ELIMINATE PERA’S UNFUNDED LIABILITY

The net assets of the Public Employees Retirement Association (PERA) decreased from $41.4 billion as of December 31, 2007, to $30.9 billion as of July 31, 2009. Thus, there is a likelihood of the funds becoming insolvent within the next 30 years. Failure to take action on this situation would threaten the retirement security of the 440,000 current or former public servants employed by public schools or the state. Thus, SB 10-001 was introduced by Senate President Shaffer.

SUMMARY of JBC briefing on PERA in November 2009:

• Based on the December 31, 2008, Comprehensive Annual Financial Report (CAFR), PERA's market valuation of investment portfolio was valued at $30.8 billion, which is a decline of 28.6 % ($12.3 billion) during the calendar year.

• According to PERA, without changes to the contribution and benefits structure, it is possible that certain divisions will reach 0% funding within the next 30 years.

• PERA proposed a legislative package to address what it believes are some of the underlying issues. These primary proposals include increasing the state and employee contribution rates, as well as reducing the Cost of Living Adjustment (COLA). The legislation would also adjust how the retirement age is calculated.

The provisions of SB 1 do not impose a reduction on the benefit amount of any current benefit recipient.  The bill does adjust the future escalation of existing benefit amounts for all current and future benefit recipients.  The statutory provisions governing escalation of the benefit amount payable by PERA have changed on numerous occasions in PERA’s history and have always been applied not only to future retirees after the statutory change, but also to the benefits existing prior to the change as well.

Regrettably, the change to future benefit adjustments for all members and retirees is critically important for PERA to return to adequate funding.  The bill includes provisions for restoration of the rate of adjustment upon recovery of PERA’s funding status.  Until PERA has adequate funding, protection of the ability to pay base benefits with limited inflation protection is paramount. That critical state interest is most equitably accomplished through the shared sacrifice contained in SB 1. 

Because PERA members will be impacted differently by this legislation (depending on when they were hired and how much service credit they have earned), I encourage anyone who is a member to contact PERA to determine how his or her particular situation will be affected. PERA’s customer service representatives can review each member’s account and determine which provisions of the bill are pertinent. PERA can be reached at 303-832-9550 or 1-800-759-7372. PERA’s website at www.copera.org is an excellent source of information as well.

SB 1 passed the Senate and will soon be considered in the House.