Capitol Conversation: How Do You Solve A Problem Like PERA?

Apr 23, 2018
Originally published on April 22, 2018 7:55 pm

A major piece of legislation to reform the state’s pension plan is making its way through the state legislature during the final days of the session. One in 10 Coloradans receives a public pension through the Public Employees Retirement Association (PERA). But PERA has unfunded liabilities totaling about $32 billion, and lawmakers are divided over how best to shore up the program.

Statehouse reporter Bente Birkeland spoke with Marianne Goodland with Colorado Politics and Ed Sealover with the Denver Business Journal about the possible changes and its likelihood of passage.

Interview Highlights

On some of the big changes being proposed:

Goodland: The first is the number of years used to calculate the pension. The Senate version had it at seven years… the House did five years, which was actually the recommendation of the PERA board. The second is in the age of retirement – currently it’s 60, depending on how many years of service. The Senate wanted 65, the House moved that back to 60.

But the biggest change of all is in what’s called a defined contribution plan – which is like your 401(k). PERA does have a defined contribution plan, but once you’re in it, you’re in it. Once you’re in the defined benefit plan which is the traditional pension, you don’t move into the defined contribution plan. What the House did was to get rid of that defined contribution change – on the basis that it really doesn’t do anything to help PERA shore up its $32 billion unfunded liability.

Sealover: The other big thing that happened was that the bill, as introduced in the Senate, required both employees and their employers – who are state governments, city governments, school districts -- to put in more money to help shore up this pension liability. It came out of the Senate without the employer contributions… [and] it came out of the House Finance Committee without any contributions. They’re actually using $225 million a year from the state’s $1.3 billion tax windfall that they’re expecting next year and saying “This is going to be enough. We don’t need to make anyone contribute.” I think this is maybe the biggest sticking point. 

The one thing I have heard that is very different than what I heard before the session started is an acknowledgment from all parties that something needs to get done. I really do think there is going to be a way to find compromise here, but I just don’t know where, because this is a giant chasm right now.

On why solving the problem has become an imperative:

Sealover: I think you’ve got the Governor beating on it. He is terribly concerned that [credit rating agency] Standard & Poor’s has said, look, if you don’t take care of this unfunded liability, we’re going to knock down the state’s bond ratings – that means it’s going to be more expensive to build college projects, to build roadways, all of these which use some form of bonding. And I think maybe they’ve just heard it from enough people, that hey – we have to take care of this now.

On how educators are responding:

Goodland: Once the House Finance Committee made those changes, the teachers got on board pretty darn quick. There was a statement issued almost immediately by the Colorado Education Association that said they were fine with the bill as it is right now. They strongly objected to pretty much everything the Senate had done, particularly that defined contribution part of it.

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