District warns PERS changes could add millions to Newberg SD 29J costs when pension bond relief ends
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Summary
CFO Nathan Rodell told the board that Newberg’s pension obligation bond and temporary legislative relief have reduced costs to date but will end in 2028, creating a risk of large employer-rate increases that could add $1.6M–$4.3M to expenses depending on the percentage-point change.
Newberg SD 29J finance staff warned the school board that state pension costs driven by PERS (Oregon Public Employees Retirement System) pose a material budget risk when the district’s pension obligation bond (POB) and temporary legislative relief expire.
CFO Nate Rodell explained that the district has benefited from earlier use of a pension obligation bond that provided a rate credit; that bond matures in 2028. Rodell used actuarial examples to illustrate the potential effect on the employer contribution rate and the district’s payroll: a 5 percentage-point increase in the employer rate would represent roughly $1.6 million more a year, a 10-point increase about $3.3 million, and a full illustrative 13-point jump roughly $4.3 million on the district’s current payroll base.
Why it matters: The POB created an effective rate credit by investing borrowed funds at a return higher than borrowing cost (arbitrage) and using those returns to lower annual PERS obligations. When that mechanism ends, the district may lose the credit and face higher net employer rates unless the legislature provides relief or the district issues a new POB. Rodell said the district has joined a market study with other districts to explore whether another POB is feasible and noted that investment returns and timing will affect outcomes.
Board members asked for clarification about debt service, the mechanics of arbitrage, and how increased payroll and earlier-than-expected payroll growth during the pandemic hastened the drawdown of POB balances. Rodell emphasized the statewide nature of the problem and said Newberg would continue to advocate for legislative solutions and to model the range of impacts as the 2028 maturity approaches.
Next steps: The district will receive updated actuarial rate-setting numbers in the coming fall/winter cycle that will improve accuracy for planning; it will also continue the market study about refinancing options and report back to the board with recommended smoothing or mitigation strategies.
Attribution: Details and figures in this article come from the PERS presentation given to the board by Nathan Rodell and related discussion with Superintendent Dave Parker during the meeting’s budget and pension briefings.