PERA board runs into reality check
The state’s largest public employee pension system is considering changes — or at least acknowledging that changes may be necessary — to shore up its long-term solvency.
That’s a departure from the steady drumbeat of assurances from PERA officials that a comprehensive reform bill passed in 2010 had largely succeeded in putting the pension plan on track to be fully funded within 30 years — the industry standard.
Greg Smith, the executive director of the Colorado Public Employees Retirement Association, spoke to the Sentinel’s editorial board Tuesday, conceding that the PERA board “can’t continue to ignore” X factors in the equation that determines the pension’s actuarial soundness.
The board had already lowered its predicted return on investment from 8 percent to 7.5 percent in 2014 and lowered it again this year to 7.25 percent. The board also adopted new mortality tables to reflect longer life spans for white collar workers in the system. Those adjustments have lengthened the number of years it will take for two of the pension’s divisions to be fully funded. Full funding for the state division is now estimated at 55 years. For the schools division, it’s 75 years.
Smith and other PERA officials are conducting a “listening tour” of Colorado towns explaining the scope of the unfunded liability, estimated at $27 billion, and gathering feedback in response to the economic and demographic realties facing the pension fund. The board will formulate some conclusions in the fall and deliver recommendations to the Legislature to improve the pension’s fund financial health.
There are any number of tweaks that could decrease the amortization period and increase the pension’s funded status. Employees could pay more into the system. The age of eligibility could be raised. Cost-of-living increases could be adjusted or the formula to calculate benefits could change.
No doubt, this is a touchy subject, but it’s clear that the reforms enacted in 2010 didn’t go far enough — even though PERA itself is a model of efficiency. Two years ago, a Denver-based actuarial firm called the pension’s benefit plan the most efficient and effective a state could have.
That’s important not only to retirees, but to the health of the state’s economy.
But that doesn’t reduce the risk to taxpayers if PERA can’t deliver what it’s promising to employees over the long term. It’s unfortunate the PERA board wasn’t more nimble or more willing to embrace some of these proposed changes sooner.
For now, PERA is back to where it was before 2010’s reforms — looking for a way to meet its obligations within 30 years.