Over the course of his first year in office, Colorado Treasurer Walker Stapleton has targeted the state’s public-employee pension plan, known as PERA, underlining its billions of dollars in liabilities and arguing that it should be reworked to reduce the state’s obligations in part by giving over money to contributors to invest themselves. He brought his case to the state’s House Finance Committee on Thursday and predictably ran up against deep Democratic skepticism.
Debate turned around House Bill 1142, sponsored by Rep. Brian DelGrosso (R-Loveland), which would grant the 500,000 or so employees covered by PERA the right to opt out of the “defined benefit” plan and choose instead to enter the “defined contribution” plan. The defined benefit plan commits the state to providing set retirement coverage and assets. The defined contribution plan, on the other hand, gives over responsibility to individual employees to manage their own retirement cash and “live or die by the success of [those] investments,” as Stapleton has put it.
Rep. Daniel Kagan (D-Englewood) lead the opposition to the bill and went back and forth with Stapleton during the hearing.
“Would you like to see us offer a choice even if we knew that it would increase the unfunded liabilities of PERA?” asked Kagan.
“Sure,” Stapleton said, adding that having to reduce PERA’s solvency is “not a happy consequence” of the proposed policy change but worth it if it meant more members of the retirement plan would win the choice to “determine their own retirement futures.”
Kagan suggested Stapleton was putting economic ideology over the obligation of his office.
“I am shocked that you as the treasurer of the state of Colorado would say, as you just said, that to you the concept of giving the consumer choice is more important than making sure that PERA is fully funded.”
The Finance Committee passed the bill on a party-line vote.
A release from the Colorado House Democrats on the exchange pointed out that state law specifies that the treasurer must “secure the maximum rate of interest consistent with safety and liquidity” for the PERA fund and makes no mention of offering employee choice.
The recession and dipping state revenues has made sustaining public-employee pension plans a pressing concern coast to coast.
The number of U.S. state governments carrying fully funded public-employee pension plans in 2008 had dipped to only four, as former Democratic Colorado Treasurer Cary Kennedy noted on her way out of office last year. Colorado wasn’t one of those lucky states.
PERA provides retirement and other benefits to the employees of more than 400 state agencies. It was established by state law in 1931.
PERA-type plans were intended to be the primary source of income for retired public employees and so the plans stressed predictable and adequate benefit delivery.
Proposals to convert state-based PERA-type plans as well as federal social security to 401(k)-type private investment plans have increasingly entered mainstream discussion. Detractors see looming disaster in such proposals and see them as a step back into the past, where lack of investment or bad investment or see-sawing markets effectively wipe out retirement funds on a vast scale and result in a ballooning class of impoverished American seniors.
[ Image: Colorado Treasurer Walker Stapleton ]