Colorado’s Joint Budget Committee is considering allowing the Public Employees’ Retirement Association to invest close to half of the state’s $2.2 billion rainy day fund to generate more income for the state workers’ pension.
The move could produce a sizable new revenue stream for the public pension, putting PERA on better financial footing to pay its long-term obligations to public retirees. But lawmakers also have grave concerns about whether the investment strategy would hinder the state from pulling cash out of its rainy day fund in an economic downturn.
The concept is the brainchild of Henry Sobanet, the former director of Colorado’s Office of State Planning and Budgeting under governors John Hickenlooper and Bill Owens.
It’s a little like a no-interest loan to the pension. PERA could use money from the reserve, invest it and benefit from the earnings. But the pension would be on the hook to repay the state in the event it needed the cash in a financial emergency.
Now the chief financial officer for Colorado State University, Sobanet acknowledges the idea would benefit his employer. In addition to investing reserve dollars into PERA, Sobanet has proposed allowing public colleges and universities to tap into the reserves, as well, to generate a funding stream for building maintenance.
Today, the state sets aside 15% of general fund spending in the reserves, which are invested by the state Treasurer’s Office in government bonds and other low-risk investments.
But in recent years, the earnings generated haven’t helped build up the rainy day fund, or allowed the state to spend more on public services. Instead, they’ve simply added to the state’s revenue surplus under the Taxpayer’s Bill of Rights, increasing the amount of money the state is required to give back to taxpayers.
“To have a 15% reserve after so much hard work to get there after the Great Recession is something to be celebrated,” Sobanet told the JBC on Monday. “The next step is to say how do we maximize the use of these dollars? I think the mechanism here would create benefit across the board with hardly any change in risk.”
On Monday, the JBC voted unanimously to have its staff study the idea and begin working on a bill draft. It has even drawn interest from the committee’s two Republicans — a noteworthy sign in a political environment where attempts to tap into the TABOR surplus have become increasingly taboo among conservatives.
“This is about investing back into Colorado, investing back into our citizens, instead of it going into the TABOR surplus,” said Sen. Barbara Kirkmeyer, a Republican from Brighton. “We would actually be using the tax dollars in a way that our citizens envisioned us using them.”
The starting point Kirkmeyer suggested for the sake of discussion: $1 billion each that PERA and Colorado’s institutions of higher education could invest from the rainy day fund.
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MORE: Here’s how the reserve fund idea would work: Colleges and universities would be loaned some money out of the rainy day fund to invest in low-risk bonds and fixed-income products, much like the Treasurer’s Office does now. But instead of adding to the TABOR surplus, the earnings would generate money for building maintenance.
PERA, on the other hand, could use the money in its own investment portfolio. At an expected investment return of 7.25%, the earning potential is far higher than the 1.8% the state treasurer earned on average over the past five years. A $1 billion investment into PERA would be expected to earn around $72.5 million a year versus $18 million in the treasurer’s investment pool.
But the risk is higher, too. PERA lost 13% on its investments in 2022, and 26% in 2008 at the onset of the Great Recession. And a downturn would be the worst possible time to sell stocks to replenish the reserves, noted Sen. Jeff Bridges, a Greenwood Village Democrat who serves on the JBC.
Sobanet has workarounds for that. During a recession, bond prices typically increase anyway when interest rates fall, so the state could actually gain money if universities were forced to sell their bonds to repay the rainy day fund in cash. That’s essentially how it works now under the direction of the state treasurer, he said. Higher education would also be in the crosshairs for budget cuts if that were not enough.
As for PERA, Sobanet proposes the state withhold its regular contributions to the pension to cover the state’s financial needs during a downturn. Between the state government and K-12 schools, which the state helps fund, Sobanet said there would be more than enough PERA contributions to cut to make up the difference.
JBC members, even as they moved forward with a bill draft, say they still need to be convinced that the risks are as low as Sobanet suggests. Credit rating agencies would likely need assurances of their own.
“If we’re going to lose money at the time we need it the most, that’s not acceptable,” Bridges said.
WHAT TO WATCH THIS WEEK
ELECTION 2024
Republican assembly in 5th Congressional District approaches amid new questions about how Dave Williams is handling being both a candidate, GOP chair
One of Colorado GOP Chairman Dave Williams‘ opponents in the Republican primary for the 5th Congressional District is accusing him and El Paso County GOP Chairwoman Vickie Tonkins of using their party positions to help Williams win the district’s Republican nominating assembly Saturday.
Williams sent an email to assembly delegates Wednesday touting his endorsement from former President Donald Trump and asking for support and donations.
Army veteran Joshua Griffin alleges he and other candidates in the crowded contest for the seat held by retiring U.S. Rep. Doug Lamborn, R-Colorado Springs, didn’t initially receive the list of delegates to contact. Griffin filed a complaint with local prosecutors alleging that withholding the information from other candidates is a violation of a state law prohibiting party leaders from skewing the outcome of caucuses or assemblies.
“It’s a conflict of interest to have a state party chair running for CD5 without stepping down from their chair,” Griffin told The Unaffiliated. “It’s a conflict of interest for a state party chair to use state party funds to do his campaign because he has no money.”
A spokesman for Williams’ campaign, in a written statement, called the complaint “frivolous” and Griffin “unserious.”
Griffin said he received the delegate list late Wednesday afternoon after complaining to El Paso County GOP officials about Williams’ email to delegates. Douglas Bruce, the author of Colorado’s Taxpayer’s Bill of Rights, also hopes to make the 5th District primary ballot at Saturday’s assembly after abandoning an effort to gather petition signatures. He wouldn’t say when he received the email list.
Williams, Griffin and Bruce are the only GOP 5th District assembly candidates we know of, but any eligible Republican can be nominated to appear on the primary ballot from the assembly floor.
Griffin and Bruce are likely long shots at the assembly and in the broader race. But Griffins’ complaint only adds to questions about how Williams is handling being a candidate and Colorado GOP chairman.
This isn’t the first time Williams and Tonkins have been accused of using their party positions inappropriately.
In 2022, a judge ordered a second GOP nominating assembly for state House District 21 after Tonkins “unilaterally and covertly” added a delegate who hadn’t attended precinct caucuses as required. Meanwhile, Williams announced his campaign for the 5th District in an email sent by the state party days after Lamborn announced his retirement at the end of his term, eliciting complaints about the use of state party resources for the chairman’s personal benefit.
Conservative commentator Jeff Crank and state Sen. Bob Gardner, two other Republicans running in the 5th District, won’t participate in the assembly. They are instead gathering voter signatures to try to make the ballot. Crank turned in his signatures March 1, and qualified for the ballot Monday. Gardner has yet to turn his signatures in. Today is the deadline for Gardner to turn in his signatures.
MORE: A Republican vacancy committee in Colorado’s 4th Congressional District will meet at 5 p.m. March 28 at the Lincoln County Event Center in Hugo to select a GOP candidate to run in a special election June 25 to replace U.S. Rep. Ken Buck.
Buck leaves office Friday, about a week and a half after announcing his departure.
The state party and former state Sen. Tom Wiens, the district’s chairman, said there will be 111 delegates on the vacancy committee, including local party and elected officials in the district. The delegates will select a Republican to run in the special election against a Democratic nominee, who will be selected April 1 by a Democratic vacancy committee of 246 delegates.
The winner of the special election will represent the 4th District until a new Congress is seated in January.
Republicans were mum on their vacancy plans for the 4th District until this weekend.
Republican delegates in the 4th District will gather again April 5 to nominate candidates for the June 25 primary. The winner will advance to the Nov. 5 general election. That assembly will take place in Pueblo, a day before the statewide GOP assembly.
Though the election for the vacancy and the primary are being held the same day, it’s possible —if not likely — the general election nominee will be someone other than the vacancy nominee.
Since the 4th District is so favorable to Republicans, it’s likely whoever is selected as the special election nominee will win the special election. Ditto for the GOP primary in the district.
ELECTION 2024
Democratic nomination in the 4th Congressional District is anyone’s to win
The Democratic primary in Colorado’s 4th Congressional District has no clear frontrunner, with 57% of voters unsure of whom they will support in the June 25 primary.
That’s according to a new poll commissioned by Ike McCorkle, a Marine veteran running for a third time in the district after two consecutive shellackings.
The poll showed McCorkle was the favorite among voters who know who they want to vote for in the race, but that’s just 21% of the total electorate. Second was Karen Breslin, a University of Colorado Denver political science professor, at 11%. Third was John Padora, who moved to Colorado in recent years and is an addiction recovery advocate. He got 9% in the poll. Trisha Calvarese, a former congressional aide and campaign operative, is in a distant fourth, at 2%.
The poll was conducted March 14 and 15 by Gravis Marketing among 439 likely Democratic primary voters — Democrats and unaffiliated voters — in the 4th District. It had a margin of error of 4.7 percentage points.
Analysis: Voters don’t know the Democratic candidates in the race yet. McCorkle’s lead could be explained simply by the fact that his name has gone before voters in two previous election cycles — which could translate to a real advantage in the primary.
As we mentioned above, the 4th District is a Republican stronghold, so whoever is the Democratic nominee likely doesn’t stand a chance in November. But Republican U.S. Rep. Lauren Boebert’s entrance into the race is shining a national spotlight on the contest, leading to Democratic “what-ifs.”
Reality check: McCorkle lost to Republican U.S. Rep. Ken Buck by 23 points in the 4th District in 2020 and by 24 points in 2022. Yes, Boebert nearly lost in the 3rd Congressional District in 2022, but recent races in that district were much closer —within about 8 points — than the margins in the 4th District.
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THE POLITICAL TICKER
STATE BUDGET: The Joint Budget Committee on Monday voted 5-1 to use the revenue forecast from the governor’s Office of State Planning and Budgeting to craft the 2024-25 spending plan, with Sen. Jeff Bridges, a Greenwood Village Democrat on the panel, opposed. That gives lawmakers more than $50 million in additional money to spend out of the state’s general fund next fiscal year than under the Colorado Legislative Council staff forecast. It’s the second year in a row lawmakers have adopted the OSPB forecast.
COLORADO LEGISLATURE: State Rep. Elisabeth Epps, D-Denver, narrowly qualified Saturday for the June 25 primary ballot in House District 6. She secured about 32% of the delegate vote at the district’s Democratic nominating assembly, coming in a distant second to her challenger, Denver attorney Sean Camacho, who received 68% of the vote. Epps and Camacho are the only Democratic candidates in the race. The results mean that Epps doesn’t need to continue a signature-gathering campaign she launched a week before the deadline as an insurance policy to try to make the June ballot.
OIL & GAS: The American Petroleum Institute is spending nearly $2 million to air a TV ad claiming that some bills being considered this year by the Colorado legislature will shut down oil and gas production in the state. The ads will air through at least the end of the month. They also come as the industry is gearing up to get pro-industry measures on the ballot and defeat any hostile measures that might be proposed. Chevron and Occidental Petroleum have each donated nearly $1.5 million to the issue committee Protect Colorado, which works to protect the oil and gas industry’s interests.
ELECTION 2024: U.S. Rep. Lauren Boebert’s $40,000 TV ad campaign began this week. The ad the Republican congresswoman is running in the 4th Congressional District touts her Trump endorsement and ties to the former president. Boebert’s campaign says it’s also spending $20,000 to run the ad on streaming platforms. The ads run through April 5, when Republicans will hold their nominating assembly for the 4th District.
STORY: Studies show Colorado property taxes are “extremely low.” So why do they feel so high?
STORY: Colorado is at odds with the feds over prescription drug importation, documents show
STORY: Colorado could owe $2 billion in taxpayer refunds. That will squeeze next year’s state budget.
COLORADO PUBLIC RADIO: Democratic state Rep. Leslie Herod granted protection against party vice-chair over “wholly unsubstantiated” claims of sexual assault and bullying
THE DENVER POST: An attempt to ban all “forever chemicals” in Colorado failed. What will it take to finally get rid of PFAS?
ABC NEWS: “You can’t write her political obituary”: Lauren Boebert walks tightrope to stay in Congress
CHART OF THE WEEK
Colorado’s eight U.S. House members spent $14.1 million on personnel, travel, constituent communication and other expenses in 2023, according to a Colorado Sun analysis of congressional records. That was about $1.3 million less than the $15.4 million allowed for such expenses.
Most House members get about $1.9 million to run their offices.
The total spending didn’t vary much among the eight members. The differences came in how the money was spent, though most of the 2023 spending went to pay staff in Washington, D.C., and in district offices who provide constituent services.
U.S. Rep. Joe Neguse, D-Lafayette, topped the list, spending nearly $1.9 million, 84% of which was used to pay staff. U.S. Rep. Lauren Boebert, a Republican who represents the 3rd Congressional District, spent slightly less than Neguse, with about 71% of her total going toward staff pay and 8% going toward travel in the state’s largest congressional district.
First-term U.S. Reps. Yadira Caraveo, D-Thornton, and Brittany Pettersen, D-Lakewood, were at the bottom of the list, spending about $1.7 million each. Caraveo spent 67% of her total on staffing, while Pettersen spent 78% on personnel.
THE BIGGER PICTURE
Corrections & Clarifications
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