Burden is spread in PERA proposal
The Colorado Public Employees’ Retirement Association will seek legislation that will suspend benefit increases for current retirees, increase costs for employers and boost contributions by future employees.
“Everybody gets to have a little pain,” said Gregory W. Smith, executive director of the retirement system, who announced the package after the end of three days of meetings today in Colorado Springs.
The board of trustees voted 14-1 today on a package of changes it will propose to the Legislature. PERA manages the pensions of 566,000 employees and retirees.
State Treasurer Walker Stapleton cast the lone dissenting vote and said the proposed changes leave the system still vulnerable, as well as threatening school districts’ general funds.
The proposal is based on an expected annual return of 7.25 percent, which Stapleton said was unrealistic and unsustainable.
It also would compel local school districts to devote 25 percent of their employees’ salaries to PERA, instead of to educational priorities such as additional teachers or technology, Stapleton said. “It will make PERA the biggest cost driver we have of budget costs,” Stapleton said.
School District 51 officials said they hadn’t seen the proposal and couldn’t comment.
Among the proposed changes:
■ Current retirees will go two years without annual increases, part of a move to bring them back to inflation;
■ Increased employer and employee contributions to the program;
■ Changes in the way retirees’ benefits are calculated.
The package will reduce the system’s $30 billion unfunded liability by an immediate $4 billion and bring the plan into compliance with standards in 30 years, Smith said.
Current retirees won’t see any annual increases for two years and when those cost-of-living increases resume, they will be capped at 1.5 percent annually.
Raises for PERA’s current retirees have placed them about 4 percent ahead of inflation, so the system is “sort of resetting to keep them in lockstep” with inflation, Smith said.
Under current law, new retirees have a one-year waiting period to receive the annual increase. Future retirees will have to wait three years to see the increases.
Taxpayers will pay more, as employer contributions would increase to 22.15 percent, up from 20.15 percent.
PERA members hired before 2020 would see their employee contributions rise by 3 percentage points and those hired after 2020 would see their contributions increase by 2 percentage points.
The board took into account the need to keep state government and school districts competitive with other employers, Smith said. “A lot of the board’s focus was on competitive advantages that our system provides and making sure we don’t undermine them,” Smith said.
PERA’s proposed legislation also includes a mechanism that would allow the system to respond to economic and demographic changes by adjusting contributions and annual increase amounts based on the financial condition of the fund.
The Legislature is responsible for setting those rates.
No legislator had volunteered to carry the measure, though Smith said the system has been in touch with leadership in both houses and on both sides of the aisle. Stapleton said he would oppose the measure in the Legislature.