BackboneAmerica

As some of you may have heard, PERA, Colorado’s Public Employee Retirement program, has got a little problem. At latest report, its obligations were down to being about 60% funded, a couple of decades
out, down from 80%, which is considered fully-funded. This is before
taking into account paper losses from real estate and other non-equity
investments.

The reason that being underfunded 30 years out is a problem is that
there are still bills to pay today, and that at some point you start
paying out money faster than it can grow. One day, you wake up, and
the seed corn is gone and the retirees are at the door.

Yesterday’s Denver Post cites a 2004 State AG’s report to the effect
that there may be some legal limitations to what PERA can do. In all
likelihood, benefits to current retirees are sacrosanct, barring a
constitutional amendment (aren’t you now glad that we rejected
Referendum O?) to permit a reduction of benefits.

New hires should be put into the 401(k) without even the option of a
defined-benefit plan. Those at or approaching retirement age should
probably not have their benefits tinkered with. But some combination
of higher contributions by employees, lower benefits, and a higher
retirement age (really, who gets to retire on full bennies at 57?) will
probably be required.

PERA’s Board may have to show to a court’s satisfaction that all this
is necessary to prevent major street corners from being overrun by
former state employees and the inevitable tin cup shortage. At the
same time, there’s no question that PERA has been operating under one
of those unspoken assumptions that the taxpayers will always be there
to bail them out, if necessary. Thus the somewhat rosy 8.5% growth
assumptions underlying their projections.

We’ll probably have to await the 2008 Annual Report to see exactly how
bad things are, but there’s no question that the sooner we deal with
this the better. After all, better to ask public employees now to
contribute more to their own financial security than to ask you, 15
years down the road and a few years away from your own golden years, to
work for a few more years.