The board of the state’s financially troubled retirement fund has come up with a rescue plan that involves a good bit of fiscal pain and sacrifice.
It appears to be a commendable starting point for state lawmakers in that it involves the sort of shared sacrifice we’ve supported in the past.
Predictably, governments — meaning taxpayers — would be on the hook for what could be a significant part of the bailout. And while that’s concerning, a more troubling element, we think, is the failure of the Colorado Public Employees Retirement Association pension board to attach financial values — real dollars — to the various components of the complex plan it’s presenting to state lawmakers.
PERA officials told us they couldn’t supply such figures. The legislature ought to demand the information before moving forward with a plan to prop up PERA, which is facing $27.5 billion in unfunded liabilities.
Such an accounting may very well inflame constituencies who find themselves taking the biggest financial hit in order to make the retirement plan solvent in the long run, but it’s necessary to figure out whether the plan is fair and workable.
PERA has been pursuing a fix under the banner of shared sacrifice. While we think the state must look hard at any commitments of additional resources to PERA, we also know that in some sense, we, as taxpayers, are stuck with PERA.
The workers who have paid into PERA, and are not paying into a Social Security system, are counting on this defined-benefit plan for support after they no longer are working. These folks are teachers, state troopers and government workers. The system has more than 438,000 members and benefit recipients.
The state has, we think, a moral obligation to PERA recipients. However, we do believe there is room for argument as to what exactly comprises those obligations and promises to retirees.
Unfortunately, that probably is a question that will end up in court.
As we said at the outset, the rescue plan is a complex one, but its proponents are calling it a “2-2-2 plus” solution. In a nutshell, the plan proposes that over time, employers increase their PERA contribution by 2 percentage points, employees increase theirs (in the form of smaller salary increases) by 2 percentage points, and the cost-of-living adjustment for those already receiving payments be capped at 2 percent.
The “plus” part includes many different cost-saving pieces, such as raising the retirement age for new enrollees.
One potential problem is the employee contribution change.
The increase is supposed to come out of an employee’s raise. What if governments, for instance, don’t have money to give raises in a particular year? Given our current economic conditions and widespread wage freezes, that is a very real possibility.
Furthermore, what’s to say that in good years, what is supposed to be an employee sacrifice is instead rolled into a bargaining package and made into an additional government obligation? Yes, we understand that would be left to individual governmental entities to be vigilant about, but we could easily see the “shared sacrifice” turning into more of a taxpayer sacrifice.
That’s why we think it’s so important that monetary values be attached to these components, even if they are estimates.
Show us the numbers, PERA, and let’s get on with the work of fairly securing the retirement fund’s future.
