Democrats debut pension reform plan sparing workers from contribution increases

Proposal cuts retirement benefits and requires more taxpayer money to shore up PERA pension

Democrats debut pension reform plan sparing workers from contribution increases

This story was updated on May 1 to include a vote from the House. 

Teachers and state workers would be off the hook for propping up the state’s pension plan under a proposal approved by House lawmakers Tuesday.

Instead, annual pay raises for retirees would be cut and an additional $225 million per year in taxpayer dollars would bolster the pension fund, which does not have enough money to pay our current and future benefits to all its members.  

The House solution, which passed the House 38-23 on Tuesday, rejects the approach approved by the Senate earlier this session. That previous plan asked the pension’s 585,000 members, which includes teachers, city workers and state employees, to pitch in three percent more of their paychecks to shore up money for the pension, which is managed by the Public Employees’ Retirement Association, or PERA.

The pension has a $32 billion to $50 billion unfunded liability. In the event of another economic downturn, PERA could be unable to pay benefits to retirees. This is because members are living longer than anticipated and the expected rate of return on pension investments was recently adjusted down, PERA says, resulting in less money for the fund.

Lawmakers agree the pension should be fully funded in about 30 years. Getting there is another matter. Democrats say there should be shared sacrifice, and are hesitant to ask public employees to pay more — most of these workers already see about 20 percent of their pay go into the fund.

Teachers rallied at the state Capitol on Monday against the Republican proposal that would ask them to pay more. For a teacher making the average salary of about $46,000, a three percent increase would be an additional annual contribution of $1,380.

Nelia Peña, a third-grade teacher at Ellis Elementary School in Denver, said there is already so much taken out of teachers’ paychecks.

“To afford to live in Denver, for many of our teachers, especially those who are starting families, it’s impossible on our paychecks,” Pena told The Colorado Independent. “I think it’s really sad because our teachers care deeply about the communities that they serve and would like to live in that same community.”

As expected, the House also stripped out a provision that allows all public employees to put their retirement savings into a 401(k)-style plan offered by PERA. Currently, all employees can do so in addition to their contributions to the defined-benefit plan, but only state workers can opt out of this plan altogether.

House Majority Leader KC Beaker, who was a lead sponsor on the bill, told the House Finance Committee in April that adding the option to join a defined-contribution plan does not help bail out the fund. And, she added, “the central tenet of the public pension system is to have a pension that provides a guaranteed income for life. And a defined-contribution option doesn’t do that.”

She told reporters on Tuesday that including this in the final plan is off the table. Also off the table is tinkering with the $225 million, which is in the state budget Gov. John Hickenlooper signed on Monday.

What she did not mention, however, was how much workers should contribute, indicating this will be a key point of compromise as the House and Senate work toward reaching a deal in final eight days of the session.

The proposed changes will provide some uncertainty for retirees. Both the House and Senate versions of the bill would freeze the cost of living adjustment for two years and then drop the annual COLA from 2 percent to 1.25 percent. It reduces the retirement age proposed in the Senate bill from 65 to 60 — still up from the current age of 58 years old.

The bill needs approval from the House Appropriations Committee and full House before it likely ends up in a conference committee where Democrats and Republicans will work out their differences. 

Sen. Jack Tate, a Republican from Centennial, is the lead sponsor on the bill in the Senate. He said in a statement he can appreciate why House Democrats watered down certain provisions of the bill.

“But it doesn’t change the cold hard reality that we at the General Assembly confront: which is a huge pension fund that could go bust if hard choices and shared sacrifices aren’t made now,” Tate said.

Lead photo: Teachers rallied at the state Capitol on Monday to demand better pay and secure retirement. Photo by John Herrick

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About the Author

John Herrick

John is covering the 2018 legislative session. Follow him on Twitter @herrickjohnny and email him at John@coloradoindependent.com.

2 Comments

  1. FIN Denver /J effco on said:

    Let’s have some transparency.

    Let’s CORA Mr. Tate’s PERA plan, (and all of the legislature, judicial, and executive officials both elected and appointed) tell the public about their golden parachute terms and conditions, compare their’s to the measly teacher led balloon terms and conditions, AND THEN we can discuss shared sacrifice.

    And maybe SHARED ACCOUNTABILITY.

  2. Mike on said:

    How much tax payer money goes to fund private sector employees pathetic social security benefits? Answer – None? How about teachers receiving the same SS benefits we must accept? Where’s the equality teachers?

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