Six years and billions of dollars into Colorado鈥檚 30-year pension rescue plan, the Public Employees鈥� Retirement Association has less than a 50-50 chance of reaching its goal of full funding by 2048.
PERA officials on Monday are expected to report back to the on what it would take to increase those odds to 67%.
The answer: $13 billion in up-front cash, or a wide-ranging package of 鈥渄raconian鈥� cuts, according to PERA鈥檚 actuaries.
Another year of has brought with it a growing chance of automatic benefit cuts for retirees and contribution hikes for public employees and the agencies they work for. That has lawmakers, independent overseers and PERA board trustees all talking, for the first time since 2018, about what can be done to improve the financial trajectory of the state pension 鈥� while simultaneously trying to alleviate the financial burden on retirees.
But the early discussions are running into some familiar barriers: a lack of political will and a lack of money.
The $13 billion figure is largely illustrative. There are no plans in the legislature, nor by the PERA board to bring the pension up to a 67% likelihood of hitting its targets. Nonetheless, state law requires PERA to outline what it would take to get there.
An alternative path presented to the PERA board last week would drop retiree cost-of-living raises to 0.5% a year, and increase employee and employer contribution rates by 1 percentage point each. Future employees would have their benefits cut, too. Do all that, and the state would still have to chip in $4 billion in cash to meet the mark.
Earlier this year, an independent report commissioned by the oversight subcommittee that seems modest in comparison 鈥� an amount that Democratic lawmakers still dismissed out of hand as a political nonstarter, given the state鈥檚 .
Jack Tate, a former Republican senator who helped craft the 2018 pension reforms, told The Colorado Sun that the gigantic dollar amount didn鈥檛 surprise him.
But while he acknowledged it鈥檚 unfeasible for the state to contribute $13 billion, he also thinks the pension needs some additional money today to mitigate the risk of a disaster. A from the pension鈥檚 actuaries found that there was a nearly 1-in-10 risk of the school division becoming insolvent and unable to pay benefits. The oversight committee鈥檚 found it could be as high as 1-in-5.
鈥淭hat鈥檚 the risk we should really be looking at from the standpoint of public policy,鈥� said Tate, a member of the subcommittee. 鈥淚f that happens, that鈥檚 bad.
鈥淚f our austerity measures pay off in 35 years instead of 30, it is what it is 鈥� it鈥檚 not ideal,鈥� Tate said. 鈥淏ut if we dodge a , a major liquidity solvency crisis, we can say we did our job.鈥�
PERA鈥檚 board chair says that if the legislature and its oversight board are serious about improving the pension鈥檚 funding, there鈥檚 a simple answer: require government agencies to fully fund the 鈥渁ctuarially determined contribution鈥� or ADC 鈥� pension speak for the exact dollar amount required to fund benefits and pay off the long-term debt.
In Colorado, government agencies pay the annual contribution rate set in law, whether or not it鈥檚 enough to meet the pension鈥檚 financial needs. Since 2001, Colorado employer contributions were more than $5 billion short of that amount, according to PERA financial reports 鈥� a long-running shortfall that into its current financial hole.
鈥淚f you look at states that are well funded, one common thread is, they pay the ADC,鈥� Chairman Marcus Pennell said at last week鈥檚 board retreat in Colorado Springs. 鈥淭hey ask the actuaries to calculate what needs to be paid and they simply pay it.
鈥淚 would really like us to speak with just a long-term, sustained voice that if you鈥檙e going to make a change, let鈥檚 just make the change to pay the ADC, because that is the real way forward.鈥�
Instead, lawmakers and board members are considering more modest changes.
One legislative proposal would increase the state鈥檚 annual $225 million payment by inflation each year, a move that pension actuaries say would help 鈥� but only a little.
Another idea being considered by the board would reduce contributions to PERA鈥檚 health care trust fund 鈥� which is in better financial shape 鈥� and divert them to the pension鈥檚 unfunded debt instead.
Taken together, PERA鈥檚 actuaries say those changes would likely delay the next round of automatic benefit cuts and contribution hikes for a number of years.
They could also pay for something else: some financial help for retirees.
Pennell on Thursday suggested using the potential savings to offset the cost of increasing cost-of-living adjustments to 2% for those 80 and older, up from 1% today.
Brian Eason is a reporter for The Colorado Sun. His work frequently appears on-air at KUNC 91.5 FM and online at KUNC.org. Contact Brian at brian@coloradosun.com.