Date: 02/08/2006

Final
BILL SUMMARY for HB06-1083

HOUSE COMMITTEE ON BUSINESS AFFAIRS AND LABOR

Votes: View--> Action Taken:
Moved a subtitute motion to postpone House Bill 06PASS


11:38 AM -- House Bill 06-1083

Representative Stengel prime sponsor, presented House Bill 1083 and was asked by the committee to give an explanation of the bill. Representative Stengel stated the bill would change the Public Employees' Retirement Association (PERA) on January 1, 2008, by abolishing the current PERA board and creating a new 9-member board consisting of the state auditor, state treasurer, and 7 trustees with financial expertise appointed by the Governor. Additionally, the bill would change the amortization period from an infinite period of time to 30 years, define what an actuarial necessity is, and would have employees hired after January 1, 2008, join a defined contribution plan. The bill would also allow current PERA members to opt into a defined contribution plan, but would not require them to. Representative Stengel explained what the bill is trying to accomplish. He stated that it is important to have a good retirement system for retention and hiring new employees. Representative Stengel responded to committee questions.

11:43 AM -- Phil Fox, representing the Colorado Association of School Executives, testified in opposition to the bill. He believes the bill does not address the unfunded liability. He responded to committee questions on whether any school board supports the bill, he responded no.

11:48 AM -- Bob Barzdukes, a retired Lamar teacher, testified in opposition to the bill. He stated that the bill would not fix PERA. He explained the problems of an appointed board and an elected board, and that PERA is a very inexpensive fund that only takes up .44 percent of the budget. Mr. Barzdukes responded to questions from the committee.

11:55 AM -- Glen Hanson, a principal and superintendent for 32 years, testified in opposition to the bill. He stated that the PERA defined benefit plan has been an incentive for new teachers, and the bill would eliminate the defined benefit plan for new employees.

11:59 AM -- Needra SanFelippo, a former Denver teacher and PERA retiree, spoke in opposition to the bill.

12:02 PM -- Miller Hudson, Colorado Association of Public Employees, spoke in opposition to the bill, specifically stating that changing the current system to a new system is just a change, not a fix of the issues with PERA. Mr. Hudson responded to questions from the committee. Mr. Hudson offered his testimony for the record (Attachment A) .

12:07 PM -- Larry Slocum, retired educator from Fort Collins representing himself, spoke in opposition to the bill. He provided his personal experience as a PERA retiree, and mentioned that West Virginia in 1991 had passed a bill like this, but last year reversed itself and went back to the old system after determining that a defined contribution plan did not work.

12:11 PM -- Connie Anderson, a retired teacher representing herself, spoke in opposition to the bill. She distributed a letter from Sue Hensler who was not able to attend today's hearing (Attachment B).

12:15 PM -- Stan Ulrich, member of the Colorado Retired School Employees Association, spoke in opposition to the bill, and distributed a handout (Attachment C). He specifically expressed concerns that actuarial necessity is not defined in the bill. He added that if the majority of the board is appointed, it puts it in the political realm when the board should remain bipartisan.

12:17 PM -- Dan Daly, Colorado Education Association, spoke in opposition to the bill, indicating that for most public employees, PERA is all that they have as they are not part of social security.

12:22 PM -- Wayne Knox, former legislator and retired teacher, testifying on behalf of the Colorado Senior Lobby, spoke in opposition to the bill.

12:25 PM -- Curtis Eckhardt, retired Department of Transportation employee, spoke about the reasons he was supportive of PERA and opposed to House Bill 1083.

12:27 PM -- Barry Poulson, a member of the Treasurer's Commission on PERA, spoke in support of the bill and distributed a handout that he walked through entitled, "The Big Freeze: A Twelve Step Solution to the Funding Crises in the Public Employee's Retirement Association (Attachment D). He commented on the situation in West Virginia that was referenced earlier. Responding to why this bill does not reflect the Treasurer's recommendations, Mr. Poulson stated that he had been a member of that commission but that he had filed a minority report with that commission reflecting the concepts in this bill. Mr. Poulson discussed Michigan as an example of a state that has enacted a defined contribution plan for all new employees. Mr. Poulson responded to questions from the committee.

12:41 PM -- Tom Hart, PERA retiree, respects Representative Stengel's tackling the legislation, but opposes the bill because it is too radical for what is needed in the situation. He stated if the bill passes, it would shift cost to the employees and cause expensive legal fees. Mr. Hart agreed with Representative Liston that having the State Treasurer on the board would be a plus.

12:47 PM -- Christine Burtt, representing Americans for Prosperity and FixPERA, testified in favor of the bill. She distributed a handout of her testimony (Attachment E). She stated that the bill offers a solution that is fair, effective, and protects the benefits of current retirees and employees near retirement without penalizing new and younger employees. The committee asked if Ms. Burtt was aware of the salary survey that is done yearly in the state, and that the benefits are far below the private sector and that public employees pay a lot for their benefits. Ms. Burtt was asked to explain her organization.

12:57 PM -- Joseph Chavez, private certified public accountant, testified in support of the bill. He stated that currently, there is no taxpayer representation on the PERA board.

01:02 PM -- Meredith Williams, representing the PERA Board of Trustees, testified in opposition to the bill. He distributed a handout (Attachment F) and explained the impact the bill would have on the board composition and system costs. Mr. Williams stated that PERA is not broken, it just needs some attention. He explained that for every dollar into PERA, 3 are paid back. He explained that 65 cents of every dollar, come from market performance not taxpayers or employees. Mr. Williams stated that lawsuits will be filed if this bill passes, and it will cost money and take time to resolve them. He spoke to the current make up of the board, and that under Colorado law, PERA is a trust and must act exclusively in the best interest of the members. Mr. Williams responded to questions pertaining to some of the figures he discussed and what the return last year was. He stated that the figures will not be available until the spring, but it will be around 8.5. In response to a request by the committee, Mr. Williams stated that he would be happy to get information to the committee on what PERA invests in.

01:12 PM

Representative Penry talked about the unfunded liability and asked Mr. Williams to explain what the bill would do about the unfunded liability. Mr. Williams stated that as PERA reads the bill, in 2014 the unfunded liability would be $21.3 billion, in 2024, $39.4 billion, and in 2034 PERA would run out of money but there would still be $69 billion dollars to pay. Mr. Williams explained why that would happen. He responded that over time, as new hires replace current employees, the dollars are based on a lower compensation and less employees.

01:18 PM -- Barry Poulson was called back up to the table to respond to some questions regarding his retirement at the University of Colorado. He responded to the questions and stated the bill is designed to strengthen PERA.

01:21 PM

Representative Stengel stated that currently, PERA employees have a fiduciary duty, but also have a direct interest in the outcome of PERA. He stated he is concerned about Colorado and PERA. There was committee discussion about the fiscal impact and potential legislation.

01:21 PM

Representative Knoedler moved to refer House Bill 1083 to the Committee on Appropriations, seconded by Liston. Representative Coleman made a substitute motion to postpone the bill indefinitely.
BILL:HB06-1083
TIME: 01:27:46 PM
MOVED:Coleman
MOTION:Moved a subtitute motion to postpone House Bill 06-1083 indefinitely. The motion passed on an 11-2 vote.
SECONDED:Paccione
VOTE
Balmer
Yes
Borodkin
Yes
Butcher
Yes
Carroll M.
Yes
Coleman
Yes
Knoedler
No
Liston
No
McCluskey
Yes
Paccione
Yes
Penry
Yes
Welker
Yes
Cerbo
Yes
Marshall
Yes
Final YES: 11 NO: 2 EXC: 0 ABS: 0 FINAL ACTION: PASS