Public workers may soon face benefits change
Teachers and government workers would have to pay more into their retirement accounts under a bill that won approval Tuesday in a Senate committee.
The measure, jointly sponsored by Senate President Brandon Shaffer, D-Longmont, and Senate Minority Leader Josh Penry, R-Grand Junction, also calls for raising the retirement age, lowering or eliminating cost-of-living raises and increasing contributions for the employees and the government agencies they work for.
Shaffer and Penry said changes were needed because most of the funds managed by the Colorado Public Employee Retirement Association are in threat of insolvency over their 30-year lifetimes.
“I don’t think anybody will stand up and say this is a perfect bill,” Shaffer told the Senate Finance Committee. “I don’t think anybody would stand up and say that this is a bill that they want to carry. We are here because of the economic circumstances that struck our nation and our state.”
Because of the recent recession and an overly generous benefits plan, PERA is facing $27.5 billion in unfunded liabilities, Shaffer and Penry said.
An audit of the state’s largest public-employee retirement system last summer revealed PERA lost about 26 percent of its investments in 2008. Losses or gains from 2009 are not yet known.
Penry agreed Senate Bill 1, which the committee approved 5-2, is an “imperfect plan,” but one that addresses the bulk of PERA’s financial troubles.
“If you think about the politics of this, a bill like this is incredibly difficult to pass without bipartisanship,” he said. “In other states, important pension reforms that have been desperately needed have been voted down by large majorities of Republicans and Democrats who voted against these reforms for different reasons.”
Penry said a similar dynamic is shaping up in the Legislature. Some members of his own caucus would rather shift the plan to a traditional 401(k), while some Democrats don’t want to roll back benefits to state workers, particularly retirees.
He said the real losers if no changes are made will be taxpayers years from now, because they would foot an even larger bill.
“This is fast approaching a $30 billion unfunded liability, more than we collect in sales, income and corporate taxes in four years,” he said. “These are huge numbers. You have to approach the task with humility and some urgency. This affects real people’s lives ... but urgency because we can’t kick this can down the road.”
Under the bill, teachers and government workers would be required to contribute 2 percent more than they do now, and cost-of-living increases would be frozen at 2 percent each year. The bill also raises the minimum retirement age, depending on a worker’s age and years of service. Currently, workers as young as 50 can get full benefits if they retire after 30 years. The measure would increase that to age 60, but that would apply to workers hired after 2017.
Opponents of the measure said some provisions in the bill may not be legal, including lowering the current 3.5 percent annual cost-of-living increase for retirees. Gary Justice, a retired Denver Public Schools teacher who now lives in Evergreen, said the cost-of-living increase was a promise that cannot be broken.
“I appears to me ... any reduction of the 3.5 percent COLA (cost-of-living adjustment) for current or future retirees will not pass muster in a court of law,” he said. “It is not acceptable to take the attitude that we’ll let the courts settle the issue.”
Sen. Keith King, R-Colorado Springs and a member of the committee, said he is not persuaded that workers who have not yet retired would see a benefit cut, because they have not yet realized it.
Penry said lowering the automatic cost-of-living increases accounts for as much as three-fourths of the money PERA would save over the next 30 years. If that part isn’t approved, the measure won’t come anywhere close to helping PERA reach solvency, he said.
PERA executive director Meredith Williams said no state pension plan has fared well during the recession. As a result, everyone must accept lower benefits, or no one will have a pension.
“There is shared pain here,” Williams said. “We cannot expect our children and our grandchildren to pay for the obligations that are occurred by members of the system today.”