Major metro daily newspapers are regularly heaped with scorn by people who remember their glory days and bemoan their diminished state.
But when a paper like The Denver Post decides to turn its still-formidable firepower on a story, it can produce top-flight journalism, and does so on a regular basis. It’s best to separate in one’s mind that hardworking journalists at the Post from the paper’s hedge fund owners, who seem bent on bleeding the once proud paper dry.
Today’s Brian Eason story on Colorado PERA, and how it got into its present pickle, is down-the-middle journalism at its best.
A Denver Post review of thousands of pages of financial reports and hours of public meeting recordings found that state lawmakers and the pension board alike ignored numerous red flags after the landmark pension reform was passed in 2010, opting time and again for political expediency at the expense of the Public Employees’ Retirement Association’s long-term financial health (emphasis ours).
Eason’s story points out that governor-appointed members of the PERA board pushed hard at times for a more transparent and public airing of the pension plan’s serious deficiencies. As Lynn Turner, a Hickenlooper appointee says in the Post story:
“Everyone has failed the citizens of Colorado and members of PERA on this — the legislature, the PERA board, and (Colorado’s) governors.”
Called out for criticism in the article is PERA’s actuarial firm, Cavanaugh Macdonald, which back in 2010 assumed a 3.75 percent annual rate of inflation, used to justify an 8 percent annual rate of return. Inflation turned out to be closer to 2 percent.
Not only has the U.S. consumer price index not averaged 3.75 percent inflation since 2010, there hasn’t even been a single year of 3.75 percent inflation dating to 1991.
“I think most of the data that we saw raised questions,” Turner said. “That fell on deaf ears.”
If the board had averaged the two inflation assumptions together, it would have dropped the rate of return to 7.125 percent — a difference of billions of dollars in investment returns. A motion to reduce the rate to 7.5 percent was defeated 10-4 by board members.
It’s worth pointing out that Cavanaugh Macdonald also urged the PERA board in October 2016 to keep the projected rate of return at 7.5 percent, when international experts were counseling something closer to 6 percent — or even lower. The board voted to hew close to the actuary recommendation, and lowered the rate to 7.25 percent — a relative drop in the bucket, but politically expedient.