Pension Fund Rescue Clears Colorado Senate
DENVER – Colorado Senate Republicans delivered again on a pledge to tackle the big issues Tuesday, by passing sweeping new changes to the state’s troubled public employee pension fund aimed at assuring its long-term solvency and avoiding the need for future bailouts.
Passage of Senate Bill-200 wasn’t an easy lift, given how hard Senate Democrats worked to remove or water-down many of the bill’s key provisions. But Republicans hung tough through the multi-day debate and pushed the measure forward on a 19-16 vote, gaining an assist from the chamber’s one unaffiliated member, Senator Cheri Jahn of Wheat Ridge.
The measure was sponsored by Senators Jack Tate (R-Centennial) and Kevin Priola (R-Henderson). Tate told colleagues that no one relished the prospect of making potentially painful changes now, but that a failure to act decisively would threaten the state’s credit rating, invite a future bailout and put the benefits of all PERA beneficiaries at long-term risk.
“The band-aids and half measures we saw applied to this problem in the past just haven’t worked, which is why we’re back at the drawing board again and now facing an unfunded PERA liability of between $30 and $60 billion, maybe more,” Tate told colleagues.
The measure will chip away at the unfunded liability by modestly increasing employee contributions, temporarily freezing cost of living adjustments for retirees, raising the retirement age for new employees and changing the way average salaries are calculated for purposes of determining retirement benefits. SB-200 also for the first time allows employees to choose a so-called defined contribution plan, rather than the “defined benefit” type plan that’s often cited as a major factor in the program’s ballooning costs and liabilities.
“Any actions we take now are understandably going to create concerns and cause hardship,” Tate conceded, “but these consequences will pale in comparison to what we’ll see if the pension program continues on the unsustainable path it’s on. We must act now to ensure that current and future employees have a sustainable retirement system that works for them.”
Senate President Kevin J Grantham (R-Canon City) agreed. It’s why he began this legislative session by highlighting pension reform as a top priority for his caucus this year. “The magnitude of the problem is larger than many believe – very possibly PERA is underfunded in excess of $55 Billion,” Grantham pointed out during his opening day speech. “This unfunded liability is a debt in excess of $10,000 per man, woman, and child in Colorado. This is large enough to affect the credit rating of the State and public institutions – and raise bonding costs for all important public construction projects.”
SB-200 now moves to the House for debate.