Who Is In Charge

PERA plan: “Work longer, pay more, receive less”

There was no good news in a 90-minute legislative discussion Thursday afternoon on the financial future of the Public Employees’ Retirement Association.

The PERA board has proposed a sweeping and complex plan designed to bring the recession-battered pension plan to solvency within 30 years. Board members and executives met with members of the Joint Budget Committee to answer questions on the plan.

Summing up the effects of the proposal on civil servants and retirees, PERA Executive Director Meredith Williams said, “So, essentially they’ll work longer, pay more and receive less.”

Public Employees' Retirement Association headquarters in Denver.
Public Employees' Retirement Association headquarters in Denver.

The rescue plan wouldn’t increase employee payroll deductions but would increase employer contributions – including from funds that otherwise would go for salary increases – and, for some workers, would raise the retirement age and reduce the salary base on which a pension is calculated.

The most controversial part of the plan, at least based on the volume of e-mail flowing into legislators’ in-boxes, is a proposal to reduce most retirees’ annual cost-of-living increases from 3.5 percent to 2 percent. It’s estimated that the current COLA would provide a third of the pension benefits over the retirement of a worker who retired in 2008.

The future of PERA – and the cost of fixing it – is of high interest to the Colorado education community. Of PERA’s 190,684 active members, 118,547 are in the school division, which includes all districts in the state except Denver. (DPS employees and retirees will enter the system Jan. 1 as a separate division.) Some 44,806 people receive benefits from the school division. Thousands of higher education employees also belong to PERA, as part of the state division.

Its investments hollowed out by the recession, PERA’s net assets available for benefits dropped from $43.1 billion at the end of 2007 to $30.8 billion at the end of 2008, a loss of more than 25 percent. The system pays about $3.1 billion in benefits a year and receives about $1.7 billion in contributions from covered employees and their employers. PERA overall is about 70 percent funded.

“Certainly these are scary times,” Williams said. “Right now we’re projected to run out of money during the lifetime of most of our members.” Despite the pain imposed by the plan, Wilson said, “It’s cheaper, more cost effective and less painful to act now.”

Some 20 percent of the money needed for the plan would come from employer and employee contributions and the rest from benefit cuts.

Thursday’s discussion was detailed and technical at times; here are some highlights.

They can’t take my COLA!

PERA officials believe retirees’ cost-of-living increases can be reduced because of legal precedent that allows doing so in times of “actuarial necessity” – legalese for the plan will go broke without changes being made.

“We believe the COLA can be modified” based on actuarial necessity, said Greg Smith, PERA chief operating officer and general counsel. “We believe that actuarial necessity exists today. … It is critical that we be able to modify the retiree COLA.” Without doing that, Smith said it would take an “extraordinary amount” of contributions for the plan to achieve solvency.

Many retirees have complained to legislators and others that they were told by human relations staff and in paperwork that the 3.5 percent COLA was guaranteed, so changing it would amount to breaking a contract.

“No matter what an employer hands out, if it doesn’t match the law, it’s not binding,”
Smith said.

Will it all end up in court?

Asked if PERA expects any changes approved by the legislature to end up in court, Smith said, “There is some speculation that it will end up in the courts. … It’s reasonable to expect litigation.”

Whom can we blame?

While neither PERA officials nor current legislators explicitly pointed fingers, there seemed to be general agreement that legislation passed in 2000 helped contribute to the current problem, During the height of the tech boom, 1999 and 2000 were the only two years that PERA has been fully funded in its 78-year history.

In 2000 lawmakers responded by effectively reducing contributions and raising benefits. “That’s kind of where it started,” Williams said.

But when asked if today’s problems could have been avoided if the legislature hadn’t been so generous in 2000, Williams said, “I think not,” saying that the economic crash in 2008 was just too big.

In 2004 and 2006 the legislature did increase contributions and tighten benefits for new employees, but Williams said lawmakers couldn’t go further then because  “We did not have an actuarial necessity. We could not make that legal case. Today we can.”

Don’t wait for the next bull market

Some lawmakers have asked – hopefully – if PERA could rescue itself by more aggressive investment strategies or be rescued by another market boom.

“That would be like going to Black Hawk and doubling down with the rent money,” said Susan Murphy of Denver, one of three PERA trustees who, by law, are neither members of nor beneficiaries of the pension system.

“That was our Plan B,” quipped Rep. Jack Pommer, D-Boulder and JBC chair.

Do your homework

Tennessee Votes 2018

Early voting begins Friday in Tennessee. Here’s where your candidates stand on education.

PHOTO: Creative Commons

Tennesseans begin voting on Friday in dozens of crucial elections that will culminate on Aug. 2.

Democrats and Republicans will decide who will be their party’s gubernatorial nominee. Those two individuals will face off in November to replace outgoing Republican Gov. Bill Haslam. Tennessee’s next governor will significantly shape public education, and voters have told pollsters that they are looking for an education-minded leader to follow Haslam.

In Memphis, voters will have a chance to influence schools in two elections, one for school board and the other for county commission, the top local funder for schools, which holds the purse strings for schools.

To help you make more informed decisions, Chalkbeat asked candidates in these four races critical questions about public education.

Here’s where Tennessee’s Democratic candidates for governor stand on education

Former Nashville Mayor Karl Dean and state Rep. Craig Fitzhugh of Ripley hope to become the state’s first Democratic governor in eight years.

Tennessee’s Republican candidates for governor answer the big questions on education

U.S. Rep. Diane Black, businessman Randy Boyd, Speaker of the House Beth Harwell, and businessman Bill Lee are campaigning to succeed fellow Republican Haslam as governor, but first they must defeat each other in the 2018 primary election.

Memphis school board candidates speak out on what they want to change

Fifteen people are vying for four seats on the Shelby County Schools board this year. That’s much higher stakes compared to two years ago when five seats were up for election with only one contested race.

Aspiring county leaders in charge of money for Memphis schools share their views

The Shelby County Board of Commissioners and county mayor are responsible for most school funding in Memphis. Chalkbeat sent a survey to candidates asking their thoughts on what that should look like.

Early voting runs Mondays through Saturdays until Saturday, July 28. Election Day is Thursday, Aug. 2.

full board

Adams 14 votes to appoint Sen. Dominick Moreno to fill board vacancy

State Sen. Dominick Moreno being sworn in Monday evening. (Photo by Yesenia Robles, Chalkbeat)

A state senator will be the newest member of the Adams 14 school board.

Sen. Dominick Moreno, a graduate of the district, was appointed Monday night on a 3-to-1 vote to fill a vacancy on the district’s school board.

“He has always, since I have known him, cared about this community,” said board member David Rolla, who recalled knowing Moreno since grade school.

Moreno will continue to serve in his position in the state legislature.

The vacancy on the five-member board was created last month, when the then-president, Timio Archuleta, resigned with more than a year left on his term.

Colorado law says when a vacancy is created, school board must appoint a new board member to serve out the remainder of the term.

In this case, Moreno will serve until the next election for that seat in November 2019.

The five member board will see the continued rollout of the district’s improvement efforts as it tries to avoid further state intervention.

Prior to Monday’s vote, the board interviewed four candidates including Joseph Dreiling, a former board member; Angela Vizzi; Andrew LaCrue; and Moreno. One woman, Cynthia Meyers, withdrew her application just as her interview was to begin. Candidate, Vizzi, a district parent and member of the district’s accountability committee, told the board she didn’t think she had been a registered voter for the last 12 months, which would make her ineligible for the position.

The board provided each candidate with eight general questions — each board member picked two from a predetermined list — about the reason the candidates wanted to serve on the board and what they saw as their role with relation to the superintendent. Board members and the public were barred from asking other questions during the interviews.

Moreno said during his interview that he was not coming to the board to spy for the state Department of Education, which is evaluating whether or not the district is improving. Nor, he added, was he applying for the seat because the district needs rescuing.

“I’m here because I think I have something to contribute,” Moreno said. “I got a good education in college and I came home. Education is the single most important issue in my life.”

The 7,500-student district has struggled in the past year. The state required the district to make significant improvement in 2017-18, but Adams 14 appears to be falling short of expectations..

Many community members and parents have protested district initiatives this year, including cancelling parent-teacher conferences, (which will be restored by fall), and postponing the roll out of a biliteracy program for elementary school students.

Rolla, in nominating Moreno, said the board has been accused of not communicating well, and said he thought Moreno would help improve those relationships with the community.

Board member Harvest Thomas was the one vote against Moreno’s appointment. He did not discuss his reason for his vote.

If the state’s new ratings this fall fail to show sufficient academic progress, the State Board of Education may direct additional or different actions to turn the district around.