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INSIGHTS: Payroll and PERA give Colorado’s state workers jitters over how and how much

Author: Joey Bunch - March 28, 2018 - Updated: March 29, 2018

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PERABalu Bhayani, 71, worked as an engineer for the Colorado Springs water department for 25 years before retiring. He left a higher paying job up in Denver for the stability of the PERA benefits package. (Photo by Michael Ciaglo/The Gazette)

State employees have enough to worry about right now. It is inevitable they’ll be taking a hit in their paychecks or pensions as Colorado lawmakers try to fill a hole that’s at least $32 billion deep over the next three decades. And it’s not at all clear whether state workers will get a pay raise to offset that new cost this year.

The Public Employees’ Retirement Association shortfall is just one of several pieces of legislation that should give teachers, state troopers, highway workers and other public servants — and taxpayers — the willies. And their concerns, as told to me, aren’t just about how much they bill be paid, but also how.

Their anxiety is heightened by the brinksmanship rhetoric about Senate Bill 200. to fill the gap in the state pension’s ability to pay its obligations in the future.

The state Senate passed the bill on a voice vote Monday, and once it makes it out of the chamber, Democrats are sure to be waiting with lots of amendments. So far the  bill hasn’t picked up a single Democratic vote. That says big changes are on the way, and Republicans probably aren’t going to like the legislation as much when the amended version swings back to them.

If Republicans and Democrats don’t compromise before the session ends on May 9, the retirement fund for 660,000 state, local and school district employees could unravel in the next economic downturn, leaving them with peanuts to retire on. It’s the same plight as Social Security, except on the state level.

Moreover, if the state’s credit rating takes a hit, every nickel of interest paid taxpayers could quickly grow to 7 cents, and that adds up to millions of dollars in a hurry — millions that would come out of government services or require new taxes.

In July, meanwhile, the state is scheduled to switch the payroll system for about 33,000 state workers. That’s just one more thing, but in this case it makes people more nervous about the deals being made on their retirement.

Most people’s lives revolve around when they get their paycheck. It affects when they pay their mortgage, how much to take out in garnishments such as child-support or deductions for medical plans and savings.

In 2015, however, lawmakers decided it wasn’t a good idea for most of the state’s employees to get paid every month, while some get paid twice a month.

Switching to one payroll system helps the state in a couple of ways. With the current system, work and pay are anticipated, not a record of completion. If there’s overtime or some other differential, the money has to be added or deducted later on to even things out. The other reason is because the state has a new human resources and payroll system that works better with one payroll schedule.

The proposal came in the final days of the legislative session three years ago, when state budget director Henry Sobanet asked Rep. Dave Young to push through House Bill 1392.

A Democrat from Greeley who sits on the legislative budget-writing committee, Young thought it was a big change to consider so late in the four-month session, but Sobanet convinced him it was worth it. Without a single payroll system, the state would have to spend twice as much programming two payroll procedures into the new system.

“We save some money and improve our efficiency,” Young, who is running for state treasurer this year, said at the time.

The new system was supposed to start in July 2017, but it was pushed back because of problems implementing it. Now as the days wind down to the new start date this July, more monkey wrenches are flying about the Capitol.

Instead of being paid  twice a month, lawmakers could decide this session if it should be every other week, instead — 26 paychecks a year or 24. That’s the way most workers are paid elsewhere.

Most profoundly, the switch from “current” pay to “lag” pay creates a two-week window in July when workers won’t have any pay coming in. They would collect that money two weeks after they leave the state workforce.

With some forethought, lawmakers included a one-time loan of two weeks’ pay during the month the change happens. There’s no penalty for paying it back right away, but the loan from taxpayers could be extended out to three years at 0.91 percent simple interest. Workers who take the loan would have payments deducted from future paychecks.

That’s how the bill was written and debated, but three years later the state is reassuring workers on its website explaining the changes, “Details of how the loan works will be forthcoming.”

If all the state workers took a loan of two weeks’ pay, it would add up to about $90 million, according to the Department of Personnel and Administration. That’s money that could be balanced out relatively simply from the existing payroll account over three years. Just last week, however, lawmakers were considering whether they should move money from the larger state budget and earmark it in the payroll to cover the loans, just in case.

But, but, but … then what happens when workers pay back that money, or what happens if the amount appropriated is way more than is borrowed? A budgetary tangle, that’s what happens.

Remember how this was going to make the payroll system more simple and efficient? The Good Lord giveth, and the Good Lord taketh away. The legislature is much the same as the Good Lord in that regard.

If state employees are unsure if the payroll switch is a wise or reasonable request of them, they could look for reassurance from their elected leaders. But they might not like what they see.

A bill waiting to be heard in the House would exempt lawmakers and legislative staff from the new system and let them remain on the monthly payroll schedule. That, of course, defeats the purpose of what they did three years ago to do away with dual payroll system. The request comes from the top. House Bill 1247 is sponsored by the top Republican and Democratic leaders in the House and Senate.

Lawmakers created such a great payroll system that they don’t want any part of it for themselves. State workers should rest easy over pay raises and PERA.

Joey Bunch

Joey Bunch

Joey Bunch is the senior political correspondent for Colorado Politics. He has a 31-year career in journalism, including the last 15 in Colorado. He was part of the Denver Post team that won the Pulitzer Prize in 2013 and is a two-time Pulitzer finalist. His resume includes covering high school sports, the environment, the casino industry and civil rights in the South, as well as a short stint at CNN.