Health and Retirement is one of Colorado Business Roundtable’s nine Key Issues, and we recently hosted a Secure Futures Colorado discussion about the Public Employees’ Retirement Association (PERA). This event was held on October 25, 2016 at the training facility of our major sponsor CAP Logistics.
Chuck Reed, the former mayor of San Jose, California and a leading national expert on pension reform, was one of the speakers. He was joined by Ben Valore-Caplan, CEO of Syntrinsic Investment Counsel and former PERA Board member. Political analyst Eric Sondermann moderated the discussion and talked about Secure Futures Colorado.
Attendees represented an array of public and private interests, from PERA and AARP to small business as well as former, current and prospective legislators and other political leaders. Sondermann opened the discussion by relating the significance of his mentor Governor Lamm’s concerns over Colorado’s current employee pension system.
Valore-Caplan, a fifth-generation Coloradan, discussed how PERA impacts all corners of the state but will require a different kind of statewide response than we ever needed previously. He noted that the financial challenges faced by PERA are not because of its participants nor its Board but a fundamentally-flawed financial model. Those financial challenges are complex, but basically PERA’s 2015 financial report shows approximately $70 billion total liability with $27.9 unfunded for a total funding level only around 60%.
Although a financial expert by profession, Valore-Caplan spoke deeply about the social implications of PERA reform, particularly in the way that one generation may seem pitted against another. Retirement reform on a policy level can quickly be felt on the personal level. While he said, “It would be inaccurate to say that PERA can fix” everything, open discussions like this one lay the groundwork for improvement in Colorado.
Looking to other public entities who have succeeded in retirement reform, we were pleased to welcome Chuck Reed as a guest to Colorado. Reed serves on the Board of Directors of Retirement Security Initiative and provides special counsel at Hopkins & Carley law firm in California’s Silicon Valley. As the mayor of San Jose (the tenth-largest city in the country and third largest in California), Reed was a key figure in its 2012 pension reform which saves the city more than $40 million each year.
In this discussion, Reed related the background of San Jose’s predicament -- going from $73 million annual pension payments to $273 million in just one decade – and noted that while Colorado’s situation is not nearly as dire, its currently unfunded 40% begs the question, “How much pain will Coloradans endure?” before our plan is stabilized and reformed.
Reed admitted that there is a lot to be said for proper plan design, but that there are political issues. “The fundamental problem with a defined benefit plan,” said Reed, “is the incentive to over-promise and under-fund. But those issues can be fixed.”
Overheard during the discussion was this strong statement, “Holy cow, we’ve made incredible promises to these people.” For those unfamiliar with the system, PERA-eligible employees do not receive Social Security benefits, and they must be covered by PERA. There is no choice nor dual enrollment. The obligation has been made to 547,500 employees who work for 402 government agencies and public entities around the state.
Doug Krug, leadership expert at the Institute for Unlearning, asked the panel what they hoped the outcome of the day’s discussion might be. Indeed, many of the people “in the room” for PERA reform, literally and metaphorically, might not even be a direct recipient of its benefits. However, it is important to consider the investments our businesses have made in this state and the investments its employees have made by working for it. This conversation brought people together, and that was the desired outcome for the day.
Down the road, Reed advises, “You can’t let the fight put off the decision-making.”
Colorado Business Roundtable President Jeff Wasden was glad to have PERA in the room for this roundtable discussion. He said, “We need to talk with – not at or about but with – PERA in order to work with it.” Wasden concluded that we can be pragmatic and leverage these lessons learned by other leaders in reform.
We would like to hear how this issue of Colorado public pension reform impacts your day-to-day or your bottom line, so leave us a comment below. And check out all the great photos, courtesy of ICOSA Media.
Secure Futures Colorado is a non-profit advocacy initiative to advance substantive reforms of Colorado’s public employee retirement system. The initiative is built around four principles -- ensure retirement security for public employees; add fiscal responsibility and solvency to the system; expand transparency; and support a system that fits the employment patterns for younger, future generations. Check out this Connect and Collaborate podcast with Secure Futures Colorado.