The District 55 School Board will consider two actions regarding the Public Employees Retirement System, which has massive unfunded liabilities.
First, the board is considering whether to join the Oregon School Boards Association in a appealing a rate increase from 12.73 percent to 18.58 percent of payroll. This does not count the 6-percent employee “pickup.” Last year, information provided to school districts indicated rates would jump to at least 15 percent.
The Public Employees Retirement Board was expected to make a decision on the rate increase yesterday (Tuesday), Business Manager Russ Allen said.
Second, the district is considering joining a pool of school districts in selling bonds at lower interest rates than PERS offers to cover unfunded liabilities accumulated in 2001. The district joined a similar pool to cover 1999-2000 liabilities.
The PERS board’s decision on new rates may be challenged based on a lawsuit in Marion County. OSBA has asked Oregon districts to join it with resolutions supporting the challenge. OSBA will cover the cost of the appeal.
Judge Paul Lipscomb ruled that the PERS board improperly credited billions of dollars to PERS employee accounts and must pull money back to stabilize the retirement fund, according to information provided by OSBA.
Under the judge’s ruling, the PERS rate increase for employers would be less than proposed, according to OSBA.
The judge will issue an order based on his preliminary findings later.
Regarding bonds for financing the unfunded liability, the district covered some $7 million in liabilities over a 27-year period at 5.3 percent interest. With sale costs, districts need at the most 7.3 percent interest to break even on the deal. PERS is charging 8 percent on the liabilities. The previous bond sale covered liabilities from 1999-2000.
The district is considering the same thing for 2001 liabilities.
As of Jan. 10, interest rates were about 6 percent, Allen told the board. At 6 percent, total cost reduction estimate over 26 years would be about $3 million or $122,908 per year.
An estimate on the total unfunded liability for District 55 was unavailable Monday night.
The liability accrued for several reasons. A high proportion of “tier-one” employees locked in their retirement returns at 8 percent, a guarantee given to public employees prior to 1995.
The PERS board had previously paid substantially more than 8 percent to tier-one regular accounts, failing to maintain adequate reserves for down years, according to OSBA information. In 2001, valuation earnings were reported at -6.96 percent, while maintaining the 8-percent guarantee.
Savings could be more or less depending on how the market performs over the next 26 years. That could affect PERS employer contribution rates. Changes to the PERS system could also affect the bottom line.
The board will consider the two items at its regular meeting on Feb. 10.
Present at Monday night’s regular meeting were Barbara Snow, David Kem, Chairman Don Hopkins, Diane Gerson, Dave VanDerlip and Milt Moran. Sam Shipp and Scott Proctor were absent.
In other business, the board:
— Accepted the resignation of Foster teacher Yuri Samer.
— Approved resolutions for service with the Linn-Benton-Lincoln ESD.
— Adopted a film policy allowing high school teachers to show excerpts from films in class.
— Approved a resolution to call an election to eliminate local school committees, which have generally been replaced by site councils.