(The Center Square) – Colorado’s public pension system’s unfunded debt went up $1.2 billion last year despite a 17.4% rate of return on investments, according to a recently released report.

The board of trustees for the Colorado Public Employees' Retirement Association (PERA) released its annual report on Friday, which said the state’s public pension funds are 62.8% funded and have $31 billion in unfunded liabilities.

More than 630,000 current and former public workers rely on PERA for retirement and other benefits, and the association distributed about $4.8 billion in pension benefits last year, according to the report.

PERA Executive Director Ron Baker attributed the increased debt to a change in actuarial assumptions and the COVID-19 pandemic in a letter accompanying the report.

The board’s updates to its actuarial assumptions “reflect that our members and retirees are living longer and the workforce is growing slower than previously expected,” he said.

Because PERA is behind on its goal to be fully funded by 2047, the circumstances trigger a 0.5% increase in contributions for PERA members and employers starting in 2022, and lower retirees’ annual increase by 0.25%.

“We understand the changes we’re announcing today are difficult for our members and retirees,” Baker said in a statement Friday. “However, the impact is clear: This change will help PERA stay on track to reach its goal of keeping PERA secure for its members now and in the future.”

The Denver-based Independence Institute’s Fiscal Policy Center said in a statement that the situation is more fraught than previously thought.

“For the second experience study in a row, the revisions to PERA’s economic and demographic assumptions show PERA’s situation to be more perilous than we thought,” the libertarian-leaning think tank said. “The employee exodus as a result of the state government’s mishandling of the COVID-19 pandemic meant both fewer people paying in and more receiving benefits, and the legislature’s unnecessary withholding of the general fund line item last year only made things worse.”

Colorado's monthly payroll reports show the state had 110,008 employees on payroll in March 2021, a 9% decrease from 120,883 in March 2020, just as the COVID-19 pandemic began.

“Now, both retirees and the taxpayer-funded employers will have to increase contributions to make up the difference,” the Fiscal Policy Center added.