State public pension officials are holding town hall meetings around the state to warn schools, cities and public agencies that they will be clobbered by an unprecedented string of pension cost increases starting in 2017.
That is expected to be followed by persistently high contribution rates that will strap public budgets for at least a decade.
Blame the Oregon Supreme Court's rejection of lawmakers' 2013 pension reforms, investment returns that have lagged expectations in the last two years, and a number of changes in the system's economic assumptions.
The result is that the unfunded liability in Oregon's Public Employees Retirement System has more than doubled in the last year and now hovers at its highest-ever level. The last official estimate was $18 billion. But if current investment returns hold through year end, the deficit will exceed $20 billion.
In order to bail out, PERS will need to raise public employers' contributions to the system by about 4 percent of their payrolls in each of the next three budget cycles. And that implies public employers will need to tap their budgets for an extra $800 million per biennium starting in July 2017, another $860 million in 2019 and an additional $930 million in 2021.
Those rate increases are based on the assumption that the pension fund's investments deliver healthy returns of 7.5 percent annually. But even if the fund generates returns of 10.5 percent annually for the next four years, the initial rate increases "are locked and loaded," said the system's actuary, Matt Larrabee of Milliman Inc.
The size of the financial hit makes it a material problem for every Oregonian. It's billions of additional dollars that will be redirected to the pension fund instead of funding teachers, school days, reduced class sizes, police, firefighters, transportation projects and so on.