Finance Committee chair Brian Del Grosso (R-Loveland) doesn't like PERA.  He called the state's pension plan a Ponzi scheme in a hearing Wednesday on SB11-076.  "It's something we've put people in jail for," apparently referring to Bernard Madoff, the notorious thief from New York City.

Representative Dickey Hullinghorst (D-Boulder) sees the state's PERA program differently.  "PERA is like social security, a pool of money that everyone benefits from when they retire."

These stark differences frame the coming arguments over how public entities will fund PERA, the only retirement program for state, county, city, and public education employees in Colorado.  Contributions to PERA have varied over the years.  In most years, state employees contributed a portion to the plan and the state contributed a somewhat larger sum.  If an employee left the state plan, the employee could withdraw his or her contribution, but not the state's part.

SB11-076, sponsored by Representative Jon Becker (R-FtMorgan), continues a payment flip for state employees from 2009-2010 to balance the budget.  Last year the legislature increased the employee contribution amount by 2.5 percent and reduced the state's contribution by the same amount.  The flip effectively reduced the take-home pay of state employees at the same time they experienced pay reductions from furlough days.

Del Grosso put up an amendment to SB11-076 to include all public entities in the pension contribution flip.  Cities, counties, and public school districts will be able to reverse the PERA contribution scale by increasing employee contributions and reducing the government amount by up to 2.5 percent. 

Other Republicans on the committee obviously had a heads up that the amendment would be introduced.  Some had spoken to Mary Chelmsley, superintendent at Cherry Creek Schools, who apparently said she supported the plan.  If districts take advantage of the flip, they will have more money to put into classrooms, and teachers will have less money in their paychecks.

Democrats were left mostly flat-footed.  Hullinghorst said she hadn't spoken with any school districts in Boulder, and Daniel Kagan (D-Denver) hadn't checked out the flip with any of his constituents.  Representative Acree (R-) told Kagan he'd have plenty of time to check out any problems later.  "It's a way we have of helping shore up our school districts.  It's a tool in their tool box."

Hullinghorst argued that the flip will affect liability within PERA.  Because of PERA's withdrawal policy, an employee contribution is valued at only 70-80 percent of the state's contribution.  The contribution flip increases the employee investment but reduces the value of the total contribution.  The result lengthens the time needed to keep the system fully funded.

"This will create a legal nightmare," said Hullinghorst.  "It will shift to governments who don't make the flip the extra cost of funding those who do make the shift." 

When asked if he supported the amendment, Becker, a member of the Joint Budget Committee, said no and yes.  As a regular representative, he likes the idea of giving school districts more flexibility.  As a member of the JBC, he has to "stick to that little group and oppose the amendment." 

Public employees must feel like they're playing whackamole.  Jefferson County School District employees just renegotiated a contract that reduces their take-home pay by 3 percent.  If the amendment passes and the school board decides to flip, Jeffco employees could take an additional 2.5 percent hit to their daily livelihood and lose the 2.5 percent district contribution to their retirement at the same time.

Are state employees lucky to have jobs, as some Republicans argue, or are public employees bearing the brunt of state budget cuts, as Democrats declare.  At some point, legislators will have to deal with the larger issues of the value of public employees, competition for competence, and public employee compensation.   PEN St. Paddy's Day

This post was published on March 17, 2011. Permalink »