April-1-2019-BoardWorkSession-Segment-1
[00:00:00] Yeah, really good. Exactly. So we're starting the West Linn Wilsonville school board work session and we acknowledge that tonight. It's a joint meeting with the budget committee and. Have one member on the phone. We'll make sure she gets a chance to identify yourself. Dr. Reynolds is gone to the National School Board Association, and we'll be reviewing the video after that not participating before go ahead and do roll call and then I have one other thing to say here.
here. Extra high here [00:01:00] here.
All right. And is that Kristen Wiles on the phone? Wyatt Hurston? Can you hear us Kirsten? Okay. Thank you. I want to acknowledge as dr. Ludwig did this morning that there was a fire in Villa, Blanca? The Wilsonville community near Lowry and even if we didn't directly have families who were impacted it impacted the neighborhood and I can tell you that because that's my neighborhood too.
And so we do want to acknowledge and thank the responders who acted very promptly to reduce the damage and and that we are thinking of the staff and the family and impacted by those. Dr. Ludwig.
Thank you for that [00:02:00] reminder when a welcome also our citizen members of the budget committee who were able to be with us if Craig Nelson and Kirsten Wyatt newly on the budget committee and a Jeff Allen and Jim kawakawa. So thank you for for being here also want to. Just do a welcome back to Claire Howell who is back representing the tidings.
So it's good to have you back. We do have two guests who we will introduce Miss Hughes will introduce them when they come up to present, but I thought I'd just open.  with.
Do some context for this evening. This was a work session requested by the board to be a listening and learning work session on some more of the Deep dive into Budget Finance. This is not an evening wear [00:03:00] the board or the citizen members of the budget committee will make any decisions or you begin any deliberations on the upcoming budget.
This really is a. Session to provide context and information for when that time comes then as a group you will have that information in that context available to you. So it's a learning time for all of us. As board members, this is your role to authorize appropriate and adopt budgets. So this is very proper to have a work session that gives you the kind of background and deep dive information that you need going forward as a member of the budget committee.
But then also the final group that does adopt the budget. For those who might be new in the audience or others here with us tonight. The budget development really is about funding that vision and goals of the school district and taking a look at the revenue. And the expenses and making [00:04:00] sure that there's a balanced budget going forward that fulfills the the mandates of an education for children and funds the vision and the goals of the school district.
We've got a compelling Vision. It's very familiar to all those at the table that really does drive us to think about the appropriation of our resources. And these are School Board goals ones that talk about student achievement professional growth. Development encouraging Community involvement and then a fourth goal that was added this year around being responsive to community growth and student learning needs by also doing some long-range Capital Improvements and financial planning.
And in order to do that. This is another reason for tonight's learning session is to think about those components that go into financial planning for long-term stability and sustainability. So this is in response to one of the board goals this learning session.  [00:05:00] Our investment strategies when we think about our board goals are most of them very well known in our community.
We've kept these for a number of years and with every budget we've talked about in response response to our community asks as well as priorities. These are our investment strategies in order to meet. Those goals of particularly board goal number one.  and then the district develops a work plan that takes Vision the mission the board goals and aligns them into strategies and actions to implement how to take those board goals and put them into action.
And of course all of this is because we're committed to Student Learning outcomes and whether they're described in our work plan through other measurements of reading or math accomplishment or even our graduation rate the purpose of [00:06:00] having a robust and well thought out budget is to fulfill the mission of the district and Educational Learning for all children.
So when a budget is being developed in most of you know, this there's quite a process in a timeline and it begins as early as in the fall with indications from the governor about a perspective perspective budget proposal for K-12 education and we did get a number from the governor in November that begins to set some things in Motion in terms of some early predictions about budget.
There's an always that first Revenue forecasts and. Be wary that gives more information around budget. For us when there's new budget committee members in March. That's when we typically have an orientation and we did have that so all budget committee members would have the context they need in terms of going forward March 18th, the state school fund [00:07:00] was released and we heard from the ways and means co-chairs that they were proposing an eight point eight billion dollar budget.
So a hundred million less than what the governor had proposed. Tonight I didn't put April 1st, but tonight we have a learning session. On Wednesday night, we will have a community listening and learning session. This is an opportunity for the community to learn about a District's budget as this is an open and transparent process and everyone in the community has access to the budget.
It's option for them to learn how a budget is put together that's happening on Wednesday evening. And it's also an opportunity to get feedback from the community regarding those Investments as well as what they feel are important priorities as constituents in the community as part of the process.
Important to use the budget committee when you come to that time when you're deliberating to say what have we heard from the community about their priorities and their input what have you heard from [00:08:00] staff? What have you heard from associations? And so this is that time when we're getting some of that feedback, On April 22nd the superintendent.
I will give the budget message and give to each of you the proposed budget for the next school year 2019 2020 that will be a time to receive the budget message. There won't be deliberation that night because you'll have just gotten that document and then they'll be a week or two for you to unpack that to send in questions to read through it.
It's quite a dense document. Um, and then we gather back together on May 13th for a work session where your questions are answered and we have discussion about the budget the proposed budget if we need another meeting will have one on May 16th. What's kind of nested in between there the way that the dates kind of lineup is the second revenue forecast.
So we'll learn a lot again on May 15th. [00:09:00] So it's good that we have that 16th. We may want to just this year wait for that unless we feel we know more has been revealed that we feel we know what we need to and then on June 3rd if the budget has been approved by the committee, it goes to the board for.
So that's the proposed timeline for now, of course at any time as we get further in the process if more information is felt that is needed and we need to slow down budget committee can ask for additional meetings and then we just make sure we keep the timeline because if to inform the public by certain timeline and that we want to make sure we adopt the budget before the school year ends.
So can we get into next year? So, of course, this can be very brief. Judges have a lot to do with what's the revenue coming in? What are our Revenue sources and over the last year you had a number of sessions with Miss Hughes where she talked [00:10:00] about for funding sources the general budget fund special Revenue Debt Service and capital projects and kind of broke down each of those for you.
So we did some kind of Finance seminars on different aspects of budget and where Revenue comes in this is just a review. We also have available to us through statute an option to add ask the public for additional Revenue through what's called a local option tax. You might hear our guests refer to that and most of you at the table know about the local option.
This is something that does have to go to voters and where there is an ask for additional tax property tax place on property tax that we can collect we currently do have a local option tax. Tax and you can see that there was a dip for a number of years during the recession and then a slow climb since then.
We also have available to us what are called Capital bonds that we can [00:11:00] ask again of a vote of the community in these help with projects. So that a number of these projects don't have to come out of our general budget and we are wrapping up a capital bond that did help with building Meridian Creek and Sunset Primary School.
And I think most of you know that the board is considering a potential Capital bond in the future your future. So we've got the revenue those sources that come in to us and then we have general fund costs and it's not surprising that for most school districts. The largest expenditure is often personnel.
And then of course, there's some other components to that and this is I know a review for most of you. So who are Personnel we have both classified and licensed staff. This is just an example of our licensed staff count.
And then our investment in our licensed staff is because we [00:12:00] hear consistently from our community that class size is important that being on the lower end of that class range is preferred. There are times when we're on the higher end of the class range. It's always a challenge when we go beyond that and there are occasions when that may happen.
It's not the norm. It is the Rarity and we work really hard to keeping our classes within that range. You might your reference to priorities tonight, and I just wanted to make sure you had these numbers available to you. And then every month Miss Hughes almost every month has given you an update on.
Where are we with our current budget? So you've gotten updates on how we're doing with the proposed and the adopted budget and where are we with our monthly accounts? And each time we have had the report that we're on target that we're on on point with our monthly. Financial updates, [00:13:00] we do know that we had a local option increase which worked to our favor and so there was an adjustment in our budget to that which was nice to have and that our enrollment does continue to increase even with the closing of open enrollment and.
Some of the restrictions with inter-district transfers nevertheless. Our community is growing and so we do have that in our favor that we have enrollment increase but we also know that personnel and cost do roll up whether it's through inflation or cost of living and just the cost of having additional staff.
We also knew last year that we were going into a biennium with seeing significant pers increases and we'll hear about that tonight. That's why we're here to learn about the impact of that and that we can already predict without talking tonight about the 1921 biennium. We [00:14:00] know that just with those roll up costs.
We are at significant place in terms of some shortage and funding.
So as I wrap up here again, this is a review the governor did come out with a budget proposal of 8.9 seven billion the ways and means co-chairs came in under that by a hundred million and just for context every 100 million at the state level equates to about 750,000 per year for us. So just that difference you can see is significant.
Based on that 8.8 7 which is what school districts are now using and CFOs are using as they guide their School District budget processes and just rolling up then status [00:15:00] as is we could be looking at a possible. Three million dollar reduction need for each year of the biennium. So as you're charged as a budget committee is to have a balanced budget that we go forward with and you will make that determination regarding ending fund balance and tonight.
You'll learn a lot about set aside accounts and reserves and options for financing. We are at a place not unlike every other school district in Oregon where simply the proposed budget by the Ways and Means Committee is not enough and districts are. Into their reserves, they're tapping into their contingencies into their rainy day accounts.
And if you've been reading the news you're hearing about neighboring school districts that are already putting forward to their communities in their listening sessions reductions that will need to be made we know there are things we can't reduce [00:16:00] we know that federal and state grants that come earmarked for certain programs are the are for those programs.
We know that there's basic utilities and maintenance and transportation that just keeps a district functioning and we know that we have contracted obligations for our staff. So as you tonight, listen and learn and take notes, you'll be taking all of that into context for when we do come together and hear the budget message and hear about proposed reductions.
But in the space in between there's the listening sessions so Wednesday night, I'll be hearing from the community members. Who come what are your priorities? What would you want from a board? What advice would you give in terms of budget development for our board and our budget committee likewise, I'll do that with staff and also Association leaders so that you have that information available to you and tonight you'll be thinking about.
Knowing [00:17:00] that if this is the budget we're going into and it doesn't change by May or anything over the summer. What are the financial options available to you? And tonight you'll hear about a lot about pers and bonds and you'll hear about Capital bonds and any other questions you may have for the Samuels and mr.
Watkins. They're here too.  provide. Resource and information. So with that I'm going to turn it over to mrs. Hughes and then we'll invite our guests up to the table with us.
Good evening. Thank you so much. Dr. La [00:18:00] coach for the overview information before we go deep dive into per bone and website account. I think it's important for us to go over the basic / some of you here the basic purpose before and some not so I would like to test it opportunity to. Shared information and have everyone on the same page.
So a top now, we all hear that Oregon. / we are in the deficit of twenty five point three billion and how did we get there? So post and for public employees retirement system purse is a pension fund that decide to have public employees into their retirement public employees such as firefighter police officer school teacher people working for government County Community College [00:19:00] and / start in 1946.
So let's take a look at the first group of people who work for her. So start in a 1946. There's a group of people working for per every periods pay periods.  They're that group of employees and the employer make contribution to per photo Now using that money invest into most conservative. Upon speak with motifs upon Government Bond and that forward 25 years from 1946 until 1970.
At that time we have a system called money Matt, whatever money that employee put in that money generate interest from the conservative Bond. They will receive that money when they retire and the employer will match that money.  [00:20:00] However, the total value of the employees retirement benefits depend on inflation cost of living adjustment and life expectancy.
It turned out the interest rate that. Now born government pain learned from that retirement account was very low. It was so low that the employee received very low in pension and board member and legislator decide to make some change into the system.  So they let the pension manager to invest this money into stock.
What they earn more money for employees the account for this group of employee it growing also. This is a very critical part because the 1975 more member [00:21:00] establish a guarantee return rate to Public Employee and that guarantee rate is between seven to eight percent. So it doesn't matter how the market performance.
Employee guarantee seven to eight percent.
to let that blow another group cast are working for / since 1975 to all the way to 1999. So this group life the first group every pay periods. They make they own they put the money into the retirement money. But at if fun is the money that not get invest in bonds get invest in stock what they earn in more return for them.
So from 1979 to 1999 the Avatar to return rate on that investment is 15% was a way more than the guarantee right seven and eight percent.  [00:22:00] The money go into high risks and receive high return on investment. And then so this is a graph that shows you the average promise is seven to eight percent to return is 15% and more and a question we have for the poor born is where this money go.
The purple the first purple with Domination by public employees. So, of course, they vote that extra money go back to public employees that well. Disregarding, you know, we have financial advisor. I advise the said don't do that. We have to save money for the ruining day. They did not listen to that advice.
So when when Dick when the second group of employees retire, they received the money they put into that per with the high interest rate from stock [00:23:00] and then the employer matching that money and on top of that.  Because of the extra money at Double sent to 15%. Public employees receive that money too.
So it turned out they make more money than when they were working. And Darwin and day has arrived. So in 2001 we had top.com and then we have now won one we have the rich recession in 2008 our of that duplicate the power money and that y Oregon Probe on get into the deficit of twenty five point three billion.
They say.  this is the information for West Linn School District. [00:24:00] We have three group of employees Tier 1 and tier 2 right now. We have T1 and T2 a total employees 290 a employee FTE and then we have tier 3 with a table sir 653 employees. We have 70 employees that never help her before they are on the waiting list because when you work for the populace, you have to wait statement in order to qualify to be in poor and then we have a hundred sixteen employees that the cultural pay casual hire some of them belong to do want to do and some of them belong to the D3.
31 are the group of employees that higher before January of 2000 of 1996 and dear [00:25:00] to the group of employee higher between 1996 and before August of 2003 and until three or Oregon Public Service retirement plan Co-op, sir. This group a higher after August 9 up 2003 and before July first of 2004 the group of people never work in public pool before.
This one is the rate for the poor in biennium of 1921. You can see here 1917 and 1919 the Tier 1 and tier 2 right 18.5 6% But in this comment biennium the right to become 20 4.25 percent was a five point six nine percent increase. [00:26:00] Th-three in 1719. We have 13 point 23% it go up 18-point 80% with a five point five seven percent go up until 3:00.
So the 24 points 25 and 18 point 18. 80 this does not include a seat percent match from employer and it's also not included 7% unfunded liability that we have. This one when I can I use the same rate but I put a dollar amount India to converse so you can see how much it costs in this rights come and up Tier 1 and tier 2 in fiscal year 18 and 19 is about twenty one point six million x about 5.9 percent gonna we're looking into 1.2 [00:27:00] million increase in debt grew.
And then click group. We have 31 Million worth Five Points five seven percent increase will look into 1.7 million go now so between the two group, we look into 2.9 Million increase in the unfunded liability for rustic coming year. And the 2.9 Million donors include a 70 employees that waiting to enter into Pearl and then cash or higher that we have.
The right now we have a total perv reserve of 3.8 million and Our obligation for this coming years in minimum. 2.9. So we only have very little money. So this 923 really used to pay for the 70 employees that waiting and [00:28:00] 116 employees that casual hi.  So with this one. I would like to invite care of some you come and present in deep about site per side account and pull born and then after that then our house on random come up and present Capital bomb project for us hard copies of the presentation.
So fantastic, you're going to want to keep it.
Miss White will make sure you get a copy Miss Douglas will have one for you here at the district office.
Well, good evening [00:29:00] everybody.
As suddenly mentioned I am Carol Samuels. I'm with Piper jaffray. And for the most part you may have encountered us with regard to your general obligation bonds because that's what we do on a day-to-day basis and lucky Brendan gets to talk about those because that's the happier part of this presentation, but about 15 years ago.
I took a slight detour in my career to focus on pension bonds and as a consequence, I became Apparently one of the state's pension experts which is a little scary because as I've said many times before you may have heard me say this my knowledge of pers is kind of like Swiss cheese. I've got pretty good surface knowledge on a lot of subjects and [00:30:00] but there are some big black holes.
So as I go through this if you have questions don't hesitate to interrupt me, but I don't promise to know the answer. So picking up on suddenly. He's excellent presentation. A lot of the initial slides are repeats just with a slightly different format. What I want you to focus on is what's been going on for West Linn as well as for school districts, generally.
And I don't think the slope of the graph is going to come as any surprise. Basically what we're looking at here between 1998 and what's projected to happen. This July is what has. Proceeded with regard to your pers payroll rates, so they were pretty stable throughout the 90s, but then all of a sudden in 2001, they started to spike [00:31:00] considerably and unfortunately, if I were to add projections for a couple of biennial out you would see that the increases do not stop.
Wes Lynn's rates took a detour down here in 2003 because you sold pension bonds note that this line does not include the cost of your debt service. So although it is overall lower than the blue line. It's not that much lower when you add the cost of The Debt Service on top. Another way of characterizing the liability is to show you some slides that the pers board routinely gets from there actuary who is milliman and the key lines to focus on here.
Is this one which shows the unfunded Actuarial liability which is. [00:32:00] Actuarial speak for the shortfall growing between the 2015 valuation where it was 22 billion then in 16 it actually grew to 25 billion. And in 2017, which believe it or not is the latest official data we have on the system and went back down because 2017 was a good year the problem with this is even though.
2017 is the latest official information. We have we have unofficial information about what happened in 2018. When I'm sure all of you were a little anxious in November December as was I about the direction of our portfolio and the system did not perform well. So this is [00:33:00] the informal estimate of what happened with 2018 s data when you take into account what they have published as their rate of return for the entire year, which was just under half a percent for the entire seventy two billion dollar portfolio.
So what happens if they only earned half a percent? Well all of a sudden the UIL which just five minutes ago was 22 billion has grown back up to 26 billion. This gives you some impression of how critical rates of return are to the system's funded status and ultimately to what it does to your payroll Roots, but one of the things that is.
A little tricky to explain is that a large portion of the purse portfolio is invested in something [00:34:00] called private equity which are stocks that are traded privately. They're not traded on the stock market. And so they're valued irregularly their valued quarterly and at the last pers board meeting there was actually one today, but this data came from the February board.
Meaning they were suggesting that the private equity in the pers fund attributable to 2018 actually lost way more than what the funds Corpus did such that they were showing. Signs of maybe if you were a tribute the actual losses to the time that they were incurred 2018 was actually down 4% So what does that mean if rather than earning half a percent you lost four percent.
Well now all of a sudden the [00:35:00] you ALS up to 30 billion. Wow.
That's why we're having this conversation one piece of good news. I can share yay is there was a pers board meeting today that I attended this morning in which the rate of return through February. Had rebounded quite strongly they were up by 3.8% just for that two month period so if you extend that out over the course of the year, maybe we can offset the fact that 2018 was a bad year, but bottom line is the shortfall is not millions of dollars.
It's not even a small billions of dollars. It is somewhere between 22 and say 30 billion dollars depending on the rate of return [00:36:00] assumption use. That's obviously a lot of money. So yes.  Are we still operating under the system where there's a guaranteed rate of return of 78% but that if there's more than 70% their current retirees get anything above that.
Or we are we create a rainy day fund it for those those funds. So what suddenly outlined was the system that was in place prior to reforms that were approved by the legislature actually quite some time ago back in 2003 where. I mean this was a little bit like closing the barn doors after the horses had left because a large portion of tier one employee's particularly those you see headlining in The Oregonian sitting by a pool with a martini glass having retired at more than a hundred percent of salary very small [00:37:00] proportion of retirees, but that's the period of time that they retired because they.
We're getting crediting at above the Guaranteed Rate since 2003. The only rate they are credited is the assumed rate which in 2003 was 8% It has been ratcheted down over the course of the past five years and is now standing at 7.2. So it's better but. As I said before there was a lot of.  funds that exited the system with a current crop of retirees who the Supreme Court has said is basically Untouchable and where do those funds go that are over 7.2% Well if it come it.
Depends on which [00:38:00] category of employee were talking about for the most part it goes into the fund itself and it is used to defray the ual.
So what can you School District do about this fundamentally a big? Reduction in your costs associated with pers is not something you have control over. So if you want to see a big reduction in your class and or a big increase in Revenue to deal with your increase costs that's got to come from the legislature.
So what I'm about to talk about our smaller things that might help at the margins, but I would strongly encourage you to keep the pressure on your [00:39:00] legislators because the only way we're going to get through this is if they balance either the expenditure Side Of The Ledger or the revenue Side Of The Ledger, okay.
But with that one of the things that has been getting a fair amount of attention because the governor has been encouraging it is something called site accounts side account is just a fancy name. For a savings account that you put money in and is set aside at pers and used to pay down some of your annual costs.
So specifically what happens is you send funds to pers they set up a side account. It is drawn down over a fixed period of time. As long as you give them anything less than 10 million dollars that fixed period [00:40:00] of time is 20 years. If you should have a sugar daddy out there somewhere who wants to give you 11 million dollars and you want to give it to pers you get to pick your amortization but assume otherwise, it's a 20-year amortization which means that they will draw it down annually and use it towards your payroll rate.
It reduces the amount you have to pay out of your general fund. There are minimums the minimums for a brand new account is 250 thousand dollars or 25% of your share of the unfunded liability. So that would be 254. We have one. You do have one. Okay. However, it's a pretty old one and it is filled with Bond proceeds.
I will talk about why I don't think it's a good idea to put more money in your [00:41:00] existing site account momentarily. But under the assumption you wanted to create a new site account. You would need to send them a minimum of 250 thousand dollars and there are certain fuse and there's a process you have to.
Go through. Yeah, but then the funds that go into this set account. It's supposed to be so that we can utilize those funds were not drawing down on our general budget, but aren't those original funds don't they come from our general budget in the first place? Okay, so we just pay now so we don't have to pay overtime later.
Okay, so. Skipping to the end of my slide here because that is a very perceptive point that I want to emphasize. There are a lot of folks out there who are saying we need to get more money into the system because that will save us money and I'm here to tell you just shifting money. [00:42:00] From your general fund Troopers does not save you a dime because you could set aside that money and use it to papers.
The difference is that if you hold on to the money you are limited in terms of what you can invest that money in by investment statutes that are fairly restrictive mostly limits you to governments and Commercial paper and things that are. Sidered liquid and fairly safe. If you sent it to purrs purrs invest their seventy two billion dollar portfolio in a whole assortment of stocks and bonds and equities and private equities and commodities and other Exotica that historically return.
Much higher rates of return than [00:43:00] what you can earn. So it's important to recognize that the difference the savings depends on your opportunity cost.
Which is if you think that pers over time over the 20-year period thank you that they're going to hold your money is going to earn more than you are then that differential that Arbitrage if you want to use fancily Finance terms.  Is where you're going to save, okay?
so. You can use cash or you can borrow money if you don't have cash and send it to pers. Purrs will treat the side account the same way. Once you have a [00:44:00] side account. You can make any amount of deposit to it without paying additional fees. So there's no minimum. Once you create the side account.
There is one limit, which is the / says you can only send in money twice a year. But you know say you send them a million dollars. It sounds like you have just under a million dollars in your purse reserve and then next year you want to send in 50,000. You can do that. The one reason I don't think it's a good idea to send it to your current site account is they will limit secondary deposits after you've created the side account to a timeline of what remains on that side account.
So say you create a new site account this year that deposit will be drawn down over 20 years. Five years [00:45:00] from now you make another deposit that deposit will only have a life of 15 years. So given that pers by definition invests in riskier. Securities then you do as you start to narrow the timeline of how much time is left for them to deposit you are in my opinion exposing yourself to a lot more investment risk and your bond funds don't have much time left.
They have about nine years. So I also think that. Not commingling those funds make sense. So you can track how your mom's have been doing. Does that make sense? Is that answer your question Carol? I'm just going to clarify we have approximately 4 million in our pers Reserve. I didn't want to misunderstand that we have not decided what to do with that.
So that slide was just showing that if we used it [00:46:00] all we still wouldn't have enough to cover. One year, but the board the budget committee has not decided yet what to do with that pers Reserve. So we're I think for tonight we'll just say we have 4 million in pers Reserve apologies and a question and I think possibly something you touched upon this in one of our board presentations, but on the site accounts is what is the quoted average?
Rate of return on that we'll get to the okay. We're getting there. All right, perfect. At your leisure and you're going to tell us how much we have in the other account. Okay in the existing site account. Sure. Okay, so we have mostly talked about this slide what sources of cash might you have, you know the governor set up a task force last year where you know, they were certain that if they looked under every Rock [00:47:00] they would find vast reserves and property you could sell and buildings you could lease in then.
Selling leaseback, etc, etc. Fundamentally, what most school districts have are contingencies. Maybe purrs reserves that they've been setting aside and I'm often asked. Okay. Well if I've set aside a pers Reserve shouldn't I think about sending that in and the answer is yes, you should think about it, but also note that once you send it to pers, you ain't never getting it back.
So if that contingency is really funds that you feel comfort in holding onto and having control over because you may have some roof fall in or some other kind of [00:48:00] catastrophe where you really need resources, you lose all control of that money when you send it to purse there is definitely upside. In terms of the expected investment return but that's not a given either.
So just be aware. There are trade-offs that are not necessarily purely Financial that you want to keep in mind.
Okay, there is a bill that was approved in the 2018 legislature. That is an effort to sweeten the pot and give you more encouragement to set up a site account its Senate Bill 1566. I've also written down Senate Bill 75 in the title because 75. Is a bill that is currently in the legislature that is an amendment to [00:49:00] 1566 and embedded in this slide are commentary on what the original Bill did and how 75 would change it but 1566 is I said before was approved last year and it did two key things.
The first thing it did was create this thing called the employer incentive fund. The employer incentive fund is designed to give employers who make a contribution to the pers fund set up a side account a state match. It's a good idea. It does provide some additional. Benefit over and above the Arbitrage difference.
We were talking about previously the problem with it. Is that the sources they've identified for this fund as of last year's estimate. Totaled about 25 [00:50:00] million dollars overall that's million with an M when we've got a shortfall that's in the 25 billion dollar range. So unfortunately, it's not a very robustly funded fund.
Nevertheless it is expected to be available. Probably some time with cash in a couple of years and 2021 the way the Fun Works is that the match can be for up to 25% So if you were to send four million dollars, you would theoretically be eligible for up to a million dollars in state matching dollars.
There are minimums the minimums are way lower than the amount you need to set up a. Side account so assume you'd have to put in 250,000. There is a maximum of five percent of your ual were 300,000 dollars and there's a process by which [00:51:00] those employers who have an unfunded liability of two hundred percent of payroll or more are prioritized in the original Bill the prioritization period last six months.
In 75 Senate Bill 75 they shorten that to three months. Unfortunately, you are not one of those prioritized entities, so. Doesn't mean you're not eligible, but the prioritize entities go first. And then if there's money left over theoretically they could give money to you note that within those two categories prioritization goes first then everybody else.
The application is expected to be filled on a first-come first-serve basis. So we.