When President Bush and Congress first proposed a financial bail out for Wall Street investors last September, a grassroots chorus — from the Left and the Right — decried using public taxpayer funds to pay off the debts of private investors.

In Colorado, the state’s largest pension fund has lost 25 percent of its investment assets — $11 billion — in the past year, jeopardizing its long-term ability to pay retirement benefits promised to some 413,000 current and former government employees.

A year ago, after enjoying a 10 percent return on investment, assets of the Public Employees Retirement Association had grown to $41 billion or about 78 percent of the funds needed to pay $53 billion in promised benefits to retirees.

Now, PERA’s assets have fallen to barely $30 billion.  An estimate by the legislature’s Joint Budget Committee pegged PERA’s current funding ratio at 56.8 cents on the dollar, using 2007 liabilities. However, the actual number is undoubtedly worse given that PERA’s liabilities (i.e., promised benefits) grow by more than $3 billion annually.

PERA officials, as is typically the case, aren’t asking the legislature for hasty changes.  While that may be wise as it applies to PERA’s investment strategy (which generally exceeds its benchmarks), failure to deal with PERA’s unaffordable benefit structure is irresponsible.  At last, that costly reality may be inescapable, even for PERA and its apologists.

Even in a strong year like 2007 when PERA’s investments grew by 10 percent, its liabilities still grew faster, adding $160 million to its funding deficit.

PERA lawyers assert that benefits can be retroactively increased (as they have been), but that once increased, those benefits can never be reduced, even for someone who has worked just one day for a PERA employer.  But what if those increased benefits threaten the solvency of the fund?  PERA had behaved as if that could never happen.

Worse still, PERA’s party line is that the responsibility to make up for any shortfall rests with taxpayers, represented by state and local governments who contribute to PERA’s pension funds on behalf of their employees.

With that in mind, it’s worth explaining how PERA’s retirement plan is funded.

State government, most school districts and many cities and counties deduct 8 percent from their employees’ paychecks and send it to PERA, along with a 10.15 percent employer contribution and a 1.5 percent supplemental contribution (which will increase to 6 percent by 2013) to help return to full funding.  That’s a total contribution rate approaching 24 percent of payroll – compared to 12.4 percent for Social Security.

That money, more than $1.25 billion a year, is invested by PERA staff with direction from the PERA board of directors, 80 percent of whom are themselves PERA beneficiaries.  Taxpayers have no meaningful input.

In short, PERA rewards its members with higher benefits when its aggressive investment strategy pays off but soaks taxpayers for a bailout when that strategy backfires.

If PERA can simply charge its losses to the taxpayers, no wonder it sees no urgency in an unfunded liability of nearly $30 billion or an unsustainable benefit structure or funding models that assume incredible rates of return for decades into the future.

That certainly sounds like using public taxpayer funds to pay off the debts of private investors.  While that’s a great deal for PERA members, most of whom can retire at age 55 and collect $2,658 a month, it’s a lousy deal for other taxpayers on Social Security where the retirement age is 67 and the average monthly benefit is $1,089.

Because PERA won’t go belly up tomorrow, the expedient course is to kick the problem down the road.  When the day of reckoning finally arrives, current PERA board and staff will be long gone.

After contributing generously to fund state employees’ retirement and giving those employees virtually unlimited control over their pension investments, Colorado taxpayers deserve to be freed from this heads-they-win, tails-you-lose proposition.

If PERA beneficiaries want their pension fund to invest aggressively, they should also bear the responsibility if those investments backfire.

8 Thoughts on “Get taxpayers off the PERA-go-round”

  • I’m a PERA employee living on my pension. If you think this is bad, look at SS. At least they do make money on their investments and in a few years will do so again. When the treasurer of the state became involved we did much worse by getting into riskier investments. I am a little puzzled why they say they can increase the payout this year, I think we could cut that out. However, I literally slaved in horrid jobs with outstandingly horrid bosses for this pension and I did buy in some years to be fully vested. I believe that Colorado is doing better than the rest of the nation in part due to these pensions.

  • I’m a working teacher in Colorado with 19 years invested in PERA. In addition, I have three separate retirement accounts. All of these “nest eggs” have taken a substantial hit in this economic downturn. Last week, I read that PERA employees might have to work longer to receive their benefits. Question: Do we REALLY want sixty-five-year-old teachers in the classroom? If the U.S. Government can bail out AIG and send their executives on retreat that reportedly cost $500,000, I think congress has a duty to fund the retirement benefits of hard-working teachers, policemen, firemen, et cetera

  • Of course, “Congress” doesn’t have any money except ours and they’ve already spent more of that than they have. Translation: Now that our parents and grandparents aren’t around to sacrifice for us, let’s charge this to our children and grand-children instead.

  • Well it doesn’t shock me one bit that the pro comments are shallow and without content. One question remains, why government pensions are so rich and lucrative when compared to almost all other pensions. When compared with the biggest of all pension funds SS, they are not even in the same realm. Gov’ worker pensions start many years before SS pensions and outstrip them sometimes as much as 5-1 in monthly payout. Government pensions are not capped, SS is for everyone. They are as high as 75%-80% of the last 3 years salary. And lets not forget how its common practice to “suddenly” get “promoted” up the last few years in government jobs. How can this be? We have all heard about the sacrifice of the government worker, and no it is not just police and firemen who get a pension. It is secretaries, parks workers, school admin, plumbers, and myriad other jobs that are not life threatening in any way. Government workers invoke the “sacrifice” mantra. All we workers sacrifice. Let not us forget that in the private sector there is little mention of job security, one only need read all about 1000’s of layoffs per day in the private sector to know this. Odd though that our government has almost no layoffs. How can this be since there must be tax shortfalls right now brought on by the downturn in the economy? But I guess that’s for another day’s topic. There is no justification for these overly rich pensions. The question is how or when they will end. The entitled government worker believes the private sector tax payers, are their personal piggy bank. I don’t believe the average private sector worker understands enough about government pensions. If they had a chance to be enlightened and then to vote as to whether government employees should receive so much more than them in retirement, I think the message would be sent loud and clear. Government entitlements are by far the largest single portion of the US national budget. It needs to stop. Additionally, how dare our government allow a “buyout” of retirement years? Where does this happen anywhere but here in the US for our poor sacrificing government worker. It happens because those who control the system are those that benefit from it. I would give myself a big fat raise, pension and early retirement too, but somehow I am just not allowed to decide my own pay rate. One last comment. Does it surprise anyone when they here about 2 school admin personal who retired at 55 and make well over 100k together. Then vacationing in Spain and have a beach front second home? All bought with government retirement money and “under paid” wages. It shouldn’t. Because welcome to the new world of the poor government pensioner.

  • I am a 63-year old retiree, who worked in city government jobs for severely incompetent managers. It cost me over $50K to buy enough years to have any kind of pension due to a divorce after 28 years. It will be the only retirement benefit/pension I get since I moved with my ex when his job required it. The Windfall Elimination will wipe away any benefit I earned via SS. So thank God for PERA.

    As far as earning PERA, government workers don’t get the top wages like private industry, no bonuses, etc. while providing a service to the taxpayers of which they are also counted in that number. Many teachers take their own salaries and purchase school supplies for their classrooms and students, their own time away from their own families to work the ‘taxpayers’ children, and expended their energy caring for children neglected by their own parents.

    Dedicated PERA workers receive LOWER than private industry pay to receive the ‘golden parachute’???? at the end of their working years. And don’t forget, they also contribute to that same pot, more than SS requires. All in all, I think we have paid our dues in full!

    And now you want to deny us a return on our sacrifices during those working years? Who then will you get who is willing to sacrifice for the low pay, long hours, and put up with/deal with uncaring parents and public???

  • Yes, I am fed up. Fed up with paying property tax, most of which pays for people’s children to receive a public education. Uh, I don’t have children, but I am forced to pay for their education? Yet, these half wit parents continue to pump out the little darlings so that those who own property, including business owners, have to educate the dimwits.

    Now, you want to hear the irony of ironies? I was a school teacher. Yep, a childless school teacher who essentially paid property taxes which paid for my salary! Go figure dimwits! Why did I do it you ask. Well, I was raised to be of service to people, I just never realized that this social virtue was going to be subject to a myriad of convoluted governmental laws in conjunction with a veritable plethora of dimwitted citizens who couldn’t pour piss out of a boot with directions on the heel.

    Yes, fed up with the endless comments of dolts who couldn’t do my job. Rest assured dimwits, I could do yours better than you ever imagined.

    Let’s see, what else just torques my chain? Tune in later dimwits…

  • Oh, and Mark. Why not try promoting a viable solution for assisting 413,000 people who had no choice but to fall under the umbrella of PERA when they were hired. I didn’t ask to get on this train, however, after 30 years of service I had no choice but to accept the retirement that was offered. I might add that I did not administrate the PERA plan. The 413,000 members don’t administrate the plan either. They just work for the state, some by choice, others because of happenstance.

    So, moderate this comment as well…

  • I have proposed solutions — for the past 4 years. But PERA and its members would rather tell me that it’s “my” (read: taxpayers) responsibility to bail them out. If you’re the exception, more power to you. The solutions include delaying retirement (or at least the age when you can collect benefits) to age 65 — or reduced benefits at, say, 62; and freezing or suspending COLAs until the fund reaches 100% funding. That’s a start. Asking taxpayers to put more money into a system that is already on track to collect 24% of payroll — compared to 12.4% for Social Security — is not an acceptable option. If members want to increase their contribution, that’s their choice.

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