The Public Employees Retirement Association gained nearly $3 billion in 2012, thanks to a strong stock market.<\/p>\n
And its annual return of 12.9 percent was well above the 8 percent the system needs to average every year to stay on a path to solvency.<\/p>\n
PERA officials, plus independent auditors and actuaries, presented the good news to the Legislative Audit Committee on Tuesday.<\/p>\n
In previous years, legislators on the committee have harangued PERA officials for running a system that was on the road to ruin. But this year, legislators had little but encouraging words to share with PERA officials after auditors gave their financial statements a clean review.<\/p>\n
\u201cWhen you see no material weaknesses or problems for two years in a row, it means they are really doing a good job, so thank you. Thank you for protecting our money,\u201d said Sen. Lois Tochtrop, D-Thornton.<\/p>\n
A 2010 reform bill was designed to put PERA on the path to long-term solvency by cutting benefits, increasing payments into the system and lowering the expected annual rate of return to 8 percent.<\/p>\n
Critics like State Treasurer Walker Stapleton and other elected Republicans say 8 percent is still too optimistic. In 2011, for example, PERA\u2019s investments returned on 1.9 percent.<\/p>\n
\u201cWe didn\u2019t hear much from them last year when they returned 1.9 percent,\u201d said Stapleton\u2019s spokesman, Michael Fortney.<\/p>\n
PERA\u2019s independent auditor, Dave Eberly of KPMG, said it\u2019s important to keep an eye on the 8 percent assumption, but it\u2019s not out of the ordinary.<\/p>\n
\u201cWhen you look at the public employee retirement systems around the country, a fairly good amount of them use 8 percent as their rate of return. Some use more, some use less, but it\u2019s probably the most commonly used rate for retirement systems,\u201d Eberly said.<\/p>\n
At least for the past year, the fund performed better than expected. It finished 2012 with $43 billion, compared to just short of $40 billion a year earlier.<\/p>\n
For perspective, the budget for the entire state government is about $20 billion.<\/p>\n
It\u2019s the sheer size of PERA that has its critics worried. If a $40 billion system became insolvent and needed to be bailed out, it would be impossible for the state to handle without severe pain for the government and its taxpayers.<\/p>\n
Investors in general did well in 2012. The Standard and Poor\u2019s 500 index of stocks increased more than 13 percent.<\/p>\n
PERA puts its money mostly in stocks, bonds, real estate and private equity.<\/p>\n
More than half a million people are in the PERA system, with 100,000 drawing benefits. PERA handles retirement benefits for employees of the state, all Colorado school districts and 143 local governments.<\/p>\n