PERA's latest fix is stronger than the last one, but longer-living retirees, future downturns could

PERA’s latest fix is stronger than the last one, but longer-living retirees, future downturns could still pose risk


Colorado lawmakers in 2018 set out to fix a $32 billion problem confronting the state’s public-pension program, and by all accounts, they appear to have succeeded.

In its latest financial statements, the Public Employees’ Retirement Association showed dramatic improvement, finally reversing a years-long slide. The rating agency questioning the state’s unfunded pension debts has withdrawn its threat to downgrade Colorado’s credit worthiness. And PERA’s insolvency risk — which was recently as high as 40 percent — has now dropped to 3 percent or less for school districts and the state.

But what if it wasn’t a $32 billion problem after all?

That’s the question policymakers in Colorado — and across the country — are now facing, as outside financial advisers and rating agencies take a closer look at pension-funding practices in the wake of the Great Recession. And it’s a question that Colorado got wrong eight years ago, when lawmakers passed the reform package known as Senate Bill 1.

A number of factors contributed to the earlier effort’s unraveling, but the most significant was that lawmakers, under PERA’s guidance, underestimated a key component — the sheer size of the debt they were seeking to address.

Read more: https://coloradosun.com/2018/09/21/pera-rate-of-return-explained/