As tempting as the latest big-money offer from Pinnacol Assurance is during difficult economic times, Colorado lawmakers ought to take a pass on it this legislative session.
The potential $330 million deal comes with strings attached that could be unfair to taxpayers. Further, these troubling new elements come as the General Assembly is entering its final weeks.
We’re not suggesting that either Pinnacol or the governor’s office is wrong to be talking. It’s possible a better version of the offer could be acceptable in the future.
Since February, the two entities have appeared to work together in good faith. Pinnacol, the quasi-public workers’ compensation insurer, wants to free itself from its state affiliation. We understand why, given last year’s attempt by the legislature to raid the insurer’s reserves for one-time budgetary fixes. That attempt, along with legislation this session that targets Pinnacol, justifies the company’s concern about ongoing relations with the state.
After an appraisal better defined the company’s financial strength, Pinnacol upped its offer to the state for autonomy by $130 million. It now stands at $330 million. If accepted, the payoff would help lawmakers trying to bridge $3.5 billion in deficits over the next two fiscal years.
But the new offer alters the benefits packages for Pinnacol’s future employees. Currently, Pinnacol’s 600 employees are covered by the Colorado Public Employees’ Retirement Association (PERA), which is heavily supported by taxpayers.
The company originally asked only that its existing employees remain enrolled in PERA, but as negotiations have evolved, PERA itself has argued for keeping existing and future Pinnacol employees enrolled, and Pinnacol has agreed to that requirement.
We question why private employees, as future Pinnacol employees would be if the company is no longer a “political subdivision of the state,” should receive generous taxpayer- supported retirement plans.
The argument is that lucrative PERA accounts are extended to government workers because they earn less than comparable private-sector workers. Even if that were always true — and it isn’t — that’s not the case at Pinnacol.
The governor’s office says PERA worries that without including the future employees, Pinnacol’s unfunded mandated cost to the system could reach $75 million. They say Pinnacol’s higher salaries are the reason the cost is predicted to be so large.
Pinnacol’s chief executive, Ken Ross, said he could accept a deal that didn’t provide PERA coverage for future workers, so there appears to be room for continued negotiation.
Or the state could use some of the proceeds from the Pinnacol deal to offset costs to PERA so taxpayers aren’t on the hook; or Pinnacol could pony up more cash in the deal to offset the expense.
We’ve leaned toward thinking a deal with Pinnacol would be good for the state, as long as it was clear there wouldn’t be any long-term problems. But this could be one.
With such large issues to work through, any deal needs more time.
