Vail Daily column: Outsized error costs public and retirees
February 18, 2017
"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 love and devotion 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 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 all of Colorado's state budget at blackjack would have achieved the same result.
In Eagle County alone, PERA and state politicians have run up losses almost three times the yearly budget of Eagle County Schools. The losses are pension obligations to retirees and current employees for time they have already served.
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?
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From another angle, if PERA-covered workers and retirees were required to fill PERA's breach all by their lonesome, then the charge would be $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.
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 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 weakened with the thought of its own blunder."
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.
That includes all statewide elected politicians and advising staff. If people expect local officials to look out for their citizens' interests, then they share responsibility, too.
School boards, elected municipal and county officials, and the senior bureaucrats that 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.
Back-of-the-envelope penciling puts the liability for those roughly 5,000 people at about $5.3 million per person.
What a crazy thought! Lock me up in a padded cell! "Oh," each will say, "I am not responsible for that." Exactly. So they don't pay.
Yet ordinary people do pay. Since they have responsibility, they should have the authority. Citizens should be making these funding decisions.
PERA has two kinds of problems. The major problem described above, and then the major problem below.
PERA swindles the young and mobile. By design, the retirement plan takes money from many PERA members and gives it to the few. It is a financial hazing of new PERA members. It punishes the moms (and a few dads) who have holes in their formal work resumes from tending their families.
The 65 percent of school teachers 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, then PERA gives them 3 percent interest on their money, not the full amount PERA earned while PERA had it. PERA officially expects to earn 7.25 percent. PERA pockets the difference. It's all perfectly legal, perfectly common. For young or mobile employees, is it also perfectly wrong.
"To avoid the wrath of the people, and seeking shelter from candor and duty, the kindly but cowering council quietly transplanted the seeds of its golden incompetence to a time it loves less than the present — the time of the future, the time of our children."
Vince Emmer is a Gypsum financial analyst who runs Citizens Due Diligence in his off hours. Email him at vince.emmer@cdudilcom.
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