The news out of Public Employees’ Retirement Association today is good news for Colorado and Coloradoans.
PERA’s Comprehensive Annual Financial Report announced a realized 12.9% return on investments for 2012, and a 22 year average of 10%. This return outpaced PERA’s projection which had been set at 8%.
However, for Colorado State Treasurer Walker Stapleton and his sycophantic chorus of talk radio hosts, the news undermines a centerpiece of their talking points.
Since taking office in 2011, Stapleton has been making the rounds of right-wing talk radio shows, inciting GOP and Tea Party posses with predictions of looming financial Armageddon due to an unsustainable pension system for Colorado’s public employees. Without a squeak of protest from his hosts, he asserts the root of the problem to be unfunded liabilities resulting from the PERA board’s unrealistic projection on the rate of returns for their investments.
Here’s an exchange with Jon Caldara on Devil’s Advocate from November 2011:
Walker Stapleton: In Colorado, we have set an expectation that people will be guaranteed effectively an 8% rate of return on the investments that the pension fund makes over a 30 year time period.
Jon Caldara: Eight percent?!
Stapleton: Eight percent. So —
Caldara: Wait, wait, wait, slow down, here! Because I’m not a financial genius on this, but I’ve been looking at my 401K plan and it’s not getting anywhere close to 8% — more like negative 8%. But it doesn’t seem that 8% as a guaranteed rate of return has anything to do with reality. Does it?
Stapleton: Right. I don’t believe that it does. And if you look, you know, markets go up and markets go down. We’ve witnessed the stock market lose more than five percent in one week alone this year. So to guarantee a 8% rate of return is a very difficult benchmark to achieve […]
Caldara: Am I wrong, or is this just fantasy […]?
Fantasy? Apparently not. Despite a desperately challenging economic climate for investments since 2008, PERA has proved to be a capable and responsible steward of the retiree’s assets. Sound decision-making based on actuarial data and smart investment strategies have quelled the hyperbolic fearmongering on talk shows, for now.
Perhaps we should just feel thankful that talk show hosts aren’t managing our portfolios. Their “realistic” rate of return would miss the mark of actual earnings by a factor of ten. On Grassroots Radio last year, hosts Ken Clark and Jason Worley, along with their guest, CO Senate candidate Dave Piggot, scoffed at PERA’s projections.
Ken Clark: […] You tell me where on this planet right now anybody can get an 8% return.
Jason Worley: Guaranteed.
Dave Pigott: [laughs] I can’t do it. I don’t know where you can get near 8% rate, unless you work for a payday lender, or you are on the receiving side of VISA or MasterCard.
Clark: Guido and Rocco—
Worley: Yeah, there might be some loan sharks out there who—
Clark: Guido and Rocco, I think, are getting about 8% but that’s about it. There isn’t any place you can go. We just talked about in our very first segment how the market and this last week has lost all of the 2012 games. You think the mutual funds are doing well? You think Oppenheimer is really having a great day? I don’t think so.
Worley: Do you think that all the money that PERA has out there invested—
Clark: […] oh yeah! PERA just took a hit as well. If you want a guaranteed rate of return, you’re talking 1.2%.
Projections are not guaranteed, granted. But PERA realized returns above the short- and long-term projections. For that, we should all be happy.
Considering the optimistic indications, perhaps Stapleton, Caldara, Worley, and Clark will reform their message to a more upbeat, accurate representation of reality. But then again, considering the ideology that drives them, perhaps we shouldn’t hold our breath.