Welcome to PERAscope, a service of the non-profit Secure Futures Colorado. If you’re a Colorado state employee, or a public school teacher in the state, and you care about your future retirement benefits, you might want to bookmark this blog.
Secure Futures Colorado exists to advocate urgently and aggressively for public sector pension reform in Colorado. PERAscope aims to shine a light on the reasons we believe the need for reform is well past due. It’s not too late – or so we hope and believe – but there is no time to waste.
As is the case with almost every issue today, the debate over pension reform has become polarized and politicized, with people hollering at each other across a gaping chasm. It needn’t be that way. Those of us who are convinced today’s pension system is unsustainable don’t want to take away your secure retirement. We want to help ensure it.
But that’s not what you’ll hear from those who choose to defend the nonsensical status quo. Ask them how they propose to pay down the Public Employee Retirement Association (PERA) $25.8 billion pension debt – which, by the way, is basically equivalent to the entire state budget. Parse their answers carefully. You’ll discover they’re based on pie-in-the-sky assumptions untethered from reality.
Even if you’re not a state employee, you should be deeply concerned about these issues. Why? Because PERA debt service is like one of those jolly, voracious PacMan monsters, gobbling up every dollar in sight. Failure to address this issue will result in ever-increasing sums of state and local tax dollars going to service pension debt.
The consequence of this is the budgetary “crowding out”, year after year, of important public services from educational programs to health care, roads, parks and all the rest. That is not the future Colorado wants.
We also believe that an intelligent, compassionate reworking of the pension system would help resolve the underpaid teacher dilemma. A smoother system of benefits accrual would mean that younger teachers who decided to leave the profession could walk away with not just what they put into PERA, but at least a piece of the substantial amount their employer put in as well. That’s not how the system currently operates.
In other words, if you’re a state employee, particularly a teacher, in early or mid-career, the pension system as currently constructed, was not designed for you. If you leave state or school district employment and then return, or if you decide after five or seven years that teaching is not for you, then you get a raw deal.
What’s more. We believe a fair and just pension system is portable. A portable pension is one under which an individual can take her contributions and investments with her wherever she may go, whether across state lines, organizations, or sectors.
PERA benefits aren’t portable. When a teacher leaves Colorado to teach in another state, her previous service years don’t automatically rollover. Instead, she starts back at square one.
So, you may be wondering, who are we? Secure Futures Colorado is a non-partisan organization, with no political ax to grind. We have Democrats, Republicans, and independents serving on our advisory board. You can find a full list of our board members and consulting staff elsewhere on this website.
As we have studied this issue and conferred with experts, we have become increasingly convinced that PERA is on an unsustainable course and, without substantial reform, will fail to deliver on it promise to provide a secure retirement to Colorado’s teachers and other state workers.
There are many reasons why public sector pensions in most states find themselves in dire straits. People are retiring earlier and living longer. Elected officials have chosen to backload public sector compensation onto pension obligations, in essence kicking the can down the road. They’re saying ‘we can’t afford to pay you now, so we’ll pay you later. Really. We promise.”
Later, of course, means some day in the future when the current crop of politicians is no longer in office, and someone else will be left to deal with the ungodly mess they’ve left behind.
Hoping to make good on politicians’ shaky promises, PERA has turned to increasingly risky investments, hoping to get a rate of return high enough to begin closing the gap between what it owes future retirees and what it will have on hand to pay them.
Unfortunately, according to a 2015 study, even PERA’s ambitious 7.5 percent rate of return will result in little reduction in pension debt between now and 2045 – to $9.2 billion for the school division from today’s $12.5 billion.
So, what’s to be done? There are no simple or pain-free answers. But you attack a problem by first acknowledging you have one. And that’s what we aim to do here. There are some promising practices in other states, which we’ll bring to light.
There are other states, of course, where the public pension system finds itself in straits far more dire than Colorado’s. We’ll also discuss how and why that happened, and how we can keep PERA from deteriorating to the level of poster-child Illinois, with its $97 billion in pension debt.
As we launch this blog, we’re going to enable the comments section, hoping and trusting that we can have a civil conversation. We’re going to require people to use their names when commenting, in the hope that this will help keep the conversation respectful.
Thanks for stopping by. We have so much to talk about. We hope you’ll be a regular visitor, and a participant in what is sure to be a lively conversation.