Sep 16, 2006

Troutdale's PERS Cost Likely To Decrease

PERS costs for the City of Troutdale will likely decrease for 2007-09 from 15.3% to about 14.2% percent of worker salary in 2007-09, according to an article in the Statesman Journal.
State Government -
In a major turnaround, the cost of Oregon's state pension system will fall next year, shaving benefits payouts for the state, school districts and other local governments.

This would be great news for Troutdale. Our general fund budget has been hammered by increased PERS costs for several years.

Technorati tags: PERS, City of Troutdale


John Eyler said...

Candidate Saxton has made PERS reform a central theme of his campaign. Do you feel he is on the right track and do you support him on this issue?

Troutdale Councilor Canfield said...

Yes, I believe Saxton is on the right track with respect to PERS reform.

Why does a PERS rate of even 14% of worker salary matter for the City of Troutdale and other government bodies?

The Oregon Constitution limits the amount of property value subject to taxation. The value limit is called maximum assessed value (MAV). The limit was established for all property in existence in 1997-98 by a formula described in the constitutional amendment, Measure 50. MAV for new property is computed using a different formula also contained in the constitution.

Once established, the MAV is allowed to increase each year by no more than 3 percent. There are exceptions to this limit, however. The addition of a new structure, major improvement of an existing structure, and subdivision or partition of the property are examples of exceptions that would increase MAV by more than 3 percent.

Each year the MAV and real market value for each property are figured. The property is then taxed on the lesser value, which is called the taxable assessed value.

The Oregon Constitution also sets limits on the amount of property taxes that can be collected from each property tax account. These limits are often called the "Measure 5 limits."

To figure these limits, taxes are divided into categories described in the constitution. The categories are: education, general government, and non-limited, which is usually general obligation bonds. The limits are $5 per $1,000 of real market value (RMV) for education taxes and $10 per $1,000 of RMV for general government taxes.

If taxes in either category exceed the limit for that property, the taxes are reduced or "compressed" until the limit is reached. Local option taxes are compressed first.

If the local option tax is compressed to zero, and the limit still hasn’t been reached, the other taxes in the category are proportionally reduced.

In Troutdale's case, when you combine PERS costs,union contract mandated annual employee cost of living raises of 2.5 to 5% per year,required longevity raises for some employees, and health insurance costs, you're talking about an expense line that goes up pretty fast.

Compare these rising expenses to the revenue side of maximum assessed value increases of 3%, and you have a recipe for mathematically guaranteed insolvency within a matter of years.

I don't want anyone to get the wrong idea. Government workers in Troutdale and elsewhere deserve a pension plan that is fair and equitable to everyone. However, current AFSCME contract COLA increases combined with high PERS contribution rates will eventually become unsustainable.

Troutdale's general fund reserve has been shrinking for years. The only revenue source keeping us above water has been building permit revenues, which will eventually become minimal when we reach buildout.

Finally, add in increases over the next several years of Troutdale's fire protection service fees charged by the City of Gresham for fire service.

It's not a pretty picture. But additional PERS reform would definitely be in order.

FYI I have a dog in this fight. I have a Tier 1 PERS account from a previous job. So when I say additional PERS reform is needed, I'm biting my own hand.