Colo. House Democrats finally pass pension bill; now they negotiate

 

Those who pay into the Public Employees’ Retirement Association — both employers and employees — are going to be kicking in even more money beginning next July.

The reported investment losses of $1.8 billion in 2018 means automatic contribution increases for employers and employees, allowed under Senate Bill 18-200.

On Monday, PERA officials said employer contributions will go up 0.50%, from a previously planned increase of 0.25%. For employees, who were already slated to contribute 0.75% more of their pay, beginning July 1, 2020, the increase will be 1.25%. 

PERA retirees will see smaller increases in their cost of living adjustments as well, at 1.25% instead of 1.5%. PERA retirees had not received a cost of living increase for two years; the 1.5% was to be the first in three years under the changes mandated by SB 200.

PERA Executive Director Ron Baker told members of the Joint Budget Committee on Monday that with those automatic adjustments, all divisions, except for the largest, the school division, will be back under the 30-year window for bringing the pension plan to full funding. Pension plans set 30 years as the standard for paying off pension obligations.

Baker said Monday that the school division, based on current projections, will need 34 years to pay its obligations, but are hopeful that its timeline for full funding will drop to around 28 years by next year.

PERA officials pointed to a market downturn at the end of 2018 for the investment losses, as well as “demographic” losses. It created a “perfect storm” that resulted in the need to implement automatic adjustments, Baker said. “We aren’t seeing growth in headcount, and that has an effect on paying a benefit 30 years down the road.”

In one of the last battles of the 2018 session, lawmakers came up with the second plan in eight years to shore up PERA’s unfunded liability, at that time around $32 billion. Under SB 200, the state pumps $225 million into the pension plan.

The bill also increased the retirement age for full benefits from 58 years old to 64 years old for employees hired after Jan. 1, 2020, in the school and state divisions, and required employees to contribute 2% more of their income, rolled out over three years.

State employees are slated for a 2% across-the-board pay increase beginning July 1, 2020, based on the budget request submitted by Gov. Jared Polis last month. With the PERA contribution increase, that leaves a net pay increase of 0.75%.

That pay increase doesn’t apply to those who work in the state’s 178 school districts, whose pay is determined by local school boards.

Amie Baca-Oehlert, president of the Colorado Education Association, told Colorado Politics that while districts and teacher groups won’t go to the bargaining table until the spring, a recent State of Education report released by the CEA pointed out a “dire reality, especially around pay.” The report said Colorado ranks 47th in the nation on starting pay for teachers.

Last year, when teachers were able to negotiate salary increases, those increases were virtually negated by increases for health insurance and PERA, Baca-Oehlert said. The 1.25% increase in PERA’s contributions beginning next July will exacerbate that, leading to situations “where people are living in their cars, or hold two to three jobs” to make ends meet.

The CEA’s top legislative priority for the 2020 legislative session is on the issue of teacher pay, she said. While the state has historically not set teacher pay, the report suggested legislative action to create a minimum base salary for educators and a base minimum wage for education support professionals, both based on the cost of living in a school district.

They also want to see more efforts to reduce the Budget Stabilization Factor, the debt to public schools that started in 2009-10 and which reached a high of more than $1 billion in 2011-12.

Polis has recommended paying down that debt, currently at around $572 million, by $52 million, the lowest payment to the debt in the last three fiscal years.

This story has been updated with this clarification: While the fiscal note for SB200 said the amount of the state contribution would increase annually, PERA officials say it has remained static at $225 million per year.

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