Emmer column: PERA hammers both the young, and democracy | PostIndependent.com

Emmer column: PERA hammers both the young, and democracy

Vince Emmer

Colorado's state and school employee pension fund, PERA, is short nearly $15,000 per Colorado household. That's $32 billion, or $150,000 per PERA member. To catch up, the poor will pay less, the rich will pay more.

If PERA was the only such mistake, the damage could be spread wide enough and thin enough to be extracted without much squawking.

Unfortunately, PERA is just one of a flock of such mistakes. The U.S. is riddled with gasping and grasping pension schemes from the biggest to the smallest. Retirement shortfalls are routinely turned into unsustainable government debt. It's a global problem and a global threat, made worse by political cowardice.

Most citizens want government to work well. They would be delighted if it were more focused, effective and competent. They would prefer it to be maximally democratic and minimally coercive. Full disclosure would help, too.

Secure retirement is a goal worthy of government attention. Yet PERA has botched its job. It thought it could forecast the future. Yet its shortfall is equal to 70 percent of the money that it has accumulated.

Like other big policy mistakes, this burden falls primarily on the young. PERA's old-school pension takes money from young employees and transfers it to PERA veterans. It quietly fleeces a wide swath of more mature workers, too.

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TeachersPensions.org put together an amusing explanation of how the system works. Search YouTube for "Teachers pensions explained in less than 3 minutes." The general scheme it describes applies to all PERA members, not just teachers.

PERA's shortfall hits young people with two more hammers. First, PERA's proposed fixes push the financial burden on taxpayers far out into the future. They cannot use that money for their own priorities. It robs the young of democratic power over their own affairs. Gene Steurele, an eight-pound brain at the Urban Institute, makes that point well in his book "Dead Men Ruling."

Second, to the extent that less money for schools damages student achievement, students are in harm's way. When they grow up, they will have more debts to pay and less brainpower to earn their way.

PERA veterans undoubtedly want to be a contributing part of a socially just system. Instead, they have been compromised. They are unwitting recipients of tainted money, just as their juniors are their unwitting benefactors.

PERA veterans are right to have ethical qualms. They can reciprocate youth's favor by supporting PERA reform that is fair to the young.

PERA's has a further deficit of democracy.

It is a "my way or the highway" operation, based on a questionable "it's for your own good" justification. Members must accept PERA or find another job.

Despite their power, PERA and its politicians have little responsibility. They will not be changing your oil or doing your laundry to make you whole. Instead, they charge you for the damage they have done and go on their merry way.

Ideally, bureaucracy is the servant of democracy. Yet, bureaucracy and democracy are natural enemies. Each struggles to force the other to its will.

It is entirely likely that more democracy could have saved PERA's bureaucracy from itself. Here's how.

Democracy is grass roots choice. If workers could opt out of PERA, its will to survive would have forced a fix. Probably decades ago.

Instead, PERA is built on a model of human behavior that might be summarized as this: PERA's unselfish, honest experts advise unselfish, honest legislators to help dedicated public employees manage their money to retire safely.

That theory assumes organizations can self-diagnose and self-correct when the inevitable problems arise. PERA is human, and humans have egos, and egos have pride. Pride resists self-criticism and so, too, self-correction. If this is right, there is a flaw in PERA's foundation.

It has been said, "In theory, theory and practice are the same. It is only in practice that they differ." So here we are; failure in practice, theory in shambles, young people sacrificed.

It is time for better policy theories, and better public practice, and better treatment of the young.

Vince Emmer is a financial analyst in Gypsum. He runs Citizens Due Diligence after hours. Reach him at vince.emmer@cdudil.com.