PERA is fiscally sound and a key economic contributor
By Carole Wright
The Oct. 7 opinion piece in The Daily Sentinel by State Treasurer Walker Stapleton, “Schools, students face fiscal pain from pension crisis,” contained factual errors that require correction and claims that warrant response.
First and foremost is the need to address the treasurer’s failure to recognize the contribution of educators and all school personnel who serve the children of this community. Attracting and retaining quality employees is essential to great schools and student performance.
For more than 80 years, Colorado PERA has helped accomplish these goals by providing a pension as part of the compensation package for public employees. The management of PERA takes long-term vision and commitment. The teacher hired this year will likely have a 60-year relationship with PERA.
The apparent large liability of a pension plan is a long-term liability. Though it may be calculated and stated today, the real final payout lies decades in the future.
Just as it did for every household and every investor worldwide, the 2008 market meltdown caused re-evaluation. After a thorough self-assessment, PERA sought legislation in 2010. The result was Senate Bill 1, which passed with bipartisan support.
The result is that current members, retirees and new members will receive less in retirement distributions going forward. Employees will be working longer for a full, unreduced retirement and paying more. Ultimately, the plan participants will shoulder 90 percent of the multibillion-dollar reform package. PERA’s 500 participant employers will cover 10 percent.
Colorado was the first to put together a “shared sacrifice” sustainable course of action after the global economic meltdown. Others now are following PERA’s lead. Unlike in other states, these PERA reforms are and continue to be supported by employee and retiree organizations — the unions.
We unequivocally disagree with the treasurer that these are promises that cannot be kept. In the last two sessions of the Legislature, PERA has had to fight off legislation that would have derailed this reform package or weakened it with special considerations.
Currently, more than 6,000 of PERA’s 100,000 retirees are your neighbors. As members of the State Patrol, they protected you. As snowplow drivers, they made your roads safe. And they educated your children and grandchildren. To these neighbors, PERA sends $197 million in annual benefit payments. This sustains nearly 1,200 jobs in your community and produces $10 million in state and local tax revenue.
We have yet to hear the treasurer propose a reform that would reduce the current long-term liability. The 2010 legislative package results in PERA being 100 percent funded in 2041.
This is not a “growing crisis.”
Some may have read the treasurer’s piece and have concluded that PERA is 20 percent of School District 51’s operating budget. The District 51 PERA contributions are just under 6 percent of the operating budget. Employees contribute 8 percent of their salaries to PERA.
In the bigger picture, the $40 billion PERA fund can trace 18 percent of its value to employee contributions and 18 percent to employer contributions, while 64 percent of the money comes from investment income. Employers and employees do not participate in Social Security.
As for this rate-of-return issue, let’s look at the facts.
Whatever the rate of return, it is not expected absolutely every year, but on average over a period of time. Since 2009, PERA’s annualized rate of return has been 10.9 percent.
Yes, the 2011 return was 1.9 percent but the preceding years were each over 14 percent and 17 percent respectively. The 25-year rate is also above 10 percent. And the majority of those in the private sector community also have set their pension rate of return at 8 percent. PERA is not an outlier.
This July, while presenting to the Legislature’s Legislative Audit Committee, KPMG, the national auditing firm hired by the State Auditor’s Office to review Colorado PERA’s financial statements, said that PERA’s “rate of return is within a reasonable range.”
Throughout all of 2009, legislators of all persuasions, the PERA Board, PERA members and retirees, and associations spent countless hours crafting a multi-faceted plan for the future of PERA. The product relied on the work of nationally recognized financial, actuarial and investment experts. The solutions contained in SB 1 require fiscal discipline for years into the future, but the path is viable and sustainable.
Now is not the time to turn PERA into the poster child for personal political ambition. Our school children, our disabled community, our infrastructure, and so much more do not need this distraction.
Carole Wright, a retired teacher who lives in Denver, is chairwoman of the PERA Board of Trustees.