Final Report of the Treasurer's Commission to Strengthen & Secure PERA

Commission Press Release - Sept. 14, 2005:

TREASURER’S COMMISSION RECOMMENDS SWEEPING CHANGES TO STATE PENSION SYSTEM

GOV. LAMM: “ACT NOW WHILE WE CAN STILL AFFORD IT”

STATE CAPITOL---The state’s pension plan is badly in need of reform, starting with changing how the system that provides retirement benefits to thousands of Coloradans is managed, according to the final report of the Commission to Strengthen and Secure PERA presented to State Treasurer Mark Hillman today.

“Colorado has a public pension problem that is massive in nature, expensive to correct, but only gets worse as time goes on. The message of this Commission is act now, while we can still afford it,” commented former Colorado Governor Dick Lamm, who chaired the commission.

With PERA announcing earlier year that its funding ratio—a measure of its ability to pay promised benefits—had slipped from its 2000 high of 105.2 percent to just over 70 percent, then State Treasurer Mike Coffman, who sits on the PERA Board of Trustees as an ex officio member, formed the Commission to Strengthen and Secure PERA.

Coffman charged the Commission to study the factors causing PERA’s financial decline and recommend ways to secure the fiscal health of a plan covering hundreds of thousands of public sector workers and retirees.

Chaired by Gov. Lamm, the nine member Commission combining successful business executives, public sector leaders and academic professionals, held a series of meetings beginning in March, taking testimony from PERA, pension experts and legal counsel.

The product of their work is the Final Report to the State Treasurer, a comprehensive analysis of why PERA’s financial condition deteriorated so rapidly, and more importantly, what options are available to fix it.

“The challenges facing PERA are immense,” Gov. Lamm continued. “Yet the options available to correct the financial course of the pension program on which tens of thousands of Coloradans depend are many.”

Topping the list of seven reform recommendations by the Commission are changes to PERA’s governance model.

According to the Commission’s report, “PERA employs an outmoded and ineffective governance regime—particularly as it relates to the sixteen-member Board of Trustees. This structure results in an organizational inability to coherently manage a pension system with more than $30 billion in assets.”

The Commission recommends a thorough change to the PERA Board of Trustees, including replacing the current sixteen-member board—all of whom are beneficiaries of the plan—with a smaller board that balances the interests of plan participants, employers and the state taxpayers.

The Commission also recommends that Trustees have a prior educational or professional background in finance, pension management or other related fields before they can serve on the board.

“The Commission cannot emphasize enough the importance of strong, effective governance of entities that provide for the financial well being of others,” the report continued. “The objective of governance reform is to bring PERA in line with modern governance practices.”

Included in the Commission’s recommendations are proposals to strengthen legislative oversight over the pension system and to roll back some of the benefit changes enacted during the boom time of the 1990s.

State Treasurer Mark Hillman, who sits on the PERA Board following his appointment as the state’s Chief Financial Officer, plans to study the report in detail and may ultimately seek legislative changes to the pension program during the next legislative session based on the Commission’s findings.

“Colorado deserves a pension plan that the state’s workers can count on and that taxpayers can afford,” Treasurer Hillman commented. “I truly appreciate the work of the Commission in analyzing PERA’s situation and developing thoughtful proposals.”

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