In case you needed another reason to vote for someone who's got a financial, rather than a political, background, you got one this week.
The largest pension fund for state and local public employees lost $10 billion in market value through mid-October, raising the specter of higher contribution rates or lower benefits in coming years if markets don't improve rapidly.Colorado PERA, which covers 413,000 employees and retirees, saw its assets plummet from $41 billion at the beginning of the year to $31 billion on Oct. 15. That drop was not as severe as some market benchmarks, but it comes on top of a long-term underfunding problem that the Public Employees' Retirement Association had hoped to make up in part through investment gains.
PERA officials have tried to reassure state and local employees that their current benefits are not at risk and that the pension has plenty of cash to weather month-to-month market fluctuations. They said they have no current plans to ask the PERA board or the legislature for changes in contributions or benefits, but the legislature did adjust those levels in 2006 for long-term solvency.
PERA's formula for a 30-year return to full funding depends on an average annual gain of 8.5 percent from its investments.
"Obviously we've got a bit of a bigger hole now," said PERA executive director Meredith Williams.
Gee, ya think? 8.5% Isn't an unreasonable number; the average stock market rise has been 8% over the last 90 years. But they're also invested in bonds, real estate, and overseas markets, and alternative investments.
Some of the T-bond investments - intended not for bond appreciation but for steady income - will have to be rolled over in the next year or two. They'll yield a lot less, which will also have to be made up. Now maybe there's a way of selling off the higher-yielding bonds now, but only if you see higher yields in which to invest.
PERA's going to have a hard time meeting all the promises it's made. Heaven help us if we start making more.