New pension law lands Colorado an outlook boost
DALLAS – Colorado's new pension law has allowed the state to shed S&P Global Ratings' negative outlook on its AA issuer credit rating.
Thursday's return to a stable outlook removes a cloud from the state’s lease debt, rated AA-minus, and its A-plus rated certificates of participation. Colorado does not issue general obligation debt.
"We have revised the outlook on all our ratings to stable following the state's adoption of pension reform in its 2018 legislative session, which, in our view, should be sufficient to prevent further decline of the funded ratios in the current outlook period," said S&P Global Ratings credit analyst Ladunni Okolo.
Under Senate Bill 18-200, Colorado intends to reduce its unfunded liabilities and reach full funding within 30 years. Gov. John Hickenlooper signed it Monday.
"While we still view the state's pension funding as weak, our stable outlook reflects that, unlike other states with similarly low funded ratios, we believe that Colorado's strong economic growth and finances position it to make meaningful steps to address its pension funding while maintaining structurally balanced budgets in the future," Okolo said.
The Colorado General Assembly sets contribution rates and benefit levels, and the Public Employees Retirement Association board of trustees has oversight of investments and benefit administration.
“We understand that these changes will not be easy, but we believe shared impact across the membership and with employers was absolutely necessary,” said Timothy M. O’Brien, Chairman of the PERA board.
SB 200 increases contributions from employers and employees, directs the state to allocate $225 million each year to PERA to reduce the unfunded liability, and modifies the retirement benefits, including reducing the annual increase for all current and future retirees as well as increasing the retirement age for new employees.
“Even with the modifications contained in SB 200, PERA will continue to provide members with a secure benefit and employers with an essential tool to recruit and retain a high-quality workforce that serves all Coloradans,” said PERA Interim Executive Director Ron Baker.