When COVID-19 shut down Colorado’s economy, lawmakers withheld a chunk of money from the Colorado Public Employees’ Retirement Association in an effort to shore up the budget. Now that the economy has stabilized, lawmakers should give that money to PERA, but it’s more than a little over-the-top for the pension to demand interest too.
As lawmakers debate whether to include the demanded $79 million in the next budget, they should think long and hard about whether PERA would have asked for less money from taxpayers had the stock market crashed instead of boomed during that time. The answer of course is no. Had the stock market crashed, PERA would be asking for more money to keep its actuarial tables on track and avoid a default in the decades to come.
Paying PERA from the general fund was a bad idea, but setting the expectation that the state will also pay interest on missed payments is a disastrous precedent.
As Colorado lawmakers debated how best to shore up the state’s pension, The Denver Post editorial board urged more of the burden fall on the current retirees who benefitted the most from years of benefits that were too rich to be sustained by the fund’s growth.
We thought it unfair for taxpayers and current state employees to pay for years where the cost of living increases given to retirees were dramatically out of line with the low inflation rate, and critically, for blunders made by the pension managers selling years of service far too cheap and offering generous salary replacement. In short, those with state pensions were able to retire far too young with far too much wage replacement and annual increases out of line with reality. It could not be sustained. We lost that fight.
Retirees did see a substantial cut in their annual cost of living adjustment, which is unfortunate given that the cost of living is now increasing at a rate comparable to what their guaranteed increase was for decades before.
Also under Senate Bill 200m passed in 2018, current workers had to pay an increased contribution to their pension retirement and also saw a decrease in their expected benefits when they retire — they are paying more and will get less.
But taxpayers got hit on two fronts. State agencies — schools, human services, transportation, health department, etc. — have to chip in more for each employee. Some agencies are paying more than 20% of their employees’ salaries to the retirement fund. That is a huge strain, especially for schools. For comparison, the private sector pays only 6.2% for Social Security (workers also pay that amount) and companies that have a 401K match on average offer 3% although some offer nothing at all.
Additionally, state lawmakers agreed to pay $225 million — cash — from the general fund every year to PERA.
We think it incumbent on lawmakers to make good on that promise. PERA recalculated its assumptions based on SB 200. If lawmakers hadn’t pledged that money to the retirement fund, other cuts would have been made to set PERA on the right track. PERA is an enormous $64.4 billion ship that cannot just easily maneuver based on changes in the economy.
It is vital to Colorado’s retirees and the state’s economy that PERA stay solvent. Not only is keeping the promise to retirees the right thing to do, but if PERA flounders, many of those retirees will rely on the state and federal government as a safety net. Taxpayers would pay for it one way or another.
However, we are incensed that PERA has the nerve to now demand interest on the $225 million payment missed during the pandemic.
Lawmakers should kindly pay the missed payment and the next one, and officials at PERA should say thank you.
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December 07, 2021 at 01:25AM
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Editorial: Pay PERA what was promised and not a dime more - The Denver Post
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