DENVER – In a down-to-the-wire deal, Colorado lawmakers Wednesday night passed a package to try and address the massive unfunded liabilities of the state pension program, the Public Employees’ Retirement Association (PERA).
The compromise between the vastly-different House and Senate versions that passed earlier this session ended with raising the retirement age for future state employees to 64, slight increases in the employee and employer contribution rates, recalculates pension earnings and brings a compromise to defined contribution plans the Senate had pushed for. It also pledges $225 million per year to paying off the pension system’s liabilities.
But since the state teachers’ association, which had pushed for the House passed plan with a lower retirement age than the Senate version sought, stood firm on a retirement age of 63, some Democrats still balked at the compromise.
Gov. John Hickenlooper joined the Democratic caucus ahead of the House vote on the conference measure to push lawmakers to support the bill, saying they had a chance to do something he thought would have been impossible.
"I wanted to thank everybody in that caucus for how hard they worked on that and to tell them not to walk away," Hickenlooper said. "And point out that next year, we don't know how much money we're going to have and that there will be a new group of legislators who might not feel PERA is as big of a priority."
He said he told them to "strike while the iron's hot."
"Even if it's not the perfect deal; even if there's another step down the road, that could be done," Hickenlooper said. "If we hadn't got something done last night...I think it would have been very troubling."
House Majority Leader KC Becker made the case to her fellow Democrats that it was better to do something than nothing while in an election year.
“We felt it was important to do something this year. The longer you wait to fix it, the more PERA sinks into a financial hold and the more it can sink into a recession,” she said. “Overall, we felt like we’re putting in a significant state infusion into the retirement system, but there is also shared sacrifice among current employees, retirees the state and future employees.”
In the end, the House passed the conference committee report in a 34-29 vote, then the Senate approved the measure in a 24-11 vote, with all no votes coming from Democrats.
The final bill increases the retirement age to 64 and pledges $225 million each year into paying down the pension system’s unfunded debt. Employers will pay more into the system, but so will employees. Cost-of-living adjustments will be cut after two years, and after that, annual raises would be capped at 1.5 percent.
It also takes part of the direct contribution language from the original Senate bill and extends some of those allowances to non-teacher state workers, but not teachers.
But the teachers’ union, the Colorado Education Association, said it was disappointed in the end result.
“We are very disappointed in our elected officials who did not support educators and retirees, and even chose to take money out of their pockets,” said CEA President Kerrie Dallman. “I’m particularly upset that the level of state funding to shore up PERA, which was agreed upon since the House amendments passed, was reduced in the final moments.”
The union said it had hoped the $225 million payment would grow to match payroll, but was changed to a flat rate the union says will cut billions over the next several decades that the employer contribution will have to cover.
"I think PERA could have been solvent without the proposal that was passed last night, meaning that there were some things that solvency would have still been there, that they didn't have to push as hard on the employee contributions in particular," Duran said.
But when asked whether the pressure from the CEA influenced her vote, Duran said, "Not at all."
"I think that, for me, it's really about the policy more than anything else," she said. "That has to be the focus and I would have much rather seen a solution that didn't go as far as it did specific to employee contributions."
Duran said that she wasn't sure how she would have voted had she been the deciding vote, and said she hopes there is a broader conversation about retirement security across the U.S.
"It shouldn't be the standard that people think there isn't going to be any plan at all," she said.
Senate Republicans call PERA deal a good compromise
Senate Majority Leader Chris Holbert went out of his way in Thursday’s end-of-session press conference for Republican leadership to thank Republican Sens. Jack Tate and Kevin Priola, as well as House Majority Leader KC Becker and Dan Pabon, two Democrats, for their work on Senate Bill 200.
He said both Democrats had “great minds” and said, “I don’t know how they got it done, but they got it done.”
He also thanked OLLS and Gov. Hickenlooper’s staffers for their work on the deal, but reserved perhaps the greatest praise for the governor himself.
“[Hickenlooper] took a leadership role, and I give him a tremendous amount of credit. Because if he hadn’t had those conversations, I’m not sure that bill would have passed. ... We got something done. Everyone deserves credit and I’m grateful for that.”
Senate President Kevin Grantham said the deal was a “must-pass” and said the bill that passed was a good first step to addressing something he said he’s sought to address since the “Band-Aid” 2010 measure.
“Did we get everything we want? No. To be perfectly honest, I think it was another good step in the right direction in many ways,” Grantham said. “But we still need to have a conversation about long-term structural changes. It’s a tough conversation.”
But he said the measure “extended the cliff out” and that more changes would be needed.
“We shouldn’t kid ourselves that this was the be-all, end-all. But we made significant progress with PERA with Senate Bill 200, and that cannot be lost on us. They (Democrats) made some significant movements in our direction, and they made some significant movements in ours,” Grantham said.
“We should not say we fixed this, that it’s all taken care of. It’s a moving target,” he continued. “Markets move, and the expectations for where the unfunded liabilities are right now could change in the next six months. So we need to be light on our feet and be ready to move in a new direction in January.”
There are about 580,000 working and retired members contributing to PERA, and a credit agency has threatened to downgrade the state’s credit rating if a plan wasn’t put in place to pay down its liabilities, which are estimated as being between $32 billion and $50 billion.
Hickenlooper said Thursday he was "probably not" going to consider a special session for PERA fixes had the measure not passed, and praised lawmakers for moving before the end of the session.