Business leaders rally around school funding

The 2013 legislative compromise to balance the state budget and the state’s public schools with new money has been mostly undone.

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The 2013 legislative compromise to balance the state budget and the state’s public schools with new money has been mostly undone. An April state Supreme Court ruling overturned what amounted to hundreds of millions in pension cuts the state legislature had authorized in 2013. Now legislators are scrambling to patch together the mess the court left them, hoping to avoid major cuts to the state’s public schools. Business leaders, concerned about school funding, have vowed to work with lawmakers to restore some of the educational dollars. “We’re seeing a trend here,” says Ryan Deckert, president and CEO of the Oregon Business Association. “The legislature works really hard to get something done, and the court erases it. But this issue is too important; we can’t let the schools lose more ground.”

Decisions loom for state budget makers as a recent Supreme Court decision promises to leave a hefty price tag.

From the Portland Tribune:

For governments and taxpayers, the decision means spending more in the future on contributions to the Public Employees Retirement System — and spending less on discretionary services to the public — to help offset an added liability of up to $5 billion over 20 years. A recent public opinion survey suggests there is little public appetite for raising general taxes to cover the added costs of pensions, or to do virtually anything else.

Meanwhile, the prospect of the state obtaining less from Oregon’s investment earnings — which now account for 73 cents of every dollar paid in public pension benefits — may force pension contributions from 925 government employers to go up even more. It is adding to an already public dispute between state Treasurer Ted Wheeler and the Oregon Investment Council on one side, and Senate President Peter Courtney on the other, over how billions in state investments should be managed. reports on the impact felt by taxpayers:

The system’s actuary, Milliman Inc., on Friday estimated  the price of restoring the 2 percent cost-of-living adjustments for members who retired before the legislation was passed: $345 million per year starting in 2017. The increase would be even higher, but the pension system plans to defer part of it until 2019 to dampen the impact on public services. That only adds to costs. Public agencies’ payments to PERS could rise by another $125 million a year in 2019.

The budget impact will be much higher on school districts than state and local governments, as schools have a much higher unfunded pension liability relative to the payroll that is taxed to pay it off. The projected rate increases also assume the state will continue earning 7.75 percent annual returns on the pension fund’s investments.

The board is mulling a quarter-to-half percentage point cut in the assumed rate.

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