Legislators send PERA reform bill to Governor

By Marianne Goodland

The bill to shore up the Public Employees’ Retirement Association (PERA) defined benefit plan is on its way to the desk of Gov. Bill Ritter, after getting final approval from the House Tuesday.

Senate Bill 1 pledges to restore the troubled pension plan to full financial health within 30 years. At the end of 2009, PERA had just an estimated $33 billion in assets to pay $57 billion in liabilities, and could go broke in as little as 26 years.

Under the bill, retirees would give up their annual 3.5 percent cost of living adjustment (COLA) in 2010. The COLA would drop to the lower of 2 percent beginning in 2011 or indexed based on the Consumer Price Index for Urban Wage Earners (CPI-W). The COLA also could drop to zero if PERA experiences a negative investment return year.

The bill also requires PERA employers in all divisions except the school division to increase contributions by 2 percent of payroll beginning in 2013. The current contribution by PERA employees also would increase by 2 percent. School division employers would contribute 1.5 percent beginning in 2013; school division employees would contribute 2.5 percent in order to gain an earlier retirement at age 58.

The plan also makes changes in the employee’s required age at retirement. Most current public employees would have to wait until age 55 to retire, with at least 30 years of service. Public employees hired after Jan. 1, 2011, would have to reach age 58 with 30 years of service before being eligible for benefits. After Jan. 1, 2017, that age requirement would increase to 60 years.

The House held vigorous debate on SB 1 during second reading on Feb. 12. Those who have had different ideas about fixing PERA “have not been heard,” said Rep. Kent Lambert, R-Colorado Springs. Lambert has a competing bill, HB 1207, which would convert PERA’s defined benefit plan to a defined contributions plan. HB 1207 is scheduled for the House State, Veterans and Military Affairs Committee next Tuesday.

“We need to slow down on this bill,” Lambert said, explaining that the Legislature has had a tendency to “ram through” legislation. Lambert tried unsuccessfully to amend SB 1 with a multi-page amendment that would slow down the process, study it, and come up with a long-term solution. SB 1 had not been adequately vetted, Lambert said, in part because the bill was written by PERA, not by Legislative Legal Services. The amendment would refer the more controversial contribution increases by the state and school divisions to an interim committee, he explained.

Assistant Majority Leader Andy Kerr, D-Lakewood, the bill’s House sponsor, told the House that by passing SB 1 the House would be showing leadership. “We cannot afford to put this off another year and let another committee study it for another year,” he said.

But Lambert said the PERA changes for school districts should be looked at in conjunction with other budget changes that are pending for K-12 schools. This “will add more pressure to school districts and it won’t fix the PERA problem,” he said. Kerr pointed out that the increased contributions for school districts don’t go into effect until 2013. “School districts understand that having a good, solid retirement system that is well-funded and stable…is critical to attracting and retaining quality teachers,” he said. “This bill comes to us at a critical juncture. It has been thoroughly vetted.”

“There is no change in the business plan for an organization that thinks of itself outside of the control of the state,” said Lambert. “This is an ongoing saga with PERA,” said Rep. Jim Kerr, R-Littleton, who lamented PERA’s estimated 8.5 percent annual investment return expectation, which he said was risky. J. Kerr said people outside of PERA should be looking at what the organization is doing, and pointed out that he had asked a year ago for something to be done, and that both he and Lambert had been shut out of the negotiations on SB 1. Kerr and other Republicans took aim at PERA’s management; Rep. Larry Liston, R-Colorado Springs, called the management “abysmal” and accusing it of running the pension plan into the ground. “I’m amazed PERA members aren’t calling for new management,” he said.

SB 1 supporters said the bill had been adequately vetted. Rep. A. Kerr provided a long list of organizations that had had input on the bill, and noted that PERA had held extensive “listening tours” around the state prior to the creation of SB 1. And PERA Executive Director Meredith Williams pointed out during testimony on SB 1 in the House Finance Committee last week that 20 percent of the 4,200 people who provided comments during the listening tour had called for his ouster.

Republicans tried a last-ditch attempt to amend SB 1 during the committee of the whole report (a part of the second reading debate process), to require easier access to financial disclosure information from PERA trustees. A. Kerr noted that the information is already available and the House voted down the amendment.

SB 1 passed the House Tuesday on a 36-29 vote, picking up three Republican votes but with five Democrats voting against it. The “yes” votes included Rep. Steve King, R-Grand Junction; Rep. Ellen Roberts, R-Durango, who voted for the bill in House Finance; and Rep. Spencer Swalm, R-Littleton, who had voted against it in House Finance. The “no” votes included Rep. Buffie McFadyen, D-Pueblo West, whose district includes eight state prisons; Rep. Mike Merrifield, D-Colorado Springs, Rep. Sal Pace, D-Pueblo, Rep. Dianne Primavera, D-Broomfield, and House Majority Leader Paul Weissmann, D-Louisville.

Rep. Jim Kerr again attempted to amend the bill on Tuesday with a third reading amendment regarding the financial disclosure information. That amendment failed on a 30-35 vote.

SB 1 was unamended in its journey through the House and hence goes straight to Gov. Bill Ritter for signing. If the bill is signed by March 1, according to PERA spokeswoman Katie Kaufmanis, there would be no annual cost of living increase on PERA benefit checks paid on March 31, the first month under which the 2010 COLA would be applied.

In related news: HB 1153, which would have changed the make-up of the PERA board of trustees, went down to defeat in the House State, Veterans and Military Affairs Committee on Feb. 11. HB 1153 would have added more gubernatorial appointees who are not PERA recipients to the board, and decreased in equal numbers trustees who are elected by PERA members. Rep. Jim Kerr sponsored the bill.

— Marianne@coloradostatesman.com


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