PERA on the Issues
This new Web page has been designed to respond to issues that involve the public pension community and to provide information on the topics frequently covered in the news. If you have an idea for an issue that you’d like PERA to comment on, please e-mail Katie Kaufmanis, PERA’s Communication Director.
PERA Signs Letter to Elected Officials on Debt Ceiling Issue
Read the letter signed by Colorado PERA’s Executive Director Meredith Williams and other public pension fund leaders sent to President Obama and members of Congress.
Colorado PERA Responds to The Denver Post Stories
On July 3 and July 4, The Denver Post ran a series of stories concerning PERA’s investment return assumption and of PERA’s expenses. We’d like to take this opportunity to provide the complete story with context so that these issues can be understood more fully than was reported in the newspaper.
“Colorado PERA raised the retirement age for teachers and state workers, cut benefits and upped taxpayer contributions – all to avoid an eventual bailout of the $39 billion public pension system.”
Last year’s Senate Bill 1, the culmination of intensive study and input from a variety of sources, was guided by the principle of shared sacrifice. This bipartisan legislative package raised the retirement age for PERA members, reduced benefits in the form of lower annual increases or cost of living adjustments (COLAs), and increased contributions for both members and their public employers, which are supported by taxpayers. In all, about 90 percent of the changes enacted by Senate Bill 1 will fall on the shoulders of current and future PERA members and retirees – not other taxpayers. Projections prior to SB 1 showed that the PERA trust funds would run out of money during the next several decades as a result of the global financial crisis. The PERA Board acted to formulate a comprehensive recommendation for the General Assembly’s consideration in early 2010 and that package became the basis for SB 1. With the enactment of SB 1, PERA is now on track to be fully funded within 30 years, the same amount of time as it takes typical homeowners to repay their mortgage. In addition, only the General Assembly can make changes to the benefit and contribution structure of PERA and that has been the practice for PERA’s entire 80-year history.
“A Denver Post review of the fund’s financial records found that the three-decade recovery is based on higher investment returns than many economists say are realistic….”
Before the PERA Board began working on its legislative recommendation, it consulted with a variety of experts – economists, actuaries, and others with extensive financial backgrounds. PERA is able to provide fair benefits for public employees like teachers and State Patrol officers while limiting the impact on taxpayers by investing the funds. Based in part on the feedback from these experts, PERA lowered the annual rate of return assumption on its investments to 8 percent. This is the rate that PERA’s unique set of investments are anticipated to make on average over the next 30 years. In some years, the investment returns may be higher (the 2010 return was 14 percent) and in some years it may be lower. Over the past quarter century, PERA’s annual rate of return on its investments was 9 percent. Setting the annual assumed rate of return is a rigorous, transparent, and documented process where nationally recognized firms and individuals are used. The rate of return assumption is reviewed every year by the Board. PERA is the ultimate long-term investor.
Corporate defined benefit plans have on average a higher than 8 percent assumed rate of return while PERA’s assumed rate of return is in the mid-range of other public retirement plans. A good summary of rate of return assumptions by the National Association of State Retirement Administrators may be found here.
“Meanwhile, the Colorado Public Employees’ Retirement Association is spending up to $2.2 million annually on attorneys’ fees, $364,000 on lobbying and $2.8 million in salaries for its dozen top-paid executives.”
As a large institutional investor, responsible for the investment of $41 billion of member retirement savings, PERA must use both in-house and external lawyers to conduct business. PERA uses attorneys in the investment arena and in the benefits arena. PERA is active in challenging companies when they have misled shareholders. These legal challenges have resulted in PERA receiving large settlements, which help support members’ retirements. PERA also has faced increased legal costs due to litigation brought by a small group of retirees after the enactment of SB 1. (A district court judge dismissed that case in June 2011.)
We administer a very complex benefit plan that, among other things, includes a disability program, a survivor benefits program, a health insurance program, a 401(k) plan, a 457 plan, a defined contribution plan, and a life insurance plan. We handle many benefit disputes each year which involve issues surrounding membership, PERA includable salary for pension benefit calculations, and other issues related to member’s benefits. We also handle many disputes each year related to our disability program. PERA provides members with access to short-term disability and a disability retirement benefit if the member meets all the eligibility requirements. When members are denied disability, many of them challenge the determination by commencing legal action against PERA.
A substantial portion of our legal fees relate to tax and transactional legal services. As a qualified governmental pension plan, we have very specialized tax needs to ensure compliance with the Internal Revenue Code. In that regard, recent Federal law changes have required significant legal work including but not limited to the preparation and filing of separate applications for Qualified Status Determination Letters for each of the separate Plans administered by PERA which will now be a process required on a periodic basis.
Our real estate portfolio has $2.8 billion in assets and our alternative investment portfolio has $3.4 billion in assets. In our alternative investments portfolio, we have over 170 different investments, many of which require ongoing legal review relating to governance related matters. Also, each year we invest in new opportunities which require legal review and negotiation. In addition to these ongoing investment related legal expenses, we have experienced increased legal expenses over the past three years in connection with the Legislature’s mandate that PERA assume responsibility for administration of the State’s three 457 Plans as well as its 401(a) plan and the requirement that PERA merge the Denver Public Schools Retirement System into PERA. The latter transition involved the transfer of over $2.5 billion in assets located throughout the world.
Additionally, PERA processes Domestic Relations Orders in house using PERA staff attorneys and one paralegal. PERA accounts are considered marital assets and can be divided in a dissolution of marriage action. The DRO allows PERA to make direct payment to a former spouse as a result of the division of a PERA account in a divorce. In 2010 we handled 207 new DRO submissions.
PERA’s total legal fees are included in the total costs of operation which has been the subject of analysis by an independent benchmarking organization (CEM) that concluded that PERA’S expenses are well below median when compared to similar pension plans around the world and in the United States.
Since all contribution and benefit levels are contained in state law, PERA believes it is important that legislators receive education on the complexities of the PERA system. Expenses for lobbying are appropriate for an organization with $41 billion in assets and 475,000 members.
Finally, PERA’s most important assets are the employees who invest our members’ retirement savings, calculate retirement benefits, answer our members’ questions on the phone and through e-mail, and support the investment and payment of benefits functions at PERA. The “dozen top-paid executives” referenced in the Post’s story are primarily investment professionals and members of the leadership team at PERA. Their salaries are competitive for like positions in the public sector. However, much higher salaries are available in the private sector for investment professionals.
PERA’s annual administrative costs total just 0.1 percent of the retirement plan’s total assets. Another 0.3 percent is spent on investing PERA’s assets, for a total overhead of just 0.4 percent annually. PERA’s overhead is lower than most other public retirement plans. This cost structure is significantly below that available to investors in a typical 401(k)-type plan and would not provide the diversified and actively managed characteristics contained within the PERA portfolio.
“…the retirement system recently cut checks for such events as a $20,000 board work session at the Grand Hyatt Denver and a $1,750 working dinner at Maggiano’s Little Italy.”
Each year, the Board of Trustees has a three-day work session where strategic planning items are discussed. For the past several years, this event has been held at a Denver metro area hotel. PERA believes that holding a planning session off site has benefits and that the cost of these working sessions is reasonable. The working dinner at Maggiano’s was attended by the 16-member Board of Trustees, senior staff, and consultants. Again, PERA believes there is value in holding this kind of session and that the cost is reasonable.
“Treasurer warns of bailout”
We’ve responded to the Treasurer’s and other critics’ claims before and those responses may be reviewed on the PERA on the Issues page.
“The state also picks up the tab for trustees’ Wall Street Journal subscriptions and their home Internet and fax lines.”
PERA (not the State) provides Internet and fax capability for Trustees since all information for Board meetings is posted online. The cost of Internet and fax service is significantly lower than the administrative and hard costs of mailing packets to Trustees. PERA uses technology to be more efficient and cost effective. Elected Trustees are volunteers who devote hundreds of hours a year to PERA business and must be up to date on the latest news. Providing subscriptions to the Wall Street Journal assists Trustees in the oversight of a $41 billion organization with over 475,000 members. PERA funds are part of the Trust and can only be expended on behalf of its members. In addition, the State of Colorado and its associated entities are one of many other employer members of PERA.
“School districts and state agencies must increase payments to the pension system each year through 2018. School contributions will rise from 10.65 percent of salaries in 2006 to 20.15 percent in 2018. Teachers contribute a steady 8 percent of their paychecks to the fund on top of the rising employer contributions.”
This is not fully accurate since legislation in 2006 created the Supplemental Amortization Equalization Disbursement (SAED), which calls for public employers to remit contributions that would have otherwise been used for pay raises for their employees. The result is that employees pay more and public employers pay less than the Post described. The SAED is by law an employee contribution – so here’s how contribution rate increases will be shared by members and their employers in the School Division:
| Year | Employer Statutory Rate* | Employer AED | Total Employer Rate | Member Rate | Member SAED | Member Total |
| 2011 | 9.13% |
2.60% |
11.73% |
8.00% |
2.00% |
10.00% |
| 2018 | 9.13% |
4.50% |
13.63% |
8.00% |
5.50% |
13.50% |
| * The Statutory Rate does not include the health care fund contribution of 1.02%. | ||||||
“Educational conferences for trustees are commonplace and cost thousands of dollars apiece.”
In order to fulfill the mandate for understanding their fiduciary responsibilities, Trustees are required to obtain education that includes new Trustee orientation and attendance at approved industry-recognized workshops and training programs. Within two years of their election or appointment to the Board, Trustees are also required to attend the Pension Fund and Investment Management program at the highly respected Wharton School of Business at the University of Pennsylvania. In addition to external training, internal workshops and formal education sessions are periodically provided to the Trustees on topics ranging from fiduciary responsibility to actuarial principles to investment risk management. The minimum threshold for continuing education for Trustees is also outlined in the Board Education Policy. Oversight of these educational requirements is provided by the Board’s Audit Committee.
Notably the Post’s review of expense records identified only travel directly related to the official functions and responsibilities of the Trustees.
PERA produced over 500 travel expense reports spanning a period of five years to the Post for review. It is PERA’s policy not to pay for entertainment such as golfing or spas. Further, PERA does not provide alcohol at any of its meetings or dinners, nor does it reimburse for such expenses when a staff or Board member travels. We are pleased that the Denver Post’s review of PERA’s travel records demonstrated that there were no policy violations.
Trustees evaluate the educational programs they have attended and this feedback is a valuable resource for other Trustees seeking to fulfill their educational requirements as fiduciaries.
In summary, PERA is a very efficient entity that takes its responsibility to members and other taxpayers very seriously and manages its members’ retirement savings prudently. Each year PERA is evaluated by a consulting firm on the cost effectiveness of service delivery. PERA’s costs are consistently below other public pension funds around the country, but more importantly, PERA delivers a high level of customer service at this low cost. Finally, it is important to note PERA’s positive economic impact upon Colorado. For every $1 contributed to the system $3 is paid out in benefits to former public servants of Colorado.
We are confident that PERA is a trustworthy and professional steward of our 475,000 members’ retirement savings as well as taxpayer dollars.
Legislative Changes Have Put PERA Fund on a Solid Footing
By Meredith Williams, PERA Executive Director
Published May 29, 2011, in The Pueblo Chieftain
The last couple years have been difficult for all Coloradans. Dreams of retirement security have collided with the harsh reality of the global economic collapse. People around the state are hurting.
Colorado’s public employees, including school teachers, prison guards, staffers at the Colorado Mental Health Institute at Pueblo and others, haven’t been immune from these pressures.
Last year, Republicans and Democrats in the Colorado Legislature reached across the aisle and agreed to make the tough choices that were necessary to put the Colorado Public Employees’ Retirement Association (PERA), which covers more than 475,000 public servants and retirees, back on track to financial stability.
Their legislation, known as Senate Bill 1, required shared sacrifice from public employees, retirees and public employers. It wasn’t easy, but it was necessary. Public employees, many of whom are already dealing with pay freezes, now face increased contribution requirements to their retirements. Retired public servants who live on fixed incomes no longer get the same cost-of-living-increases upon which many had come to depend.
In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.
As the first state to bite the bullet and comprehensively address the impact of the international financial crisis, Colorado has received national recognition. New York Times financial columnist Ron Lieber called Senate Bill 1 “an act of rare political courage” by “a bipartisan coalition of state legislators.”
And these dramatic reforms are working, putting Colorado PERA on a course to recover from the financial downturn and move steadily to a strong financial footing.
That’s why it was disappointing to see The Chieftain repeat some alarmist rhetoric suggesting that PERA is on the wrong track.
Some of the criticism focuses on PERA’s assumption that the retirement contributions it invests will make an average annual return of 8 percent over the next three decades. Not only is this assumption in line with other public retirement funds across the nation, but it is less than the average assumption of corporate pension plans.
The Chieftain notes that investment returns have been less in the recent past — I think we’ve all witnessed what a global economic downturn can do to investments — but The Chieftain ignores the fact that PERA’s annualized returns have averaged 9.3 percent over the past quarter century.
PERA is the ultimate long-term investor focused on long-term results that will support the retirements of public servants, including those who are just now starting their careers.
Most PERA beneficiaries don’t qualify for Social Security so their modest PERA benefit may be the only steady retirement payment they’ll ever receive. After careers in public service, this is a reasonable reward. They have earned it.
Hard-working Coloradans — regardless of whether they chose to work for a private company or the government — deserve secure retirements at the end of long and productive careers. For more than three-quarters of a century, PERA has safeguarded public employees’ retirements and we’re committed to provide retirement security for them for the next 75 years and beyond.
Guest Commentary: Careful Planning, Not Hope, Drives PERA
By Jennifer Paquette, PERA Chief Investment Officer
Published May 22, 2011, in The Denver Post
On one point, the Colorado Public Employees' Retirement Association agrees with guest columnist Blaine Rollins: Hope is not an investment strategy.
In fact, hope has never been part of PERA's investment strategy.
PERA has instead relied on solid investment strategies created under the direction of the board of trustees with the help of highly experienced staff and consultants. PERA's investment strategies match its mission, with an investment horizon of decades and a focus on maintaining the stability of the fund.
As a result, our investment portfolio is broadly diversified across and within asset classes. Since PERA adopted a benchmark for comparison purposes in April 2004, PERA's actual investment returns have exceeded it by more than $1 billion, according to our most recent annual financial report.
As a very large investor with $40 billion in assets, PERA has access to attractive investments that aren't available to the typical individual investor. Our costs for managing investments are also far lower than those paid by a typical individual investor.
Like other investors, PERA took a significant hit during the global economic crisis. But even when that period is considered, PERA's investments earned annualized investment returns of 9.3 percent over the quarter century ending in 2009. While the 2010 results haven't been formally released yet, PERA's investment returns last year comfortably exceeded our long-term 8 percent assumption.
Mr. Rollins is correct that PERA's 8 percent annual return assumption is in line with other public pensions.
Over the quarter century ending in 2008, 21 percent of money in the PERA trust funds came from employees' own contributions while 19 percent came from public employers who are supported by taxpayers. The rest (60 percent) comes from investing these contributions.
These investment returns allow PERA to provide reasonable benefits for public servants without placing an excessive burden on taxpayers. In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.
PERA Response to The Pew Center on the States’ Report “The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs”
On Tuesday, April 26, The Pew Center on the States released its most recent report on the funding status of public pensions and retiree health care. The report notes that the funding of public pension and retiree health care has declined. We’d like to provide our perspective on this finding as it relates to Colorado PERA.
The Pew report focuses on fiscal year 2009, which varies among the systems analyzed. The Pew report also does not include the full range of changes that were the result of 2010’s Senate Bill 1 that will ensure that PERA is fully funded in the next three decades. Investment returns in 2010 were comfortably above the assumed 8 percent rate of return and this information was not included in the Pew report.
The Pew report uses actuarial valuation of assets as the basis for comparison and its findings should not be surprising since pension systems are still smoothing in the 2008 market decline. PERA, like most public pension plans, uses a concept called actuarial smoothing, where investment returns are averaged over a four-year period to reduce the volatility associated with the ups and downs of the investment markets. However, PERA reports both the actuarial value of assets and the market value of assets as of year-end so that members and others may have a clear picture of PERA’s funded status. The PERA Board based its 2009 recommendation on a market value of assets basis, and this foundation ultimately became Senate Bill 1.The market value of assets and the actuarial value of assets information for 2010 will be available once it is audited and will be posted on the PERA Web site in July. This information will likely show that PERA’s funding level increased year-over-year on a market value basis.
Finally, PERA sent a letter to the Pew Center regarding the findings related to PERA’s pre-funding of retiree health care. In last year’s Pew report (“The Trillion Dollar Gap”), Colorado was identified as one of only a few states as being a “Solid Performer” when retiree health care was analyzed. You can read that letter, in which we acknowledge the difficult task Pew undertook in analyzing a complex issue with systems using a variety of actuarial methodologies and reporting dates.
The funding of public pension plans and retiree health care will continue to be a challenge for many states in the aftermath of The Great Recession. In Colorado, we’ve met that challenge by working with members, retirees, employers, and elected officials to return the state’s largest pension system to long-term sustainability.
PERA’s Response to Vincent Carroll’s Column “Status quo for PERA board,” April 13, 2011, The Denver Post
In the April 13, 2011, Denver Post, columnist Vincent Carroll opines on House Bill 11-1248, which would change the composition of the PERA Board of Trustees. Prior to this column, Colorado PERA Board Chair Carole Wright authored a Guest Commentary for The Denver Post on this topic.
Setting the Record Straight
The Denver Post opinion piece by Treasurer Walker Stapleton (“Trouble Looming for Public Pensions,” April 10, 2011), contained factual errors that need to be addressed.
“PERA isn’t fiscally sound and taxpayers are on the hook.”
Colorado PERA was one of the first public pension plans in the nation to address the 2008 market downturn. Before Mr. Stapleton joined the PERA Board of Trustees, the Board sought input from members, the public, media, and elected officials on what action should be taken to return PERA to long-term sustainability. From these efforts, the Board with the assistance of nationally respected actuarial firms formulated a comprehensive legislative proposal that became the bi-partisan Senate Bill 10-001 (SB 1). Cavanaugh Macdonald Consulting, LLC, the retained actuarial firm for PERA, has certified in connection with the most recent valuation of the Plan that all divisions of PERA are in compliance with the 30-year amortization standard in Colorado law.
As PERA members know, this legislation reduced benefits and increased contributions and represented a shared sacrifice approach to ensure PERA benefits could be paid now and in the future. In fact, approximately 90 percent of the changes in SB 1 are being shouldered by current and future members, as well as retirees – not taxpayers.
“…Senate Bill 1 made incremental improvements last year….”
SB 1 made sweeping changes, not “incremental” ones to the PERA benefit structure. For this effort, others have noted that what was done in Colorado to address the pension situation is a model that other states should follow. (Elizabeth Keller, Center for State and Local Government Excellence.)
Mr. Stapleton fails to acknowledge that SB 1 reduced PERA’s liabilities by $9 billion immediately in 2010 and if the plan laid out in SB 1 is followed there will be no unfunded liabilities in less than 30 years.
“If this current and growing gap is not addressed, which Forbes magazine estimates at $15,000 for every Colorado taxpayer, the people of Colorado are ultimately responsible for funding this massive shortfall.”
Mr. Stapleton’s claim relies on “research” (as cited in Forbes) conducted by Robert Novy-Marx and Joshua D. Rauh that uses an artificially low rate of return estimate that has been in the news lately. Using a bond rate of return assumption (4 or 5 percent) increases the liabilities of the system and does not reflect historical returns that show PERA outperforming the average annual rate of return of 8 percent by better than a full percentage point over the past 25 years. In addition, this research does not include the impacts of SB 1.
The basic math is this:
PERA’s unfunded liability at market value at the end of 2009 = $21.8 billion
Divided by 2.3 million Colorado taxpayers (number of tax returns filed last year) = $9,478
But what’s not mentioned is that this liability is not due and cannot be made payable today, just like a mortgage. This is the aggregate amount owed by PERA to current retirees and to all existing workers who have begun work for a public employer in Colorado and may not begin receiving a benefit for three or more decades. The bottom line is that SB 1 prefunds these liabilities over the next 30 years while the payment of benefits will occur over the next 70 years.
Further, Forbes awarded Colorado a sound debt rating of 4 stars (out of 4 stars) and Mr. Stapleton inaccurately quotes the Forbes measure saying it is on a Colorado taxpayer basis when it is really on a per capita basis.
“…the pension system has promised an 8 percent average return for the next 30 years – a figure that financial experts find to be laughably generous.”
Mr. Stapleton should be aware that corporate defined benefit plans, on average, have higher than 8 percent assumed rates of return, while most public plans use 8 percent, like PERA. Further, the assumed rate of return is not an arbitrary number. Before setting the rate of return, the PERA Board consults with nationally recognized actuarial and financial experts. This is a serious and reasoned approach using information from the actuarial and investment communities.
Finally, PERA does not “guarantee” a return of 8 percent every year. The 8 percent return assumption is not like an insurance contract that pays a fixed return each year, as claimed by Mr. Stapleton. Rather, the assumption is an average of what PERA’s investments will return over the next 30 years as an institutional investor with access to asset classes that are typically not available to the mutual fund or insurance annuity consumer in a retail setting. This approach has earned PERA historical annualized returns of 9.3 percent over the past 25 years, including the devastating market performance in 2008.
“Wilshire Associates, a national expert in public pension plans, just released a study in which it reviewed more than 125 plans across the country and it found that none of them will achieve an 8 percent average return over the next 10 years.”
PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years. A very good summary of rate of return assumptions and perspective on funding status for public pension plans may be found on the National Association of State Retirement Administrators Web site.
“To close the gap, employers, all of whom are ultimately taxpayers, need to increase the amount of money they contribute to PERA. For example, by 2018 school districts must match more than 20 percent of salaries with contributions to PERA.”
The facts show that while contribution rates are scheduled to increase to address the funding shortfall as a result of the economic downturn, the General Assembly chose a shared sacrifice approach, with public employees and their employers contributing to the solution. In fact, most members, by 2018, will be contributing 13.5 percent, with most employers contributing 13.63 percent. These totals are in lieu of participation in Social Security and will be adjusted downward when PERA’s funded status reaches 103 percent. Details are available on PERA’s Web site here.
“For Colorado lawmakers and PERA’s board to stand by and wait for the problem to fix itself is delusional.”
Last year’s SB 1 addressed PERA’s funding problem in bipartisan fashion, and these efforts have received widespread acclaim in the national media.
“Changes to the retirement system need to come from some current and all new PERA enrollees.”
In fact, this was the very approach taken in SB 1. Current and new members will contribute more, work longer, and receive a lower benefit in retirement.
PERA’s Sustainability
Recently, we’ve come across claims that PERA could run out of money within the next decade. That’s the kind of sensational assertion that’s likely to get the attention of members and retirees who are concerned about the future of their pension benefits. However, these claims are not substantiated by the facts.
Thanks to the enactment of Senate Bill 1, PERA’s unfunded liability is expected to be eliminated over the next three decades.
PERA’s trust funds will be accumulating more assets than liabilities over the three-decade period ending in the year 2040, according to actuarial projections based on expected returns and current law. By the end of this period, these projections show that PERA will have sufficient assets to cover all of its liabilities. In the plainest terms, this means that – over this period – instead of running out of money PERA will be accumulating funds to pay for the benefits of current and future retirees.
These trend lines point in the right direction because of the hard choices and shared sacrifice in Senate Bill 1, the comprehensive reform package enacted by the Colorado Legislature in 2010. Before this bill became law, PERA was on track to eventually run out of money. That’s why it was so important that leaders of both parties came together to support this legislation. No one enjoyed making the changes included in Senate Bill 1 but they will help avoid some of the dire scenarios that have been painted.
States and Bankruptcy
First reported in the trade journal Pensions & Investments and widely covered in media reports such as The New York Times’ story A Path Is Sought for States to Escape Their Debt Burdens, some are encouraging Congress to allow states to file for bankruptcy protection to void pension and benefit obligations to state employees. Involved in this effort are former House Speaker Newt Gingrich and Grover Norquist, the president of Americans for Tax Reform.
Members and retirees have asked how PERA would be impacted if the State of Colorado pursued this option.
PERA does not believe that the State of Colorado would declare bankruptcy, even if federal law permitted it, to shed pension obligations to public employees.
Recall that, in 2010, the Colorado General Assembly largely adopted the PERA Board of Trustees’ legislative recommendations, which became Senate Bill 10-001. SB 1 returns PERA to long-term sustainability and prevents Colorado from having to consider some of the more drastic measures other states are considering. Colorado was the first state in the nation to address the important issue of pension funding after the Great Recession.
We acknowledge that the State of Colorado and PERA’s other public employers are facing difficult budget decisions, but pension obligations are not bankrupting the state and other public employers in Colorado. Indeed, the National Association of State Retirement Administrators issued a recent study that showed that, on average, pension costs represent only about 3 percent of total state and local government expenditures. In Colorado, state and local government expenditures to fund retirement benefits totaled only 2.16 percent.
Since the state bankruptcy story first broke, the National Governors Association and National Conference of State Legislatures sent a letter to Congressional leadership opposing this effort. Additionally, there may not be complete Congressional leadership support for state bankruptcy. The Washington Post quoted Eric Cantor, House Majority Leader, as saying he did not support the idea.
Read National Association of State Retirement Administrators researcher Keith Brainard’s testimony to the House Subcommittee on Courts, Commercial and Administrative Law Committee on Judiciary. (2/14/11)
Other quotes of note from the Denver February 11, 2011, Public Pension Briefing by the Center for State and Local Government Excellence and the National Conference of State Legislatures (both entities are non-partisan research groups):
Elizabeth Keller, Executive Director, Center for State and Local Government Excellence
- “It’s really to your credit that you, in this state, have already taken some steps to strengthen your funding levels.”
- “Colorado is actually looked at as a model for a lot of other states – particularly for some of the changes you made last year to strengthen your funding and it has both immediate effect on your funding status as well as a long-term benefit…”
Ron Snell, Director, State Services, National Conference of State Legislatures
- “2010 was the busiest year on record for pension legislation. You [in Colorado] kicked the year off with some very dramatic pension system reforms.”
- “If there is a policy to follow it’s to think of these as long-term issues, not short-term issues and make wide plans and then stick with them.”