Study: PERA insolvency issue a serious one

Study: PERA insolvency issue a serious one

Charles Ashby

GJ Sentinel

June 15, 2015


Dueling reports released Monday showed that while the state’s largest public employee pension system has a positive impact on the state’s economy, the pension is in great jeopardy.

The Colorado Public Employees’ Retirement Association released Monday a study showing how its annual pension payments have had a $5.2 billion impact on the state’s economy.

But a separate study, released the Houston-based Arnold Foundation, showed that impact is in serious jeopardy if the system doesn’t address a 30-year, $26 billion insolvency issue.

PERA officials have long maintained that its $45 billion in assets and its rate-of-return expectations make the system sustainable over the next 34 years, or sooner if its rate of return continues to do as well as it has in recent years.

They also have repeatedly said that changes the Colorado Legislature made in 2010 were adequate to help it meet that goal.

Critics, however — chiefly Colorado Treasurer Walker Stapleton — continue to maintain that’s not good enough, saying the system could become insolvent sooner than PERA’s Board of Directors is willing to admit.

Monday’s study, written by retirement security experts Josh McGee and Michelle Welch, says that PERA is only 61 percent funded, and that the 2010 law didn’t go nearly far enough to fix what ails the pension.

“Although legislators made an effort to fix the problem through the passage of Senate Bill 1, which included retiree benefit cuts and increased statutory contribution rates, these actions have failed to provide relief in the near term,” the study says. “Even more concerning is the fact that the pension system remains particularly vulnerable to market downturns, meaning that the debt, which now totals at least $25 billion, will likely continue to grow.”

Stapleton, an outspoken critic of PERA who has repeatedly questioned the pension’s long-term solvency, said the report shows something needs to be done sooner, rather than later.

“This study is further evidence that PERA has serious and increasing liabilities that, if not proactively addressed, will negatively impact the state budget and the retirement benefits of public workers,” Stapleton said. “I don’t know how many more nonprofit and nonpartisan groups need to chime in before reforms take place. PERA’s $26 billion unfunded liability is a math problem that needs to be solved.”


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