PERS board members and outside advisers told the board that a single strong investment year would not justify awarding cost-of-living adjustments (COLAs) for Tier 5 retirees while the system's funding ratio remains low, and rating-service analysis called for recurring, non-investment revenue to reduce risk and protect the state's credit standing.

Ed Coble, identified in the meeting as a representative of CABMAC, said the recent strong investment return would not be a basis to recommend a COLA at current funding levels. "If we were in the situation today and we're 56% funded, then no. I would say investment return that occurred just recently would not, a COLA should not be approved based on the funding ratio in place today," Coble said.

PERS staff and board members summarized a Moody's publication that reached similar conclusions: Tier 5 is long-term reform that helps future solvency, but without additional recurring funding the plan remains exposed to investment volatility and credit-rating risk. PERS staff noted the system currently pays more in benefits than it collects in employer and employee contributions (a negative pension cash flow) and that rating agencies emphasize the need for increases in non-investment contributions.

At a recent House select committee hearing on PERS, board staff described positive legislative sentiment for increased funding, but members cautioned that timing and amounts will be subject to the legislative process. Staff and several board members said a "sinking COLA fund" (seeded over years) or other pre-funding mechanism could reduce the actuarial impact of an ad hoc COLA and potentially make future COLAs actuarially neutral if properly funded in advance.

Why it matters: The question of whether to grant COLAs and how to structure funding for long-term solvency is central to the board's fiduciary duty. Rating agencies tie pension funding progress to state borrowing costs; PERS and state leaders warned that inadequate recurring funding could increase interest costs on future debt issuance.

Quotes and specifics: Treasurer McCray and Senator Sparks (both identified by title in the meeting) and staff joined the discussion urging continued legislative engagement. Staff summarized Moody's view that the pension contribution pullback increases exposure to volatile returns and projected that unfunded liabilities could grow materially without new recurring revenue. A board adviser gave a numerical illustration staff characterized as an example: recurring annual contributions on the order of hundreds of millions of dollars could significantly improve funded status over a decade.

Ending: Board members urged continued communication with legislators and employer stakeholders and requested that staff continue to provide clear, factual updates ahead of the legislative session so supporters of additional funding can follow developments and respond.