How to Save a Billion Dollars
Colorado taxpayers are on the hook for more than $1 billion in unfunded liabilities incurred in the defined benefit retiree health plan administered by the Public Employee Retirement Association (PERA). An additional $79 million in unfunded liabilities was incurred in 2008, reflecting both a rapid growth in retiree benefits and losses in the assets held in the Health Care Trust Fund. Prospects are for continued volatility and deterioration in the funding status of PERA’s retiree health plan.
These are just some of the findings by Independence Institute Senior Fellow Barry Poulson in his potent new issue paper, “How to Save a Billion Dollars in Other Post Employment Benenfit Costs.”
In it, Barry lays out the looming fiscal crisis driven by, among other things, flawed actuarial assumptions by PERA, and outrageously optimistic assumptions (which have failed to be realized) about the rate of return on assets held in the Health Care Trust Fund.
As Barry writes:
The Colorado Legislature should replace PERA’s retiree health plan with a defined contribution plan, similar to that enacted in Idaho. We estimate that in the short run this reform would reduce the employer annual required contribution to the plan from $72.6 million to $29.0 million. The annual required contribution from the state would be reduced from $24.6 million to $14.5 million, a savings of $10.1 million. More importantly, this reform would reduce the accrued actuarial liabilities in the plan, and enable the state to pay off the $1 billion in unfunded liabilities over a 30 year period.
Check the whole report out here.
I think that the legislature will never pass such a change in the law. The only way this will happen is through a Constitutional Amendment.
29 Sep 2010 at 4:39 pm