PERA in peril
Colorado’s Public Employee Retirement Association — the pension fund for most state employees, school teachers and many local-government workers — is facing an economic crisis again.
Fixing the problem will require sacrifices. But asking state and local taxpayers to pay more to resolve the funding issues should be a solution of last resort.
Like other organizations and individuals that invested heavily in the stock market, PERA lost great amounts of money as the market plunged in the past year and a half.
Just a couple years earlier, PERA announced a strategy to make its fund more solvent over the next three decades. But that strategy relied on a very ambitious 8.5 percent annual return on investment. Instead, the return has gone in the opposite direction.
That’s only part of the problem, however. According to an audit of the pension fund, “PERA’s current contribution rates are not sufficient to support the current benefit structure.” For instance, it paid about $2.8 billion in benefits in 2008, while receiving only $1.6 billion in contributions.
A large part of that is due to changes made in the 1990s, when the fund was growing rapidly.
The retirement age was reduced, and some employees were allowed to purchase additional years of retirement benefits for pennies on the dollar.
But contributions to the system come not just from employees, but from the state, school districts and local government for which they work. Their contribution rates also dropped during the 1990s.
PERA will have to seek higher contributions from its worker members, and probably some reduction in benefits if it is to move toward sound economic footing. Eventually, government contributions may also have to increase. But not now.
As the state faces serious budget shortfalls and school districts and local governments face their own budget crises, and taxpayers are already being burdened with higher fees, now is not the time to seek more money for PERA from any government entity.