PERS deficit climbs to $21 billion

Gordon Friedman | Statesman Journal | March 28, 2016 700 p.m.

TIGARD — The amount of unfunded liabilities carried by the Public Employees Retirement System has exceeded $21 billion, up from $18 billion last year. The deficit stems from high pension costs, poor returns on investments that fund state pensions, and a state Supreme Court decision overturning legislative efforts to rein in pension costs.

The public employees’ retirement fund — which holds more than $65 billion — lost 5 percent of its value between January 2015 and 2016.

Pension investments in public equity, real estate and alternative energy have fallen markedly. In January, public equity lost 6.66 percent, real estate 1.17 percent and alternative energy 0.05 percent. Other investments have remained flat.

The cost of the unfunded liabilities will be shouldered by public employers like state and local governments, school districts and emergency service departments. Those employers are expected to have at least 30 percent of payroll go towards paying down the unfunded liability, according to a January report from Matt Larrabee of Milliman, an actuarial firm that conducts PERS financial estimates.

Public employers will be forced to consider budget cuts, layoffs or tax increases to pay for pension costs.

The five-member PERS Board met Monday afternoon at their Tigard headquarters and discussed repayments ordered by the Oregon Supreme Court. The decision, Moro v. State of Oregon, mostly overturned pension reform efforts and added more than $5 billion in unfunded liabilities to the pension system because of compounded cost-of-living adjustments.