A plan to shore up Colorado’s ailing retirement system for its teachers and state employees passed the Senate today–but only after an extended floor debate with minority Republicans, who pressed for more concessions from beneficiaries.
The bipartisan bill had the support of two key GOP members–Minority Leader Josh Penry and Assistant Minority Leader Greg Brophy–but many of their Republican peers contended the measure doesn’t do nearly enough to rein in a system that critics say is too cushy for state employees and too costly for the public to bear. Yet, a slew of amendments offered by several Republicans aimed at a more permanent solution were shot down one by one.
Senate Bill 1, introduced by Senate President Brandon Shaffer, D-Longmont, as well as Penry, of Grand Junction, is being touted to lawmakers as a compromise attempt at heading off eventual insolvency at the Colorado Public Employees’ Retirement Association. The bill represents months of negotiations among PERA’s key stakeholders over proposals to pare back the system’s payouts and pump up employer contributions.
“This bill is bipartisan, and is a fiscally conservative, piece of legislation,” contended Shaffer. He was tag-teamed by Penry, who told senators, “The consequences of inaction are great . This is an emergency and the single largest fiscal challenge we are facing.”
PERA is facing insolvency in light of a 30-year unfunded liability to future state employee retirees, including tens of thousands of public schoolteachers statewide. The bill addresses the looming liability by increasing the contributions made by state employees, their employers, and by a reduction in cost-of-living increases afforded to retirees. Specifically, the measure as drafted would raise contributions from employers by 1.5 percent, contributions from employees by 2.5 percent and reduce cost-of-living increases to retirees from 3.5 percent to 2 percent. There would be a one-year cost-of-living time-out tied to inflation to give the fund time to recover, and the average retirement age would be raised to 58 with 30 years of service.
A core group of Republican lawmakers said the bill does not go far enough in fixing the problem for the long term and that more sweeping reform is necessary to reflect the realities faced by employers and employees in the private sector, where many generous pension plans have been replaced with defined-contribution benefits such as 401k plan.
“We need to give employees the opportunity to control their retirement,” said Sen. Scott Renfroe, R-Greeley, in support of Republican suggestions for reform that included:
- Raising the retirement age for state employees to 59½–as required for 401K’s—from 55½.
- Prohibit “spiking’, a term used to describe a system where the last few years of employment are used to determine retirement benefits.
- Repealing a PERA guarantee of automatic cost of living increases each year for retirees.
- Modifying the benefits for new hires.
Some GOP members expressed frustration with what they said was the preconceived outcome of today’s debate. Sen. Kevin Lundberg, R-Berthoud, called the bill as a “bailout” and charged that the debate was already over by the beginning of the legislative session, alluding to the compromise between PERA and the bill sponsors over a six-month period prior to January.
“This is a balanced bill—a compromise. Please vote yes,” Shaffer countered in defense of the bill.
Not so fast, said the GOP’s Sen. Ted Harvey, R-Highlands Ranch.
“Thirty-nine amendments not passed. Who compromised?” Harvey said. “The labor unions? No, the taxpayers.”
One thing most lawmakers agreed on was the difficulty in finding a fair solution that would affect the least amount of people.
“The hardest thing will be for the retirees,” said Sen. Gail Schwartz, D-Aspen, a sentiment echoed by former schoolteacher Sen. Bob Bacon, D-Fort Collins, who said that state employees agreed to an extremely low wage in the beginning of their careers in exchange for “a fairly good retirement” at the end of their careers.
“There are people that will say ‘I want mine and I don’t care about anybody else,’ and I will not be voting that way. I am proud to vote yes on this bill,” said Bacon.
Penry blamed both the Republicans and the Democrats, who he said have contributed over the years to the current insolvency.
“Shame on both us for creating sweetheart deals when times were better,” said Penry, conceding that the ideas offered by his colleagues were good ideas but unrealistic.
Sen. Rollie Heath, D-Boulder, who supported the bill, added his own perspective on the bill as a 72-year-old PERA retiree.
“We put these benefits in place a long time ago,” Heath said, conceding, “If we started from scratch, we probably wouldn’t do it this way.” said Heath after the floor debate was over.
A former GOP lawmaker familiar with both PERA and sponsoring bipartisan measures in the legislature, Burlington former Sen. Mark Hillman, complimented Shaffer and Penry for grasping the magnitude of the issue, but he said the bill doesn’t go far enough.
“The best part of the bill is that it addresses the current cost of benefits by reducing the cost of living increases and the worst part of the bill is that it doesn’t really address retirement age in a way that is that is fair to tax payers,” said Hillman, who has served as the Senate’s majority leader, its minority leader and for a time as acting state treasurer–a post that includes a seat on PERA’s board.
“This is a difficult bill. Nobody wants to do this,” Shaffer said, adding that it brings PERA back into solvency over the next 30 years. “That’s our goal.”