Sen. Pat Steadman, D-Denver, has introduced legislation that would cause PERA members to continue making the higher payments they began making because of legislation last year.
He referred to his bill as “a necessary evil”, but pointed to a bill carried by Republican senators as further compounding the problem.
The Colorado Public Employees Retirement Association has come out against bills that would increase contributions while reducing benefits, calling the bills potentially unconstitutional.
Steadman’s bill will compel state employees to continue contributing an extra 2.5 percent of their paychecks into their PERA accounts and allowing the state to reduce its contributions by 2.5 percent in the next fiscal year. Steadman said the general fund savings will be about $19.5 million with individual departments saving additional money. The total savings, he said, add up to $46 million.
The bill will not affect teachers or local government workers.
“There aren’t a lot of good choices to reduce our state budget and reduce the shortfall–there really aren’t. So state employees are going to be asked to continue the sacrifice that began last year,” Steadman said. “This isn’t the best fiscal policy for PERA, and we are going to ask them to hold their nose and be tolerant.”
However, Steadman said a bill sponsored by Sen. Kent Lambert, R-Colorado Springs — also a co-sponsor of Steadman’s bill — would allow local governments to also reduce their contributions to employees’ pension plans while increasing employee contributions. Steadman said he was against Lambert’s bill.
Steadman said there may be a certain amount of hypocrisy in his decision to allow the state to do something that cities, counties and school districts cannot do.
“This isn’t a good policy move. Just because we are forced to do it doesn’t mean that we should compound the problem by letting everyone do it,” Steadman said.
PERA’s Chief Executive Officer Meredith Williams told the Colorado Independent that the board of trustees was against the bills.
“Number one, we like dollars that come from employers. When an employee contributes into PERA it goes into an account. If an employee quits and forfeits their service under the system they get all of the money that they have contributed, they get interest on that money and they get a match on that money to give them something for their contribution.” Williams said. “So an employee dollar coming into PERA is worth about 70 cents as opposed to an employer dollar that is worth a 100 cents.
“The other concern is that we question the constitutionality of the swap. The members essentially have a contract with the employer. And the contract is that the employer will pay in so much and here is the benefit that you ultimately will receive from that. The courts have ruled in some districts that if you are going to change that contract you have to change both sides of that equation… In this case the employee has paid in more and is not receiving any additional benefits.”
Steadman acknowledged both of the problems, but he said his plan was the best of the numerous options he and other Joint Budget Committee members were faced with.
Pointing to furlough days used two years ago to help balance the budget, he said that enacting those both affected total contributions into the fund and in some cases changed the formula used to calculate an employees payout.
“By doing this, every single penny that is supposed to be in the employees benefit account is getting into their account. It is held harmless, and on paper their salary still looks unaffected. Furlough days are with you forever, Steadman said.”
He went on to say the third option was to enact pay cuts across the board for state employees. He said the best option in his mind was to ask individuals to contribute more to their retirement package.
Asked if he thought there would be a lawsuit in response to his bill, Steadman said people can sue anybody anytime for anything in Colorado.
“That risk is always out there. The fact of the matter is that from the perspective of state employees this is a better option than most of the alternatives.”