PERA Payments on the Chopping Block as Polis Seeks Short-Term Budget Relief

By: Brian Eason | The Colorado Sun

Colorado Gov. Jared Polis has proposed cutting the state’s contributions to the public pension by as much as $38 million next year to help cover the cost of employee raises owed under the state’s collective bargaining agreement.

The move would buy the state government some financial breathing room for next year, when it faces an $850 million deficit. But it would also come at a steep long-term cost that could come back to bite public workers and taxpayers alike.

The legislature’s Joint Budget Committee will consider the proposal between now and March, when it’s scheduled to adopt the state’s annual budget for the 2026-27 fiscal year. If the budget panel and the rest of the state legislature approves, it would mark the second time the state has fallen short of its commitments under the 2018 state pension deal that set PERA on a 30-year path to full funding.

At a JBC hearing earlier this month, Public Employees’ Retirement Association officials told lawmakers that the cuts would add a projected $180 million to the pension’s long-term debt to retirees. That’s thanks to lost investment earnings that PERA would have otherwise made from those payments to the pension, which grow at an expected rate of 7.25% annually.

“Borrowing money from PERA is expensive,” Andrew Roth, the pension’s executive director, said during the hearing. “We’re similar to a fairly high interest rate credit card, and so delaying money owed today significantly increases what’s owed to the plan tomorrow.”

PERA’s balance sheet has improved significantly under the 2018 reforms, climbing from the brink of insolvency to relatively stable ground today. Four of PERA’s five divisions, including the state government, are on track to reach 100% funding by 2048, the target set in state law. The schools division is not far off, with a projected full funding date of 2053.

In large part, that’s because public employers have fully funded their share of employee benefits since the deal was struck — a stark contrast from the 2000s and 2010s, when PERA’s finances deteriorated.

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