Emmer column: PERA’s perils punish peasants
“Once upon a time that we wish was long ago, in a land we wish was far away, there was a kind-hearted Council that bestowed upon itself nearly royal powers. To gain its workers’ love and devotion, it proclaimed: Thou shall have a retirement rich with gold and free of worry.”
After bountiful harvests, the Council desired even more faithfulness from its peasants. So it decreed, “Thou shalt have an even richer retirement, even fewer worries.” Then harvests fell. Despite a mighty income, the Council did not save ample gold to fulfill its retirement oaths.”
Colorado’s Public Employees Retirement fund (PERA) is short nearly $28 billion, or almost 40 percent of retirement pledges it and the state Capitol made to government workers. Taxpayers are on the hook, too.
Blowing almost the entire state budget at blackjack would have achieved the same result.
In Garfield County alone, PERA and state politicians have run up losses three times the yearly budget of the Roaring Fork School District. The losses are unpaid pension obligations to retirees and current employees for work they have already done.
The impact crater public officials blew open in citizens’ wallets in roughly a decade is equal to $12,000 per Colorado household. And growing. The rich would pay more, the poor would pay less. Imagine what an extra half year of college would do for every family in the state? That is the depth of the PERA pit.
From another angle, if PERA-covered workers and retirees were required to fill PERA’s breach all by their lonesome, the invoice would charge $130,000 each. That is three years of living expenses for many retirees. Remedies? Live on less. Work three years more. Or finish life three years earlier.
Note, taxpayers can be proud of PERA’s worker-bee staff. They have a record of competitive investing results even if the fund has fallen short its board’s aggressive expectations.
“Much to its dismay, the great Council found its great powers allowed it to make great mistakes. To fill the cavern it so created, the Council would take the people’s porridge and oxen and iPhones and cast them into the abyss until it was filled. The Council’s knees were weakened with the thought of its own responsibility.”
Neither Colorado’s ordinary citizens nor PERA’s rank-and-file members’ approval was sought for PERA’s program. Yet they are compelled by law to accept PERA’s errors and fulfill the obligations at which PERA is failing.
Powerful people designed the retirement plan. They took credit when the promises were made. Likewise, they should take responsibility when the promises are broken.
At its core, that includes all statewide elected politicians and advising staff. Further, if people expect local elected officials to look out for their citizens’ interests, they share responsibility, too.
School boards, elected municipal and county officials and the senior bureaucrats who advise them share fault. As do the special interest groups, lobbyists, party activists, union officials, political donors, and opinion shapers that designed and tinkered with the program, too.
Quick, back-of-the-envelope penciling puts the liability for those roughly 5,000 people at about $5.3 million each. “Oh,” each will say, “I am not responsible for that.” Exactly. Ordinary people are.
What a crazy thought. Lock me up in a padded cell! Political people don’t personally pay the price of their policies. Since ordinary people do pay, they should make the decisions wherever practical.
PERA has two kinds of problems. The major, major problem described above, and then the major problem below.
PERA diddles the young and mobile. By design, the retirement plan takes money from the many PERA members and gives it to the few. It is a financial hazing of new PERA members. It is punishment of the moms (and a few dads) who have holes in their formal work resumes from tending their families.
The 65 percent of schoolteachers who leave those jobs within the first five years are forced to abandon the retirement money taxpayers set aside for them. They kiss off a damaging 20 percent of payroll, when early savings is key to a financially healthy retirement.
Some employees survive the first five years, but then leave before drawing their pensions. If they take their retirement money because, say, a spouse gets transferred out of state, or any other reason, PERA gives them just 3 percent interest on their money, not the full amount PERA earned while PERA had it. PERA legally expects to earn 7.25 percent.
PERA charges another punitive commission here. The difference that PERA skims from these younger and mobile workers is given to those who stay put for their full career. It’s all perfectly legal, perfectly common and perfectly wrong.
“To avoid the wrath of the people, and seeking shelter from candor and duty, the kindly but cowering Council quietly planted the fruit of its golden incompetence on a time which it loves less than the present — the time of the future, the time of our children.”
Share your story or offer feedback to Gypsum financial analyst Vince Emmer, firstname.lastname@example.org.
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