One of the hardest things about discussing PERA’s liability is the sheer magnitude of the numbers involved.  Twenty-five billion used to sound like a lot, until we started throwing around trillions.  Forty billion, likely closer to the real number, sounds like it might be more, but it’s almost impossible to gauge how much more.

The chart below tries to show how PERA’s unfunded liability has grown in terms of our ability to pay it off.  In 2000, PERA was nominally overfunded, meaning that all of its long-term liabilities were accounted for, and then some.  In reality, this almost certainly wasn’t the case, but for the purposes of this post, we’ll just use PERA’s own current-dollar estimates of its unfunded liability.

Using BEA numbers for Colorado’s GDP, its total Personal Incomes, and its population, it’s  a little easier to see the threatening direction this debt is taking.  On a per-person basis, the unfunded liability now sits at just over $4000.  That means that, to pay off the unfunded liability, it’s $4000 out of the earnings of the average Coloradoan. This includes those who are too old and too young to work, so for the average worker, the number is much higher.  Four thousand dollars may not sound like a lot, but of course, it’s going to get worse – likely, much worse – before it starts to get better.

As a percentage of the state GDP and Personal Income, things are even more discouraging.  PERA’s liability amounts to 8.15% of Colorado’s GDP, and nearly 10% of the total Personal Income.  But this isn’t the only debt that the state, local, and district governments owe on your behalf, and it’s likely not the only debt you owe, either.

From 2004 to 2007, the ratios appeared to improve, but if you look closely, you’ll see that during a period of strong growth, the per-person dollar liability was flat, and the per-GDP and per-PI percentages barely moved.  This strongly suggests that this is a liability that it’s going to be very hard to grow out of.

PERA will be quick to point out that you’re not going to be expected to cough up all of this money at once, and that they have a long-term, 30-year glide path to solvency.  Any time any government program says it has a 30-year plan for solvency, you should stop listening and start moving your money someplace else.  As we’ve noted before, PERA is significantly understating the size of the unfunded liability, both by overstating the rate of return and by misusing the discount rate.  Moreover, mentally amortizing the liability over 30 years makes it that much easier to ignore until someone misses a payment, and the whole structure comes crashing down.  I’m sure that San Bernadino and Stockton were using similarly comforting thoughts before they filed for Chapter 13.