COLORADO PERA ECONOMIC AND FISCAL IMPACTS Reports... · » PERA provides retirement distributions to members at retirement (or if disabled or to a survivor upon a member’s death)

COLORADO PERA ECONOMIC AND FISCAL IMPACTS

December 2016

Prepared by

PACEY ECONOMICS, INC.

Contents

01 EXECUTIVE SUMMARY

02 COLORADO PERA BACKGROUND

03 PERA AND PERSPECTIVE ON THE MAGNITUDE OF PERA RETIREMENT DISTRIBUTIONS

08 MEASURING ECONOMIC AND FISCAL IMPACTS

12 PERA ECONOMIC AND FISCAL IMPACTS

By State, Region, and Selected Counties for Output, Value-Added, Labor Income, and Employment

Fiscal Impact on State and Regional Government Budgets

By Industry Sector for State for Value-Added, Labor Income, and Employment

22 ABOUT THE RESEARCHERS

23 APPENDICES

Appendix A – PERA Retirement Distributions as a Percentage of Payroll by County

Appendix B – Economic and Fiscal Impacts by County

Appendix C – PERA Economic Benefits by Industry Sector – State of Colorado

Appendix D – Statewide Comparisons to Previous Studies

Appendix E – Economic and Fiscal Impact Analysis Detailed Methodology

1PERA Economic and Fiscal Impacts

This study measures the economic and fiscal impacts of the Colorado Public Employees’ Retirement Association (PERA) retirement distributions to Colorado recipients and provides a description of PERA members (active and benefit recipients). This December 2016 study is a follow-up to the earlier reports performed in August 2009, November 2011, and April 2015.

$3.83 billion

in retirement distributions to

Colorado residents

$6.09 billion

in economic output and

helps sustain

32,807 jobs

EXECUTIVE SUMMARY

» Colorado Public Employees’ Retirement Association (PERA) is the retirement plan for more than 402 public entities and government agencies within the State of Colorado, with the five divisions comprising the following percentages of total recipients: 1 School Division–54.3% 2 State Division–33.2% 3 Local Government

Division–6.1% Denver Public Schools

Division–6.1% 5 Judicial Division–less

than 1.0%

» PERA is important to the state as well as regional and local (county) economies.• The Association provides

retirement distributions of $3.83 billion annually to Colorado residents (based on August 2016 retirement distributions annualized).

• These PERA retirement distributions include only monthly pension retirement distributions and not health care benefits provided to retirees or refunds to members, understating the full advantages the community receives from its PERA recipients.

• For perspective, retirement distributions can be examined on a per capita basis as well as compared

to total payroll. Per capita, as opposed to per recipient, retirement distributions average some $691 per person at the state level to more than $1,389 per person in the Pueblo-Southern Mountains Region. When measured against total payroll, retirement distributions amount to 3.4 percent at the state level, but for rural areas, such as the Pueblo-Southern Mountains and San Luis Valley Regions, amount to 14.8 and 13.7 percent of local area payroll, respectively, reflecting the importance of PERA retirees to the economy in these rural areas.

• For example, during the recession of 2009–2011 the payments driven by the Pueblo-Southern Mountains Region benefit recipients, amounted to $274 million, and was a major source to limit the negative economic downturn in the area

• PERA distributions provide reliable, predictable income allowing for an “automatic stabilizing effect” on state, regional and local economies, especially in economic downturns (as these monies provide important stimulus in maintaining market activity).

» Commonly recognized economic impact measures include output, value-added, labor income, and employment.

The $3.83 billion annual PERA distributions to Colorado residents results in $6.09 billion in output (all goods and services transactions), $2.78 billion in value-added (state gross domestic product), $1.56 billion in labor income (which measures worker impact in wages), 32,807 jobs, and $271.4 million in state and local tax revenues. This economic output is an increase from $5.2 billion in 2014, further stabilizing state and local economies.

» When the impact results are analyzed on an industry sector basis, there are five major sectors (Real Estate and Rental and Leasing, Health Care and Social Assistance, Finance and Insurance, Retail Trade, and Information), each of which contributes between 6 and 23 percent of total value added. These five sectors account for more than 60 percent of the value added to our state economy from PERA retirement distributions.

» Substantial variation in impacts is evident at the county level, but the largest value-added and labor income impacts, as measured on a per capita basis, occur in a number of the rural counties.

» PERA provides a healthy return on investment: Annual economic output of $6.09 billion from retirement distributions from employer contributions of $1.32 billion (in 2015).

4

EXECUTIVE SUMMARY

2 PERA Economic and Fiscal Impacts

COLORADO PERA BACKGROUND

» Colorado PERA, established by state law in 1931, operates by authority of the Colorado General Assembly and is administered under Title 24, Article 51 of the Colorado Revised Statutes.

» Initially, PERA covered only state employees, but over the years has expanded to 402 government agencies and public entities within the State of Colorado including all Colorado school districts, state judicial systems, and many municipal and local governments.

» Retirement distributions are pre-funded: while a member is working both the member and the employer contribute a fixed percentage of the member’s salary to the retirement trust funds. The employee’s contribution is 8 percent for most members; the employer’s contribution in the early 2000’s was approximately 10 percent but in 2004 and 2006 legislation was passed that required employers to remit additional contributions to PERA. Now, most division employers contribute 19.13 percent plus 1.02 percent for the health care fund. (But in reality, of the 19.13 percent, 5 percent is to be funded by moneys otherwise available for employee wage

increases. Thus, the employers contribution is approximately 14 percent).

» PERA provides retirement distributions to members at retirement (or if disabled or to a survivor upon a member’s death). Fewer than 1 percent of PERA members participate in Social Security and, therefore, the PERA retirement distribution is designed and funded to provide total retirement moneys consistent with the private sector where retirement is based on a combination of a private plan and Social Security.

» As of December 31, 2015, PERA’s membership included 203,969 active members, 108,426 retirement distribution recipients, and 2,287 survivor benefit recipients (a distribution that is similar to the private sector). The total PERA retirement distributions to recipients amounted to $4.1 billion (including in-state and out-of-state residents) with an average (per recipient) monthly distribution of $3,153. This monthly distribution allows PERA recipients with more than 30 years of service to receive approximately 72 percent of their pre-retirement income from retirement distributions, a ‘replacement ratio’ recommended by financial experts.

» The trust funds are invested by PERA under the direction of a Board of Trustees. PERA’s investment strategy uses actuarially established investment objectives with long-term goals and policies. Since the Great Recession, the time-weighted net-of-fees annualized rate of return for the pooled investment assets was 9.7 percent, although returns are variable and were lower in the most recent two years, further highlighting the benefit of long-term risk pooling.

PERA

ESTA

BLISH

ED IN

1931

FEWER THAN 1% OF PERA MEMBERS PARTICIPATE IN SOCIAL SECURITY

“

“

COLORADO PERA BACKGROUND


106,898

30,537

2,458

203,969

108,426

2,2870

50,000

100,000

150,000

200,000

250,000

Benefit Recipients(Retirement and Disability)

Survivor Benefit Recipients

1990 2015

Active Members

PERA Active Members and Retirement Distribution Recipients, 1990 and 2015

Source: Colorado PERA Comprehensive Annual Financial Reports

Source: Colorado PERA Comprehensive Annual Financial Report for the Fiscal Year Ended December 31, 2015

FIGURE 1

TABLE A

PERA AND PERSPECTIVE ON THE MAGNITUDE OF PERA RETIREMENT DISTRIBUTIONS

As noted earlier, initially PERA covered only state employees but over the years the system has expanded to 402 government agencies and entities within the State of Colorado including all Colorado school districts, the state judicial system, and many municipal and local governments. Denver Public Schools has joined PERA since the August 2009 economic and fiscal impact report. As of December 31, 2015, PERA included 203,969 active members and 108,426 retirement distribution recipients with approximately $4.1 billion in annual retirement distributions (including in-state and out-of-state residents) and an average payment of $3,153 per month.

PERA’s membership includes:

» Employees of Colorado state government

» Teachers » Judges » State Troopers » Many university/ college employees

PERA covers the workers that provide many of our basic social needs including education, health care, law enforcement, justice, safety, etc.

The largest division of members and retirement distribution recipients is the School Division followed by the State Division and then the Local Government division. The Judicial Division is the smallest. A breakdown of

active members and retirement distribution recipients by division is identified in Table A.

The number of active members and retirement distribution recipients has increased over the past two and a half decades from 106,898 active members with 30,537 retirement distribution recipients in 1990 to 203,969 active members with 108,426 retirement distribution recipients in 2015. The growth in retirement distribution recipients relative to

active members is consistent with the demographic phenomena of an increasing number of retirees relative to active workers in our society. (The number of survivor benefit recipients has decreased from 2,458 to 2,287 over the same time frame.) Also of importance, the number of participating employers increased from 342 in 1990 to 402 in 2016.


State Division

School Division

Local Government

Division

Judicial Division

Denver Public

Schools Division

Total

Active members 55,291 120,239 12,176 334 15,929 203,969

Inactive members 69,385 108,184 21,915 8 8,118 207,610

Recipients receiving retirement distributions 35,977 58,855 6,597 330 6,667 108,426

Average monthly benefit (retirement benefits)

$3,294 $3,052 $3,114 $5,379 $3,206 3,153

Recipients receiving survivor benefits

888 1,089 160 14 136 2,287

PERA Active Members and Retirement Distribution Recipients by Division

PERA

RETIR

EMEN

T DIST

RIBUT

IONS


Source: Pacey Economics, Inc. calculations and consistent with information from National Association of State Retirement Administrators (NASRA) systems annual reports.

Employer Contributions20.0%

Investment Income63.0%

Employee Contributions(includes service credit purchases)

17.0%

Additions to the PERA Trust Funds 1985 to 2015

Colorado State Expenses by Department

Higher Education17.3%

K-1222.2%

State Departments46.3%

PERA2.9%

Towns and Other4.4%

State Programs6.9%

A key element of PERA funding is the ability to generate income from the investment of employer and employee contributions. A summary of the source of PERA assets is provided in Figure 2. Over the last 30 years, the largest portion of additions to the trust fund has been investment income amounting to 63 percent of additions.

Figure 3 provides perspective on the relative expense of PERA compared to other state expenditures. PERA employer contributions account for only 2.9 percent of the overall budgets of its participating employers, lower than average when compared to other states. The per capita costs per Colorado resident to pay for the pension benefits for the State’s teachers, law enforcement, judges, etc. the PERA members is less than $250 per year.

FIGURE 2

FIGURE 3



$1,963

$450$329

$44 $66

$247$130

$473

$125

$0

$500

$1,000

$1,500

$2,000

$2,500

MetroDenver

ColoradoSprings

Pueblo-Southern

Mountains

San LuisValley

SouthwestMountain

Western Mountain Northern Eastern

Benefit Payments (in millions)

Northern12,217$473.0

Metro Denver47,238

$1,963.3Mountain

3,412$130.4Western

7,100$246.6

SouthwestMountain

1,971$66.3

San LuisValley1,409$44.1

Eastern4,078$125.4

ColoradoSprings11,879$450.0

Pueblo-Southern

Mountains9,028$329.1

Number of PERA Recipients and Annual PERA Payments by Region

(PERA payments shown in millions)

Source: Data from Colorado PERA as of August 2016. Retirement distributions have been annualized.


PERA Retirement Distributions by Region (in millions)

FIGURE 4

FIGURE 5

The nine regions identified in this research consist of the same counties and designations as utilized by the Colorado Legislative Council for its economic forecasts. The map at right shows the number of PERA retirement distribution recipients and the total annual PERA payments for each region. (Although smaller numbers of PERA participants reside outside the Metro Denver region, the monetary impact of PERA distributions on maintaining the health of the regions in more rural areas is substantial.)

Total PERA retirement distributions paid in 2015 amounted to $4.1 billion. As of September 2016, approximately $3.83 billion (on an annualized basis) will be paid by PERA to recipients who continue to reside in Colorado by the end of the year. The 2016 geographic dispersal of PERA retirement distributions by regions is illustrated in Figure 5.

Total retirement distributions are concentrated in the Metro Denver region (see Figure 5).



Regional Per Capita PERA Retirement Distributions


$630 $657

$1,389

$949

$672$737

$576

$748 $775

$0

$200

$400

$600

$800

$1,000

$1,200

$1,600

$1,400

MetroDenver

ColoradoSprings

Pueblo-Southern

Mountains

San LuisValley

SouthwestMountain


Benefit Payments (per capita annually)

FIGURE 6

TABLE B

PERA Recipient Payments as Percentage of Payroll (dollars in millions)

$1,389PER YEAR PER PERSONIn the Pueblo- Southern Mountains Region

PERA Retirement

Distributions

Figure 6 identifies the PERA retirement distributions on a per capita basis and demonstrates the relative importance of the PERA payments to each region. The per capita measure demonstrates that these payments are important to all regions, but are especially important in rural regions such as the Pueblo-Southern Mountains Region where these payments amount to nearly $1,400 per year per person (i.e., when measured by all persons in the region, not only PERA recipients).


Source: Data from Colorado PERA as of August 2016. Retirement distributions have been annualized. Payroll data from 2014 County Business Patterns, U.S. Census Bureau adjusted to 2016 dollars.

Note: There are statewide payroll dollars of $2.85 billion (in 2016 dollars) (2.5 percent of total) which U.S. Census Bureau does not assign to a specific county and, hence, are not assigned to any region in this analysis.

State/Region August 2016 Retirement Distributions Annualized

Annual Payroll (adjusted to 2016)

PERA Payments as Percentage of Payroll

State of Colorado $3,828.2 $112,194.1 3.4%

Metro Denver 1,963.3 76,387.1 2.6%

Colorado Springs 450.0 10,139.3 4.4%

Pueblo-Southern Mountains

329.1 2,218.7 14.8%

San Luis Valley 44.1 323.1 13.7%

Southwest Mountain 66.3 1,330.1 5.0%

Western 246.6 4,484.1 5.5%

Mountain 130.4 3,998.7 3.3%

Northern 473.0 9,236.6 5.1%

Eastern 125.4 1,229.6 10.2%


State/Region August 2016 Retirement Distributions Annualized


PERA Payments as Percentage of Payroll

State of Colorado $3,828.2 $112,194.1 3.4%

Metro Denver 1,963.3 76,387.1 2.6%

Colorado Springs 450.0 10,139.3 4.4%


329.1 2,218.7 14.8%

San Luis Valley 44.1 323.1 13.7%

Southwest Mountain 66.3 1,330.1 5.0%

Western 246.6 4,484.1 5.5%

Mountain 130.4 3,998.7 3.3%

Northern 473.0 9,236.6 5.1%

Eastern 125.4 1,229.6 10.2%

Mo�at

Routt

Rio Blanco

Garfield

Pitkin

Eagle

Mesa

Delta

Gunnison

Montrose

OuraySan Miguel Hinsdale

Dolores San Juan

Montezuma La Plata

Mineral

Archuleta

Rio Grande

Saguache

Conejos

Alamosa

Custer

Huerfano

Costilla

Pueblo

Las Animas

Otero

Jackson

Grand

Summit

Lake

Cha�ee

Park

Teller

Fremont

El Paso

Crowley

Bent

Baca

Prowers

Kiowa

CheyenneLincoln

Kit CarsonElbertDouglas

Arapahoe

WashingtonYuma

Adams

Morgan

LoganPhillips

Sedgwick

Weld

Broomfield

Denver

Larimer

Boulder

Gilpin

ClearCreek

Je�erson

Over 25 percent of Payroll 15-25 percent of Payroll 10-15 percent of Payroll Less than 10 percent of Payroll

FIGURE 7

PERA Retirement Distributions Relative to Payroll by County

Table B (page 6) and Figure 7 provide a perspective on the magnitude of PERA payments to recipients relative to the state, regional, and local (county) economies. Annual PERA recipient payments to Colorado residents of $3.83 billion amounts to approximately 3.4 percent of statewide payroll. (Statewide payroll is collected from the County Business Patterns from the U.S. Census Bureau and includes all forms of compensation to those employed.1) This data further confirm that PERA payments are especially important in rural regions and less critical, but still important, in the Metro Denver and Mountain Regions.

Figure 7 illustrates PERA retirement distributions as a percent of county payroll and shows PERA to be a significant contributor to local economies.

» PERA retirement distributions represent a larger share of the local economy in the less populated regions of San Luis Valley, Pueblo-Southern Mountains, and Eastern.

» In more affluent or urban areas, this percentage is less than 10 percent; however, for a substantial number of rural counties, PERA retirement

distributions are in the range of 10 to 25 percent with some notable exceptions including the counties of Costilla (49.3 percent), Conejos (45.9 percent), Custer (33.3 percent), Fremont (29.4 percent), and Washington (25.9 percent).

» PERA retirement distributions are an important source of financial stability in the state economy, especially during times of recession.


PERA RETIREMENT DISTRIBUTIONS ARE AN IMPORTANT SOURCE OF FINANCIAL STABILITY IN THE STATE ECONOMY, ESPECIALLY DURING TIMES OF RECESSION

“

“

1 County Business Pattern data items are extracted from the Business Register (BR), a database of all known single and multi-establishment employer companies maintained and updated by the U.S. Census Bureau. This series includes the number of establishments, employment during the week of March 12, first quarter payroll, and annual payroll.

» Appendix A provides a county-by-county detailed table.


FIGURE 8

The Multiplier Effect of Household Expenditures

Figure 8The Multiplier E�ect of Household Expenditures

PERA Retiree Payments

SavingsHousehold SpendsMoney to Acquire

Goods and Services

Food Gasoline Utilities Other Needs Taxesfrom from from from to State and Local

Grocery Store Service Station Energy Co. Businesses Government

Inventory isPurchased

Employeesare Hired Wages Paid to

EmployeesIncreasesIncome toHousehold

MEASURING ECONOMIC AND FISCAL IMPACTS

When a household receives PERA retirement distributions, it represents an infusion of income into the local economy that creates a chain of economic activities whose total impact is greater than the initial retirement distribution payment. That is, these payments have substantial “ripple” or “multiplier” effects where one recipient’s spending becomes someone else’s income. With $3.83 billion paid to recipients who reside in Colorado, PERA has a large economic footprint on the state, regional, and local economies.

The impact of the PERA retirement distributions reaches well beyond those who receive the initial retirement distributions (retirees or survivors) as the recipient can fulfill obligations such as purchasing groceries, apparel, gasoline, etc. with these monthly PERA payments. This creates the “multiplier” effect as described and illustrated in Figure 8 at right.


The Multiplier Effect » PERA makes lifetime monthly distributions to recipients (retirees and survivors).

» PERA recipients spend the monthly moneys on household needs (such as food, gasoline, and utilities) and pay taxes and fees.

• PERA recipients may also “save” some of the monthly moneys and this “savings” leaks out of the multiplier effect, but since most recipients are in the decumulation phase of life, most of the distributions are spent.

» Businesses and/or governments providing those needs use their existing inventory or

purchase new inventory and may also be required to hire labor to sell or produce their products or provide their services.

» Then business owners as well as their employees obtain income from these purchases (initially by the PERA recipient) and they too then


This broad measure includes the total sales or revenues generated by firms, government, and households, from initial stimulus (i.e., the PERA benefit payment) and subsequent expenditures.

A key economic performance measure that includes only “additions” in the economy, i.e., newly created goods and services resulting from the PERA distribution; not the sum of sales at each transaction, but rather, the component of sales that represents the additional production of goods and services; commonly referred to as Gross Domestic Product (GDP).

Definitions

OUTPUT

VALUE-ADDED

go out and buy goods and services.

» Which, in turn, means added business income and wages/salaries.

» And the cycle repeats.To measure the multiplier effect, sophisticated mathematical procedures (generally referred to as input-output models) are created to track the flow of dollars through an economy. These input-output models recognize the relationships between industries and institutions (households, business, and government sectors) in the economy of a certain geographic area (state, region, or county). The models incorporate the prevalence of different industry sectors in different geographic


regions and recognize certain industries retain more of the dollars within the region than other industries.

For example, money spent on professional services or accommodations/food are more likely to stay within the area and benefit the local community while mining or manufacturing sectors may improve employment and wages, but if much of the product is sent out of the area or the input needs are purchased elsewhere, the economic impact will be more limited. Also, another integral piece of the model is the weighting of different consumer expenditure patterns by income levels.

There are a number of well-recognized input-output models including RIMS II, IMPLAN, REMI, etc. This research utilizes the IMPLAN

(formerly an acronym for IMpact Analysis for PLANning) input-output model to estimate the economic and fiscal impact of PERA recipient benefits to the state and regional economies. (Appendix E provides more detailed information regarding the methodology used for this research.)

Key and commonly recognized economic impact measures include output, value-added, labor income, and employment. Definitions and examples for each of these measures are provided and illustrated on pages 9 through 11.

PERA HAS A LARGE ECONOMIC FOOTPRINT ON THE STATE, REGIONAL, AND LOCAL ECONOMIES

“

“


Output and Value-Added

A classic example is presented to assist in understanding the output and value.

Farmer sellswheat to the Mill for $0.50, using supplies costing $0.25

Bakery makes bread and sells it to the Customer for $1.75

Mill makes �our and sells it to the Bakery for $1.00

OUTPUT VALUE-ADDED

$0.50 ($0.50–$0.25) = $.25

+ $1.00 +($1.00–$0.50) = $.50

+ $1.75 +($1.75–$1.00) = $.75

$3.25 $1.50 $1.50



Definitions

A component of value-added, labor income, measures the portion of newly created value that is employee compensation and self-employment income required to produce or sell the additional goods and services.

Employment is the level of full-time and part-time jobs generated by the PERA payments; i.e., ongoing PERA payments support this level of jobs.

LABOR INCOME

EMPLOYMENT


Output and value-added are measures of economic impact that include all types of economic activity. That is, when PERA retirement distribution recipients spend money in grocery stores, retail shops, restaurants, etc., those businesses respond by buying more supplies, utilities,

building space, etc. Businesses also respond by hiring more workers. The employment component of the economic impact on workers from a stimulus to the economy, such as the PERA retirement distributions, is of particular interest and is measured by labor income (which

measures worker impact in wages) and employment (which measures worker impact in number of jobs).


$271 million

PERA ECONOMIC AND FISCAL IMPACTS

PERA retirement distributions are a critical source of reliable, predictable income and provide an “automatic stabilizing effect” on state, regional, and local economies, especially in economic downturns as these monies provide important stimulus to local and state market activity. As noted in the previous section, these steady monthly retirement distributions are especially vital to small communities due to the lack of diverse local industries when other steady sources of income are not readily available. Households with stable incomes can be counted on to spend on basic needs and other purchases as well as pay taxes and fees generating revenue for state and local governments. In addition, monthly distribution recipients are less subject to extreme economic and life events that would result in the need for government assistance.

The following sections estimate the effect of spending from PERA retirement distributions, including the overall economic impact and by industry sectors, as well as a more narrow analysis of the fiscal impact on state and local government revenues. (For a more detailed description of the methodology used in this analysis, see Appendix E. The methodology is well accepted and widely used by federal, state, and local governments, research organizations, academic institutions, and businesses to assess the economic and fiscal impacts of a variety

of developments, including numerous analyses of the retirement distributions of publicly funded pension plans. Notable IMPLAN clients include: from the Federal Government, the Bureau of Economic Analysis (BEA) and the Federal Reserve; from the State Government, Colorado Department of Labor and Employment; both University of Colorado and Colorado State University; and from the local private sector, Development Research Partners.)

Figure 9 illustrates the economic impacts of PERA on the State of Colorado as calculated using the well-recognized and well-accepted IMPLAN model. The $3.83 billion in annual PERA retirement distributions to Colorado residents results in $6.09 billion in output, $2.78 billion in value-added, $1.56 billion in labor income, 32,807 jobs, and amounts to 1.25 percent of Colorado gross domestic product. Of note,

the impact on employment is measured in “annual average jobs” and reflects jobs supported for one year. The ongoing PERA retirement distributions would continue to support these jobs and additional increases in retirement distributions to PERA recipients (such as an increase in the number of recipients or increases in retirement distributions) over subsequent years will, on the margin, add new jobs to the economy. The economic impact to state/local governments amounts to $271.4 million. Notably, the state and local tax impact reflects only a modest increase from the previous study as a result of IMPLAN incorporating current BEA Benchmark data that has significantly adjusted taxes on production and imports (TOPI) downward. TOPI includes property taxes and sales taxes, among other items, and is a large portion of overall state and local

$

ColoradoUtah

FIGURE 9

Multiplier Effect Illustration


ECON

OMIC

IMPA

CTin Tax

Revenue


taxes measured in this analysis. Given sharply rising Colorado property values (over 10 percent in the previous year) since the release of BEA benchmark data, property taxes identified in this study are likely understated.

The total output multiplier can be derived by dividing the totaleconomic output ($6.09 billion) by the initial retirement distributions ($3.83 billion) amounting to a multiplier of 1.59. This means that for every dollar spent by a PERA recipient an additional 59 cents are generated in the economy through additional rounds of spending.

As discussed previously, the economic impact of PERA retirement distributions is larger than just the initial retirement distribution because of the “multiplier” effect. The multiplier effect occurs when a PERA retiree spends some of his/her retirement distribution on food, for example, which creates income for grocery store employees who, in turn, spend it on clothing, and so on and so on. Hence, the PERA dollars ripple throughout the economy, and the size of the ripple is known as the multiplier.

The multiplier effect arises when individuals spend their dollars in specific stores. Consequently, the size of the multiplier is influenced by the particular geographic region being studied, which will include some stores and exclude others. This idea is illustrated in Figure 9 which shows the flow of PERA dollars within Colorado and between Colorado and Utah. When

measuring the multiplier using the state of Colorado as the geographic region, only income and purchases within the state are included. If a retiree lives in Colorado but buys in Utah, or lives in Utah and buys in Colorado, those dollars are not included in the multiplier for the state of Colorado. The dollars spent across state lines still generate economic activity, they are just not included in the computation of the state multiplier. Similarly, the multiplier for the Northern region does not include purchases made in the Metro Denver region, and the multiplier for Jefferson County does not include purchases made in Denver County. Consequently, the full multiplier effect to the state, and its regions and localities is even greater than identified in this report.

The multiplier for PERA retirement distributions for the state of Colorado in this study is 1.59. However, a larger geographic region gives a larger multiplier because a larger region will include more stores. In fact, Pensionomics 2014 authored by the National Institute on Retirement Security (NIRS) utilizes the same IMPLAN software (as do numerous other academic and government institutions) as this analysis, but incorporates pension and trade flow data nationwide and finds a multiplier of 1.79 for the State of Colorado which implies economic output of $6.86 billion vis-à-vis the $6.09 billion output identified in this report. The NIRS multiplier is larger because it includes the out-of-state purchases of Colorado retirees. Similarly, smaller geographic regions give

$3.83 billionInput

$6.09 billionOutput

$2.78 billionValue-Added

$1.56 billionLabor Income

32,807Employment

$271.4 millionState/Local Taxes

FIGURE 10

Economic Impact for the State of Colorado


MULTI

PLIER

EFFE

CT

FOR EVERY DOLLAR SPENT BY A PERA RECIPIENT AN ADDITIONAL 59 CENTS IS GENERATED IN THE ECONOMY THROUGH ADDITIONAL ROUNDS OF SPENDING

“

“


smaller multipliers. The simple average (not weighted average) multiplier for the nine legislative regions is 1.28, and the simple average multiplier for the 64 counties is 1.16. However, the multiplier in the larger regions and counties are significantly higher than the average. It should be emphasized that the smaller county multiplier doesn’t imply that PERA dollars spent in, say, Conejos County somehow have less of an impact. Rather, it is simply a reflection that, by necessity of purchase opportunities, some of the Conejos dollars are spent in Alamosa County, and those dollars are included in the multiplier for Colorado, but not in the multiplier for Conejos, nor in the multiplier for Alamosa. As a result, the county-by-county impacts presented in Appendix B should not be added to derive state or regional totals; state and regional impact measures are identified elsewhere in this report.

Of note, this analysis is limited to the disbursement of retirement payments to the households, the largest benefit provided by PERA. The economic activity related to other benefits provided by PERA (such as the PERACare subsidy, 401(k) and other voluntary benefit programs) has not been incorporated into this analysis but would obviously increase the overall economic and fiscal impacts provided by PERA.

The salient information for the economic impact by region is best demonstrated by the value-added and labor income measures, beyond the substantial direct fiscal impact.

FIGURE 11

FIGURE 12

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

MetroDenver

State ofColorado

ColoradoSprings

Pueblo-Southern

Mountains

San LuisValley

SouthwestMountain


$2,785

$1,462

$208$125

$16 $33$118

$52$192

$35

$0

$100

$200

$300

$400

$500

$600

MetroDenver

State ofColorado

ColoradoSprings

Pueblo-Southern

Mountains

San LuisValley

SouthwestMountain


$503

$469

$304

$529

$346$330

$354

$231

$303

$216

Total Value-Added for State and Regions(dollars in millions)

Per Capita Value-Added for State and Regions



FIGURE 14

FIGURE 13

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

MetroDenver

State ofColorado

ColoradoSprings

Pueblo-Southern

Mountains

San LuisValley

SouthwestMountain


$1,558

$828

$115$72

$9 $18$65

$26$101

$17

$0

$50

$100

$150

$200

$250

$350

$300

MetroDenver

State ofColorado

ColoradoSprings

Pueblo-Southern

Mountains

San LuisValley

SouthwestMountain


$281$266

$168

$305

$191 $184$193

$116

$160

$105

Total Labor Income for State and Regions(dollars in millions)

Per Capita Labor Income for State and Regions


Total impact at the state and regional levels is largely driven by population and, therefore, the impact figures are further refined by adjusting for population. The following figures demonstrate the impact on a per person basis in the region. (That is, per capita impacts are obtained by dividing total impact by the relevant population base for the state, regions, and counties.) The magnitude of the results varies across regions as each region has different industries and economic infrastructure and, as such, the multiplier effect for each region will differ.

Figures 11 through 14 identify value-added and labor income for the total and per capita impacts for the state and regions. The following figures show that the value-added and labor income impacts follow the same distribution patterns across regions as retirement distributions:

» Naturally, total impacts are greater in the more populated regions.

» The per capita impacts are fairly constant between regions with the exception of the Pueblo-Southern Mountains Region where the per capita impact is substantially greater. PERA also plays a particularly important role in the local economics of the Western, Northern, and Eastern Regions.

» Not surprisingly, the per capita impacts are smaller in the Mountain Region where the prevalence of


TABLE C

Total Economic Benefit to the State and Regions of PERA Retirement Distributions (dollars in millions, except employment and multiplier effect)


State/Region

August 2016 Retirement

Distributions Annualized

Output Value-Added Labor Income Employment Multiplier

State of Colorado $3,828 $6,094 $2,785 $1,558 32,807 1.59

Metro Denver 1,963 3,085 1,462 828 16,103 1.57

Colorado Springs 450 580 208 115 2,953 1.29


329 397 125 72 2,016 1.21

San Luis Valley 44 53 16 9 272 1.20

Southwest Mountain

66 89 33 18 493 1.34

Western 247 331 118 65 1,838 1.34

Mountain 130 158 52 26 653 1.21

Northern 473 589 192 101 2,798 1.25

Eastern 125 144 35 17 564 1.15

the resort communities likely contribute to a large in-flow of non-resident spending that overshadows the spending of PERA recipients.

» Of note, output and employment impacts attributable to PERA recipient spending exhibit similar patterns at both the state and regional levels.

On pages 14–15, Figures 11 and 12 identify the total and per capita value-added dollar impact, respectively; while Figures 13 and 14 identify the total and per capita labor income dollar impact, respectively.

A summary of the economic impacts identified in Figures 11 to 14 for the state as well as the impacts for each region is provided below in Table C. County level impacts are provided by displaying economic output per capita in Figure 15. Notably, and importantly, state impacts are not the sum of the impacts of individual regions/counties. That is, because households make some of their purchases for goods and services outside a certain region/county

FIGURE 15

Mo�at

Routt

Rio Blanco

Garfield

Pitkin

Eagle

Mesa

Delta

Gunnison

Montrose

OuraySan Miguel Hinsdale

Dolores San Juan

Montezuma La Plata

Mineral

Archuleta

Rio Grande

Saguache

Conejos

Alamosa

Custer

Huerfano

Costilla

Pueblo

Las Animas

Otero

Jackson

Grand

Summit

Lake

Cha�ee

Park

Teller

Fremont

El Paso

Crowley

Bent

Baca

Prowers

Kiowa

CheyenneLincoln

Kit CarsonElbertDouglas

Arapahoe

WashingtonYuma

Adams

Morgan

LoganPhillips

Sedgwick

Weld

Broomfield

Denver

Larimer

Boulder

Gilpin

ClearCreek

Je�erson

Over $1,500 per Person $1,000-$1,499 per Person $500-999 per Person Less Than $500 per Person

and, as such, those expenditures are not counted in the economic activity of the region/county where the retirement distribution recipient resides. Given that the state encompasses a larger geographic

and, therefore, larger economic area, it will include more economic activity and, hence, the economic impact for the state will be larger than the sum of the counties/regions.

Total Economic Output Per Capita (from PERA Retirement Distributions) by County


TABLE D

Fiscal impact is a component of total economic impact, but measures only the government tax revenues generated by PERA retirement distributions. PERA recipients pay a portion of the PERA retirement distribution in income taxes and also pay additional taxes on goods and services which are subject to sales, use, or property taxes as well as fees for licenses or permits. There are additional taxes and fees paid on the subsequent rounds of spending

generated by the multiplier effect. Fiscal impact recognizes expenditures made by state and local governments to hire additional workers, make purchases in the local community for equipment needs, etc. Fiscal impact measures include the income and property taxes paid on the first round of spending plus other taxes and fees paid on subsequent rounds of spending which generates revenues for state and local government budgets.

The fiscal impacts from PERA retirement distributions as measured via the IMPLAN model are noted in Table D. The total impact to state/local governments amounts to $271.4 million with regions ranging from $2.2 million in San Luis Valley to $139.0 million in Metro Denver.

Fiscal Impact


Fiscal Impact to the State and Regions (dollars in millions)

State/Region Sales Tax Property Tax Other Tax (Including Income Tax)

Total State/Local Tax Impact

State of Colorado $92.5 $78.8 $100.0 $271.4

Metro Denver 46.1 39.3 53.5 139.0

Colorado Springs 7.9 6.7 8.8 23.5

Pueblo-Southern Mountains 5.7 4.8 5.8 16.3

San Luis Valley 0.8 0.7 0.7 2.2

Southwest Mountain 1.3 1.1 1.3 3.6

Western 5.1 4.3 4.7 14.1

Mountain 2.0 1.7 2.3 6.0

Northern 8.2 7.0 8.8 24.1

Eastern 1.9 1.6 1.8 5.4


TABLE E

The economic impact measures will vary depending on the composition of industry sectors across the state, regional, and local economies. This research first identifies state Gross Domestic Product (GDP) and annual payroll by industry sector in billions of dollars to provide an overall understanding of the State’s economy.

Table E below illustrates GDP for Colorado by industry sector. The top five industries account for nearly 50 percent percent of the state’s GDP. The table at right provides the top five industries and also includes the percent of GDP nationally for comparative purposes.

Economic Impact by Industry Sector


Industry Sectors of the Colorado Economy (dollars in millions)

Sector 2015 Gross Domestic Product

Annual Payroll

Finance and Insurance $17,827 $8,202

Health Care and Social Assistance 19,649 13,298

Government 38,126 n/a2

Real Estate and Rental 44,167 1,848

Retail Trade 17,677 7,364

Accommodation and Food Services 10,792 4,863

Information 23,789 7,231

Wholesale Trade 17,969 6,905

Manufacturing 22,981 6,789

Professional, Scientific, and Tech 28,185 16,537

Transportation and Warehousing 9,523 3,296

Administrative and Waste Services 9,867 11,1223

Utilities 4,113 825

Arts, Entertainment, and Recreation 4,347 1,566

Management of Companies 7,125 6,363

Educational Services 2,347 1,574

Construction 14,503 7,510

Agriculture, Forestry, Fishing, and Hunting 2,518 59

Mining 12,062 3,559

Other 7,313 3,284

All Industry Total $314,878 $112,194

Source: Regional Economic Accounts, Bureau of Economic Analysis; Bureau of Census–County Business Patterns

Source: Bureau of Economic Analysis

2 Data from the Bureau of Census - County Business Patterns excludes most government employees. 3 Includes some government administration allowing payroll to be greater than GDP.

Colorado United States

Real Estate 14.0% 13.2%

Government 12.1% 12.4%

Professional, Scientific, and Tech

9.0% 7.1%

Information 7.6% 4.9%

Manufacturing 7.3% 12.2%

Top Five Industries Percent of GDP


Mining3.8%Construction

4.6%

Accomodation and Food Services3.4%

Retail Trade5.6%

Administrative and Waste Services3.1%

Finance and Insurance5.7%

Transportation and Warehousing3.0%

Wholesale Trade5.7%

Other2.3%

Health Care and Social Assistance6.2%

Management of Companies2.3%

Manufacturing7.3%

Arts, Entertainment, and Recreation1.4%

Information7.6%

Utilities1.3%

Professional, Scientific, and Tech9.0%

Agriculture, Forestry, Fishing, and Hunting 0.8%

Government12.1%

Educational Services0.8%

Real Estate and Rental14.0%


Colorado has professional, scientific, and tech and information sectors larger than the national average and less prominent manufacturing sector than the country as a whole.

Government is a large sector due, in part, to Denver being a “branch”

for a number of federal government and government-related agencies (e.g., the Denver Federal Center in Lakewood, U.S. Mint in Denver, etc.).

An additional 30-plus percent of the state’s GDP is provided by health care and social assistance, finance

and insurance, wholesale trade, retail trade, construction, and mining. The remaining industry sectors account for approximately 20 percent of state GDP. This distribution is illustrated in Figure 16 below.

Components of the Colorado Economy

FIGURE 16



0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Finan

ce an

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rance

Manufac

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Professional

– Scientifi

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ch

Transp

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Administrat

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ces

Utilitie

s

Arts – Enterta

inment and Recreati

on

Manag

ement of C

ompanies

Educatio

n

Constructio

n

Ag, Forestr

y, Fis

h and H

unting

Mining

Health an

d Social

Servi

ces

Government a

nd Other

Real Esta

te and Rental

Retail Tr

ade

Accommodati

on and Fo

od Servi

ces

Informati

on

Wholesale Tr

ade

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Finan

ce an

d Insu

rance

Manufac

turing

Professional

– Scientifi

c and Te

ch

Transp

ortatio

n and W

arehousin

g

Administrat

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d Wast

e Servi

ces

Utilitie

s

Arts – Enterta

inment and Recreati

on

Manag

ement of C

ompanies

Educatio

n

Constructio

n

Ag, Forestr

y, Fis

h and H

unting

Mining

Health an

d Social

Servi

ces

Government a

nd Other

Real Esta

te and Rental

Retail Tr

ade

Accommodati

on and Fo

od Servi

ces

Informati

on

Wholesale Tr

ade

FIGURE 18

Value-Added by Industry Sector—State of Colorado

Labor Income by Industry Sector—State of Colorado

Figures 17 through 19 demonstrate the statewide impacts by industry sector. (The data used for these figures are found in Appendix C.) The economic impact by industry sector for Value-Added (i.e., state GDP) is illustrated in Figure 17 at left. Although Real Estate and Rental and Leasing, Government, Professional and Business Services and Information account for approximately 48 percent of the 2015 state GDP, the economic impact as measured by value-added is greatest in the Finance and Insurance Services, Public Sector Government Enterprises, Health Care and Social Services, Retail Trade, and Real Estate and Rental and Leasing.

In fact, only six sectors (Finance and Insurance, Public Sector Government Enterprises, Health Care and Social Assistance, Retail Trade, Real Estate and Rental and Leasing, and Information) account for approximately 68 percent of the Value-Added impact (i.e., contribution to GDP). (The output impact is not illustrated although it has a somewhat broader distribution.) Note, impacts are likely concentrated in the Health Care Sector given that PERA retirement distributions drive household final demand while other sectors of state GDP (Real Estate, Professional Services, etc.) are largely driven by business-to-business transactions.

Figure 18 demonstrates the economic impact on labor income at the state level from PERA recipient spending is heavily concentrated in Health and Social Services (24 percent) with Retail Trade, and Finance and Insurance generating an additional 21 percent of labor income.

FIGURE 17


0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Finan

ce an

d Insu

rance

Manufac

turing

Professional

– Scientifi

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Transp

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Arts – Enterta

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Manag

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Educatio

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Constructio

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Ag, Forestr

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Mining

Health an

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Servi

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Government a

nd Other

Real Esta

te and Rental

Retail Tr

ade

Accommodati

on and Fo

od Servi

ces

Informati

on

Wholesale Tr

ade

FIGURE 19

Employment by Industry Sector—State of Colorado

Figure 19 identifies the employment impact by sector and shows that three sectors, Health and Social Services, Retail Trade, and Accommodation and Food Services account for more than 45 percent of total employment impacts. This is consistent with their importance to the value-added. Together, Government and Other Services and Finance and Insurance account for an additional 20 percent of employment impacts.



ABOUT THE RESEARCHERS

ABOUT THE RESEARCHERS

Pacey Economics, Inc. located in Boulder, Colorado, has over 25 years of providing consulting services and analyses on an array of economic and business issues. We are a small boutique firm, focused on providing economic analyses for state agencies and private or publicly held companies plus offering economic reports or opinions and expert witness testimony in legal matters. Over the past decade, Pacey Economics, Inc. has been awarded many state government contracts through a number of different agencies to forecast, analyze, and evaluate programs and legislative changes. The staff contributing to this report are described below.

Patricia L. Pacey, PhD Dr. Pacey is President of Pacey Economics, Inc. and Principal Investigator on the PERA project. She received her PhD in economics and BA in mathematics from the University of Florida and held positions with the University of Colorado and the Congressional Budget Office before forming her own firm, Pacey Economics Group.

Mark S. McNulty, PhD Dr. McNulty is Managing Director at Pacey Economics, Inc. and supervised research on the PERA project. He received his PhD in economics and statistics from Iowa State University, was tenured faculty with Kansas State University for 13 years before accepting a technical researcher position with Los

Alamos National Laboratory. He was then employed with the University of Wyoming before joining the firm.

Jeffrey E. Nehls Mr. Nehls has been with Pacey Economics, Inc. since 2009 and was a key contributor to the impact analysis. Mr. Nehls obtained a bachelor’s degree in 2007 from University of Puget Sound, Tacoma, with a major in economics and minor in mathematics and a master’s degree in economics from University of Colorado Denver in May 2015.

Matthew S. Kaiser, BA, JD Mr. Kaiser received his bachelor’s degree in economics from Colorado State University in 1996 and his Juris Doctorate from the University of Colorado School of Law in 2004. He worked with Pacey Economics for a number of years prior to obtaining his law degree and has intermittently consulted with the firm since that time. He also has experience as an attorney, as an associate at a sports and media consulting firm, and as an editor of legal reference materials.

PACE

Y ECO

NOMI

CS, IN

C.

PACEY ECONOMICS, INC.

Patricia L. Pacey, PhD

Mark S. McNulty, PhD

Jeffrey E. Nehls, MA

Matthew S. Kaiser, JD


APPENDICES Appendix A – PERA Retirement Distributions as a Percentage of Payroll by County

Appendix B – Economic and Fiscal Impacts by County

Appendix C – PERA Economic Benefits by Industry Sector – State of Colorado

Appendix D – Statewide Comparisons to Previous Studies

Appendix E – Economic and Fiscal Impact Analysis Detailed Methodology

APPENDICES


APPENDIX A—PERA RETIREMENT DISTRIBUTIONS AS A PERCENTAGE OF PAYROLL BY COUNTY

County RegionRetirement Distributions

Annualized (in thousands)


(in thousands)

PERA Retirement Distributions as

Percentage of PayrollCostilla San Luis Valley

$2,972

$6,035 49.25%

Conejos San Luis Valley

8,500

18,532 45.86%Custer Pueblo-Southern

5,774

17,319 33.34%

Fremont Pueblo-Southern

68,038

231,806 29.35%Washington Eastern

5,048

19,491 25.90%

Park Mountain

9,989

41,566 24.03%Huerfano Pueblo-Southern

6,961

33,128 21.01%

Dolores Southwest Mountain

1,451

7,030 20.64%Crowley Eastern

3,388

16,704 20.28%

Bent Eastern

3,629

18,255 19.88%Baca Eastern

2,997

16,018 18.71%

Jackson Mountain

1,457

8,208 17.75%Elbert Eastern

16,635

96,730 17.20%

Las Animas Pueblo-Southern

16,278

103,781 15.69%Hinsdale Western

666

4,463 14.91%

Chaffee Mountain

26,745

179,973 14.86%Lake Mountain

4,689

32,569 14.40%

Otero Eastern

18,562

129,885 14.29%Sedgwick Eastern

2,049

14,626 14.01%

Lincoln Eastern

5,563

40,683 13.67%Rio Grande San Luis Valley

10,500

77,549 13.54%

Kiowa Eastern

1,280

9,842 13.01%Pueblo Pueblo-Southern

232,082

1,832,693 12.66%

Teller Mountain

20,789

179,729 11.57%Saguache San Luis Valley

2,822

24,801 11.38%

Prowers Eastern

9,847

88,138 11.17%Delta Western

25,554

232,364 11.00%

Mineral San Luis Valley

880

8,116 10.84%Logan Eastern

20,397

188,241 10.84%

Ouray Western

3,764

34,842 10.80%Alamosa San Luis Valley

18,476

188,102 9.82%

Phillips Eastern

2,994

34,869 8.59%Clear Creek Mountain

8,991

111,615 8.06%

Montrose Western

32,923

428,017 7.69%Kit Carson Eastern

4,950

66,593 7.43%

Montezuma Southwest Mountain

17,191

235,199 7.31%San Juan Southwest Mountain

320

4,617 6.94%

Archuleta Southwest Mountain

5,765

84,553 6.82%Yuma Eastern

5,991

95,716 6.26%

Morgan Eastern

20,611

347,068 5.94%Gunnison Western

11,931

204,952 5.82%

Mesa Western

126,380

2,234,423 5.66%Jefferson Metro Denver

542,170

9,656,429 5.61%

Larimer Northern

288,725

5,432,554 5.31%Weld Northern

184,265

3,804,068 4.84%

Moffat Western

7,295

153,804 4.74%Grand Mountain

11,233

239,624 4.69%

El Paso Colorado Springs

449,975

10,139,298 4.44%Rio Blanco Western 5,537 126,615 4.37%La Plata Southwest Mountain 41,532 998,718 4.16%Garfield Western 29,724 922,841 3.22%Cheyenne Eastern 1,464 46,781 3.13%Douglas Metro Denver 169,943 5,758,665 2.95%Adams Metro Denver 203,636 7,110,642 2.86%Boulder Metro Denver 259,172 9,301,082 2.79%Arapahoe Metro Denver 377,877 16,170,174 2.34%Gilpin Mountain 3,664 170,645 2.15%Routt Mountain 14,670 693,263 2.12%San Miguel Western 2,804 141,821 1.98%Summit Mountain 11,074 568,377 1.95%Broomfield Metro Denver 44,969 2,766,245 1.63%Denver Metro Denver 365,540 25,623,845 1.43%Eagle Mountain 12,954 1,136,236 1.14%Pitkin Mountain 4,164 636,911 0.65%

PERA Retirement Distributions as a Percentage of Payroll by County

(sorted by percentage of payroll)

APPENDIX A


(sorted by percentage of payroll)

APPENDIX B—ECONOMIC AND FISCAL IMPACTS BY COUNTY

Economic and Fiscal Impacts by County4

(actual dollars)

County Region Labor Income Value-Added Indirect Effect Induced Effect

Adams Metro Denver $39,248,204 $72,568,765 $16,064,255 $15,998,708Alamosa San Luis Valley 4,794,955 8,327,092 2,761,941 2,219,134Arapahoe Metro Denver 129,688,336 225,786,979 79,331,820 59,921,173Archuleta Southwest Mountain 831,535 1,907,097 702,941 347,942Baca Eastern 225,111 537,785 145,222 58,064Bent Eastern 195,455 566,710 119,468 47,027Boulder Metro Denver 78,571,354 139,605,343 51,227,393 39,233,754Broomfield Metro Denver 8,957,467 17,645,062 5,909,539 2,725,997Chaffee Mountain 4,158,477 8,877,357 3,372,812 1,866,247Cheyenne Eastern 93,530 249,242 67,798 21,620Clear Creek Mountain 857,254 1,918,971 703,416 236,908Conejos San Luis Valley 767,714 1,657,809 451,957 219,279Costilla San Luis Valley 136,975 425,153 125,228 31,620Crowley Eastern 185,063 488,972 67,300 34,677Custer Pueblo-Southern 404,773 1,051,881 509,577 116,516Delta Western 3,280,298 6,640,589 2,214,373 1,138,545Denver Metro Denver 145,764,577 250,968,073 91,881,098 59,330,930Dolores Southwest Mountain 107,408 250,183 43,828 18,277Douglas Metro Denver 30,587,208 60,160,457 17,196,509 9,688,593Eagle Mountain 3,536,284 6,342,841 1,944,559 1,690,317El Paso Colorado Springs 114,876,955 207,853,514 70,618,347 59,603,490Elbert Eastern 827,357 2,460,799 823,673 178,215Fremont Pueblo-Southern 9,643,967 18,946,508 5,469,451 3,817,876Garfield Western 6,599,662 12,287,940 3,359,630 2,960,452Gilpin Mountain 150,718 502,880 68,474 26,888Grand Mountain 1,366,589 3,322,810 1,105,220 504,451Gunnison Western 1,769,863 3,972,247 1,674,861 735,457Hinsdale Western 32,589 104,829 44,503 8,536Huerfano Pueblo-Southern 830,905 1,690,838 623,264 319,483Jackson Mountain 74,780 220,571 54,305 17,074Jefferson Metro Denver 120,079,232 219,906,862 53,469,966 51,212,172Kiowa Eastern 58,927 176,860 32,626 11,210Kit Carson Eastern 593,181 1,284,065 405,159 188,806La Plata Southwest Mountain 12,351,258 21,618,185 8,401,785 6,864,603Lake Mountain 473,880 1,015,001 250,488 153,397Larimer Northern 70,988,485 134,608,393 53,723,938 37,778,975Las Animas Pueblo-Southern 2,347,064 4,625,234 971,483 853,159Lincoln Eastern 553,435 1,314,278 366,859 181,481Logan Eastern 3,658,028 6,673,337 1,707,598 1,383,322Mesa Western 36,781,907 63,742,313 23,530,729 21,754,388Mineral San Luis Valley 55,373 158,023 37,516 10,646Moffat Western 1,258,216 2,483,436 736,972 494,870Montezuma Southwest Mountain 3,423,947 6,235,146 2,092,506 1,568,471Montrose Western 7,030,087 12,873,975 5,337,749 3,486,910Morgan Eastern 3,303,386 6,342,745 1,752,671 1,262,817Otero Eastern 3,393,247 6,031,512 1,797,590 1,398,107Ouray Western 399,321 917,339 444,438 141,634Park Mountain 539,557 1,580,838 669,172 140,962Phillips Eastern 281,847 635,724 202,741 84,667Pitkin Mountain 882,962 1,700,636 501,053 243,627Prowers Eastern 1,354,778 2,780,855 1,037,967 493,980Pueblo Pueblo-Southern 57,025,861 95,112,364 23,039,567 27,065,895Rio Blanco Western 405,925 1,132,562 376,880 114,568Rio Grande San Luis Valley 1,625,206 3,015,188 768,951 552,118Routt Mountain 3,969,418 7,426,692 2,295,264 1,761,628Saguache San Luis Valley 184,222 452,328 117,579 47,374San Juan Southwest Mountain 17,986 53,940 12,543 4,733San Miguel Western 415,278 934,600 313,205 150,124Sedgwick Eastern 178,898 413,386 153,785 56,751Summit Mountain 2,415,788 4,767,998 1,519,455 1,094,692Teller Mountain 2,313,841 5,415,924 1,968,289 841,615Washington Eastern 348,092 857,321 255,372 87,434Weld Northern 28,361,673 53,977,554 12,680,411 10,259,983Yuma Eastern 752,235 1,512,145 530,302 229,450

APPENDIX B


APPENDIX B—ECONOMIC AND FISCAL IMPACTS BY COUNTY

Economic and Fiscal Impacts by County4 (continued) (actual dollars)

County Region Sales Tax Property Tax Other Taxes (Including Income Tax) Total State And Local Tax

Adams Metro Denver $2,969,883 $2,526,975 $3,716,890 $9,213,748Alamosa San Luis Valley 382,286 325,144 348,108 1,055,538Arapahoe Metro Denver 7,172,723 6,112,149 8,638,348 21,923,220Archuleta Southwest Mountain 85,598 72,667 79,668 237,933Baca Eastern 42,236 35,839 32,753 110,828Bent Eastern 34,203 29,000 41,481 104,684Boulder Metro Denver 4,945,442 4,210,711 5,698,220 14,854,373Broomfield Metro Denver 697,577 592,361 761,099 2,051,037Chaffee Mountain 498,890 423,431 420,964 1,343,285Cheyenne Eastern 16,864 14,310 16,314 47,488Clear Creek Mountain 115,483 98,030 127,794 341,307Conejos San Luis Valley 98,618 83,690 97,700 280,008Costilla San Luis Valley 28,511 24,170 30,330 83,011Crowley Eastern 26,763 22,684 31,328 80,775Custer Pueblo-Southern 78,213 66,308 76,900 221,421Delta Western 403,123 342,172 357,606 1,102,901Denver Metro Denver 6,795,233 5,788,586 8,328,520 20,912,339Dolores Southwest Mountain 14,886 12,620 13,359 40,865Douglas Metro Denver 2,599,856 2,211,793 3,305,404 8,117,053Eagle Mountain 209,636 178,622 262,306 650,564El Paso Colorado Springs 7,912,099 6,735,165 8,843,065 23,490,329Elbert Eastern 187,515 158,945 208,140 554,600Fremont Pueblo-Southern 1,028,881 873,515 980,726 2,883,122Garfield Western 486,057 413,677 560,011 1,459,745Gilpin Mountain 22,772 19,309 39,783 81,864Grand Mountain 150,611 127,868 165,873 444,352Gunnison Western 180,476 153,196 182,779 516,451Hinsdale Western 7,915 6,707 10,146 24,768Huerfano Pueblo-Southern 100,405 85,208 87,348 272,961Jackson Mountain 16,507 13,997 14,805 45,309Jefferson Metro Denver 8,660,062 7,368,904 10,600,000 26,628,966Kiowa Eastern 16,621 14,088 13,325 44,034Kit Carson Eastern 80,303 68,205 64,096 212,604La Plata Southwest Mountain 812,299 691,819 887,647 2,391,765Lake Mountain 52,712 44,759 62,348 159,819Larimer Northern 5,630,784 4,788,772 5,942,484 16,362,040Las Animas Pueblo-Southern 236,617 201,030 232,923 670,570Lincoln Eastern 76,864 65,199 75,862 217,925Logan Eastern 317,049 269,613 317,091 903,753Mesa Western 2,696,758 2,294,107 2,505,294 7,496,159Mineral San Luis Valley 9,489 8,046 10,140 27,675Moffat Western 116,171 98,771 112,550 327,492Montezuma Southwest Mountain 292,218 248,463 261,346 802,027Montrose Western 627,736 533,495 543,373 1,704,604Morgan Eastern 294,255 250,239 297,844 842,338Otero Eastern 307,875 261,737 285,567 855,179Ouray Western 54,736 46,441 47,489 148,666Park Mountain 115,571 97,939 117,318 330,828Phillips Eastern 46,190 39,199 36,549 121,938Pitkin Mountain 53,185 45,277 75,786 174,248Prowers Eastern 152,150 129,276 135,128 416,554Pueblo Pueblo-Southern 4,033,500 3,432,827 4,323,378 11,789,705Rio Blanco Western 69,909 59,283 62,629 191,821Rio Grande San Luis Valley 154,791 131,605 148,666 435,062Routt Mountain 244,351 208,244 322,217 774,812Saguache San Luis Valley 30,297 25,693 27,849 83,839San Juan Southwest Mountain 4,105 3,478 3,194 10,777San Miguel Western 35,873 30,488 43,366 109,727Sedgwick Eastern 29,041 24,660 23,616 77,317Summit Mountain 178,619 151,967 223,561 554,147Teller Mountain 302,939 257,139 303,917 863,995Washington Eastern 60,031 50,915 72,963 183,909Weld Northern 2,466,599 2,096,203 2,850,422 7,413,224Yuma Eastern 89,292 75,895 78,946 244,133

4 As noted previously, county-level impacts do not include inter-county economic activity, so the county-by-county impacts presented here should not be added to derive state or regional totals; state and regional impact measures are identified elsewhere in this report.

APPENDIX B


County Region Sales Tax Property Tax Other Taxes (Including Income Tax) Total State And Local Tax

Adams Metro Denver $2,969,883 $2,526,975 $3,716,890 $9,213,748Alamosa San Luis Valley 382,286 325,144 348,108 1,055,538Arapahoe Metro Denver 7,172,723 6,112,149 8,638,348 21,923,220Archuleta Southwest Mountain 85,598 72,667 79,668 237,933Baca Eastern 42,236 35,839 32,753 110,828Bent Eastern 34,203 29,000 41,481 104,684Boulder Metro Denver 4,945,442 4,210,711 5,698,220 14,854,373Broomfield Metro Denver 697,577 592,361 761,099 2,051,037Chaffee Mountain 498,890 423,431 420,964 1,343,285Cheyenne Eastern 16,864 14,310 16,314 47,488Clear Creek Mountain 115,483 98,030 127,794 341,307Conejos San Luis Valley 98,618 83,690 97,700 280,008Costilla San Luis Valley 28,511 24,170 30,330 83,011Crowley Eastern 26,763 22,684 31,328 80,775Custer Pueblo-Southern 78,213 66,308 76,900 221,421Delta Western 403,123 342,172 357,606 1,102,901Denver Metro Denver 6,795,233 5,788,586 8,328,520 20,912,339Dolores Southwest Mountain 14,886 12,620 13,359 40,865Douglas Metro Denver 2,599,856 2,211,793 3,305,404 8,117,053Eagle Mountain 209,636 178,622 262,306 650,564El Paso Colorado Springs 7,912,099 6,735,165 8,843,065 23,490,329Elbert Eastern 187,515 158,945 208,140 554,600Fremont Pueblo-Southern 1,028,881 873,515 980,726 2,883,122Garfield Western 486,057 413,677 560,011 1,459,745Gilpin Mountain 22,772 19,309 39,783 81,864Grand Mountain 150,611 127,868 165,873 444,352Gunnison Western 180,476 153,196 182,779 516,451Hinsdale Western 7,915 6,707 10,146 24,768Huerfano Pueblo-Southern 100,405 85,208 87,348 272,961Jackson Mountain 16,507 13,997 14,805 45,309Jefferson Metro Denver 8,660,062 7,368,904 10,600,000 26,628,966Kiowa Eastern 16,621 14,088 13,325 44,034Kit Carson Eastern 80,303 68,205 64,096 212,604La Plata Southwest Mountain 812,299 691,819 887,647 2,391,765Lake Mountain 52,712 44,759 62,348 159,819Larimer Northern 5,630,784 4,788,772 5,942,484 16,362,040Las Animas Pueblo-Southern 236,617 201,030 232,923 670,570Lincoln Eastern 76,864 65,199 75,862 217,925Logan Eastern 317,049 269,613 317,091 903,753Mesa Western 2,696,758 2,294,107 2,505,294 7,496,159Mineral San Luis Valley 9,489 8,046 10,140 27,675Moffat Western 116,171 98,771 112,550 327,492Montezuma Southwest Mountain 292,218 248,463 261,346 802,027Montrose Western 627,736 533,495 543,373 1,704,604Morgan Eastern 294,255 250,239 297,844 842,338Otero Eastern 307,875 261,737 285,567 855,179Ouray Western 54,736 46,441 47,489 148,666Park Mountain 115,571 97,939 117,318 330,828Phillips Eastern 46,190 39,199 36,549 121,938Pitkin Mountain 53,185 45,277 75,786 174,248Prowers Eastern 152,150 129,276 135,128 416,554Pueblo Pueblo-Southern 4,033,500 3,432,827 4,323,378 11,789,705Rio Blanco Western 69,909 59,283 62,629 191,821Rio Grande San Luis Valley 154,791 131,605 148,666 435,062Routt Mountain 244,351 208,244 322,217 774,812Saguache San Luis Valley 30,297 25,693 27,849 83,839San Juan Southwest Mountain 4,105 3,478 3,194 10,777San Miguel Western 35,873 30,488 43,366 109,727Sedgwick Eastern 29,041 24,660 23,616 77,317Summit Mountain 178,619 151,967 223,561 554,147Teller Mountain 302,939 257,139 303,917 863,995Washington Eastern 60,031 50,915 72,963 183,909Weld Northern 2,466,599 2,096,203 2,850,422 7,413,224Yuma Eastern 89,292 75,895 78,946 244,133

4 As noted previously, county-level impacts do not include inter-county economic activity, so the county-by-county impacts presented here should not be added to derive state or regional totals; state and regional impact measures are identified elsewhere in this report.

APPENDIX C—PERA ECONOMIC BENEFITS BY INDUSTRY SECTOR—STATE OF COLORADO

Sector Value-Added Labor Income Employment

Finance and Insurance $252.1 $174.6 $2,774

Health and Social Services 402.6 367.1 6,333

Government and Other 163.4 129.2 3,187

Real Estate and Rental 645.0 44.5 2,738

Retail Trade 241.5 159.4 4,587

Accommodation and Food Services

137.8 94.0 3,936

Information 178.4 77.1 602

Wholesale Trade 147.1 88.3 954

Manufacturing 62.0 30.3 442

Professional, Scientific, and Tech 143.0 116.7 1,642

Transportation and Warehousing 63.8 53.3 858

Administrative and Waste Services

89.9 70.9 1,958

Utilities 61.8 19.5 130

Arts, Entertainment, and Recreation

54.1 29.1 1,077

Management of Companies 43.4 34.9 242

Education 26.3 23.0 623

Construction 29.3 23.6 434

Ag, Forestry, Fish, and Hunting 18.4 7.9 192

Mining 24.9 14.0 95

PERA Economic Benefits by Industry Sector—State of Colorado (dollars in millions, except for employment)

APPENDIX C


APPENDIX D—STATEWIDE COMPARISONS TO PREVIOUS STUDIES

Impact Measures

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APPENDIX E—ECONOMIC AND FISCAL IMPACT ANALYSIS DETAILED METHODOLOGY

ECONOMIC AND FISCAL IMPACT ANALYSIS DETAILED METHODOLOGY

PERA retirement distribution information as of August 2016 was used in the input-output modeling software, IMPLAN, to determine the economic impact of the retirement distributions by county, region, and the State of Colorado. IMPLAN was initially developed in the 1970s for use by the US Forest Service, in cooperation with other federal agencies, to assist in land and resource management planning. The University of Minnesota was also involved in the development of the model in the 1980s and, in 1993, the Minnesota IMPLAN Group, Inc. (MIG) was formed to privatize the development of the data and software. IMPLAN is widely used by federal, state, and local governments as well as academic institutions and businesses to assess the economic and fiscal impacts of a variety of developments, including numerous analyses of the retirement distributions of publicly funded pension plans.

An input-output model, such as IMPLAN, accounts for the relationships in the economy of a certain geographic area (for example, the State of Colorado, a region, or a county). This is accomplished through a Social Accounting Matrix (SAM) framework which captures all industry and institution (including household and government) transactions in a local economy. The SAM traces the flow of dollars from purchasers to producers while also accounting for taxes paid by households and business.

The IMPLAN model measures the impact of the flow of dollars through a regional economy by estimating the direct effect, indirect effect, induced effect, and total effect. The distinction

between these effects is best illustrated by applying them to the task at hand although only the total effect is reported in the results section of this report.

» The direct effect, the initial event, is the spending of PERA benefits by households at businesses or taxes paid to the state and local governments.

» The indirect effect identifies the impact on the economy when the businesses and government purchase inventory and hire employees.

» When employees of the businesses and government spend their wages and profits, this impact is considered to be an induced effect.

» The total effect is the sum of the direct, indirect, and induced effects.

It should be noted that state impacts are not the sum of the impacts of individual regions/counties. This is because households make some of their purchases for goods and services outside a certain region/county and, as such, those expenditures are not counted in the economic activity of the region/county where the retirement distribution recipient resides. Given that the state encompasses a larger geographic and, therefore, larger economic area, it will include more economic activity and, hence, the economic impact for the state will be larger than the sum of the counties/regions.

Of note, since the August 2009 study, MIG has incorporated modifications to the methodology used to calculate the proportion of each dollar of local demand that is purchased from local producers and the proportion purchased from producers in other regions. Version 2.0 of IMPLAN, used in the August 2009 study, utilizes an econometric approach to calculate these proportions. Version 3.0 of IMPLAN,

used in this study and the 2011 study, utilizes a trade flow methodology believed to be superior to the econometric implementation. A detailed explanation of this new model can be found online at: http://implan.com/V4/index.php?option=com_docman&task=doc_download&gid=138&Itemid=7.

Retirement Distributions This analysis recognizes that not all PERA beneficiaries continue to reside in Colorado. Those recipients that are no longer in the state are likely spending their retirement distributions in their new locale. As such, payments for recipients who reside out-of-state were not included in this analysis. By not including any out-of-state PERA recipients, we assume that the expenditures by these recipients have no effect on economic impacts within the state.

For the county/regional analyses, only recipients residing in the respective county/region are included.

Household Expenditure Pattern The typical expenditure pattern of a household will vary, in part, due to their income level. For example, a higher income household may spend more on entertainment than a lower income household. IMPLAN recognizes this and has several different household expenditure groups.

Regional impacts were analyzed using the expenditure patterns for three household income groups: $25,000 to $35,000, $35,000 to $50,000, and $50,000 to $75,000. These income ranges were chosen after reviewing average PERA benefit payment information and median household income data from the U.S. Census Bureau (American Community Survey and 2000 Census).

The household expenditure pattern of the income range $25,000 to $35,000 was


used for the Eastern, Pueblo-Southern Mountains, and San Luis Valley.

The household expenditure pattern of the income range $35,000 to $50,000 was used for the Metro Denver, Colorado Springs, Southwest Mountain, Western and Northern regions and the State of Colorado. For the Mountain region, the $50,000 to $75,000 household spending pattern was used. For the counties, the income range for the household expenditure pattern, with a few exceptions, typically followed the respective region.

The actual expenditure pattern of the PERA households may differ somewhat from the IMPLAN average as approximately 95 percent of the PERA recipients are age 55 and older. Data from the Consumer Expenditure Survey showed that households with older individuals spend proportionately more on certain items (e.g., health care) and less on other items (e.g., education) than the average household although total spending dollars were relatively comparable within income levels.

Taxes and Saving Households spend out of their disposable income. That is, purchases of goods and services are made once adjusted for income taxes and savings. Therefore, subtracting income taxes and savings from gross retirement distributions is important to accurately estimate the local economic impacts. (IMPLAN assumes the dollars inputted are to be spent.) The income taxes do not go unspent and the impacts on state and local government are included in this analysis.

Of note, data from the Colorado Department of Revenue continues to be used regarding average federal and Colorado taxes paid in 2004 by income classes for residents 65 and older, as it is anticipated that the effective tax rate has not changed substantially since that time frame. This data provides the effective tax rate, recognizing the amount of tax an individual actually pays includes tax deductions and exemptions, credits, etc. For the household income $25,000 to $35,000, taxes paid as a percentage of federal adjusted gross income were 4.3 percent for federal taxes. For the household income $35,000 to $50,000, the rate is 6.3 percent for federal taxes. Because state income taxes more directly affect the fiscal impact to the state of Colorado, 10 effective tax brackets were applied to individual disbursements (this is an updated methodology from previous studies). All tax rates are likely low as they do not consider likely spousal or other income which would result in increased tax rates.

Information from the Consumer Expenditure Survey was evaluated to derive the savings rate. For individuals over age 55 in the lower household expenditure pattern ($25,000 to $35,000), essentially no moneys were devoted to savings and, as such, a 0 percent rate was incorporated into the analysis; however, for the higher household expenditure pattern ($35,000 to $50,000), a 5 percent rate is used given the expenditure data.

State and Local Tax Generation To calculate state and local tax generation, state income taxes paid by recipients on retirement distributions are added to taxes paid in all subsequent rounds of spending. For the first, the state taxes

are included as described above while IMPLAN calculates corporate, personal income, sales, property, etc., taxes generated from each subsequent round of spending.

Adjustments Retirement distributions data provided by PERA is in 2016 dollars while IMPLAN’s data is in 2014 dollars. IMPLAN incorporates the producer price index (PPI) to adjust 2014 dollars to 2016 dollars.

Notes on Impacts As described above, a number of assumptions were made regarding household expenditures, taxes, and savings. As such, a range of outcomes is likely appropriate and an exact dollar figure is not feasible although results provided here reflect a reasonable measure of the economic and fiscal impacts of the PERA retirement distributions.

Also of note, an economic impact study can never capture the exact benefit as economies are always in a state of flux.

APPENDIX E—ECONOMIC AND FISCAL IMPACT ANALYSIS DETAILED METHODOLOGY

Documents

COLORADO PERA ECONOMIC AND FISCAL IMPACTS Reports... · » PERA provides retirement distributions to members at retirement (or if disabled or to a survivor upon a member’s death)