If you had your money in an index fund that tracked the S&P 500 last year, your investments would have closed with a double-digit gain. Tracking the Dow Jones industrial average would have resulted in a 7.52 percent boost.
The Colorado Public Employees’ Retirement Association (PERA) released its 2014 investment report the other day, and its rate of return on investment was 5.7 percent. The association has a diversified portfolio, of course, as it should. And PERA was quick to note that its investment returns “met the established total fund benchmark of 5.7 percent.”
Fair enough. But the results are nothing to crow about, obviously, even though PERA seems mainly to do that these days. In fact, its outward face has become a public-relations megaphone, releasing reports like one last month that solemnly informed us — hang onto your seats — that retirees spend much of their income in the local economies.
You don’t say!
PERA assumes it will earn 7.5 percent over the next few decades, and its record over the past five years has been a healthy 9.9 percent. But 7.5 percent is arguably still too aggressive for a long-term outlook. Anyone approaching retirement who is banking on a similar investment performance could be in for a rude surprise.
In PERA’s case, of course, the surprise would be for taxpayers.
PERA’s unfunded liability rose last year (to $24.6 billion) and its state and school divisions — its largest — each finished at a funding level lower than the year before: 59.8 percent and 62.8 percent, respectively. These figures fluctuate, of course, but the funding levels for both are lower now than they were in 2010 when the system’s reforms kicked in.
But don’t worry. It will all work out, we’re repeatedly told.
Even if policymakers were confident that the 2010 reforms will fill the funding gap over the coming decades, they still might be interested in greater equity among beneficiaries. For example, the present system rewards full-career workers with disproportionately large benefits compared to those who change careers and leave PERA. But PERA tends to brush off discussion of fairness, too, as tantamount to an attack on public pensions.
Nothing could be further from the truth. Public pensions are everyone’s business because everyone contributes to them. And all of us have a duty to speak out.
To send a letter to the editor about this article, submit online or check out our guidelines for how to submit by e-mail or mail.
