The Salem-Keizer School District is confronting a $20 million rise in pension expenses for the upcoming year. This increase threatens to absorb a large portion of the additional state funding that has been proposed for educational institutions. During a recent school board meeting on November 12, Superintendent Andrea Castañeda brought attention to this financial hurdle.
This surge in pension costs stems from the state’s investments not producing the anticipated returns. Consequently, local governments, inclusive of school districts, must shoulder a larger portion of the retirement liabilities associated with Oregon’s Public Employee Retirement System (PERS). Governor Tina Kotek has outlined a strategy that aims to dedicate an extra $515 million each year to school districts.
This means that Salem-Keizer would receive roughly $18 million more annually. Nevertheless, the projected increase in pension costs is set to outweigh these extra funds.
Pension cost increase raises alarm
Superintendent Castañeda noted that the escalating pension costs are a significant concern throughout Oregon. “This is causing a low-grade panic statewide,” she remarked. The budget assessment disclosed that the district currently devotes around $395 million to salaries and an additional $100 million to pension commitments from its overall budget.
For the next year, pension expenses are expected to surpass $120 million. Despite this obstacle, the district’s financial situation remains relatively robust following considerable cuts in the previous academic year. Unexpected additional state funding and various cost-saving strategies have led to a $9 million surplus in the district’s budget.
The district intends to utilize only $5 million from its savings, which will leave about $90 million in reserves by year-end. This financial stability should mitigate the need for further cuts next year, provided the proposed increase in school funding is approved. However, Superintendent Castañeda cautioned that sustaining this financial stability in the long run may prove to be more demanding due to escalating costs.
