Public Employee Retirement System (PERS) is the retirement fund for the employees of state and local agencies like schools, police, and government workers. It’s how the State of Oregon pays retirement benefits, or pensions, to its retired workers.

Sensible modifications to PERS are one of the necessary parts to a comprehensive solution to Oregon's ongoing school funding crisis.  Revenue reforms that provide greater stability and increase overall school funding must also be part of the fix.

Why does PERS matter right now?

The amount of money that school districts must pay to PERS each year is increasing dramatically.  Less than 10% of a district’s budget used to cover PERS costs. For most districts, that number will nearly double from to 2009-2015. The main reason costs have increased is because of decisions made by the Board that manages PERS in the 1980s and 90s. Those decisions resulted in significant increases in pension payouts for certain categories of retirees—increases above what was originally agreed upon by employers and public employee unions. Continuing to pay at that increased level of benefit has now become very costly, which means we don't have enough money to pay for the services we need now—like education.

Currently, the state cannot afford to give districts all the money they need to cover their increased PERS costs. If our legislators do not address PERS costs this session, they will continue to rise at a much faster rate than revenue, even if the State of Oregon finds new sources of income.

How will PERS impact Oregon classrooms?

Since almost all of a school district’s budget is spent on teachers, the only ways a district can save money is by cutting the number of teachers it has, or the number of schools days.

That’s one reason Oregon ends up with one of the shortest school years and some of the largest class sizes in the country. Next year, we are facing the loss of thousands more teachers if we don’t control costs, and that’s why we need to find ways to lower the cost of PERS.

How can we reduce PERS costs and rescue Oregon public schools?

The PERS Board originally promised—and employee unions accepted—that a fair benefit for a retired employee was approximately 75 to 85 percent of their final salary including PERS and Social Security. This is called a replacement ratio. The actual replacement ratio for most State of Oregon retirees has ended up significantly higher, at 100 to 140 percent of final salary.  The Governor is proposing several adjustments to PERS that will sustain and protect our current services, but also attempt to treat current and retired public employees fairly.

Homework:

The Khan Academy cleverly illustrates how pension plans work in a digestible manner. Even with revenue reform, pensions will continue to eat up our schools’ budgets, and teacher cuts will loom every year into the foreseeable future. Here’s why. 

Up next:

Next Wednesday, Stand for Children will host a webinar to help our members get smart on PERS and its impact on school funding. You must be a member to attend this webinar. If you are not a member, please join here. If you are unsure about your membership status, call (503) 308-7292 or email membership@stand.org. Register for the webinar online.

Updated 3/6/2013:

RESources:

PERS: By the Numbers: Oregon PERS Board, February 2013
The Oregon PERS Challenge: ECONorthwest, February 2013
Oregon PERS: Burdened by the Past, Poised for the Future: City Club of Portland, May 2011