DENVER (AP) – Colorado Gov. Bill Ritter on Tuesday signed a bill that cuts state employee retiree benefits to prevent the pension system from going broke.
Ritter said the cuts are difficult but necessary. Provisions in the bill require shared sacrifice and shared solutions from public employers and employees without imposing an unfair or undue burden, he said.
The pension system covers 450,000 state workers, teachers and local government employees, as well as lawmakers.
State budget officials warned that without changes, the Public Employees Retirement Association plan would go broke in 20 years.
“This legislation will keep the PERA fund solvent and allow the system to meet its obligations to current and future retirees. We are all confronting the harsh economic realities of the worst recession since the Great Depression,” Ritter said.
Under the new law (Senate Bill 1), retirees will get no cost of living increase this year instead of the normal 3.5 percent increase, which would save PERA $80 million. Next year they would get the lesser of inflation or 2 percent and, after that, annual increases could be no higher than 2 percent.
Backers wanted to pass the bill before March, when PERA would have to issue its normal cost of living increases.
The retirement age for new employees will rise from 55 to 60, and contributions would increase for both employees and their government employers.
PERA is suffering partly because of the recession. Its assets fell from $41.4 billion in December 2007 to $29.5 billion in July 2009 although PERA estimates that it will have a 15 percent rate of return when all its investments are counted from 2009.