Colorado Lawmakers Pass Pension Reform Bill in Late-Night Deal
In the 11th hour of the legislative session, Colorado lawmakers passed a compromise deal to reform the state's underfunded pension system for teachers and other public employees.
The final version of the bill, which is now headed to the governor's desk, increases employees' contributions to the retirement fund, raises the minimum retirement age for new teachers from 58 to 64, calculates retired employees' earnings from five years of their highest average pay, and reduces the cost-of-living adjustment from 2 percent to 1.5 percent. Retirees will also lose cost-of-living raises for two years.
Teachers had protested at the state capitol weeks earlier against proposed changes to their retirement benefits. Some of the changes that teachers most disliked didn't make it to the final version of the bill. For example, legislators originally proposed calculating retirement earnings from seven years of employees' highest average pay—currently, it's calculated from the top three years. And Republican lawmakers originally didn't want to increase the contributions made by the state or school districts to the retirement fund, but the final version of the bill shares the increased contributions between employers and employees. Colorado will contribute $225 million annually to help pay off the unfunded debt.
"This is nobody's idea of a perfect solution," said Democratic Gov. John Hickenlooper, according to the Denver Business Journal, in an appearance at the legislative caucus meeting. "But you've got to look at the long term. This is much better than what we had."
Colorado's pension system has some of the largest debts of any pension in the country, according to the Associated Press—it owes retirees $32 billion to $50 billion in unfunded benefits. Colorado teachers are among the 40 percent of teachers nationally who are not eligible for Social Security.
According to the AP, the state teachers' union criticized legislators for rushing a compromise without giving the public enough time to review the deal.
"This is bad policy done in haste," said Kerrie Dallman, president of the Colorado Education Association.
Across the country, states' pension obligations for public employees are accelerating—teachers' pension debt tops out nationally at more than $516 billion. Teachers in Kentucky have also walked out of their classrooms and protested their state's pension reforms this spring. Legislators there passed a bill that says teachers who are hired after the start of 2019 will be put into a "cash-balance" plan, which is a hybrid of a traditional defined-benefit pension and the kind of 401(K) retirement savings plan common in the private sector.
Colorado legislators had considered enacting a similar plan for new teachers hired after 2020, but the final version did not include that provision, which had been adamently opposed by the teachers' union.