After three straight years of pay raises, Colorado state workers are in better financial shape than they were when the pandemic hit.

But they could still make more money working somewhere else.

Those were the main takeaways from the state’s latest pay study, presented to the legislature’s Joint Budget Committee last week. The annual report found that state employees make about 8% less than workers in comparable public and private sector jobs. And that’s even after this year’s 5% across-the-board pay raise.

Under the state’s collective bargaining agreement with Colorado WINS, the union for state employees, workers are owed another 3% bump in the 2024-25 budget year, which starts July 1. For the first time since the late 1990s, the state is also implementing a tiered system that will provide regular raises based on years of service.

But the strong labor market has made it harder for the state to catch up to other employers. The average employer is expected to give 4% raises over the coming year, the study found.

The presentation, from the state’s Department of Personnel and Administration, drew concerns from state budget writers, who said the government shouldn’t rely too much on Coloradans’ willingness to make less in the name of public service.

“None of us is here for the money,” said Rep. Jeff Bridges, a Greenwood Village Democrat who serves on the JBC. “That being said, having an entire state government where (public service) is the primary reason for folks working is not sustainable in the long term.”

Rep. Shannon Bird, the JBC’s chair, put it more bluntly.

“We need to pay people,” said Bird, D-Westminster. “It’s always a frustrating comment when people say ‘oh, nobody goes into this for the money.’ Well, we all go into our work to pay our bills. The state should be an employer of choice.”

Today, the evidence suggests Colorado is not an employer of choice. High turnover left around 1 in 5 state jobs vacant in the wake of the pandemic.

Hilary Glasgow, executive director of Colorado WINS, says the employment crisis is a result of decades of underfunding that has left the state as a de facto “training ground for the private sector.”

Under the current pay structure, she told The Colorado Sun, “there’s no reward for longevity. There’s no reward for seniority.” Employees would get frustrated when they couldn’t get a raise and leave after a few years, taking their skills and institutional knowledge with them.

When the new longevity-based system kicks in, Colorado will look more like other public sector employers, including the federal government, which competes directly with the state for some workers.

Implementing it all won’t come cheap. The 3% across-the-board raises will cost the state $93 million next year, according to a JBC staff report. Getting employees up to their new pay grades under the longevity system will cost even more, $109 million.

The elephant in the room is the state pension. The legislature’s attempts to shore up the Public Employees’ Retirement Association’s troubled finances have taken a bite out of employee pay in the form of higher contributions and worse benefits.

The pension had long been the sweetener offered in exchange for public sector service. “Despite there being lower pay, you had the benefits of retirement and health care that were good,” Glasgow said. “As those benefits have been eroded over time, it is less of an incentive.

Today, employees contribute 11% of each paycheck to PERA, up from 8% before the Great Recession. Meanwhile, the state puts in nearly 22% – most of which goes to pay off the state’s unfunded debt to retirees. That’s a lot of money for a pension that studies suggest may no longer be competitive with the retirement benefits provided by similar employers.

The personnel department’s most recent study from 2021 is outdated. But back then, PERA provided 29% less value to workers than the average pension.

It’s less clear how the pension compares to private sector retirement benefits. On its own, a PERA pension provides significantly more value than the typical 401(k), but PERA members don’t pay into or receive Social Security. Budget writers and PERA officials suggested this week it may be time for a new study. The last time the state legislature commissioned independent assessments of PERA’s retirement package was in 2014, when the pension provided better benefits than it does today.