In 2020, while facing a $3.3 billion budget deficit due to the COVID pandemic, the General Assembly cut its $225 million direct contribution to PERA. This annual contribution is required under SB18-200 to make up for the state’s past underfunding of PERA. Later that year, as revenue returned, the General Assembly restored funding for many of programs and projects that it had to cut, except for the $225 million direct contribution for PERA. When PERA posted a 17.4% rate of return for 2020, the loss of the $225 million was exacerbated.
Fast forward to this fall, the Pension Review Commission, which oversees the Fire and Police Pension Association (FPPA) and PERA, approved a bill draft that would pay back that missed 2020 contribution plus lost earnings for a total of $303.57 million. This direct contribution would be in addition to the $225 million direct contribution required for 2022. The bill draft is set to be bipartisan and carried by Representatives Shannon Bird and Shane Sandridge and Senators Chris Kolker and Kevin Priola.
The bill draft isn’t official yet. It must be approved by the Legislative Council of the General Assembly, an oversight committee comprised of party leadership that reviews all legislation developed by interim committees such as the Pension Review Commission. If the Legislative Council approves the bill draft, it will be introduced in the 2022 session starting in January.
Secure PERA’s top priorities for 2022 are ensuring the state makes it annual $225 million direct contribution and pays back the missed 2020 direct contribution.
Why is this important? The state’s direct contribution is a critical component of the plan to reach full funding by 2040. In addition to increases in employee and employer contributions and reduction in the COLA for retirees, the state committed in SB18-200 to make this annual contribution. Without this annual contribution, there will be more adjustments that will be needed, and public employees and retirees will have to carry that burden.