Changes to PERA proposal earn support from state teachers union

    The effort to shore up the Public Employees’ Retirement Association is moving through the House after clearing the Senate on a partisan 19-16 vote in March.
    The state pension plan covers 660,000 state, judicial, local government and school employees in Colorado. But the plan doesn’t have enough money to cover all of its pension obligations to those employees. Estimates of the shortfall range from a $32 billion deficit to as much as $50 billion over the next 30 years.
    A proposal by Senate Republicans, as contained in the original version of Senate Bill 200, would require employees to contribute another 3 percent to the pension plan, phased in between July 1, 2018, and July 1, 2020.
    Currently, school, state and local government employees contribute 8 percent of their salaries; that would go up to 11 percent. State troopers put in 10 percent with a hike to 13 percent under the bill as passed by the Senate. The PERA board recommended a 2 percent hike in contributions in all divisions.
    Another change is in how pensions would be calculated. New employees hired after Jan. 1, 2020, or those not vested (you need five years to be vested in the plan) as of that date would have their pensions calculated on seven years of their highest-average pay. The PERA board had proposed a change to five years.
    As adopted by the Senate, the bill also allows anyone in PERA’s defined benefit plan to switch to a defined contribution plan. The latter is like a 401(k); you get out of the plan what you put into it. Most PERA employees are in the defined benefit plan, which guarantees a pension based on the years of service.
    However, opponents, such as the state’s teachers union, pointed out that this change doesn’t help fix PERA’s shortfall and that it may increase the unfunded liability. Supporters, however, say a defined contribution plan is a better option for younger workers who don’t intend to make state service a lifelong commitment, meaning they can more easily switch those dollars to other plans as they change jobs.
    The bill also sets a minimum retirement age of 65 with 40 years of service required to obtain a full pension, up from 60 years in current law.
    The Senate version would put PERA back in the black in 25 years; the plan proposed by the PERA board would do the same in 30 years, which is the industry standard for pension fixes.
    House Democrats were at the ready this week with 11 amendments to change the bill to their liking. The House Finance Committee this week stripped out the defined contribution plan, put in a direct $225 million contribution to PERA and took out the additional employee contribution, reduced the retirement age back to the original 60 years of age for school employees, and reduced the highest-average-salary definition to five years (as proposed by the PERA board).
    Those changes earned the bill the support of the state teachers union and grudging support from groups like the Denver Metro Chamber of Commerce.
    The bill cleared the House Appropriations Committee on April 19 and will be heard by the full House in the coming days. The real battle is shaping up to be a conference committee that will work out the differences between the House and Senate versions.

Income tax rate unlikely to be cut
    A bill to reduce the state’s income tax rate cleared the Senate but is likely to go no further in the Democratic-controlled House.
    Senate President Pro tem Jerry Sonnenberg of Sterling is the sponsor of Senate Bill 61, which would reduce the state income tax rate from 4.63 percent to 4.43 percent. The bill would cost the state almost $375 million in 2018-19 and close to $400 million the following year.
    But it failed to gain a single Democratic vote in its trip through the Senate, a sign that it faces the ax from Democrats who control the House.

The full article is available in our e-Edition. Click here to subscribe.