Senate Bill 158 could shake up the PERA board that oversees Colorado’s $42 billion retirement fund for state employees and teachers, adding fewer representatives from the workforce, younger board members and more financial experts.
Sen. Jack Tate of Centennial and Rep. Dan Nordberg are sponsoring the bill, but state Treasurer Walker Stapleton, a frequent PERA critic, is behind the proposal.
“This bill will make sure that the board has a greater range of experience in investment management, economics, accounting, pension administration, or actuarial analysis, while minimizing the appearance of conflicts of interest in matters dealing with PERA’s solvency and the financial liabilities of the State,” Tate said in a statement released by Stapleton’s office. “As a result, we can look forward to a more intellectually honest discussion of what the future holds.”
Here’s how the changes work out:
The current board includes the state treasurer, three elected members representing state employees, four elected members from schools division, one elected member of the local government division, one elected member of the judicial division and two elected retirees. One ex officio trustee represents the Denver public schools division.
Three trustees who are not PERA members or retirees, but who qualify as experts, are appointed by the governor and confirmed by the state Senate.
The bill eliminates one member from the state division and two members from the school division. One of the two remaining members from state division and one of the two from the school division must be at least 20 years from retirement eligibility.
The board gains three experts who are not PERA members or retirees who are appointee the governor and confirmed by the Senate. The experts would have “significant experience and competence in investment management, finance, banking, economics, accounting, pension administration or actuarial analysis,” according to the bill.
A six-year member of the PERA board, Stapleton said it is “in desperate need of some independent voices that understand finance.
“I don’t care if these board members are a Democrat, Republican or unaffiliated. I have witnessed first hand how CEO Greg Smith has run roughshod over of a group of well-intentioned people without a background in finance, who make up the majority of the board. It’s bad for PERA members and taxpayers. In the case of PERA’s governance, the tail is wagging the dog, and PERA executives are desperate to see it stay that way.”
Stapleton was on the losing end of a 7-3 vote to block a 3 percent cost-of-living raise for Smith in December after Smith received a 20 percent raise in August 2015.
The group Secure PERA opposes the bill, citing:
— Current Trustees have the skills, knowledge, and experience to effectively manage the fund. All Trustees are required to attend educational workshops on investments, actuarial practices, benefits administration, and other topics related to serving as a fiduciary. Additionally, the Board employs a professional staff and many consultants who are experts in all areas of the Board’s responsibility.
— The PERA Board administrative model represents the best practices in governmental pension plan governance. Research by Boston University Asst. Professor of Law David H. Webber shows that when there are elected or “beneficiary” members of boards, the investment returns are better.
Board composition was modified in 2006 when three Governor-appointed and Senate approved Trustees were added to the Board.
— The Board makes recommendations to the General Assembly but it is the General Assembly that ultimately decides what the benefits structure should look like and what the contribution amounts should be – not the PERA Board.
— The provisions of the bill are discriminatory due to the mandate that two seats be held by members who are more than 20 years away from retirement. No one older than 45 could be elected for his or her first term for a seat with the 20 years from retirement eligibility criteria since members can retire at age 65 with any amount of service. This bill may also exclude some members older than 30 from being on the Board when first elected since some members can retire at age 50 with 30 years of service.
Lynea Hansen, Secure PERA’s executive director, said Stapleton insulted the board members he should be trying to work with.
“The PERA Board serve in volunteer positions and work very hard at educating themselves about PERA and to ensure sure PERA is there for future generations,” Hansen said. “To insinuate differently is grossly underestimating his colleagues. As for both of the bills Walker has ‘introduced,’ Secure PERA opposes both of them as neither are in the best interest of PERA employees or retirees, they are simply a power grab by Walker as he launches his run for governor.”
The bill is scheduled for its first hearing before the Senate Finance Committee at 2 p.m. on Feb. 14. Happy Valentine’s Day.