Colorado House gives preliminary OK to a pension fix
Author: Joey Bunch - May 1, 2018 - Updated: May 10, 2018
On the night of the 111th day of the 120-day legislative session, the Colorado House finally voted on what was hailed as one of the most important bills before the General Assembly this year, a fix to the underfunded state pension plan that has the potential to collapse the state’s credit rating.
Senate Bill 200 was approved on a voice vote Monday night. The bill still must pass on a recorded vote in the chamber, which would send it to a conference committee from each chamber to work out a compromise. The House and Senate must agree before the legislature gavels out by midnight on May 9.
On its current course, the Public Employees’ Retirement Association would come up $32 billion short of what it needs to cover benefits within the next three decades. The pension plan has 586,634 members.
“I think we’re making an excellent start that will get us to a 30-year, fully funded status for PERA,” said House Majority Leader KC Becker, D-Boulder, one of the co-sponsors of the pension fix.
Another co-sponsor, House Finance chairman Dan Pabon. D-Denver, said, “This is a historic night and a historic bill, because it puts us on that path.”
The fund could go insolvent in a recession, leaving retirees in a lurch, but even before that a shaky credit rating would drive up the interest rates for all manner of government borrowing. That would cost programs and services and potentially drive requests for future tax hikes.
Democrats have pushed to have the state put in $225 million each year directly from the state budget, which is about $29 billion this year`. The bill, however, doesn’t guarantee future legislatures will make good on that amount of money, if times are tough.
The bill, the way it’s currently written, would include a trigger to keep the pension in balance. If things get out whack, retirees and current employees would lose benefits or pay more into the fund, respectively.
Retirees would see their cost-of-living allowances shrink from 2 percent annually to 1.25 percent.
Monday night the House added another layer of oversight to the fund — a legislative committee of experts appointed by House and Senate leadership from both parties.
Republicans want to include an option for future employees to opt out of the pension and put their retirement savings in 401(k)-type investments. The state would pay a subsidy into the pension, to help offset the contributions of employees not in the pension.
The privatized retirement option will likely be a big part of the compromise discussion.
Rep, Justin Everett, R-Littleton, spoke directly to those potential state employees from the House floor.
“This is going to give you more control over your portfolio, not the whim of politicians,” he said.
Becker said that investment strategy doesn’t provide the retirement security of guaranteed income from a pension fund, and it ” just shifts responsibility on to the government to take care of people in their old age.”
Republicans tried an amendment Monday night that brought attention to the fact that legislators have the option of using private investments.
“Not offering this to other employees of the state of Colorado, when we’re offered that, it’s elitist, it’s insulting, and it’s what Washington, D.C-style politicians do by exempting themselves from laws,” said House Minority Leader Patrick Neville, R-Castle Rock.
Democrats defended a House committee amendment that would allow Department of Corrections employees to get a better retirement plan with earlier retirement opportunities equal to that of state troopers.
Rep. Susan Beckman, R-Littleton, said it should be considered outside the effort to fix PERA.
“This amendment is inappropriate for the discussion we’re having to try to save PERA,” she said.
Rep. Matt Gray, D-Broomfield, said those new employees would pay more into their retirement plans, and it recognizes Department of Corrections as law enforcement officers who have dangerous duties.
“This is not a gift,” he said. “This is not something we’re doing to be nice to them, but it recognizes their service.”
House Republicans also tried and failed to restore the retirement benefit calculation on the average of the seven highest paid years, the way the Senate passed it. Democrats in committee lowered it to five years. Currently retirement is based on the three highest years.