When Colorado voters passed Proposition 130, they mandated the state to allocate $350 million towards supporting law enforcement, but did not specify how this funding was to be financed.
As the state grapples with a $1.2 billion shortfall, lawmakers faced a difficult choice: making further cuts to education and health care, which are two significant drivers of state spending, or finding an alternative approach.
Recognizing that slashing budgets for social services could be counterproductive—given their role in crime prevention—lawmakers sought a creative financial solution.
Governor Jared Polis recently signed Senate Bill 310 into law, marking the implementation of a novel budget strategy that has not been attempted in Colorado, or potentially anywhere else.
The legislation received unanimous support in the state Senate and was overwhelmingly approved in the House, with only nine lawmakers opposing it.
The financial mechanics of the plan involve assigning $500 million from the state’s reserve fund to the Colorado Public Employees’ Retirement Association (PERA).
This enables PERA to invest the money alongside its existing $62 billion portfolio, with the expectation that returns on these investments could finance Proposition 130 over the next decade without burdening taxpayers directly.
However, a significant complication arises: once the money is allocated to PERA, it becomes a permanent part of the pension fund and cannot be returned to the state, due to federal regulations.
Thus, the state cannot utilize PERA’s annual revenue to make direct payments for law enforcement grants.
In case of an economic downturn, the state would also face restrictions, as it would lose access to $500 million of its reserves designated for PERA.
To navigate these issues, the state plans a workaround: instead of receiving payments directly from PERA, the state will reduce its own contributions to the pension by the same amount—$35 million annually—until the full $350 million is paid off.
Additionally, in the event of economic challenges, the state may further decrease its contributions to PERA to replenish its general reserves.
The new legislation establishes a fund specifically for peace officer training and support, which will be distributed to local law enforcement agencies across Colorado over time.
The aim is to tackle the persistent shortages in law enforcement, allowing funds exclusively for recruitment, training, and employee salaries.
Each agency will receive a minimum of $15,000, plus additional funds based on the number of officers they employ.
However, it is anticipated that releasing the entire $350 million will take at least a decade, and possibly longer.
The distribution of funds will correlate directly with PERA’s investment returns, meaning that in years when PERA generates at least $35 million, that amount will be allocated to the law enforcement fund.
But in years when returns are lower, the law enforcement agencies will receive significantly less, with a minimum annual allocation of $15 million if returns are disappointing.
This variability means that the timeline for implementing the law’s intent could stretch even further than expected.
Greeley Police Chief Adam Turk expressed concerns, asserting that this framework undermines the expectations voters had when approving Proposition 130.
“Even in the best case scenario, that timeline does not align with the pressing staffing and resource challenges that agencies are facing today,” Turk stated during a legislative committee hearing this spring.
He pointed out that the Colorado Association of Police Chiefs initially discussed a more expedited seven-year timeline before settling on a ten-year payout due to budget constraints.
Conversely, some law enforcement representatives, like Amanda Gall from the Colorado Fraternal Order of Police, recognized the necessity of balancing police funding with other critical social services.
“There are many agencies that are understaffed, but we recognize the state’s budget constraints and the state’s needs in other areas, and how those other areas like education, health care, etc., intersect with the work our officers do every day in the streets,” Gall said.
In addition to the law enforcement funding, voters also approved a $1 million death benefit for the families of officers killed in the line of duty, which will continue to be funded after the $350 million allocation is exhausted.
From PERA’s perspective, the proposed arrangement could yield positive outcomes.
If all goes as planned, PERA and its 600,000 members might benefit from the measure granting law enforcement funding.
“Ultimately, big picture, PERA stands to gain money from the state over the long term,” stated Andrew Roth, the pension’s executive director.
While the investments carry risks, there is significant upside potential, particularly since PERA would not need to return the full $500 million but only repay $350 million, coming from investment earnings.
If PERA’s investments exceed expectations, it could retain funds beyond the stipulated law enforcement payouts, essentially earning additional revenue.
This setup also means that should PERA face market challenges, the state’s obligations only adjust relative to the pension’s income from the initial $500 million investment.
However, the unconventional nature of this funding strategy does pose risks for both the state and PERA.
Montoring the upcoming budget year, set to commence on July 1, reveals that the general fund’s reserve is projected at nearly $2.5 billion, including the $500 million earmarked for PERA.
Nonetheless, if an economic crisis unfolds, the state will not have full access to its reserves to continue funding government services.
The law mandates that if reserves drop below $1 billion, the state must adjust by cutting up to $225 million from its annual contributions to PERA.
Furthermore, continued cuts could occur in subsequent years until the $500 million is duly repaid.
According to budget officials, while drastic spending is unlikely to happen all at once, this strategy provides a buffer period for the state to recover its reserves.
Traditionally, during economic downturns, the state has already made similar cuts; for instance, it eliminated a required $225 million payment to PERA during the pandemic.
This new regulation ensures that PERA begins with $500 million more in its portfolio in the face of potential economic adversities.
The impact of this unique financial strategy on the state’s credit rating remains uncertain.
Mark Ferrandino, the governor’s budget director, has indicated no significant negative implications are anticipated, although any displeasure regarding the withdrawal of reserve funds could be mitigated by the assured funding increase to PERA.
As Colorado navigates its budget landscape, state officials will keep a close watch on this seemingly unorthodox funding approach to ensure a balance is maintained between law enforcement needs and the financial health of the state.
image source from：https://coloradosun.com/2025/06/04/pera-colorado-law-enforcement-funding-deal-proposition-130/
