The Colorado Public Employee Retirement Association fund took a beating in 2008 losing nearly 30% of their value in one year and taking the funded ratio of assets to liabilities to near 50%.
This is a huge problem. The fund is $30 billion in the red and facing the real possibility of crossing a tipping point from which there will be no recovery. If things don’t change soon, a tipping point will be reached in 4 – 6 years, followed by a fund that is completely out of money in another ten years.
If that happens, either retirees will get no money or the state will have to figure out how to pay the current equivalent of $2.85 billion a year in benefits out of the general fund – the money that funds K-12, Higher Ed, Corrections, etc. $2.85 billion represents 40% of the general fund, in other words, we’ll be broke.
Fortunately, a solution was crafted the put the fund on track for solvency in 30 years without increasing taxes.
The solution is hard to take; it reduces benefits and requires the state and employees to put more cash into the fund. Basically no one likes it, but most understand that it’s something that has to be done.
I wrote a response some of the critics of the solution with Sen Penry in the Post.
We didn’t respond to the PERA members who are critical of the reduction in benefits.
I understand that they won’t like the cost of living adjustment (COLA) increases being cut from 3.5% to 2%. I wouldn’t either, but I suspect that they’d like a bankrupt fund a lot less. As the United retirees who have seen their retirement benefit cut to a fraction of what it was; a real fraction, not a reduction in the rate of growth, but checks that are actually cut by more than half of what they were before United’s fund bankruptcy.
Finally, it is important for retirees to remember that a future legislature can increase COLA’s if warranted and affordable. I just hope that if a future legislature does, they will be smart enough not to over promise what can be delivered.
The Legislature has tinkered with PERA some 93 times since 1969. Maybe that is part of the problem.