Colorado Considers Reducing Pension Contributions in Response to Budget Concerns

If pension contribution policies are adjusted it would result in the addition of significant long-term costs and a public pension plan that is no longer en route to full funding.

By Zachary Christensen and Truong Bui May 21, 2020

Just two years after sweeping reforms were made to set the Colorado Public Employees’ Retirement System (PERA) on a path to improved funding, the state’s Joint Budget Committee is considering options that would postpone some of those changes and even permanently reduce supplemental contributions that were implemented in 2004. The proposal is an attempt to reduce the short-term costs associated with PERA, in anticipation of what will obviously be a difficult year for Colorado’s revenue and pension assets.

While the coronavirus pandemic and economic downturn are making the need for budget-saving actions very real, Colorado policymakers should understand the long-term costs of shorting PERA contributions in 2020.

 A major part of the 2018 pension reform—which had significant bipartisan support—was a direct annual distribution of $225 million into the pension fund from the state budget. The purpose of this additional infusion of cash was to make up for several decades of significant shortfalls in investment returns and pension contributions, among other factors that have been a drag on PERA’s funding. As a part of the current Joint Budget Committee (JBC) proposal, the state would suspend this funding assistance for two years, picking it back up in the summer of 2022 and continuing (as originally planned) into perpetuity............To Read More.....