The Salem-Keizer School District is facing a $20 million increase in pension costs for the upcoming year. This could consume much of the additional state funding proposed for schools. Superintendent Andrea Castañeda highlighted this financial challenge during a recent school board meeting on November 12.
The increase in pension costs is due to the state’s investments not yielding the expected returns. This requires local governments, including school districts, to cover a larger share of the retirement expenses for Oregon’s Public Employee Retirement System (PERS). Governor Tina Kotek’s plan aims to allocate an additional $515 million annually to school districts.
This would mean approximately $18 million more each year for Salem-Keizer. However, the anticipated pension cost hike would more than offset these additional funds.
Pension cost hike concerns district
Superintendent Castañeda emphasized the widespread concern about rising pension costs across Oregon. “This is causing a low-grade panic throughout the state,” she stated. The budget update revealed that the district currently allocates about $395 million for salaries and another $100 million for pension obligations from its total budget.
Next year, the pension costs are projected to increase to over $120 million. Despite this challenge, the district is in a relatively strong financial position after substantial cuts in the previous school year. Unexpected additional state funds and cost-saving measures have resulted in a $9 million surplus in the district’s accounts.
The district plans to draw down its savings by only $5 million, leaving approximately $90 million in reserves by the end of the year. The district’s financial stability should prevent further cuts next year if the proposed school fund increase is approved. However, Superintendent Castañeda warned that maintaining this stability in the longer term could be more challenging due to rising expenses.
