DENVER (AP) — Colorado's Republican-led Senate passed a bill Tuesday to stabilize a state pension program whose billions in unfunded liabilities have led to one state credit downgrade, but the rescue package is certain to be changed in the Democrat-led House.
One of the top legislative priorities of 2018, the bill exposed stark differences between Democrats who argue it's unfair that retirees and public employees bear the brunt of stabilization and Republicans who say further delay could lead to insolvency.
All agree on the urgency of fixing the Public Employees' Retirement Association, which covers more than 560,000 Coloradans. PERA, according to Republican bill co-sponsor Sen. Jack Tate, has $50 billion in unfunded liabilities. PERA itself puts that figure at about $32 billion.
The bill passed Tuesday increases employee contributions by 3 percent of net pay; temporarily freezes cost of living adjustments for retirees; raises the retirement age for new employees; and lowers the average salary figure used to calculate retirement benefits.
Taxpayer-funded employers ranging from school districts to the Colorado State Patrol would see no increase in contributions that already exceed 20 percent of employee compensation. Republicans argue forcing more contributions would, for example, starve school districts already struggling to hire and retain teachers.
In November, Standard & Poors Global Ratings lowered its credit rating outlook for Colorado from stable to negative, citing PERA's liabilities. It warned of another downgrade if Colorado didn't adopt a plan within two years.
Democratic Gov. John Hickenlooper, too, has called for no raise in employer contributions and higher employee contribution rates. He's also urged a 3 percent salary increase for state employees starting July 1.
Minority Senate Democrats called for "shared sacrifice" in the 30-year rescue plan. They also objected to the bill's offer to employees the option of participating in a 401K-style defined contribution plan rather than the current standard retirement defined benefit plan. They said that option leaves employees' savings at the mercy of the markets.
The Senate vote was 19-16, with all Republicans and the chamber's lone independent in favor.
The last dramatic changes to the pension system came in 2010, when lawmakers approved benefit cuts and increased contributions over several years to strengthen a fund whose assets dropped dramatically in the Great Recession. Increased retiree longevity and overoptimistic investment returns also contributed to PERA's troubles.