Colorado Coalition for Retirement Security Oppose Senate Bill 76
UPDATE: The amendment was removed that included the school, DPS and local government divisions. Only state and judicial divisions remain in the swap.
We all learned what shared sacrifice was during the 2010 session by accepting the changes in Senate Bill 1 that were required to make PERA sustainable. We often didn’t like the changes but we knew they were needed to help PERA provide its members with long-term retirement security.
Now, some legislators are trying to undermine that shared sacrifice and we need to stop them. As introduced, Senate Bill 76 would reduce the employers’ contribution to PERA by 2.5% for state employees and raise the employees’ contribution by 2.5%. Then it was amended to allow school districts and local governments do the same.
This isn’t shared sacrifice – it’s putting the burden all on PERA members. This amounts to a 2.5% cut in take-home pay and it undercuts the fiscal future of PERA because employee contributions are not worth as much when it comes to reducing PERA’s liabilities. We must tell the House that we won’t stand for a take-home pay cut that also destabilizes PERA.
The Facts About Senate Bill 76
* If employers in the School, DPS and Local Government Division opt to permanently (on a 30-year actuarial basis) decrease employer contribution rates and increase employee contribution rates by 2.5%, (employers will probably have no choice but to opt to do the swap on permanent basis), the increase in the present value of the unfunded actuarial accrued liabilities to these trusts today will be:
School Division: $158.5 million
Local Government Division: $28.2 million
DPS Division: $15.8 million
* This amended bill eliminates the employer’s portion of the shared sacrifice of the SB 10-01 and places the total burden for maintaining PERA solvency on employees and retirees. In fact, this will result in a monetary windfall for employers in these Divisions compared to pre-SB-01. The additional employer contribution rate (AED) increases under SB-01 for the School and DPS Division are scheduled to be a total of 1.5% that was not slated incrementally increase until 2013. This bill negates that increase and adds an additional 1.0% of pay to the employer. SB01 as structured had 90% of the burden placed on employees and retirees through employee contribution rate increases and benefit cuts.
* This amended bill increases litigation risks astronomically. Currently, the State and PERA are defendants in a lawsuit over the constitutionality of the benefit cuts imposed per SB-01. By the employers in these divisions no longer contributing at all towards the future solvency of the fund, the potential to lose this lawsuit is heightened immensely. In addition, as testified to on SB11-74 and SB11-76, the constitutionality of this swap is also in question, heightening the likelihood of an additional new lawsuit. Please see written comments on the legality.
* This bill creates inequity among employers. To the extent that an employer didn’t opt to permanently swap contributions, the effect would be to subsidize other employers within the Division inequitably by paying more towards the unfunded accrued liability.