Posted by 15 November 2017
Colorado has a $43 billion pension system, paying or promising retirement benefits to scores of state employees. However, this pension system faces trouble with its $32.2 billion in unfunded liabilities. In other words, the state’s politicians have promised retirees a more generous retirement package than what these politicians have actually saved money to give them. Unless the state acts, either taxpayers will be forced to cover this large gap or retirees will see their benefits drastically reduced.
Governor Hickenlooper’s recently released budget suggests a few options to deal with this issue. His budget has proposed reducing employees’ guaranteed cost-of-living adjustment from 2% to 1.25%. He would also like to require employees to pay an additional 2% into the pension plan, which would bring their total contribution up to 10%. In return, state employees would receive a 3% pay increase in the next fiscal year.
This plan takes elements from a plan put forward by the Public Employees’ Retirement Association, the board that manages the state pension system. The board’s recommendations included increasing the retirement age for newly-hired state employees, cap cost-of-living adjustments at 1.5%, and increase the amount that state agencies pay into the system on behalf of employee retirement.
State Treasurer Walker Stapleton, a Republican gubernatorial candidate, supports a reform that require the state to assume a lower rate of return for pension investments. Republican Sen. Kevin Lundberg has suggested the state consider moving to a retirement plan that is similar to a 401(k), which relies not on a defined benefit (like a pension) but instead on a defined contribution from the state.
Legislators will take up the issue of pension reform when they convene in January.
Do you think that Governor Hickenlooper is right to require state employees to pay more into their retirement system? Or should Colorado end traditional pensions and move state employees to something like a 401(k)?