Bill reduces cost of pension benefits to public entities

Oregon Senate Bill 822 is receiving a mixed response from municipalities around the state despite the fact that it will significantly reduce public pension contributions over the next two years.

Passed by the state Legislature in April and signed into law by Gov. John Kitzhaber on May 6, the bill reduces the cost of living adjustment, or COLA, payable to pensioners enrolled in Oregon’s Public Employee Retirement System (PERS). In addition, the bill also eliminates supplemental tax remedy benefits for PERS recipients who do not live in Oregon and do not pay state income tax.

Finally, and most controversially, the bill includes a 1.9 percent rate contribution deferral intended to ease the current burden paid by cities, counties and special districts. This, however, will have to be repaid in the future in the form of higher contribution rates.

In Wilsonville, this package of remedies means the city will pay 4.4 percent less in the coming year for employee retirement benefits than otherwise would have been the case.

Out of a total budgeted payroll for the coming year of $9.37 million, the city will save $412,659 of that total. The latter figure breaks down into two main areas of savings. The first comes from the COLA adjustment, which will save the city roughly $234,000. The second comes from the rate deferral and totals just more than $178,000.

Wilsonville Finance Director Joanne Ossanna delivered the news to the Wilsonville City Council during its June 17 meeting. While councilors were pleased to hear of the savings, they also quickly realized the bill could come at a high future cost.

“So, you’re saying they did a fine job of putting the burden back on a future Legislature?” Councilor Scott Starr asked Ossanna.

“It is short-term relief,” Ossanna said. “We knew the rates would potentially be finalized, and there are a number of finance directors who believe that this is not the best choice. But it is what we have.”

Under SB822, COLA rates will be restricted to an increase of 1.5 percent annually for all benefit recipients compared with a current maximum of 2 percent.

The elimination of the PERS tax remedy benefit for out-of-state recipients, meanwhile, will save Wilsonville and other PERS contributors another 2.5 percent in coming years.

City Manager Bryan Cosgrove told the council any savings incurred by the city would be placed in one of a number of reserve funds attached to the general fund and other areas of the city budget responsible for personnel costs.

“In effect we are banking it, because it’s going into reserves,” Cosgrove.

Ossanna also noted this will help the city cover an as yet unknown spike in PERS contributions in the future when the current deferral must be paid back.

“We do keep reserves in place to cover these types of things,” she said. “I believe our fund balances and contingencies will cover any adjustments in the future.”

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