'Win-win' pension deal

Owens, lawmakers reach pact, avoid tax rescue of PERA

Lynn Bartels, Rocky Mountain News

Saturday, May 6, 2006

Gov. Bill Owens and lawmakers reached a deal on the thorny issue of state pension reform Friday with a compromise that rules out the need for a taxpayer bailout.

Neither the Democrats who control the legislature, the Republican governor nor the 370,000 members and retirees of the Public Employees Retirement Association, who rely on the pension plan as their main source of retirement, got everything they wanted in the deal.

But the compromise on Senate Bill 235 ended the threat of a special session during the summer, where it was possible neither side would budge.

"It's been a really tough negotiation. Everyone has sacrificed in this," said Rep. Rosemary Marshall, D-Denver. "But I think the changes that were made will be beneficial in the long run."

Employees gave up 3 percent of their cost-of-living raises over the next six years, and future PERA members will work five more years before becoming eligible for retirement, concessions that will put PERA on course to pay off its unfunded liability several decades from now.

The Public Employees Retirement Association board - while not trimmed to nine members as Owens had wanted - will have 11 beneficiaries serving, with the governor appointing three outside members who have financial and legal expertise.

"I'm really pleased," Owens said of the deal. "It balances Colorado's pension fund without putting any more tax dollars in it. It uses employees' own resources to balance the pension fund."

The Colorado Coalition for Retirement Security, which represents 10 workers' unions, also praised the deal.

"Colorado's teachers, state troopers and other public employees work hard for all of us every day," said spokeswoman Edie Sonn. "SB 235 is a win-win for employees, who will have a secure retirement after long years of public service, and for taxpayers, who can rest assured that PERA is on a sound footing for the future."

The only one who didn't sound happy was state Treasurer Mike Coffman, one of the first to sound the alarm about solvency of the PERA fund. He said he doesn't think the deal goes far enough.

But, Coffman said, he thinks Owens got the best deal he could, "considering the governor is dealing with a Democratic-controlled legislature."

PERA is estimated to be underfunded by $11.3 billion. Under the compromise, it is expected to be fully funded by 2051.

"We have put PERA back on the road to financial security," said Rep. Bernie Buescher, D-Grand Junction, when he helped present the compromise to the House.

"We have done that without a single dollar of tax money," he said.

Rep. Ted Harvey, R-Highlands Ranch, conceded it was "not a perfect bill," but he urged his colleagues to approve it.

The House voted 65-0 to send the measure to the Senate, where it was sponsored by Sen. Paula Sandoval, D-Denver. The Senate approved the bill 33-2 and sent it to the governor.

Owens, who sat on the pension board for four years when he was state treasurer, said he believes the pension deal could be used as a "model for other states."

The governor said the compromise has nothing do with a proposed ballot measure on pension reform that would, among other things, abolish the PERA board and turn the pension over to the treasurer's office.

PUBLIC EMPLOYEES' RETIREMENT ASSOCIATION PENSION PLAN

• Membership: 370,000 state employees, including judges, office workers, snowplow drivers and teachers.

• Problem: The pension was flush after the stock boom but now has an $11.3 billion unfunded liability for future pensioners.

WHAT GOVERNOR WANTED

• Smaller trustees board with an even mix of members and appointees. More financial expertise on board. Expansion of defined contribution plans. Members to forgo 3 percent of their raises.

WHAT DEMS WANTED

• One benefit plan for all PERA members. A board that maintained strong member control.

THE COMPROMISE REACHED FRIDAY

• PERA members will give up 3 percent of their cost-of-living raises over the next six years to help cover $11.3 billion shortfall.

• Retirement age will rise by five years. In past, employees whose age and years of service totaled 80 could get full benefits, but now they must total 85, with a minimum retirement age of 55.

• Three financial experts, appointed by governor approval, will join trustees board.

• Defined contribution, 401(k)-style of benefits will be offered to higher education employees hired in 2008.

bartels@RockyMountainNews.com or 303-892-5327