From staff and wire reports

Units of local governments and public school districts face sharp increases in pension costs for the new biennium starting July 1, according to the state's Public Employees Retirement System.

The increase to agencies and districts will average about 5 percent of total employee payroll. The money goes to covering the pension system's costs, including stock market losses on pension fund investments before 2003.

Yamhill County took a big hit two years ago.

The news wasn't as bad this time, according to John Krawczyk, the county's chief administrative officer. The county's rate will go from 14.2 percent of payroll to about 15.5 percent.

"Our increase was one of the smallest," Krawczyk said. "Still it's a lot to pay for retirement."

The proposed new rate for school districts is a uniform 17 percent, up from just over 11 percent during the current biennium.

It would be greater, but the schools opted to split the increase they had coming in half in order to lessen the impact. Under the plan, they can expect another hike two years hence, adding about four more percentage points to their burden.

Some districts, including McMinnville, sold bonds to raise money to pay PERS off in a lump sum for its market losses in the recent economic slump. As a result, they should see their rate come in significantly below the 17 percent mark.

They now have bond payments to make as well, of course.

However, David Horner, director of business services for the McMinnville School District, thinks districts taking that approach should come out ahead in the end. "It should still save us money, even if the rate goes up," he said

The city of McMinnville is currently at 12.93 percent. It has been told to expect an increase of 4.85 percent, which would put it at 17.78.

A rate of 18.8 percent was initially projected for the current biennium. Legislative reform measures cut it almost six percentage points, but the reform package has been subjected to a union legal challenge now pending before the Oregon Supreme Court.

Like most other entities falling under the PERS program, the city is setting aside the difference in case it has to pay up. It figures to have more than $750,000 socked away in its PERS reserve fund by June 30.

State government has the most to gain or lose, of course, because it has the most employees. Each percentage point of its PERS rate, up or down, means a swing of $17 million a year.

Before the legislative reform package went through, the average rate for schools and other units of government around the state was 16.5 percent of payroll. The reform package cut that to a much more manageable 10.6 percent.

Even with the reforms, though, the average rate for the coming biennium has soared to 18.9 percent of payroll. And an adverse court ruling, negating the reforms, would no doubt push it several percentage points higher - possibly to the 25 percent mark.

PERS adjusts what it charges agencies and schools every two years. Employees covered under PERS include those who work for state, county and city government, and school system employees.

PERS officials said it is possible that the magnitude of the increases could be reduced, depending on how its investments fare in the remaining months. The PERS fund earned a respectable but not spectacular return of 14.5 percent last year.