When the state’s pension system was “fixed” in 2010 with widely hailed legislation, Coloradans were promised it would be 100 percent funded in 30 years.
By 2041, in other words.
Now, thanks to an analysis released this month by we learn that the system won’t be fully funded until more than a decade after the target date — if all goes well with investments.
Among the divisions, only local government is projected to be fully funded by 2041. The state and school divisions won’t reach that target until the early 2050s, and the judicial division until the 2060s.
To be sure, without the 2010 reform legislation, the Colorado Public Employees’ Retirement Association (PERA) would be on the road to utter insolvency. But what is striking about the consultant’s report is how small the margin for error remains.
There is, for example, just a 51 percent chance that the state division of PERA will be fully funded by 2o55. Indeed, the report adds, “there is a 28 percent chance that 40-year average returns will be below 6.1 percent, the minimum necessary to remain solvent.”
PERA’s average return on investment for the past 35 years is a reassuring 9.7 percent. But the past 16 years (1999 to 2014), it’s been a nail-biting 6.3 percent. And if that average continues for another 16 years before ticking up to 7.5 percent, the report says, the state division will still go belly up.
No one really knows how an aging population and higher taxes will affect economic growth and investments. Even seemingly small demographic changes can alter predictions. “If mortality continues to improve beyond 2020,” the report notes, “the full funding date will likely be later.” But why wouldn’t mortality continue to improve?
We’ve argued that lawmakers have unfinished business in shoring up PERA so it isn’t such a touch-and-go affair. The latest report bolsters that conviction.
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