By Todd Shepherd | Colorado Watchdog
DENVER — The Colorado Public Employee Retirement Association’s poor investment performance leaves state taxpayers holding the bill for an additional $1 billion in future obligations, says Colorado State Treasurer Walker Stapleton.
The state treasurer’s website estimates PERA’s unfunded liability at about $21 billion. That number could vary with actuarial and accounting assumptions.
“Unless we get a handle on this problem,” Stapleton said on 850 KOA’s Mike Rosen Show, “and on the outsized promises and financial myth that we’re perpetuating both on plan members and on taxpayers, we’re going to have some serious bloodletting in Colorado’s future along with the expanding Medicaid roles as a result of the Supreme Court’s ruling on health care.”
The U.S. Supreme Court on Thursday upheld the Patient Protection and Affordable Care Act.
On Tuesday, PERA announced its overall return on investment for the previous year was an anemic 1.9 percent. A 2010 law allows PERA to calculate future obligations based on an assumed 8 percent annual rate of return on the pension’s investments.
PERA insists it’s on solid financial footing.
“While the plan earned a 1.9 percent return on investments during the 2011 year, the three-year annualized return was 10.9 percent, nearly three percentage points greater than the 8 percent annual rate of return assumption set by the Board of Trustees.”
PERA concedes that its 10-year rate of return was a more modest 5.7 percent.
Stapleton is an automatic board member of PERA because of his position as state treasurer. Almost immediately after taking office, Stapleton and PERA engaged in a series of minor battles, including a fight over PERA’s refusal to divulge some internal information, as well as beneficiary information such as the yearly benefit each retiree earns.
While the treasurer acknowledges he may not be on PERA’s Christmas card list, he said that two gubernatorial appointees to the board who do not have a financial stake in the future of the pension were on his side.
“I’m happy and pleased to say that two out of three of Governor Ritter’s appointees have joined me in calling for a reduced rate of return and (for) PERA to get real and get honest,” Stapleton said. “But we’re consistently out-voted.”
Public pensions have simmered in the background of the recent recession, but became more noteworthy this week, with Stockton, California becoming the largest municipal bankruptcy in U.S. history. One cause of that city’s financial collapse: public-sector employee pensions.
Additionally, U.S. Census Bureau data released this week show state and local pensions in the first quarter of 2012 continued to fall behind their ability to pay future benefits.
Earlier this month, Stapleton told 1310 KFKA‘s “Amy Oliver Show” that the failed June 5 recall of Wisconsin Gov. Scott Walker shows the public wants reform of public-sector entitlements, like pensions.
“There’s no magic bullet to redress this situation,” Stapleton said Thursday on 850 KOA. ”Either the taxpayers of the state get soaked with a massive bailout bill, or the (PERA) members themselves get benefits cut and retirement ages increased with the stoke of a legislative pen.”