Written by: Colin Staub, Newberg Graphic 

City of Newberg fares better than some employers, particularly due to the TVF&R contract that began this year

The Public Employees Retirement System (PERS) Board met Friday and approved the 2017-19 employer contribution rates, meaning local governments and school districts now know, percentage-wise, how much more they are on the hook for paying into employees’ retirement plans during the coming two years.

For the city of Newberg, the news could have been worse.

PERS costs have been expected to skyrocket beginning next summer, a result of the April 2015 Oregon Supreme Court decision to partially void legislation that reduced PERS benefits, and therefore cut costs to public agencies, for retired public employees.

The court decision did not affect 2015-17 contributions by government employers, whose rates were set by the PERS board in 2014 before the court ruling. Beginning July 1, 2017, PERS rates will jump up again, leaving many public employers until now wondering just how much they will need to come up with to fill the hole.

The Newberg increases are broken down into three categories of PERS wages. The city’s contribution rate for the Tier One and Tier Two category (the city has about 34 employees in this class) will increase 5.23 points up to 20.32 percent, while its Tier Three general service category (9 employees) will rise 2.91 points to 10.02 percent; and its Tier Three police and fire class (16 employees, which doesn’t match up with the size of the Newberg-Dundee Police Department because some officers are in the other PERS categories depending on when they were hired) will jump up 3.57 points to 14.79 percent.

Out of the roughly 155 city employees, there are about 25 part-time workers who are not eligible for retirement benefits. About 72 other city employees are enrolled in the city’s in-house retirement plan, the Newberg Employee Retirement Plan, and rates for those employees’ plans are not directly impacted by the PERS ruling. The city’s contribution rates for the in-house plan are substantially higher than they are for PERS – almost double under some employee classes – and even with the new rate increases, PERS is a cheaper option for the city. That prompted the council in June to move that new non-represented employees hired after July of this year will enter PERS rather than the in-house plan.

It’s not precisely clear what sort of dollar figure the new PERS rates will translate into, and won’t be until staffing levels are confirmed when the budget is adopted next spring. But Finance Director Matt Zook calculated an estimate by applying the rates to the current budget, and came up with a roughly $225,000 increase in city spending in the first year, 2017-2018, due to the rate increases.

It may sound daunting, but it could have been much higher; particularly if the Newberg Fire Department had not entered into its contract with Tualatin Valley Fire & Rescue. Doing so moved 25 fire department positions out of the city’s responsibility, meaning the PERS increases for those positions will be borne by TVF&R instead. Finance Director Matt Zook said those PERS costs will likely ultimately be tied into how much the city pays TVF&R for service, but looking at the rate increases, not being responsible for those PERS costs saved the city a substantial amount of money in the short term.

This year Newberg’s budget committee moved to set aside about $180,000 in the current year budget, the idea being to partially offset the cost increase. That suggests the city needs to come up with about $45,000 more to fill the gap in 2017, but the number could be higher. Next year’s budget could affect the cost based on whether staffing levels are changed at all, and there are also multiple labor negotiations that are coming up in the next couple years. Increased wages through contract negotiations would almost certainly raise the city’s actual PERS contribution figure.

Another factor is whether the city puts all or part of the earmarked $180,000 toward the first year of increases (2017). Using the entire amount for the first year means a low impact that year, but it also means the city will have to either find more reserves to use for the following year (2018), or face a larger hole to fill during that year’s budgeting process.

But overall, with the city and the other roughly 900 public employers in the state now given a clearer idea of where they will stand, the work turns toward budgeting accordingly.

City Manager Joe Hannan said the question will come before the budget committee and the council, of how to fill the funding gap.

School district

Newberg Public Schools will see their PERS contribution rates rise quite dramatically.

According to district communications coordinator Claudia Stewart, Tier Three police and fire rates do not apply to the district, but it will see its Tier One and Two category contribution rate more than double from 5.64 to 11.69 percent and its Tier Three general service category increase from 0.95 to 6.36 percent.

In a statement released Monday, the district indicated the increases were bigger than expected and that it is examining their impact on the 2017-2018 budget.