Proposed Legislation Would Confuse the Facts

Proposed federal transparency legislation (PEPTA) would confuse the facts.

Rep. Devin Nunes of California has reintroduced legislation (H.R. 4822) requiring public pension funds such as Colorado PERA to produce a separate set of financial reports. This would be in addition to all of the financial reporting and compliance such pension funds already provide to local, state, and federal governments and agencies.

For any public pension fund that did not provide this second set of financial reports, the proposed legislation would disallow issuing tax-exempt bonds. Most of PERA’s 500 affiliated employers issue bonds as a way to finance necessary capital projects, so this provision in federal legislation could curtail important bond-financed projects like roads and school construction.

This legislation, known as PEPTA or the Public Employee Pension Transparency Act, has been introduced several times recently, including by Rep. Nunes in 2010 and again in 2013. Similar provisions were also included in the Puerto Rico Assistance Act of 2015, despite the fact that they were not germane to the underlying financial concerns in Puerto Rico. (See Puerto Rico and Pensions on PERA on the Issues, for more information.)

PERA opposes this legislation and we urge you to use our advocacy center to contact your members of Congress and ask them to say ‘no’ to PEPTA by declining to sign on as a co-sponsor.

More specifically, PEPTA would:

• Burden state and local government pension plans, including Colorado PERA, by requiring an additional set of financial reports in addition to what is already required, such as standards set forth by the PERA Board of Trustees (Board) and the Government Accounting Standards Board (GASB). (Read more about how pension rules adopted by GASB have already enhanced pension disclosure.)
• Require public pension plans to overstate their future liabilities by dictating that the second set of financials measure future liabilities using a rate of return linked to interest earned on Federal Treasury bonds. Such a low interest rate would make pension liabilities appear to be larger than even many of the most conservative actuarial forecasts. (Currently, the rate of return as dictated by the legislation is less than 3 percent, while the PERA Board, after considering information from investment and actuarial advisers, has set the current assumed rate of return at 7.5 percent.) Two sets of drastically different financial statements would also confuse the public, failing to provide any clarity or transparency with regard to public pension accounting.
• Impose inappropriate, costly, and burdensome federal mandates while restricting state and local governments that cannot meet the requirements of the legislation from issuing federally tax-exempt bonds. This would divert taxpayer resources from other priorities, add red tape onto state and local governments, and overreach into the business functions of state and local pension plans that are neither funded nor operated by the federal government.

Over the last six years, PERA has taken significant steps to strengthen its long-term sustainability. Landmark legislation passed in 2010 (SB 1) required sacrifice from members, retirees, and employers in order to return PERA to long-term sustainability. The result? A $15 billion reduction of the unfunded liability to date. The proposed legislation would do nothing to improve the funded status of the plan, and would instead burden both taxpayers and pension plan administrators like PERA.

Already, PERA is subject to numerous comprehensive oversight and reporting requirements, including the significant pension disclosure standards recently required by GASB. Since January 2015, PERA has been the subject of three independent studies and in December 2015, PERA provided the Colorado General Assembly with a five-year report on the impacts of SB 1. Like many pension plans for public employees, PERA continues to be transparent and innovative, looking for ways to enhance what is already a strong and sustainable retirement plan for Colorado’s public workforce.

Contact your members of Congress now and ask them to oppose PEPTA legislation by choosing not to be a co-sponsor.

More information: PERA Letter to Congressional Delegation | State and Local Fiscal Facts: 2016

Unfunded liabilityThe difference between the projected amount of money needed to pay benefits earned to date and the amount of money currently available to pay those benefits.Assumed rate of returnThe investment return a pension plan expects to achieve or beat over the long term. This rate is key to estimating how much money the plan will have on hand to pay future benefits.