As percentage of government spending, employer contributions to Colorado’s public pensions remain low.

Contributions to Colorado’s public pensions from government employers remain low as a percentage of direct general spending, according to information recently released from NASRA, the National Association of State Retirement Administrators.

For Fiscal Year 2016, contributions made by state and local governments to pension trust funds accounted for 4.7 percent of all direct state and local government spending. In Colorado, that percentage was lower: 3.6 percent of all direct state and local government spending was pension contributions, NASRA found.

State and local government spending on pensions varies widely among states, from 1.9 percent of spending to nearly 10 percent. There are a number of reasons for this variation, including levels of benefits, conservative assumed investment returns, and historic underfunding, thus requiring governments to increase contributions if they are making a good-faith effort to pay the necessary level of funding to pay benefits.

Additionally, states like Colorado that don’t participate in Social Security tend to have higher pension benefit levels and, therefore, higher costs. If not for the pension plan, those employers and employees would be contributing 12.4 percent of payroll to Social Security.

Colorado’s 3.6 percent was also lower than the median (half higher/half lower) of the 10 other non-Social Security states and the District of Columbia, or 3.9 percent of direct government funding, according to NASRA.

The research also found that, since 1988, investment earnings have accounted for 62 percent of public pension revenue. Employer contributions have made up another 26 percent, and employee contributions the remaining 12 percent.

While employer and employee contribution rates to Colorado PERA will increase on July 1, 2019, as required by provisions of SB 200, the state will still enjoy relatively low pension contributions as a fraction of government spending, particularly considering that PERA is a replacement for Social Security.