Save this content for laterSave this content on your device for later, even while offline Sign in with FacebookSign in with your Facebook account Close

EDITORIAL: Make public pensions like private-sector plans

By: The Gazette editorial board
March 9, 2018 Updated: March 9, 2018 at 6:44 am
0

A bill overhauling Colorado's public employee pension emerged in the Legislature on Wednesday, showing political will for meaningful change.

Obstacle: the teacher's union.

The Public Employees' Retirement Association was only 64.7 percent funded in 2010, when the Legislature enacted reforms to stabilize it. Eight years later, the pension's assets equal only 58.1 percent of liabilities.

Main sponsors of this year's bipartisan bill are House Majority Leader K.C. Becker, D-Boulder, and Sen. Jack Tate, R-Centennial. As explained by Erica Meltzer in Chalkbeat Colorado, the bill calls for:

- Employee contributions to increase by 3 percentage points over the next two years

- Taxpayer contributions to increase by 2 percentage points during the same period

- Cost-of-living raises to decrease from 2 percent to 1.25 percent

- Increased retirement age for employees age 46 or younger, and all new members

- A new legislative oversight committee

- A mechanism to allow automatic adjustments of benefits and contributions if needed for financial stability of the fund

The bill creates a defined-contribution plan for employees hired after Jan. 1, 2020, which is the part the teachers union hates.

A defined contribution plan would leave future teachers, and other public employees, with retirement prospects more similar to those of their private sector peers.

A defined benefits plan guarantees retirement income based on a formula determined by the size of a retiree's salary and number of years on the job. Beneficiaries enjoy contractual guarantees of incomes that are not subject to market crashes, recessions, or even a depression.

The private sector abandoned defined benefits plans for defined contribution 401(k) accounts long ago. Benefits paid by a defined contribution plan depend on deposits made to each account and returns earned in the stock and bond markets. The accounts offer no guarantees of minimum incomes.

"PERA's defined retirement benefits, so rare now in the private sector, help teachers tolerate low wages," said the Chalkbeat article, explaining the teachers union's opposition.

The argument has merit, but does not solve the problem of defined-benefit plans creating liabilities disconnected from market reality. These pensions are troubled all over the country.

A better solution to low wages for teachers would be higher wages for teachers - while they are working. It makes little sense to shortchange teachers during their working years, forcing future workers and taxpayers to fund guaranteed passive incomes that are unmoored from economic reality.

The Gazette editorial board has repeatedly asked school board members and taxpayers to consider paying wages that better reflect the important work provided by teachers. On average, their incomes are a disgrace in relation to the credentials and dedication required to prepare children to sustain and improve our future.

The PERA bill, in general, appears a responsible mix of adjustments to stabilize the fund and secure its future. Linking benefits to market conditions, for future members, is common sense. Teachers should have pensions similar to those of their private-sector peers. Along with higher incomes.

Register to the Colorado Springs Gazette
Incognito Mode Your browser is in Incognito mode

You vanished!

We welcome you to read all of our stories by signing into your account. If you don't have a subscription, please subscribe today for daily award winning journalism.

Register to the Colorado Springs Gazette
Subscribe to the Colorado Springs Gazette

It appears that you value local journalism. Thank you.

Subscribe today for unlimited digital access with 50% fewer ads for a faster browsing experience.

Already a Subscriber? LOGIN HERE

Wake up with today's top stories in your inbox

Wake up with today's top stories in your inbox

or
Already a print subscriber?
Already a digital subscriber?
 
This is your last FREE article for the month
This is your last FREE article for the month

Subscribe now and enjoy Unlimited Digital Access to Gazette.com

Only 99 cents for Unlimited Digital Access for 1 month
Then $2.31/week, billed monthly, cancel anytime
Already a print subscriber?
Already a digital subscriber?

 
You have reached your article limit for the month
You have reached your article limit for the month

We hope that you've enjoyed your complimentary access to Gazette.com

Only 99 cents for Unlimited Digital Access for 1 month
Then $2.31/week, billed monthly, cancel anytime
Already a print subscriber?
Already a digital subscriber?
 

Exclusive Subscriber Content

You read The Gazette because you care about your community and the local stories you can't find anywhere else.

Only 99 cents for Unlimited Digital Access for 1 month
Then $2.31/week, billed monthly, cancel anytime
Already a print subscriber? Get Access | Already a digital subscriber? Log In
 
articles remaining
×
Thank you for your interest in local journalism.
Gain unlimited access, 50% fewer ads and a faster browsing experience.