SALEM, Ore. (AP) - The board overseeing Oregon’s public pension system is set to vote on whether to downgrade assumptions about how much return the system will get on its investments.
Changing the assumptions about returns on the investments that fund payments to public employees in retirement could increase the pension’s unfunded liability from $22 billion to $50 billion, meaning that state agencies and school districts would have to put more money into the system in the coming years, The Oregonian/OregonLive reported (https://bit.ly/2w1dMHb). The decision would also impact employee benefits, employer benefits, public services and the state’s long-term economic competitiveness.
The Public Employees Retirement Systems Board currently assumes its investments will earn 7.5 percent annually. Market experts have said that is a gross overestimate that does not reflect the real size of today’s underfunded public pension system and it minimizes required contributions from government employers. The state’s actuary, Milliman Inc., estimates the board will make a 6.7 percent earning on its investments over the next two decades.
The board has voiced its intention of lowering the rate, but it is unclear by how much the rate will be lowered. Board member and Eugene businessman John Thomas said should the board vote for a rate higher than what is being recommended “we better have some very specific reasons and methodologies to back that up. I personally don’t see where those changes would be.”
Some employers support cutting employee benefits that they say are too generous as an alternative solution - in addition to lowering the assumptions.
“If they’re trying to cover someone politically, stop it,” said Jim Green, deputy executive director of the Oregon School Boards Association. “The system needs to be looked at and reformed, and keeping the assumed rate high, or using rate collars is just allowing policymakers at the state level to say, ’It’s really not that bad.’”
If the board does not lower its assumption on Friday, Milliman has said it will flag the discrepancy in its next report card on the system. The action could cause hurt Oregon’s credit rating.
___
Information from: The Oregonian/OregonLive, https://www.oregonlive.com
Please read our comment policy before commenting.