Oregon's public pension system is not broken. It is unfinished business, and for the first time in years the finish line is visible.
The Oregon Public Employees Retirement System (PERS) is a promise. It is the promise made to the teacher who spent thirty years in a classroom in Coos Bay, the firefighter in Bend, the water operator who kept a small town's taps running through every winter storm. Those promises are kept by the agencies we all depend on: school districts, cities, counties and special districts across the state.
For most of the last two decades, conversations about PERS have been framed around fear: rising rates, crowded-out budgets and headlines about billions in unfunded liability. Those pressures are real. But the latest numbers tell a more hopeful story, and they point to a practical path from where PERS is today to a fully funded system in the next decade.
Where PERS stands today
PERS is roughly three-quarters funded, and its actuary projects the gap could close by 2034 if investment returns hold up.
"Funded status" compares the assets PERS expects to have against the benefits it expects to pay. The shortfall is the unfunded actuarial liability, or UAL. Here are the key figures:
Measure
Figure
Source
Funded status, Dec. 31, 2024 (excluding side accounts) = 73%
Funded status, Dec. 31, 2024 (including side accounts) = 77%
Unfunded liability reported in the 2024 annual financial report =$29.4 billion ($24.0 billion with side accounts)
Assumed long-term investment return = 6.9%
Oregon State Treasury, Oct. 2026
Projected year the UAL could be eliminated = 2034
Oregon State Treasury, Oct. 2026
The momentum is real. On September 25, 2026, the PERS Board trimmed employer base rates by 0.35% for the next two years and held the assumed return at 6.9%, decisions made possible by two years of healthy investment returns. The Oregon Investment Council also adopted a new asset allocation projected to return 7.3% over the next four years, shifting weight toward public equity and fixed income and away from private equity.
That said, relief is not here yet. Under the system's "rate collar," employer rates cannot fall meaningfully until PERS reaches about 90% funded, which the State Treasurer estimates is roughly six years away. Meanwhile, pension obligation bonds that have been offsetting rates are expiring for 144 participating employers, and more than half of school district side accounts end their terms in 2027. Many agencies will feel more pressure before they feel less.
How we got here
Today's gap is mostly the cost of past decisions and past markets, not of today's employees.
PERS has been fully funded before. Its annual financial report shows the system above 100% funded in 2014, sliding to about 92% in 2015, 83% in 2017 and about 76% by 2020. The causes are well documented: investment returns that fell short of assumptions, updated actuarial assumptions (including longer life expectancies) and the generous Tier One benefits promised decades ago, sometimes in place of pay raises during lean years.
Oregon has already acted several times. Reforms in 2003 created the less costly OPSRP plan for new hires. In 2015 the Oregon Supreme Court's Moro decision struck down much of the 2013 cost-of-living reductions, a reminder that benefits already earned are legally protected and that savings must come from other levers. In 2019, Senate Bill 1049 re-spread the Tier One and Tier Two liability over a longer period, capped the salary used in benefit calculations and redirected part of member contributions into a separate account while the system is below 90% funded. In 2018, Senate Bill 1566 created the Employer Incentive Fund and the School Districts Unfunded Liability Fund.
As the Oregon School Boards Association put it this spring, schools are paying now for decisions made by policymakers who are long gone. The good news is that each reform has moved the system closer to stability, and the remaining work is clearer than ever.
What could carry PERS to full funding
No single fix will close the gap; steady discipline across several levers will.
Pay now, save later. In May 2026 the PERS Board chose to keep school district rates at 13.95% of payroll rather than roll forward a temporary credit to 12.27%. Milliman estimated the lower rate would have cost districts roughly $1 billion more over the next decade. Resisting the temptation to defer costs is the single most powerful habit the system can keep.
Realistic, prudent investing. The 6.9% assumed return and the new diversified allocation balance ambition with caution. Keeping assumptions honest prevents the surprises that created much of today's gap.
Targeted state dollars. The Employer Incentive Fund, financed by sports betting lottery proceeds, matches 25% of qualifying employer side account deposits. In its second cycle, employers deposited about $136 million and received about $34 million in matches. Continuing and expanding funding like this, along with one-time money such as the School Districts Unfunded Liability Fund, buys down debt at a lasting discount.
Smart use of side accounts. When an employer prepays part of its liability, the deposit is invested alongside the pension fund and lowers that employer's rate for years. With many side accounts expiring in 2027, agencies have a decision to make about renewing them.
Stable, predictable policy. The rate collar, intergenerational fairness and a firm commitment not to re-amortize debt again all keep the system on course.
Reasonable people disagree on some of these choices. Some argue for benefit changes or a shift toward defined-contribution plans for new hires; others warn those changes are legally limited by Moro and could hurt recruitment. Either way, the levers above are within reach today without reopening those debates.
What your agency can do now
Full funding is a statewide goal, but it is reached one budget at a time. Every city, county, school district and special district has a role to play.
Know your own numbers. Your agency's advisory valuation from Milliman shows your share of the liability and your projected rates. Read it, and make sure your council or board understands it.
Plan for side account expirations. If your side account or pension obligation bond offset ends soon, model the rate jump now rather than discovering it in budget season.
Build a PERS reserve. Setting aside even modest amounts each year gives you the option to make a side account deposit when match funds open up.
Watch for Employer Incentive Fund cycles. A 25% match is a meaningful return. The minimum deposit is $25,000, it must come from cash on hand rather than borrowed funds, and matches go first come, first served.
Put pensions in your long-range forecast. PERS costs belong in a five- to ten-year forecast alongside wages, capital needs and utility rates, so trade-offs are visible early.
Agencies like Deschutes County and the Sisters-Camp Sherman Fire District have already used reserves and state matching funds to prepay their liabilities. Their example shows what preparation makes possible.
How Veritas Imperium can help
At Veritas Imperium Consulting, we help Oregon's public agencies turn PERS from a source of anxiety into a line item they can plan for with confidence.
Based in Eugene and serving municipalities, special districts and public agencies across Oregon, we bring hands-on public finance expertise to the questions PERS raises:
Long-range forecasting that models your PERS rates, side account expirations and bond offsets over five to ten years, so your board sees the full picture before decisions are made.
Budget preparation that builds pension costs and reserves into a balanced, defensible budget.
Side account and Employer Incentive Fund analysis to help you decide whether, when and how much to prepay, and whether a reserve strategy makes sense for your agency.
Clear explanations for councils and boards, translating actuarial reports into plain language your elected officials and community can trust.
Interim finance leadership when your finance director has left and PERS planning cannot wait.
We treat public sector financial leadership as a craft, and we measure success by your agency's long-term health. If PERS is weighing on your next budget, a 20-minute conversation costs nothing, and you will know right away whether we can help. Contact us.
A promise worth keeping
A fully funded PERS would give retirees peace of mind and free up dollars that schools, cities and districts could spend on classrooms, public safety and infrastructure. That future is not guaranteed, but it is within reach. It will come from patient choices made in thousands of budget meetings across Oregon, and every agency that plans ahead brings the whole state a step closer.
