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EDITORIAL: Save teacher wages; put PERA on a diet

By: The Gazette editorial board
March 20, 2018 Updated: March 20, 2018 at 6:57 am
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Sponsors of bipartisan Senate Bill 200, intended to fix Colorado's troubled public employees' pension, deserve accolades for removing a proposed 2 percent increase in the taxpayer and employer contribution to the fund.

Don't throw new money at PERA. Put the plan on a diet, and rein in the costs.

As the bill works its way through the Senate Appropriations Committee Tuesday, on its way to the House of Representatives, legislators should avoid any increase in the taxpayer contribution.

As frequently stated in this space, Colorado teachers are grossly underpaid. The original version of SB 200 contained a 2 percent increase in the taxpayer contribution rate, which would cut into teacher pay.

As it stands, schools and other public employers pay a PERA contribution equal to 20.15 percent of employee salaries. Adding more to this would only impose more hardship on teachers and other public employees.

At a recent hearing, Denver Public Schools Superintendent Tom Boasberg explained how pension costs squeeze school district budgets across the state to the point at least half of the of districts are going to four-day work weeks and making due with excessive classroom populations.

Boasberg said a 2 percent increase in taxpayer contributions would cut $55 million from the budget of Denver Public Schools — the second-largest employer of PERA members. That's enough money, he explained, to pay for "well over 700 teachers."

We don't need pension funding to become the primary objective of schools and other government entities charged with serving the public.

"We've seen how General Motors became a pension fund that also made cars," said a top official of then-New York Mayor Michael Bloomberg. "Unless we make real changes, New York City's government is in danger of becoming a pension fund that occasionally delivers city services to the people who live here."

The increase in contributions, Boasberg said, would cause "reduced salaries or cuts and reductions in positions." He recommended adjustments focus more on the structure of benefits paid to retirees, and less on funding.

Forecasts show Colorado's Public Employees Retirement Association with a $32 billion unfunded liability, which risks the fund's ability to pay future retirees if adjustments are not made to improve the trajectory. State agencies, local governments, and school districts simply cannot afford the generous benefits promised by PERA.

"Failure to control retirement costs has dragged down states like Illinois, where pensions consume one quarter of the budget, and bankrupted giants of U.S. industry like General Motors," states the executive summary of a PERA study commissioned by Colorado's Common Sense Policy Roundtable and REMI Partnership.

State, local, and school district employer contributions to PERA have almost doubled in 10 years to $1.6 billion.

"Pension costs should not be allowed to crowd out funding for essential public services, including road maintenance and construction, new and expanded schools, police and fire departments, and more. We must put PERA on a sound financial footing, but not at the expense of other essential budget priorities in Colorado. This is common sense," the summary states.

SB 200 reduces guaranteed annual increases in retiree benefits from 2 percent to 1.25 percent. To protect teacher salaries, school district budgets, and other taxpayer interests, legislators should amend the bill to reduce the automatic increases to 1 percent, or even .75 percent. Doing so would help pay off the unfunded liability in less than 30 years, as determined by the Common Sense and REMI Partnership study.

If legislators and Gov. John Hickenlooper save PERA by raising retirement ages and reducing automatic raises for retirees, they will avoid eroding teacher salaries and maintain the pension as a plan most private-sector employees will continue envying.

Save PERA, but not on the backs of employers, school district, teachers, and other taxpayers. Craft a bill that reflects the advice of Superintendent Boasberg. Focus on the benefit structure, not the funding side.

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