Lawmakers take step to shore up judicial fund
Billwould ask taxpayers, workers to pay more toward retirement.
Colorado taxpayers and judicial branch employees will be asked to contribute more to the judicial retirement fund under a House bill that cleared its first committee hurdleWednesday.
The stopgap measure is aimed at bringing the judicial division back from the brink, before Colorado’s Public EmployeeRetirement Association ( PERA) returns next year with a broader package of reforms to address the state pension fund’s increasingly perilous financial position.
“This is not a solution,” said Greg Smith, PERA’s executive director. “This is a start toward the solution.”
The judicial branch is now in the worst financial shape of any of the state’s retirement divisions — a reversal from earlier this decade when the judiciary was one of the most stable.
Among the biggest reasons for the shift: Beginning in 2010, most of the state’s other retirement funds steadily increased their contributions to stave off potential insolvency. The judicial division, because of its stronger financial footing, was exempt from the annual increases.
House Bill 1265, sponsored by House Democratic Leader KC Becker andGOPRep. DanNordberg, would gradually reverse that decision beginning in 2019, bringing the judiciary’s contributions in line with that of other divisions by 2023.
The changes will cost taxpayers $ 726,000 in the 2018- 19 fiscal year, according to a fiscal analysis, an amount that would grow over time as the contribution rate continues to increase. Employees would be required to contribute an equal amount, pulled from money that would otherwise have gone to annual pay raises.
Critics, likeTreasurerWalker Stapleton and a number of Republican lawmakers, say it doesn’t make sense to ask taxpayers to fund the same reforms that have proved inadequate to shore up PERA’s other divisions.
“( PERA CEO Greg) Smith has been selling taxpayers and PERA members a fake bill of goods, and now facing fiscal insolvency Greg Smith has the audacity to go back to the taxpayers and ask for more money,” said Stapleton, who serves on PERA’s board and has been a vocal critic of the system’s financial management for years.
“Before any more money is put into this financial sinking ship, PERA must make the real structural reforms necessary for long solvency, simply continuing to throwmore money atColorado’s largest unfunded liability is fiscally irresponsible.”
The reforms passed in 2010 were designed to pay off PERA’s liabilities within 30 years— and at first, they were projected to do just that. But lackluster investment returns, coupled with longer projected employee lifespans have combined to undercut the assumptions that were used in the crafting of the 2010 reform bill.
The single biggest difference: in 2010, PERAassumed an 8 percent annual return on its investments. Today, PERA assumes a 7.25 percent return. That’s more conservative than the typical public pension fund, but some argue it’s still too high.
Over the past five years, PERA has averaged a 7.5 percent return. Over the past 10, it achieved 6 percent, and over the past 35, it yielded 9.5 percent.
Republican lawmakers this year pushed a series of bills that would have imposed new restraints on the state retirement system and its managers, an opening salvo in a debate sure to spill into the next legislative session, when the PERA staff will suggest additional changes.
One would have capped taxpayer contributions at 2018 levels, a move that would have effectively pre- empted the judicial reforms being considered now. A House committee rejected it.