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WEDNESDAY, APRIL 17, 2019
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Governor Brown to unveil plan to help schools cover PERS costs
Claire WITHYCOMBE
OREGON CAPITAL BUREAU
SALEM — Two elements make
budgeting a painful math exer-
cise for the Umatilla School Dis-
trict: employee health benefi ts and
retirement benefi ts.
Right now, the school district
pays about 8 percent of its budget,
or $1.2 million, to the Oregon Pub-
lic Employees Retirement System.
In the next school year, that cost
will go up an estimated $46,000.
That may not seem like much,
but for Umatilla it could mean cuts
— especially if the state doesn’t
come up with more money for
schools.
“If there’s any type of increase,
that is a direct hit to what we can
offer to students,” said Superin-
tendent Heidi Sipe. “…PERS is a
larger and larger percent of those
expenses that’s hitting us harder
and harder each year.”
Gov. Kate Brown wants to help
Sipe and her colleagues in districts
across Oregon by diverting state
money to pay part of the districts’
retirement bill. She is scheduled to
unveil exactly how she would do
that in an appearance before the
Capital Construction Committee
Friday.
Brown’s proposed budget
already is intended to help districts
maintain the district’s current staff,
HH fi le photo
Second-grade teacher Sue Smith holds out a cue card while teaching her class about the calendar in September
2014 at McNary Heights Elementary School in Umatilla.
Sipe said.
But legislative leaders have
released a lower tentative budget
that means Umatilla may have to
cut one teacher and two assistants.
That makes a difference in a
district with about 90 teachers and
roughly 330 personnel altogether.
“Every cut hurts,” Sipe said.
The rapidly growing cost of
retirement benefi ts is putting the
squeeze on school districts across
the state.
Larger school districts are brac-
ing for eye-popping increases until
2035.
Brown wants to make those
leaps less dramatic.
Her goal: rustle up at least $2.46
billion between 2021 and 2035.
That money would go to a spe-
cial account to offset the increases.
Brown wants $800 million in
“seed funding” to get that account
started later this year.
Then, over time, the state would
dedicate more than $1 billion in
future taxes to help schools mit-
igate increasing assessments to
cover retirement costs.
The upshot is, if the state is help-
ing schools pay for those increases,
schools would be able to use their
money for other things — namely,
to keep teachers on payroll.
“She doesn’t want to see cuts
in teacher positions,” Nik Blosser,
Brown’s chief of staff, said in an
interview.
Where would the money come
from?
Brown is fl exible, Blosser said.
But she has some ideas.
They include using some of the
“kicker” income tax rebate, using
money from the state’s workers
compensation fund, and using any
higher-than-expected
revenues
from taxes on capital gains and
estates.
Brown signed a bill Wednesday
that would reduce the expected
2020 kicker by $108 million.
Brown is also proposing that
employees contribute money to
their basic pension, in an amount
depending on their salary and when
they joined government service,
until the system is fully funded or
14 years, whichever comes earlier.
PERS is a hybrid plan, mean-
ing there’s a basic pension and a
401(k)-style savings plan on top.
The governor’s idea is to reduce
the amount of money employees
contribute to the 401(k)-style plan,
and put that money toward paying
for the employee’s basic pension.
Employees wouldn’t see a pay
cut under that idea. But their bene-
fi ts would get reduced.
Cities worry about prevailing wage bill’s impact on development
By JADE MCDOWELL
NEWS EDITOR
A
bill aimed at regulating con-
struction wages has cities
worried major developers
will look elsewhere.
House Bill 2408, passed out
of committee last week, would
require private companies to pay
prevailing wages on construction
projects in Oregon covered by
enterprise zone tax incentives.
Projects under $20 million
would be exempted, according to
the bill’s current language.
David Stockdale, Umatilla’s
city manager, said the enterprise
zone is a “signifi cant” incentive
that has helped bring in data cen-
ters and other economic devel-
opment to Umatilla. He said it
seemed counterintuitive to coun-
teract the tax break with higher
construction costs.
“Enterprise zones have been
highly effective,” he said. “They
have had such a high success rate,
it’s troubling to see (the legisla-
ture) try to fi x something that’s
defi nitely not broken.”
Oregon’s current prevailing
wage law requires contractors on
government-funded projects to pay
wages above a certain rate set by
the Bureau of Labor and Industry.
Proponents say it prevents con-
tractors from depressing wages
in order to be the low bidder on
projects, encourages high-qual-
ity work and benefi ts workers who
take home more pay. They want
to see those benefi ts added to pri-
vate projects that are reaping the
benefi ts of temporary tax breaks
through an enterprise zone.
The League of Oregon Cities
has pushed back, asking its mem-
ber cities to submit testimony
opposing the bill. Stockdale said
he agrees with the League of Ore-
gon Cities that the prevailing wage
requirements in the bill might stifl e
economic development.
“Especially for projects right at
that $20 million threshold, it might
not pencil out anymore,” he said.
Hermiston mayor David Drot-
zmann has expressed his opposi-
tion to the bill as well. He tweeted
that it would “crush” one of the
only economic development tools
cities have left in Eastern Ore-
gon. During a city council meeting
last week he said that companies
looking to locate or expand in the
Hermiston area have not-so-sub-
tly threatened to take their busi-
ness across the river to Washington
if Hermiston is not able to provide
the right incentives.
He said if paying prevailing
wage had added just 10% to Lamb
Weston’s $250 million expansion
in Hermiston, that would repre-
sent an extra $25 million expense
for the company, wiping out most
of the money the company is sav-
ing through the enterprise zone tax
break.
“That can sometimes be the
pendulum swing that takes (proj-
ects) up to Washington or over to
Idaho,” he said.
Hermiston city councilor Jackie
Myers said in addition to increas-
ing labor costs on the construc-
tion side, in her professional life
she has performed the accounting
for projects involving prevailing
wage, and “you need a full-time
accountant to keep track of that.”
Drotzmann said when Knerr
Construction of Hermiston worked
on the Eastern Oregon Trade and
Event Center they had to pay a
separate consultant to handle the
large amounts of paperwork and
accounting involved in complying
with prevailing wage requirements.
“This is potentially a killer to
economic development,” he said.
The bill passed out of the House
Committee of Business and Labor
on April 8 on a 6-5 vote.
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