The week before Christmas Bigger Pie Forum looked at PERS’ cost of living adjustment (COLA), commonly known as the 13th check. PERS recipients get a 3% raise every year as a COLA. Many retirees take it in a lump sum at the end of the year–the 13th check.
PERS’ COLA exceeds commonly recognized inflation indexes. The average gain of the consumer price index since the legislature raised COLA to 3% was 2.18%. According to BPF:
Just reducing the size of the COLA payout by a third over the past 18 years would’ve saved more $2.2 billion, which would’ve helped address the plan’s $16.6 billion in unfunded liabilities….
The easiest way to stem the bleeding on PERS’ bottom line is to change the way the COLA is computed. Many states index the COLAs for their pension funds on the CPI. Others base the annual COLA percentage on the plan’s funding ratio, which is the share of future obligations covered by current assets. Some do a combination.
Legislators need to study how other states with healthier pension funds are holding down the costs on the COLA for PERS. Doing so would be an easy fix and allow retirees to continue to boost the buying power of their benefits while ensuring the plan’s future.
Good point. Defenders of the 3% COLA need to understand that it is blowing a hole in the system. The longer the legislature waits to fill the hole, the harder it will be.
Taxpayers for sure–and likely retirees–will suffer a lot more pain because PERS and the legislature have not addressed the problem sooner.
We are now going on year nine since the Governor’s PERS Study Commission’s report. PERS and state leadership continue to ignore or downplay the magnitude of the problem.