The Gazette: Gov. Hickenlooper shields Colorado taxpayers from PERA trouble
Author: The Gazette Editorial Board - November 4, 2017 - Updated: November 6, 2017
Gov. John Hickenlooper is wise to protect taxpayers from new contributions to the Public Employees Retirement Fund, and he should hold his ground.
Hickenlooper released a $28.7 billion budget proposal Wednesday that counters the PERA board’s desire to increase taxpayer contributions to bail out the troubled fund.
The governor’s proposal is merely a guideline for the Legislature.
The pension aspect of Hickenlooper’s proposal puts the Democratic governor in agreement with most Republican legislators, who oppose increasing taxpayer contributions. Democratic legislators and public employee unions are expected to push for more taxpayer support of the fund.
With or without more money from taxpayers, PERA is the looming financial train wreck state Treasurer Walker Stapleton has warned about for a decade. The fund was in crisis in 2010, when it was only 64.7 percent funded relative to liabilities. Back then, the Legislature passed Senate Bill 1 to cut benefits and boost contributions.
The 2010 austerity measures were expected to reduce the unfunded liability. At best, they only slowed the rate of increasing debt. Nearly eight years later, funding of 64.7 percent has slipped to 58.1 percent.
The PERA board met in September in Colorado Springs and voted 14-1 for reforms that include cutting retirement benefits and significantly increasing contributions by public employees and taxpayers. Only Stapleton, a member of the board, had the wisdom to vote against the proposal.
The board’s plan requires legislative approval, setting the stage for a spirited partisan battle in the 2018 legislative session as Democrats play to public sector labor and Republicans defend taxpayers’ wallets.
“Everybody’s going to hate this — let’s face it,” said PERA board member Carolyn Jonas-Morrison, as quoted in the Denver Post after the September meeting.
There is no fun way to pay down a $32.2 billion debt.
The PERA board proposal would boost contributions by current state employees to 11 percent of their salaries, beginning in 2020 — a 2 percent increase. Employees hired after 2020 would contribute 10 percent, but would not become eligible for retirement benefits until age 65 — five years later than current employees. The plan would cap cost-of-living adjustments for retirees at 1.5 percent, down from 2 percent.
The PERA board’s plan calls for taxpayers to contribute 22.15 percent of the pension’s income, an increase of 2 percent.
PERA is a defined benefits pension, known technically as a 401(a) plan, meaning members are essentially guaranteed retirement incomes even if the stock market and economy collapse. It is a luxury few taxpayers working in the private sector enjoy.
At best, most of today’s private sector workers rely on 401(k) defined-contribution retirement accounts that can be wiped out by recession, depression, or a stock market crash. Yet, those taxpayers are the backstop that guarantees public employee pensioners receive benefits rain or shine. They potentially bear all the liability, with no prospect of enjoying the payout. It is only fair public pensioners pay more upfront for additional burdens of bailing out the fund.
PERA cannot continue its downward spiral and must be made whole. Private-sector workers pay more than their fair share. Gov. Hickenlooper is right to protect them from paying even more.