By NICOLE MONTESANO
Of the News-Register
McMinnville may join a multicity lawsuit appealing the 2003 employer-paid rates for the Public Employees Retirement System - once the rate is set.
The city council voted unanimously Tuesday night to join the lawsuit, being coordinated by the League of Oregon Cities. The LOC sent letters to cities earlier this month, urging them to band together to sue the PERS board, accusing it of improperly calculating the rates and failing to maintain adequate reserves in case of shortfalls. However, the action is now on hold.
The cost per city to join the lawsuit is $150. McMinnville City Manager Kent Taylor told the council the decision was "a no-brainer," given that the city's PERS payment for next year is estimated at $2,000,150, a $453,000 increase over last year. The increase comes at a time when the city is facing a budget shortfall expected to require cutting services and possibly laying off employees.
But in a surprise decision, the PERS board, which also met on Tuesday, put off adopting the final rates for one month. LOC Executive Director Ken Strobeck said the move was apparently at the request of Gov. Ted Kulongoski, whom he said is believed to be working behind the scenes to expedite negotiations on the PERS issue.
No appeal can be filed until the rates are set. The PERS board sent estimated rates to the cities, school districts and other participating entities in December, but those numbers remain only educated guesses until the final rates are adopted.
Strobeck said he expects the board to adopt its final rates at its February meeting. Cities will then have 60 days to file their appeal, if they still believe the rates are too high.
Meanwhile, many cities are beginning work on their 2003-2004 fiscal year budgets now. McMinnville's budget committee is scheduled to hold its first meeting on Jan. 27. Because it can't afford to wait to start making the tough budget decisions facing it, the city will just have to assume it will pay the highest of the estimated rates given, City Finance Director Carole Benedict said.
"You go with the best numbers that you have. That's what a budget is," she said.
"You have to make the best decisions you can with the information that you have."
The League of Oregon Cities is relying on an opinion issued by a Marion County judge in a consolidated lawsuit brought by Eugene, Lane County, Multnomah County, Portland, Roseburg, Huntington, the Canby Utility Board and the Rogue River Valley Irrigation District against the PERS board.
Although the plaintiffs did not prevail in all of their complaints, Judge Paul Lipscomb ruled in their favor on several crucial points.
"As a direct result of the board's improper management of PERS, particularly in recent years, there have been funding shortfalls which should not have occurred if the board had been faithful to its duties under the statutes," Lipscomb wrote in his October ruling.
The LOC said in its letters to cities that the board had failed to obey Lipscomb's orders.
"PERS was ordered to recalculate the employer contribution rates for 1998 and 2000, yet those rates have not been recalculated, and the issues identified by the judge were not corrected before calculation of the 2003 employer rates. Therefore, the 2003 employer rate orders are inaccurate and likely inflated," Strobeck and LOC President and Beaverton Mayor Rob Drake wrote in their letter to the cities.
