PERA, which replaces Social Security benefits for most state, local government and school employees in Colorado, has seen its assets fall from $43.2 billion at the start of 2008 to $30.2 billion on Monday, legislators were told. Those remaining assets are still inflated, cautioned PERA executive director Meredith Williams, because the fund's real estate and private equity holdings will fall when appraisals are finished this year.
Meanwhile, PERA is paying out nearly $2.7 billion in benefits each year while taking in only $1.3 billion in contributions from state employers and workers. The stock-market plunge and recession have set PERA's funding levels back years: Williams said PERA's 25-year investment history created 10.8 percent average annual gains through 2007; one awful year in the stock market sliced that to an 8.9 percent average over 25 years.
In contrast, the Social Security trust fund has a much lower rate of return, but was almost indifferent to the market crash and will be solvent for several decades. Social Security is close to universal for non-state employees, but is not intended to provide a sole source of income in retirement in the way that PERA does. Social Security is also more tightly constrained by statute.
"Pre-funding" the Social Security trust fund with private securities as PERA is, would greatly increase the long run rate of return, even with years like 2008. But, government investments in the private sector on this scale raise issues about government control issues similar to those involved in the large bailout related investments made in 2008.