DENVER -- A state-appointed panel said Wednesday that Colorado's public employee pension fund should cut benefits and replace its entire board of directors to erase a projected $12.8 billion shortfall.

The panel, chaired by former Gov. Dick Lamm, warned that the Public Employees Retirement Association will go bankrupt in 30 to 40 years unless changes are made.

PERA covers 68,000 retirees and 175,000 active workers in state and local governments.

Lamm said politicians had too much control over PERA and its 16-member board does not have the experience to run the fund.

"Politicians are at fault, PERA is at fault, governors were at fault. There is enough blame to go around," Lamm said.

A spokeswoman for PERA did not immediately return a phone call seeking comment.

The panel was established by Mike Coffman, the state treasurer who took a leave of absence to serve with the Marines in Iraq. Acting state Treasurer Mark Hillman received the recommendations from Lamm.

"Coloradans deserve a plan that state workers can count on and taxpayers can afford," Hillman said.

PERA has been in a political quagmire, not only facing massive shortfalls in its ability to pay future retirees but also facing an audit for wasting money on excessive perks.

PERA underwent a state audit after a 7NEWS investigation revealed that the board was spending tens of thousands of dollars on unnecessary perks and keeping insufficient records.

When confronted in January PERA Director Meredith Williams explaining that a board retreat at an exclusive club in Colorado Springs was justified.

He said the board was justified to spend $23,000 for a three-day board meeting at the retreat because the board was making huge decisions during the course of that meeting.

That audit confirmed lavish spending for things like in-house catering, which amounted to nearly $70,000 a year in 2002 and 2003 and more than $50,000 in 2004.

PERA Board also racked up hotel charges topping $400 a night at places like the Waldorf Astoria in New York City, and restaurant tabs for nearly $5,700, including more than $1,000 for liquor.

The state audit said "PERA should re-evaluate policies and procedures for travel and related costs to ensure that these costs are reasonable and necessary."

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