With reform fight looming, Colorado Republicans push to rein in PERA – The Denver Post
Republican lawmakers are forgingahead with a series of bills that would impose new restraints on the Colorado public retirement system and its managers, setting the tone for a debate that is all but certain to spill into the next legislative session and an election year.
On one thing all sides agree: For the second time since the Great Recession, the Public Employees Retirement Association finds itself in a precarious financial position. Retirees are living longer, and investment returns are lower than PERA expected when a broad reform package was passed in 2010.
The situation isnt as dire as it was then, but it has deteriorated to a point thatPERA officials will have to return tostatelawmakers with a plan tocut benefits, boosttaxpayer contributions or both to restore the pension system to its recommended funding levels.
So far, the battle for reforms is shaping up as a partisan fight, with Republican State Treasurer Walker Stapleton a potential gubernatorial candidate in 2018 at the center.
The Republican-controlled Senate this month passed a Stapleton-backed bill to cap taxpayer contributions at 2018 levels a policy designed to take additionalpublic supportoff the table as PERAs staff and board of directors consider how to shore up the systems finances.
Republicans say its a needed safeguard for taxpayers, whose contributions have gone up every year since the reforms took effect. Different divisions contribute different amounts. But as an example, school districts today are contributing45 percent more toward PERA than they were in January 2010.
This is an issue of such import, Stapleton told lawmakers at a committee hearing this month.The giant sucking sound of a drainis real and its coming for the budgets of our school districts and our cities and our government.
Democrats counter that Republicans are putting the cart before the horse, sayinglawmakers should wait for PERAs staff to complete its own review and make recommendations, after a planned statewide listening tour set for later this year.
I personally think that we should work closely with PERA rely on the professionals and actuaries who do this, Sen. Andy Kerr, D-Lakewood, who co-sponsored the 2010 reforms, said in an interview. Other peopleseem to think that throwing bombs is the better course of action.
Were nowhere close to where we were seven to eight years ago, Kerr added.
When the reforms were passed in 2010, PERA assumed an 8 percent annual return on its investments. That target was later reduced to 7.5 percent, then to 7.25 percent last year. Stapleton believes even that is too optimistic he has advocated for an assumed 6 percent return, which would make PERAs finances look even worse than they do now.
In reality, PERAs returns fluctuate wildly from year to year. Over the past five years, PERA has averaged a 7.5 percent return. Over the past 10, it achieved 6 percent, and over the last 35, it yielded 9.5 percent.
Caught in the middle of the legislative battle are PERAs550,000 current and future retirees, who fear what further changes will do to their retirement livelihoods. SecurePERA, a group that represents PERA members, argues that employees alreadybore the brunt ofthe sacrifices in the 2010 reforms.
Some of the increased taxpayer contributions effectively came from the employees pockets, because PERA took a portion of each annual pay raise employees would have otherwise received. Retirees took an evenbigger hit from benefit reductions, such as annual cost-of-living increases that were scaled back.
Other Republican-sponsored bills would shake up the membership of the board of directors and give the treasurer access to financial information that today is considered confidential, two moves that Stapleton says are neededto increase accountability.
PERAsboard of directors voted to opposeall three bills, and theyre unlikely to pass the Democrat-controlled House.
The Board did not believe that these bills would improve the administration of PERA or benefit the PERA membership in any way, Timothy OBrien, the board chairman, said in a statement.
The contribution cap measure, in particular,is largely symbolic. Current law freezes contributions in 2018, anyway and lawmakerswould have to pass a bill to change that. But it sends a message to the PERA board to think carefully before asking taxpayers to spend more.
Broader reforms arent expected tohappen until next year at the earliest. But the statement bill from Republicanscomplicates legislation that was expected to be introduced this year to addressthe judicial division, which is in the worst shape of any of PERAs retirement funds.
PERA officials have declined to say what solutions theyre considering to shore up the judiciary, but in a message to its members, SecurePERA, the advocacy group, suggested that higher taxpayer contributions are among the options beingnegotiated. Because it was in better shape than the other divisions in 2010, the judiciary was exempt from the contribution increases required ofother government agencies.
Many of the solutions the judicial division and PERA are talking about to reduce the number of years before the judicial division is 100 percent funded require additional employer contributions, SecurePERA officials wrote in a message to theirmembers. This bill would prevent that fix.
The early message from Republicans is thats just fine with them.
Maybe they need to come up with more creative financial (solutions), said state Rep. Justin Everett, R-Littleton, who sponsored two of the three bills. Theres other ways to skin a cat.
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With reform fight looming, Colorado Republicans push to rein in PERA - The Denver Post