Stabilizing PERS and Preparing for the Next Recession

Governor Brown’s Proposed Framework

to Address PERS Rates for Education

Problem: PERS rates continue to increase and are projected to remain high until 2035. In any economic
environment, these increases are not affordable for our schools and will lead to teacher layoffs.
However, when another economic crisis inevitably sweeps the country, the promise of a secure
retirement will be one of the first cuts on the table if the system isn’t stabilized.

How do we address the problem?

1. We can’t kick the can down the road. High rates are projected to be a 14-year problem. A
recession will make the problem worse. We must take action this session, before the next
recession hits, and we must have a plan that stabilizes rates for this time period.
2. We must ensure public employees have a secure retirement. Undermining the sustainable
OPSRP defined benefit plan doesn’t solve the problem, could cost employers more, and
threatens the retirement security of our teachers, police, firefighters, and child welfare workers.
3. We cannot ask public employees to solve this problem alone. Public employees didn’t create
the unfunded liability. And while they must be part of the solution, we can’t ask them to help
solve the problem unless the State is willing to take significant action.

Solution framework

1. Create a School PERS Offset Account to pay for the increase above 2019-21 PERS rates for
schools until PERS is fully funded or for 14 years, whichever comes first. This will cost about
$400 million a biennium. The account must be seeded with $800 million, and will require $1.6
billion over the following 14 years.
2. Begin PERS stability contribution pension accounts for employees to secure the defined benefit
portion of PERS. The contribution will equal 3 percent of payroll for Tier 1 and Tier 2 members
and 1.5 percent of payroll for OPSRP members, after the first $20,000 of annual salary. With the
exemption, the average contribution would be 2.1 percent for Tier 1 and 2, and 1 percent for
OPSRP. Stability contributions will continue until PERS is fully funded or for 14 years. Members
will not see a reduction in their current take-home pay as a result of these contributions.
3. After PERS stability contributions end, if PERS drops below 90 percent funded in the future,
employees will pay a temporary stability contribution of 3 percent (after $20,000 exemption),
until PERS funded status recovers.
Where do we get the funds for the School PERS Offset Account?

• Kicker: one-time retention of kicker, after returning the first $100 to each Oregon family — $400
million to $500 million
• SAIF: excess surplus above the Board’s target levels — $486 million, or an alternative that
includes SAIF covering workers’ compensation costs for school districts and a smaller one-time
transfer
• Repatriation funds: already dedicated under 2018 SB 1566 (and SB 1529) — $83.3 million
• Windfall revenue from variable sources: direct above-trend revenues from capital gains and
estate taxes to the account.