DENVER — A bill making its way through the House of Representatives could cost Colorado taxpayers hundreds of millions of dollars, while benefitting only a privileged few as Democrat lawmaker aim to give retired Public Employee Retirement Account (PERA) holders as well as those part of local government retirement accounts an additional $1,400 over the next couple of years.
House Bill 23-1016, sponsored by Shannon Bird, D-Westminster and Emily Sirota, D-Denver in the House and Chris Kolker, D-Littleton and Chris Hansen, D-Denver in the Senate, would create an income tax credit for tax years 2023 and 2024 for Colorado residents who:
- Are 55 or older at the end of 2023 and 2024;
- Retired from a position that had a Colorado state public pension plan;
- Or retired from a position that had a public pension plan administered by a local Colorado government.
The bill has been assigned to the House Finance Committee, but there is no date scheduled for a hearing as of press time.
According to the bill, inflation is up, and public service employees are likely to be on a fixed income, and Cost of Living Adjustments (COLAs) increases to their benefits doesn’t match inflation.
The credit would be a refundable credit, meaning that once the taxpayer’s tax liability is met, anything remaining would be refunded to the taxpayer.
Joshua Sharf, a senior fellow in fiscal policy at the Independence Institute,* who serves as an appointee on the legislative oversight subcommittee for PERA said there was some skepticism of the idea of a special tax break for government retirees when it was brought up at a meeting late last year, even among Democrat committee appointees. However, it was never reviewed by his group as the subcommittee’s input was skipped over and the bill was passed directly to the next level, the Pension Review Commission.
Sharf said a 2018 Senate Bill imposed a brief moratorium on COLAs as well as ratcheted down any progress made toward fully funding the pension program that has been in the red for decades.
Sharf said lawmakers argued that with no COLAs in 2018 or 2019, and small amounts in 2020 and 2021 current retirees are hit harder than the 2018 bill intended.
However, he adds that PERA retirees from 2010 received COLAs that outpaced inflation through 2017 (14.9 percent total compared to 11 percent inflation).
Sharf said the other problem with the bill is the fact that it is not intended just for PERA retirees, but any public pension plan, even those that co-exist with Social Security benefits — which does get an equal COLA yearly, and received an 8.7 percent increase this year.
While there is not a fiscal note attached to this bill yet, a bill in 2022 that impacted the same workforce estimated approximately 315,000 retirees. That multiplied by $700 per person, per year is $220 million per year, or $440 million total.
Sharf said additionally, the bill considers a retiree to be 55 or older.
“Fifty-five may be old enough to retire, but for most people, it’s hardly beyond the point where they have the ability to improve their financial situations,” he said. “Taxpayers who are helping to fund these pensions in the first place are, by and large, still working at that age.”
Sharf said Colorado already has income tax credits that reward behaviors, but this would reward a specific class of individuals.
“This particular credit is simply a wealth transfer to a politically connected group,” Sharf said. “There’s no prospective behavior being encouraged here, unless it’s to retire in the next couple of years. The bill was structured this way – through the tax code – in order not to affect PERA’s bottom line, it’s funded level, or the automatic adjustments designed to put the system on a path to full funding by 2047.”
The bill does not have a safety clause on it, meaning if it passes, any Colorado resident could challenge the bill and force it to go to the voters, so long as a petition is filed within 90 days after the final day of the 2023 legislative session. Those wishing to repeal the bill would need to gather 124,238 signatures from registered voters in 60 days to force it to a vote. It would appear on the 2024 ballot.
The number of signatures needed is down 394 from previous years, as it is based on 5 percent of the total number of ballots cast in the last election for Secretary of State. The 2022 election had a lower turnout than 2018, the last time the number was set.
The last time a private citizen successfully challenged a legislative action was in 2019, when Rep. Rose Pugliese, R-Grand Junction (then a Mesa County Commissioner) led the charge to stop Colorado from joining the National Popular Vote compact. Pugliese was successful in getting the matter to the voters, but her effort lost at the polls.
Complete Colorado will continue to follow this bill as it goes through the process, including when a fiscal note is released.
*Independence Institute is the publisher of Complete Colorado.
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