director for Central Point Schools. Like school districts throughout the county, Central Point is looking at an estimated 3.75 to 4.25 percent increase in July 2003 to cover skyrocketing costs of the Oregon Public Employees Retirement System. PERS, which manages the retirement program for most public employees, has been hard-hit by the economic downturn that has substantially reduced its ability to provide an 8 percent rate of return on employees investments. When the plan was originally devised, investment returns averaged 13 percent, so 8 percent seemed like a safe rate - until the recent economic downturn. As a result, the unfunded liability to K-12 systems statewide has grown to almost $1.9 billion, an amount calculated on what would be paid out in benefits over a 30-year time period. Central Point schools' liability, for instance, is $13 million and Medford schools' is $38 million. Robinson said it has been difficult to analyze the PERS problem in light of the $800,000 in budget cuts the district is considering next year. "We have to get past this milestone before we get to the next milestone," she said. Oregon School Boards Association lobbyist Jim Green said, "It's a huge thing. It's one of the costs that school districts have no control over." OSBA had tried to organize a $1.9 billion bond among most of the state's 198 school districts that would have provided an annual $11 million savings to schools But the plan hit a snag, said Green, over PERS plans to change its way of calculating earnings, and other complications. While this plan would have provided only modest relief for schools, Green said it will be up to lawmakers to find a more effective solution. The Legislature took action in 1996 to soften the impact of PERS by making new employees receive what the funds actually earn, minus administrative costs. "So far, these funds have earned minus 6.66 percent for the year," he said. David Amick, spokesman for PERS, said, "It's bleak. Nobody here denies that. It's one of those tear-your-hair-out scenarios."For school districts faced with another budget crisis in 2003 because of an anticipated state budget shortfall, Amick said the PERS funding problem creates a deadly combination. The big hope is that eventually the economy turns around, flooding the investment account with a higher rate of return. Galen Anderson, business manager for Medford schools, said his district spends $8.4 million annually for PERS, translating into 10 percent of its $80 million budget. Under the estimated increase from PERS, Anderson, who is working to cut $2.4 million out of the 2002-03 budget, said that could add up to another $1.6 to $1.8 million. Prospect schools Superintendent Don Alexander said, "I think the Legislature has to step in and put some controls on what's going on up there." His district decided not to support the OSBA's bond levy because it would have tied the district into payments for 27 years. "The whole thing smelled pretty fishy to me," he said. While the PERS plan is proving a disaster for school districts, Alexander said employees get to reap its benefits. Alexander calculated that he would earn from $72,000 to $86,000 annually, depending on the date he chooses to retire, compared to his current annual salary of $65,000. "When you can retire for more money than you're getting right now, it is kind of strange," he said. Ashland schools, which is cutting $1.9 million out of the next fiscal year budget, could see its PERS payments increase by about $500,000 in 2003. If this holds true, budget manager Loren Luman predicts another budget crunch for the 2003-04 budget year. "The answer is that we're going to reduce more services to kids," he said. Reach reporter Damian Mann at 776-4476, or e-mail [email protected] Mail Tribune Home | Ottaway Newspapers, Inc. | Dow Jones & Co., Inc. | Privacy | Contact Us Copyright � 2001 Mail Tribune, Inc.