The JBC’s complicated plan to use PERA to fund Proposition 130 ...Middle East

Something’s missing from the Colorado state budget proposal — and it’s a biggie.

The Joint Budget Committee this week finalized its budget package without deciding what to do about Proposition 130: the voter-approved requirement that the state spend $350 million to support law enforcement.

But the six-member panel does have the makings of a plan.

The JBC was briefed this week on a draft bill to dole out the $350 million in regular installments over the next 10 years.

If only it were that simple.

To pay for it, the JBC would execute a complicated series of transactions that loops in the Public Employees’ Retirement Association and the state’s $2.4 billion reserve fund, then somehow emerges in 10 years without spending an extra dime of taxpayer money.

Still with us? OK, here’s how it would work:

Under the draft proposal, the state would issue PERA a warrant for $500 million that PERA would then invest alongside the rest of its portfolio. If PERA’s staff can generate the 7.25% return it expects on its investments, that would produce $36 million a year for the pension — just enough to cover the cost of a $35 million annual installment for Prop. 130.

There’s just one problem: The state can’t take money out of PERA once it’s been given, because of federal laws protecting pension funds. So those investment returns have to stay within the retirement system.

Instead, the state would make its annual payments to law enforcement by reducing its own required payments to PERA by the same amount. That would cut the $225 million it has to give to PERA each year to $190 million a year.

The initial $500 million would come from the general fund reserve — and here’s where it gets even more complicated.

Under the proposal, the state would still count the $500 million as part of its 15% reserve, even though the state can’t really access the money.

This concept is kind of a mashup of two other plans that have surfaced over the past 12 months.

Last March, former state budget director Henry Sobanet pitched the JBC on an idea that would have allowed PERA, as well as colleges and universities (like Colorado State University, where Sobanet now works), to invest some of the state’s reserves in order to generate higher returns.

More recently, in his January budget request, Gov. Jared Polis suggested tapping the rainy day fund to pay for Prop. 130. His plan wouldn’t have involved PERA, though. Instead, the legislature would have distributed the grants over six years, and repaid the reserve fund in $50 million installments over seven years.

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BUT WHAT HAPPENS IN A RAINY DAY?

Suffice it to say, the maneuver is not risk-free. The whole point of an emergency reserve is that you can actually spend the money in an emergency.

That has Rep. Emily Sirota, a Denver Democrat, worried that the scheme could hurt the state’s credit rating.

At a Monday briefing, Mark Ferrandino, the governor’s budget director, conceded that it might be frowned upon by rating agencies. But, he noted, giving the money to PERA could offset those concerns.

“I do think it would probably be close to neutral for them, and here’s why: When you talk to credit agencies, one of their biggest concerns is always the unfunded liability on your pension fund,” Ferrandino said. “And this moves us to a better place on funding the pension fund.”

The bill would have some safeguards in place. If a recession hit and state lawmakers depleted the general fund reserve below $1 billion, the state could cut its annual PERA distribution entirely to pay back the reserve as fast as possible.

Sen. Barbara Kirkmeyer, a Brighton Republican, said that even if the state had to cut PERA’s funding in such a situation, the pension would still be better off financially under the proposal.

During the last economic crisis in 2020, the state responded by cutting its payment to PERA. If the state gave the pension $500 million ahead of time, PERA would be better positioned to weather future cuts.

“If we did end up in a COVID (situation), PERA is actually in a better position if we do this versus what we did in COVID,” Kirkmeyer said. “We don’t ever want to short-change PERA.”

As for the state, Ferrandino said the remaining reserve should be large enough that the state government wouldn’t need the $500 million back all at once.

“We are comfortable with this,” Ferrandino told the committee. “When (the Great Recession) hit (in 2008), it wasn’t really until the 2010 fiscal year that it actually really hit the budget in a significant way. You have some time to think about it, to plan and to be able to make this adjustment.”

Oddly enough, the state already has assets in a different reserve fund that it can’t easily convert to cash. The $600 million Taxpayer’s Bill of Rights emergency reserve has two state buildings in it, the State Services Building and the Merrick Parking Garage, which are valued at a combined $40 million.

WHAT TO WATCH IN THE WEEK AHEAD

COLORADO PUBLIC RADIO: Colorado Republicans pick a new leader this weekend, here’s who’s running

STATE PARTIES

Colorado GOP reports weak February fundraising as Chairman Dave Williams’ tenure comes to an end

The Colorado GOP raised less than $4,500 in February, spending about $33,000 during the month and starting March with roughly $200,000 in the bank.

The party’s largest single expense in February was an $8,000 payment to Fox Group Ltd., the consulting firm operated by Chairman Dave Williams, who is in his final weeks as the Republican leader. He’s not running for reelection to his post.

The Colorado GOP has paid Fox Group Ltd. $168,500 since Williams became chairman two years ago. That’s an average of about $84,000 a year.

The state Republican Party has paid Tactical Data Solutions, the consulting firm operated by party Treasurer Tom Bjorklund, nearly $140,000 over the past two years, including for expense reimbursement.

The Colorado Democratic Party raised $74,500 in February and spent $110,000 during the month. It had more than $320,000 in the bank to begin March.

YOU HEARD IT HERE

“I haven’t made a decision. It’s definitely something that I’m considering.”

— Former U.S. Rep. Yadira Caraveo, D-Thornton, speaking about whether she will run to reclaim her 8th Congressional District seat in 2026

Caraveo made the remark while speaking to KDVR-TV this week. It was her first interview since losing her reelection bid in November to Republican Gabe Evans by about 2,500 votes. She hasn’t been in the public sphere since.

Caraveo said she will decide to run again if she comes to the conclusion that she is the best person to represent the 8th District and has the best chance to beat Evans. Based on the fact that she did this interview and a similar one with Colorado Public Radio, and based on what we’re hearing in the rumor mill, it sure seems like she’s already made up her mind on both of those fronts.

The smart money says to expect an announcement soon.

During both interviews, Caraveo also disclosed that she attempted suicide a “couple” of times as she battled depression in the past year and was hospitalized for mental health issues more than the one time she previously disclosed.

She said she’s now doing much better after finding the right medications and therapy.

Want to reach Colorado political influencers and support quality local journalism? The Sun can help get your message attention through a sponsorship of The Unaffiliated, the must-read politics and policy newsletter in Colorado. Contact Sylvia Harmon at [email protected] for more information.

THE POLITICAL TICKER

CONGRESS

U.S. Rep. Joe Neguse, D-Colorado, was the most effective member of the House from Colorado during the 118th Congress, according to the Center for Effective Lawmaking, a joint project from the University of Virginia and Vanderbilt University that measures how many measures representatives and senators get signed into law.

Neguse, a Lafayette Democrat, was the second most effective Democrat in the House, up one spot from the previous Congress.

The other rankings:

In the Senate, John Hickenlooper was the 15th most effective Democrat in the chamber, while Michael Bennet was the 32nd. That was out of 51 Senate Democrats.

CORY GARDNER

Former Colorado U.S. Sen. Cory Gardner, a Republican, has been named to the board of Finance of America, a mortgage lender.

“Cory’s deep understanding of public policy will be instrumental as we continue to enhance our offerings and advocate for responsible financial solutions for older Americans,” board Chairman Brian Libman said in a news release.

ELECTION 2026

EMILY’s List, the political organization that works to elect Democratic women, has named three Republican congressmen in Colorado as among its top 2026 congressional targets.

U.S. Reps. Jeff Hurd, Jeff Crank and Gabe Evans are on the group’s list of 46 House Republicans that they want to unseat next year.

The designation likely comes with financial and technical support for the Democratic nominee in each of the congressmens’ districts.

READ MORE

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DO THE MATH

$12,162

How much money Heidi Ganahl, the 2022 Republican gubernatorial nominee, paid Douglas County last year to inspect a sample of ballots cast during the 2022 election.

The spending was first reported by former Colorado Sun correspondent Sandra Fish through the Colorado Freedom of Information Coalition.

Ganahl lost to Gov. Jared Polis by about a percentage point in Douglas County. Polis beat Ganahl statewide by nearly 20 percentage points.

“Originally, Ganahl asked to inspect all 2022 ballots and the county quoted a fee of nearly $213,000,” Fish reported.

Ganahl has been alleging there are problems with the state’s voting systems that led to irregularities in 2022, but her claims have mostly been debunked by election experts, both Democratic and Republican.

THE BIGGER PICTURE

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