A bill to radically change the composition of the PERA board has been introduced (pdf) by Rep. Jim Kerr, R-Littleton. His bill would reduce the number of members elected by PERA participants and replace them with political appointees.
The Public Employees’ Retirement Association of Colorado (PERA) has been in financial trouble for years, and Kerr says part of the problem is that too many board members have a conflict of interest. Others say it is precisely those who pay into the system and benefit from the system who should be in charge.
Kerr said putting the reins of retirement packages in the hands of pension trustees who receive the benefits is absurd and called for governor-appointed positions of individuals with financial backgrounds to take over the employee elected roles. Colorado employee groups said the bill was part of an ideological debate that would only be politicized further if governors controlled the state employee representation in the fund’s future.
“I hope to create a board with people who do not have a dog in the fight making decision with about a billion dollars in trust money, that is what I hope to gain.” Kerr told The Colorado Independent. “If you think about it, if you have a kid and you give him a choice of broccoli or ice cream, what do you think that kid is going to do?”
However, Colorado employee groups called foul on the repeat legislation they say stifles employee voices.
“This shuts out the voices of the public employees who contribute the hard earned dollars to the fund,” said Scott Wasserman, political director for Colorado Workers for Innovation and New Solutions (WINS). “Currently our state employees are paying 10.5 percent of their salary into the fund. So, any investor would want to have a voice in how their dollars are spent. We don’t understand why you would want to mess with this system when it is seen around the country as one of the top employee pensions.”
Wasserman, along with the Colorado Education Association, said workers who place their money in the pension fund deserve to have representation in how those funds are being used.
The board of trustees is currently made up of 15 trustees and one non-voting, ex officio trustee from the Denver public schools division. Of those, the majority of voting members are receiving PERA benefits and are voted into office by constituent public employee divisions. These include four members from the education division, three from the state, one from local government, one form the judicial division and two retirees. In addition to these members, the state treasurer along with three governor-appointed trustees sit on the pension board that is responsible for directing the fund’s investments.
Kerr’s bill would increase the number of governor-appointed positions to eight, reducing the number of teachers and other state employee divisions on the board. As is currently the case with the three appointed positions, the governor-appointees, who are confirmed by the senate, cannot be members of PERA and must have significant experience in investment management, finance, banking, economics, accounting, pension administration, or actuarial analysis. In addition, the bill stipulates that only four appointed members can be of the same political party.
Kerr said it was next to impossible to have the best interests of the tax payers in mind when PERA benefits and funding are controlled by representatives who are elected by individuals also gaining benefits. He said back-funding the PERA fund had become commonplace when actuary models failed to produce the growth needed to keep the program solvent. “It is ‘we the people’ who are paying for those benefits and since I represent the people, and I don’t represent PERA, I want to look out for the taxpayer,” Kerr said.
A recent editorial in Colorado Education News, written by former treasurer and PERA board member Cary Kennedy, explained that 80 percent of PERA was funded through its recipients. She noted PERA members pay an average of eight percent of their earnings to get their benefits.
Jeanne Beyer, director of communications for the Colorado Education Association (CEA), told the Independent that the board had made significant changes last year to shore up the pension fund.
“Last year Senate Bill 1 would provide evidence to the contrary, the PERA board supported the major changes that were made in Senate Bill 1,” Beyer said. “Senate Bill 1 had some fairly drastic measures to limit benefits.” (pdf)
Senate Bill 1 provided concessions that according to projections should see PERA return to full funding in 30 years. The bill, signed into law last year, asked many employees to pay 2.5 percent more into the fund, employers to add an extra 1.5 percent, a decrease in cost of living increases to 2 percent or less while increasing the retirement age to 60 years for new employees, among other changes.
Kerr said that the PERA board moved in the right direction, but he said the program was ultimately a Ponzi scheme that could not survive in the current economy.
Kerr said that he would prefer to see state employees using a defined contributio program like his own 401(k) plan instead of defined benefits plans. He said “Joe Six-pack” was offended when he saw government employees walking away with a significant portion of their salary in retirement benefits when “Joe” was left with a paltry social security benefit.
Beyer rejected this model and said some legislators have a fundamental difference of opinion with the CEA about the benefits that state employees deserve.
She went on to say that while many people feel that teachers are under-compensated for their work educating children, the move to reject pensions similar to PERA in 13 states has been part of a larger national movement that focuses on ending defined benefit plans for government employees.
“Some legislators believe that government employees should earn less and have lesser benefits than they have now. We don’t think that state employees or K-12 educators are paid at all what they are worth.”
Wasserman said that the ramifications of having an 8-member, governor-appointed board would depend on the governor who was appointing them. But said it would politicize a board focused on fiduciary responsibilities.