As part of the Gov. John Hickenlooper’s budget balancing plan, he is calling on government employees to reach into their wallets and put an additional 4.5 percent of their monthly salary into the state pension plan, money that the state normally contributes as part of the contract. Both Sen. Pat Steadman, D-Denver, and Colorado WINS have come out questioning the decision.
“Again this is a budget plan, but you can’t change the numbers. The four letter word is math. If we can’t get it one place we will have to get it from somewhere else,” Hickenlooper told The Colorado Independent. “I know how hard it is to motivate a workforce. I have been through difficult economic times and didn’t give anybody a raise. That is tough. It is hard if you went two or three years without a raise and you take a pay cut with PERA, it is hard for people to get up and put their all into a job. But they can and they will.”
Hickenlooper’s plan calls for state employees to contribute an additional 2 percent of their salary on top of the 2.5 percent they were already asked to pay last year. Those additions would see many employees paying upwards of 12.5 percent into the system. The change will save the state’s general fund an additional $15.7 million on top of the $19.5 million realized in the continuation of the 2.5 percent PERA “swap.”
Hickenlooper said that a 4.5 percent pay cut is significantly better than many workers have fared in the last few years. He said many workers would jump at the chance to still have a good paying job even if there was a pay cut involved.
“They would think ‘My gosh, I can get back to a 9-5 job, 40 hours a week and only take a 4½ percent pay cut from what I was getting before. I would be thrilled.”
Steadman told the Independent he was unhappy about the notion of putting further burden on public employees. “I just don’t think that is a really good move. I’m not a big fan of the shift of the 2.5 percent in the bill I am already sponsoring and I think it is a mistake to go any deeper.”
Steadman said he was worried that reducing the benefits package would force competent individuals out of government positions.
While a spokesperson for the PERA board declined comment, instead waiting for the board to take vote on a position, its past arguments are likely to be similar in this case.
Meredith Williams, chief executive officer for PERA, told the Colorado Independent when discussing Steadman’s bill a few weeks ago that the long term solvency of the plan and the constitutionality of augmenting employee contracts were at the top of the list of board concerns.
Williams explained that employee contributions are worth 70 cents on the dollar whereas state contributions are worth the full dollar. He said this occurs due to a number of factors, but the stability of the state dollar is at the forefront of the equation. In many cases, employees drop out of the fund and are allowed to take their contributions with them, plus interest accrued. State dollars can be used with little concern of their removal from the fund.
“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.
“The other concern is that we question the constitutionality of the swap,” he continued. “The members essentially have a contract with the employer … 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.”
It is unclear at this time exactly what impact the change would have on the program though it is unlikely to contribute positively to the long-term solvency of PERA.
“Over the past three years state workers have absorbed cuts to help balance our budget – furlough days, pay cuts and cuts to benefits. Governor Hickenlooper’s budget proposal includes a 4.5% pay cut to state workers at a time when too many of these workers are already struggling to pay bills and rent. Some are even being forced to claim bankruptcy, use food banks to feed their families, and work second jobs to scrape out an existence.” Robert Gibson, executive director for Colorado WINS, said in a release. “We oppose these proposed cuts as they will further hurt our ability to provide essential state services to Coloradans.”
Hickenlooper said he understood the pain and would work hard to ensure state employees get a raise next year.