Kristen Rose, a seventh-grade English teacher at West Early College in Denver, takes part in a rally outside the state Capitol on April 16, 2018.

Some math, for starters:

• Colorado PERA, the state’s pension plan for public employees, has roughly $58 billion under management.

• Over the most recent year, PERA made a noteworthy return of nearly 17.5% on its investment portfolio.

• Yet, despite that impressive investment performance, PERA finished the year in even worse financial shape than at year’s beginning, adding a full $1.2 billion to its unfunded debt.

Now for those readers still with me after that double-whammy lead of PERA and math, let’s dive into the bottomless mess that is the Colorado Public Employees’ Retirement Association.

As background, over a decade ago, my old consulting firm worked with PERA on various public relations assignments. Before we resigned the gig, I often thought about what it must have felt like to counsel steel company executives in Pittsburgh in the 1970s. Those in senior positions at PERA were good people, but the world was changing and they were unable to adapt.

More recently, before turning over those reins last year, I spearheaded a coalition of business and civic leaders working to bring overdue reforms to PERA to solidify its sustainability.

So how is it possible for PERA, with a full 631,000 members, to have a banner year on the investment side but still slip further down the financial hole?

Much attention, arguably too much, has been focused on PERA’s projected rate of investment return. That benchmark has been set for a while at 7.25%. To this observer, that still strikes me as high. Who among us realistically expects to earn an annual average of over 7% on our investments over the next 20 years?

But that optimistic number might be the least of PERA’s challenges. The main explanation for why their hole got deeper even as their investments skyrocketed relates to a multitude of other metrics.

For years, PERA has set its dials somewhere between “high” and “wildly optimistic” on everything from the rate of growth in the public employee headcount to the rate of salary escalation.

The COVID pandemic put a lie to many of those estimates. But even if most of the world had never come to learn of Wuhan, China, these turned-up gauges were always going to be problematic in a TABOR-controlled state that constrains the public sector.

Anyone who has ever used a financial planner has been advised to err on the cautious, conservative side; to underestimate assets and overestimate living costs.

The PERA ethos is the opposite. It is akin to developing a personal financial plan based on ever-increasing salary, a robust stock market as far as the eye can see, and few unexpected expenses.

The intent of significant legislation passed in 2018 was to put all five divisions of PERA on track to full funding within 30 years. However, just a couple of years later, the school division is already 43 years away from such status and other divisions are also lagging.

This bad news, even with investments going gangbusters, means that PERA retirees will see their cost of living adjustment reduced just as inflation looms, and both public employers and employees will put even more into propping up a precarious system.

Some more troubling math: Every school district in Colorado pays the value of almost 21% of all salaries into PERA. That percentage will go up again this coming year due to the worsening shortfall. That is just the employer share without even beginning to account for what each employee contributes.

The number is similar for employers in other PERA divisions. To be clear, these burgeoning employer payments are not the result of increased benefits. In fact, benefits are being trimmed. Rather, it is a function of debt, the four-letter word that defines PERA.

No serious person questions that public employees, like all workers, deserve a secure retirement. Moreover, in PERA’s case, the system is a substitute for Social Security. Of course, contribution rates are going to be higher than in businesses that offer supplemental retirement plans.

But PERA’s mountain of debt is a heavier and heavier drag on all sorts of public services. Instead of lower class sizes or after-school programs or other forms of educational enrichment, we have decided to fund PERA instead. Those who so actively campaign for higher teacher salaries might direct some of their venom toward the retirement system that soaks up countless, endless dollars.

Essentially, there are two forms of compensation. First are the paychecks that show up in our bank account every couple of weeks. Second is deferred compensation mainly in the form of employer-paid retirement funds.

Wittingly or unwittingly, Colorado is spending abundant resources on the second at the expense of the first. The sad reality of PERA is that only relatively few retirees do quite well while it is a bad bargain for the largest chunk of public workers.

Back to that 1970s Pittsburgh example of a changing world, PERA was created in an era when many workers spent a career with a single employer. What was then the rule — the school teacher who started at age 25 and retired from the same district decades later — is now a rarity.

Those days are gone and not coming back. Workers belonging to post-boomer generations pursue multiple careers in various installments. Even the most devoted, full-career teacher might take some years off to raise kids or be forced to move to a new state as a trailing spouse or to care for elderly parents. In any circumstance other than a rigidly straight-line career, PERA offers a false promise.

Just in Denver Public Schools, roughly two-thirds of teachers leave before the five-year mark. Across PERA, approximately 60% of members never vest. Precious few last all those years to receive the late-career spike in benefits.

PERA’s model, by design, shortchanges the large majority of workers in order to enrich those shrinking few lifers and to keep the whole enterprise somewhat afloat.

The dirty little secret PERA would prefer to hide is that the vast and growing majority of its members would fare demonstrably better with a decently-funded 401(k) or similar retirement plan.

However, due to a cynical exercise of political power on the part of Colorado’s teachers’ union, there is now exactly one category of employees who are explicitly ineligible for a 401(k)-type plan, even as just an option. You guessed it: public school teachers. Keep that in mind the next time the Colorado Education Association preaches equity and claims to represent all teachers.

None of this even begins to address the financial calamity that will befall PERA with some medical advancement that extends life expectancy. We are unlikely to awake to a single, momentous headline announcing, “Cancer cured.” Progress will be more incremental. But when the happy day comes that we have a cure for even just one common cancer, all of PERA’s actuarial tables go out the window.

Any fix is complex and multi-faceted. But it must start with three principles. First, governance matters. The PERA board is overwhelmingly comprised of PERA members and beneficiaries. Get the foxes away from the henhouse and replace them with capable experts in the relevant fields, as is the practice most other places.

Second, PERA needs to get out of the bunker. In many states, the public retirement plan is a partner in necessary reform measures. Here, PERA too often jumps reflexively into full adversarial mode in response to any critique. Ask yourself whether the real ally of the public retiree, current or in coming years, is the person trying to hold the system together with baling wire and unrealistically rosy projections or the one prescribing some medicine today for long-term health.

Third, per the adage, when you are in a hole, quit digging. Of course, PERA must meet its obligations to all currently in the system. But perhaps it is time to cap this gusher of an oil leak and put in place for new employees a new plan more attuned to emerging work patterns and based on solid, affordable financial assumptions.

A few years back, newscaster Kyle Clark interviewed former Democratic Governor Dick Lamm and posed the simple question, “What is the one issue Colorado is ignoring at its peril?” Lamm’s response: “Our public pension system, PERA.” 

Anyone really disagree? 

Eric Sondermann is a Colorado-based independent political commentator. He writes regularly for ColoradoPolitics and the Denver Gazette. Reach him at; follow him at @EricSondermann.

Read his previous columns here.

Eric Sondermann is a Colorado-based independent political commentator. His weekly column appears every Sunday in ColoradoPolitics. Reach him at; follow him at @EricSondermann on Twitter

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