By Andrew Roth and the Rebecca R. Freyre

The next legislative session is two months away, and budget conversations at the state Capitol are already underway. The General Assembly will once again face the difficult task of cutting spending to pass a balanced budget, setting up a series of challenging choices for lawmakers.

As leaders of the organization that provides retirement income to 1 in 10 Coloradans, the Colorado Public Employees’ Retirement Association wants to remind policymakers of the promise the state of Colorado made to its public workforce. Public employees often work for lower wages than what’s available in the private sector, with the state pledging to provide those workers with dependable retirement income. A reduction in contributions to PERA has the potential to negatively affect the retirement security of hundreds of thousands of Colorado residents.

While PERA is on a path to full funding by 2048, it’s important we stay on that path and follow the plan laid out in SB18-200. Nationally, the average public pension is now more than 80% funded; PERA is hovering just under 70%. Though we’re making progress, we need the General Assembly’s support to keep that momentum going. We all owe it to our members and retirees to stay the course.

Though PERA’s investment performance is strong and our returns have outperformed our benchmarks over the long term, consistent contributions are essential for PERA to reach full funding. Nearly 40% of PERA’s funding comes from members, employers and the state. Any reduction to expected contributions puts added pressure and risk on PERA’s investment portfolio to exceed its targeted 7.25% rate of return. Maintaining our current funding levels is vital to ensure we meet our long-term goal and fulfill Colorado’s promise.

It’s important to note any cuts in contributions to the PERA trust funds don’t just affect the plan today — they compound over time. Of PERA’s $29 billion in unfunded liabilities, nearly $8 billion of that is interest. Any contribution shortfall will accrue additional interest at our assumed 7.25% rate of return. Even a 1% cut in the state’s employer contribution is projected to increase the state division’s unfunded liabilities by more than $40 million over the next few years, accumulating to greater than a $180 million shortfall (compared to expected) by the end of 2047.

Legislative reforms during the past decade aimed at improving PERA’s funding have lowered retirees’ annual benefit adjustments and raised contributions from working members and their employers. If PERA falls behind on its funding progress, our stakeholders will have to carry even more of the burden of getting us back on track — in the form of higher contribution rates and lower annual increases.

We look forward to working with our partners in the General Assembly to ensure Colorado’s hardworking public employees can continue to count on a secure retirement.

Andrew Roth is the chief executive officer and executive director of the Public Employees’ Retirement Association of Colorado (PERA). Hon. Rebecca Freyre is a judge with the Colorado Court of Appeals and chair of the Board of Trustees for PERA.