Plaintiffs Gary R. Justus et al and defendants State of Colorado et al have appealed the Colorado Court of Appeals decision that declared that Colorado PERA retirees have a contract that includes their annual cost-of-living (COLA) increases, albeit for very different reasons! Plaintiffs’ attorneys filed Nov. 20 and defendants’ attorneys filed the next day.
Plaintiiffs seek to have the Supreme Court decide “Whether, in a case involving public sector employees’ rights to a cost-of living adjustment (“COLA”), the Court of Appeals wrongly ruled that aspects of Police Pension and Relief Board of the City and County of Denver v. McPhail, 139 Colo. 330 (1959), and Police Pension and Relief Bd. of City and County of Denver v. Bills, 148 Colo. 383 (1961), are no longer good law because, contrary to those cases, there can be no Colorado Constitution Contract Clause violation even for persons already retired or eligible to retire so long as the defendant public entity shows that impairment of the employees’ rights is “reasonable and necessary to serve a significant and legitimate public purpose.”
Defendants ask the Supreme Court to decide “( 1) Whether Colorado Public Employees’ Retirement Association (“PERA”) members have contractual rights to the cost-of-living adjustment (“COLA”) formulas in place at their respective retirements for life without change. (2) Whether SB 10-1, which adjusted COLAs to their current level of two percent compounded annually, was constitutional because it (a) did not substantially impair contractual expectations and was reasonable and necessary to ensure the pension funds’ long-term viability, and (b) was not a regulatory taking.”
That this case would eventually be appealed to the Colorado Supreme Court was both expected and sought by all parties due to the precedent that Senate Bill 10-001 created in reducing COLA contractual benefits for retirees and those eligible to retire. The two briefs filed this week can be found at www.SavePERACOLA.com/resources.
It has been two years and eight months since PERA first failed to pay its full contracted COLA to retirees. The current per cent deficit is 6.83%. Support this legal effort at PayPal by clicking 
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THE TOP TEN: DAMNING EVIDENCE IN THE COLORADO PERA RETIREE LAWSUIT, JUSTUS v. STATE. Part 1 of 2.
Here’s a synopsis of the “Top Ten” for the casual reader:
(1) Colorado governments face no fiscal “crisis” that would warrant the breach of their pension contracts. They spend a mere two percent of revenues on public pensions.
(2) The Colorado General Assembly has not paid its full pension bill for a decade. It comes with dirty hands.
(3) The Colorado General Assembly has adopted PROSPECTIVE, legal pension reform for Colorado county governments (SB12-149). It can also adopt such PROSPECTIVE, legal pension reform for the Colorado PERA pension system. SB12-149 is proof that the Colorado Legislature can adopt “less drastic” pension reform than the breach of “fully-vested” PERA public pension contracts. The 2010 PERA COLA taking was unnecessary.
(4) The Colorado PERA COLA benefit is an “AUTOMATIC” COLA benefit, a contractual obligation of Colorado PERA employers, rather than an “ad hoc” pension COLA that can be diminished by pension plan sponsors. Colorado PERA officials have confirmed this fact in writing.
(5) Opinions of Colorado Attorneys General and Colorado case law support the sanctity of Colorado PERA COLA pension contracts.
(6) Colorado PERA officials have testified before the Colorado Legislature that the PERA COLA is their contractual obligation. Their words are on the record at the Colorado Legislature.
(7) The taking of the PERA COLA benefit was planned by lobbyists and the Leadership of the Colorado Legislature. Thus, Leadership failed to send an interrogatory to the Colorado Supreme Court, or appoint an interim study committee to explore legal pension reform options. Colorado PERA was shopping for a legal rationale to break COLA contracts a full year prior to the adoption of SB10-001.
(8) The Colorado Legislature overreached in attempting to shift 90 percent of the PERA pension reform bill’s costs away from those who actually owe the debt, Colorado PERA-affiliated employers, and onto those who DO NOT owe the debt, Colorado PERA pensioners. Not exactly “reasonable.”
(9) Colorado PERA’s actuarial funded ratio (AFR) has been much lower in the past, than its level at the time of the contract breach, yet no “crisis” was perceived by PERA or Colorado legislators or Governors in the past. Clear evidence that SB10-001 was arbitrary . . . political.
(10) In 2009, Colorado PERA selected a politically, and judicially, connected lawyer to create a legal rationale to break PERA COLA contracts. This connected lawyer worked with our gifted Colorado Supreme Court Justice Marquez (a former PERA legal advisor) on the lawsuit, Justus v. State.
Income inequality in the United States is bad enough without the Colorado Legislature exacerbating the problem by breaking the contracts of elderly, middle-class pensioners. The Colorado Legislature intends to take the property of Colorado PERA retirees in order to help preserve Colorado’s status as a “tax haven,” the state with the lowest per capita state tax burden in the nation. The Colorado Legislature has planned a deliberate breach of Colorado PERA retiree pension contracts that will result in Colorado corporations, corporate owners and executives controlling even more of the wealth in the state.
In 2010, a majority of Colorado legislators decided to use the force of government to take property from Colorado PERA pensioners, to renege on the contractual obligations of Colorado state and local governments, as well as taxpayers. Our state legislators took this action as a political favor for their voters, and for the constituencies that finance their state legislative campaigns.
In 2010, a troop of 27 statehouse lobbyists, hired by Colorado PERA-affiliated employers, rammed a bill through the legislative process (SB10-001) in an attempt to force their employer’s debts onto the backs of Colorado PERA pensioners. Three years have passed, and I still cannot believe that a majority of the members of our own Colorado Legislature were capable of such immorality.
October 22, 2009
“PERA is obviously gearing up for some heavy-duty lobbying, one observer noted. The agency has hired two lobbyists from the firm Colorado Communiqué, Collon Kennedy and Steve Adams, former president of the Colorado AFL-CIO. The pension system also has hired Mary Alice Mandarich, a well-connected Democratic lobbyist who formerly was chief of staff for Senate Democrats and who worked on campaigns for former Senate President Joan Fitz-Gerald, former Gov. Roy Romer and gubernatorial candidate Gail Schoettler.”
http://www.ednewscolorado.org/news/capitol-news/pera-woes-loom-large-for-education/comment-page-1
Over the last three years, a great deal of information relating to the circumstances of the Colorado Legislature’s 2010 PERA pension contract breach has come to light. Colorado PERA officials have already admitted (provided written and verbal testimony to the Legislature) that the Colorado PERA COLA benefit is a contractual obligation of PERA-affiliated employers.
Their legislative testimony is in agreement with the recent finding of the Colorado Court of Appeals that the PERA COLA provision IS such a contractual obligation. Why does Colorado PERA bother appealing a ruling on this question, when they agree with the Court of Appeals decision? It makes no sense. Further, it is obvious that the taking of one-third to one-half of a contracted annuity stream is a “substantial” impairment of the contract, just as the taking of one-half of a homeowner’s equity would be a “substantial” taking.
In legal briefs, the State of Colorado and PERA Defendants present arguments in favor of the legislative taking of contracted Colorado pensioner benefits. In this article, I rank what I perceive to be the most damning evidence to the State of Colorado and PERA Defendant’s legal arguments. I prioritize the evidence (discovered to date) that I believe most soundly refutes the State of Colorado and PERA Defendant’s legal arguments that the taking of money from PERA pensioners to meet Colorado public sector debts was “reasonable and necessary.” Even the evidence gathered to date, without formal discovery, demonstrates that the Colorado Legislature’s 2010 PERA pension contract breach was completely arbitrary, and purely a political preference, rather than “reasonable,” or “necessary.”
The Top Ten:
(1) Colorado is not in the midst of a fiscal “crisis.” Colorado is a wealthy state with a budget surplus. Colorado has paid off $700 million in local government pension debt that is not its responsibility, while ignoring its own contractual Colorado PERA debt. Colorado has recently made $100 million grants of discretionary property tax relief. Colorado governments can afford to pay their debts.
(2) The Colorado General Assembly has, historically, ignored its PERA pension bills (ARC), the Colorado PERA Board of Trustees has, historically, made it board policy to underfund the PERA pension system (a “90 percent cap.”)
(3) The Colorado Legislature has recently adopted PROSPECTIVE, legal public pension reform honoring the accrued pension benefits of thousands of Colorado county government pensioners (SB12-149). Thus, the General Assembly has demonstrated that it is capable of public pension reform that conforms to the strictures of the Colorado Constitution. Similar legislation may be adopted to bolster the actuarial funded ratio (AFR) of the Colorado PERA pension system.
(4) The Colorado PERA COLA benefit is an “AUTOMATIC” COLA benefit, a contractual obligation of Colorado PERA employers. It has a legal status identical to any other provision of the written, statutory Colorado PERA pension contract. In spite of the wishes of those who would break PERA contracts, it IS NOT an “ad hoc” COLA benefit (provided by some states) that may be diminished by a pension plan sponsor for vested annuitants.
(5) A number of Opinions of Colorado Attorneys General support the sanctity of Colorado PERA COLA contracts.
(6) Colorado PERA officials have provided written testimony to the Colorado Legislature’s Joint Budget Committee stating that the Colorado PERA COLA benefit is a contractual obligation of PERA-affiliated employers. Officials of the Ritter Administration (Governor Ritter signed SB10-001) have confirmed this opinion in a letter to the federal regulatory agency, GASB.
(7) The Legislative Leadership of the Colorado General Assembly failed to perform due diligence. Although encouraged to do so, Leadership failed to send an interrogatory to the Colorado Supreme Court to clarify the contractual nature of the PERA COLA benefit. Leadership failed to appoint an interim study committee to examine PROSPECTIVE, legal pension reform options. The taking of the PERA COLA benefit was preconceived, rather than the result of a deliberative process.
(8) The Colorado Legislature (and lobbyists hired by PERA employers) overreached in attempting to shift 90 percent of the costs of PERA reform away from those who legally owe the debt, PERA employers, and by incorporating an unnecessary “100 percent” funded ratio threshold into the PERA statutory contract.
(9) The actuarial funded ratio of the Colorado PERA pension system has been much lower in the past, than its level at the time of the SB10-001 pension contract breach. Yet, during those times, Colorado PERA officials supported PERA pensioner contractual rights.
(10) In early 2009, the supporters of the planned Colorado PERA COLA contract breach shopped for a law firm to create a legal rationale to justify the taking of the COLA benefit. They selected the law firm of an education advocate with impressive connections in the Colorado political and judicial communities. The selected attorney, Jean Dubofsky, worked on the Justus v. State lawsuit with current Colorado Supreme Court Justice Monica Marquez. While at the Colorado Attorney General’s Office, our accomplished Justice Marquez provided legal advice to Colorado PERA.
#1: COLORADO STATE AND LOCAL GOVERNMENTS FACE NO FINANCIAL “CRISIS.”
Prior to the adoption of SB10-001, Colorado PERA officials assured us that the Colorado PERA pension system faced no “crisis”:
August 11, 2009
Colorado PERA Board Trustee Casebolt assures PERA retirees present at Colorado PERA Denver meeting of the PERA “Listening Tour”: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”
http://www.copera.org/pera/about/listeningtour.htm
April 12, 2011
Colorado PERA in “Setting the Record Straight”: “But what’s not mentioned is that this liability is not due and cannot be made payable today, just like a mortgage.” “PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years.”
https://www.copera.org/pera/about/issues.htm
March 1, 2012
Representative Kagan, March 1, 2012, House Finance Committee: “(In adopting SB10-001) we had put PERA . . . on an actuarial sound footing without waiting for a crisis to hit, without waiting for exposés and pressure . . .”
(My comment: Here, Rep. Kagan notes that the Colorado General Assembly adopted SB10-001 in 2010, breaking PERA pension contracts, while Colorado PERA faced no financial “crisis.”)
April 12, 2013
From Governing Magazine:
“Tax revenues increased in all but five states in fiscal year 2012, with some recording noticeable gains. In all, states collected $794.6 billion, a record-high that represents a 13 percent increase from 2010 totals, not adjusting for inflation.”
“Governing compiled current and historical revenue data reported to the Census Bureau into the chart below.”
Colorado Total Revenue Collected, 2008: $9,624,636,000
Colorado Total Revenue Collected, 2012: $10,250, 628,000
http://www.governing.com/gov-data/state-tax-revenue-data.html
March 18, 2013
State financial crisis? From the Denver Business Journal: “. . . next year’s money — $924.3 million above the amount the state will spend this year, according to Legislative Council — is up for grabs.”
http://www.bizjournals.com/denver/news/2013/03/18/colorado-state-revenue-picture.html?page=all
States that are able to voluntarily pay off debts that ARE NOT their contractual obligations, while ignoring debts that ARE INDEED their contractual obligations do not, by definition, face a financial “crisis”:
April 2, 2013
The Colorado Legislature has paid off local government pension debt that IS NOT the contractual obligation of the State of Colorado. (This 2013 $142 million appropriation brings the total to $700 million for this purpose.) “House Republican leaders are floating a proposal to repay a longstanding debt (My comment, this is not a state ‘debt,’ sloppy reporting) to the state’s Fire and Police Pension Association in full as a way to get some GOP lawmakers to vote in favor of the $20 billion state budget for next year, which will be up for debate in the House on Thursday.” “‘It’s (House Minority Leader) Waller’s effort to buy some Republican votes,’ one GOP lawmaker told FOX31 Denver Tuesday.” “Waller, who is almost certain to run for Attorney General (next) year, would like to be able to demonstrate that he leads a group of lawmakers who are pragmatic and responsible; and helping forge a bipartisan budget compromise would help him make that case.”
http://kdvr.com/2013/04/02/republicans-considering-pension-deal-hoping-for-bipartisan-budget-vote/
September 19, 2012
FPPA testimony (Dan Slack, CEO, FPPA) regarding the obligation of the State of Colorado to pay for local government “Old Hire Police Officers Pension Plans” to the Colorado General Assembly’s Police Officers and Firefighters Pension Reform Commission (29 minutes into the hearing):
“So the State has made certain commitments, but has been very careful not to make binding obligations upon itself as the state to provide some assistance with funding for these plans.”
Link:
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
The fact that the State of Colorado has directed $700 million ($142 million at the 2013 legislative session) to the payment of public pensions (Old Hire Fire and Police pensions) that ARE NOT its contractual obligation, the fact that the State of Colorado is making a $105 million discretionary grant of property tax relief in the budget for the coming fiscal year, proves that the State of Colorado has available financial resources and is quite able to perform under the terms of its Colorado PERA public pension contracts.
Next year’s property tax relief grant, from the Colorado Long Bill – $105 million in property tax relief:
Colorado State Budget 2013/2014 (Long Bill SB13-230), page 238, “Homestead” property tax relief grant: $105,200,000
http://www.leg.state.co.us/CLICS/CLICS2013A/csl.nsf/BillFoldersSenate?OpenFrameSet
#2: THE COLORADO GENERAL ASSEMBLY HAS NOT PAID ITS PUBLIC PENSION BILLS FOR A DECADE.
Colorado state and local governments (employers) have not paid their full pension bills for a decade. Colorado PERA members (workers) have ALWAYS paid their required Colorado PERA pension contributions, every month from their paychecks, without fail. These workers are required under Colorado law to make their PERA pension payments. In the history of the Colorado PERA pension system public workers have NEVER missed a payment. Why does Colorado law not similarly force Colorado PERA-affiliated employers to pay their own PERA pension bills?
Now that the Colorado Legislature has run up the PERA pension debt by failing to require PERA-affiliated employers to pay their pension bills, the Legislature seeks to push this EMPLOYER pension debt onto former employees.) That is plainly immoral and illegal.
October 10, 2003
“In 2003, (Treasurer) Coffman warned that the state’s pension fund may be in jeopardy after legislators lowered the state’s contribution from the general fund. [Associated Press, 10/10/03]”
“Adding to the problem is the fact that the legislature voted to reduce the amount of the state’s contribution into the program from 12.2 percent in 1991 to 10.15 percent in 2004, Coffman said.” (October 10, 2003, Rocky Mountain News)
http://mediatrackers.org/wp-content/uploads/2012/07/DCCC2012MikeCoffmanCO06-ResearchBook.pdf
March 11, 2009
Colorado PERA officials place blame on the Colorado General Assembly for creating the latest PERA financial downturn: “Other notable factors (for the downturn in PERA’s fiscal position) include employers not contributing the actuarially determined contribution rates, the sale of purchased service credit at rates below actuarial costs, and the raising of benefits in the late 1990’s coupled with decreasing employer contributions.”
http://www.kentlambert.com/Files/PERA_Response_Pt_1.pdf
August 11, 2009
Colorado PERA’s General Counsel Greg Smith blames the Colorado General Assembly for PERA’s fiscal downturn: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”
http://www.copera.org/pera/about/listeningtour.htm
February 23, 2012
Colorado PERA Executive Director Meredith Williams’ comments on February 23, 2012 to the House Finance Committee relating to the Legislature’s historical underfunding of its PERA pension obligations:
“We’ve had a significant problem over the years, in that . . . contributions, payments by (PERA) employers into PERA have been kind of the last thing in the budget building process, and we have not made the required payments. Unfortunately, in our line of work, where we’re involved in compounding shortfalls grow, particularly when the shortfalls continue year after year after year.”
March 1, 2012
House Finance Hearing: Don Schaeffer, Colorado PERA retiree, “I actually worked at PERA for 20 years.” “In my job at PERA, I was the Communications Director, and that started somewhere back in the early 80s.” “In the year 2000 . . . we (PERA) were fully funded and they (the General Assembly) said ‘Oh, we have too much money,” and so then we had (pension contribution) cuts, and we had benefits added and so forth.”
(My comment: I ask: Why should Colorado PERA retirees, who have fully-vested public pension contracts relinquish their constitutional rights to compensate for such policy decisions of the Colorado General Assembly?)
March 1, 2012
House Finance Hearing: Rep. Hullinghorst, “We got ourselves into this mess in the 1980s to begin with, in the 1980s and 1990s, when the Legislature just on a whim decided they were going to do this and that with PERA, and made some changes that were very detrimental to the system.”
Even the Colorado PERA Board of Trustees has sought to limit the funding available to the Colorado PERA pension system in the past. Now, having supported underfunding the system, the Board seeks to compensate by breaking Colorado PERA pension contracts.
1999
George K. Baum study performed under the auspices of Colorado PERA (presented on Colorado PERA letterhead) for State Treasurer Mike Coffman asks: “Why does PERA appear to have a policy to keep a 10% unfunded liability?” (If Colorado PERA had a policy, in the past, to cap the funded ratio of the PERA pension at 90 percent, why does the PERA Board propose to break PERA contracts in SB10-001 until a 100 percent funded ratio is achieved? As PERA officials have noted, the pension debt comes due over up to 70 years, it is not “due tomorrow.”)
Was the PERA Board’s “90 percent cap” on the actuarial funded ratio of the PERA trust funds a formal or informal board policy? By what means did the PERA Board seek to “cap” the trust funds? In what years has this policy been in place? Did the PERA Board make recommendations to the Legislature to maintain this 90 percent funded level?
#3: THE COLORADO LEGISLATURE HAS ADOPTED PROSPECTIVE, LEGAL PENSION REFORM HONORING ACCRUED PENSION BENEFITS OF THOUSANDS OF COLORADO COUNTY GOVERNMENT RETIREES. THE LEGISLATURE CAN ALSO HONOR COLORADO PERA CONTRACTS.
May 16, 2012
The Colorado General Assembly enacts the bill SB12-149, reforming certain Colorado public pension systems and honoring the accrued public pension benefits of public workers who are members of those pension systems, after having retroactively taken accrued benefits from Colorado PERA retirees in 2010.
Language from SB12-149:
“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”)
Link to SB12-149, the Act:
http://www.leg.state.co.us/clics/clics2012a/csl.nsf/fsbillcont3/0E9F894D31C081EF87257981007DAF5A?open&file=149_enr.pdf
Reforms adopted by the Colorado Legislature for county government pension systems (administrative arms of the state) conform with the legal theories of Professor Amy Monahan regarding protection of accrued public pension benefits.
March 17, 2010
Professor Amy Monahan, University of Minnesota School of Law, “Public Pension Plan Reform, the Legal Framework”: “This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
http://www.ncsl.org/documents/fiscal/AMonahan_Handout.pdf
March 13, 2012
Denver attorney Cindy Birley (a champion of prospective public pension reform in Colorado) testifying before the Colorado Legislature’s Senate Finance Committee hearing on the bill SB12-149, on March 13, 2012: “Generally, you would not change people who have already retired . . .”. “There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.” “The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . . ‘definitely determinable’.” “So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.” “Because, it may not qualify as a defined benefit plan.” “We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.” “It still has to pass muster as a DB plan.”
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
What instructions did the PERA Board or staff provide to PERA’s actuaries modeling costs of proposals for pension reform? Did PERA’s actuaries not find it odd that nearly all pension reform alternatives under consideration in the summer of 2009 financially impacted PERA employees and retirees, rather than PERA employers? What actuary performed these services for PERA? How many years has this actuary worked for PERA? What has been the value of Colorado PERA’s contracts for actuarial services in recent years? Over the totality of the contractual relationship?
#4: THE COLORADO PERA COLA BENEFIT IS AN “AUTOMATIC” PENSION COLA BENEFIT, RATHER THAN AN “AD HOC” COLA THAT MAY BE LEGALLY DIMINISHED BY A PENSION PLAN SPONSOR.
Note that the Colorado PERA Defendants are clearly aware of the difference between an “ad hoc” public pension COLA benefit and an “automatic” public pension COLA benefit. On page 5 of the May 10, 2010 PERA Defendant’s Motion to Dismiss, PERA’s lawyers write: “From 1975 to 1978, the General Assembly also enacted ad hoc increases.” See also, page 6 and page 7 of the PERA brief: “The ad hoc increases were also eliminated.” Although Colorado PERA administrators know the difference between “automatic” and “ad hoc” pension COLAs, they would prefer that Colorado courts not recognize the difference. Accordingly, since deciding to attempt a breach of Colorado PERA COLA contracts, Colorado PERA officials no longer describe the COLA as an “automatic” pension benefit (as has been their historical practice.)
For decades, in every paycheck, Colorado PERA retirees paid for their contracted, “automatic,” PERA COLA benefit. The Colorado General Assembly voluntarily offered this “automatic,” pension COLA benefit in the PERA contract. Colorado PERA retirees acted on this contractual offer, they chose to continue in state service, forgoing other job opportunities, and they retired under these contractual terms. The Colorado General Assembly has no right to claw back this earned, accrued, deferred compensation after the fact.
At some point in recent years the decision was made that part of Colorado PERA’s legal strategy would be to attempt to deny the “automatic” nature of the PERA retiree COLA benefit itself. In hindsight, so much evidence of the “automatic” nature of the PERA COLA benefit exists that this decision now looks foolish. Prior to 2009, Colorado PERA officials had correctly assumed that fully-vested PERA retiree benefits, including contracted “automatic” COLA benefits were inviolate.
When it became clear that Colorado PERA would attempt to deny the “automatic” nature of the PERA COLA as part of its legal defense strategy, PERA began placing “disclaimers” on documents published on its website that identified the PERA COLA as “automatic.” PERA officials stopped referring to the PERA retiree COLA benefit as “automatic.”
June 2011
National Institute on Retirement Security on “automatic” and “ad hoc” public pension COLAs: “One key design feature of a COLA is whether it is automatic or ad hoc in nature. An automatic COLA means the retiree’s benefit increases automatically every year by a certain percentage. An ad hoc COLA is granted at the discretion of the plan sponsor, usually when the fund is in a well-funded position and investment gains have exceeded expectation.”
http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf
August 8, 2012
Douglas Greenfield: “The theory behind that is that a pension that
has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.” Greenfield participated in a panel discussion hosted by the National Conference of State Legislatures. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”
http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx
March 24, 1993 (1:32 PM – 2:28 PM)
Rob Gray, Director of Government Relations, Colorado PERA testifying to the Legislature’s House Finance Committee in regard to the “automatic” PERA COLA benefit under consideration (in House Bill 93-1324): “The PERA Board does support this bill.” “We felt like it is something that is good pension policy . . . that it makes sense . . . THAT IT IS MAKING PERMANENT CHANGES, and also that it does help employers which is one of the goals of the bill.” Rob Gray states that the proposed COLA “adds predictability for current and future retirees, people looking at leaving might look at this and say now I know how my future increases are going to be determined . . .”. Rob Gray characterizes the “automatic” PERA COLA benefit as a Colorado PERA liability: “when a change in benefits is added, like this bill, it extends out the period for paying off that unfunded liability.” If you listen to the recording of this meeting, you will also hear a member of the House Finance Committee refer to the Colorado PERA COLA provision under consideration as a pension benefit that is “guaranteed,” “now and in the future.” (Note that the contracted PERA COLA benefit adopted by the committee was in later years improved by the Colorado General Assembly to flat 3.5 percent level [constitutionally permissible as this "improvement" did not impair PERA pension contracts.])
From the Colorado PERA 2001 CAFR (financial report), page 64:
“Summary of Actuarial Methods and Assumptions”
“Benefits are assumed to increase at a rate of 3.5 percent after payments begin.”
https://www.copera.org/pdf/5/5-20-01.pdf
From “Ask Meredith,” December 16, 2009:
In December 2009, PERA’s Executive Director Meredith Williams was unaware of PERA’s ultimate legal defense strategy in the case, Justus v. State, when he wrote the following: “. . . most other pension plans, public and private, do not have automatic COLAs and remember that Social Security is not a retirement plan.)”
http://www.copera.org/pera/about/ask.htm
Colorado PERA has since added a “disclaimer” to this publication. (The PERA website is now peppered with disclaimers.)
Another PERA publication refers to the “automatic” nature of the PERA retiree COLA benefit:
“PERA Benefits at a Glance,” 2004:
“Receive an annual automatic increase of 3.5 percent in your monthly retirement benefit to help keep up with the cost of living.”
Yet another PERA publication refers to the “automatic” nature of the PERA retiree COLA benefit:
PERA Legislative Update, February 2006:
http://www.copera.org/pdf/Legislation/2006/LegUp2-06.pdf
“Employees hired before January 1, 2007 remain in PERA Pioneer (and will receive) automatic increase of 3.5% per year after retirement.”
“PERA members hired January 1, 2007 or later, called PERA Centennial, no guaranteed annual increase after retirement.”
Further evidence of the absurdity of Colorado PERA’s denial of the “automatic” nature of the PERA COLA exists. PERA has historically communicated the “automatic” nature of the COLA benefit to the “fiscal note” staff of the Colorado General Assembly. These communications should be on file at the offices of these legislative staffers.
Colorado PERA tells us in a 2004 document:
“Whenever legislation is contemplated regarding PERA benefits or contribution rates, PERA asks the actuary for an estimate of the long-term impact. The results are communicated to Legislative Council for preparation of fiscal notes on such legislation.”
From this document:
http://www.copera.org/pdf/Legislation/2004/LegUp2-04.pdf
With such information from Colorado PERA, the Legislative “fiscal note” staff wrote the fiscal note for House Bill 00-1458 (the bill that improved the COLA benefit to a fixed 3.5 percent.) The fiscal note for this bill, HB 00-1458, includes the term “automatic” in the following description of the retiree COLA:
“Established 3.5% compounded annual automatic COLA effective March 2001.”
As we know, Colorado PERA contracts with outside, independent actuaries for supplemental actuarial reviews every five years. In 2001, Buck Consultants provided such an actuarial report to the Legislative Audit Committee of the Colorado General Assembly.
This Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”
The Buck Consultants report identifies the 3.5% PERA COLA as “automatic,” contrasting the PERA COLA with an “ad hoc” COLA “as approved by Legislature.”
Specifically, the report makes reference to:
“PERA’s automatic 3.5% per year COLA feature”;
“the guaranteed lifetime income provided by PERA”;
“COLA – Automatic 3.5%” as opposed to an “ad hoc” COLA;
“PERA guaranteed benefits at retirement”;
“Colorado PERA vesting requirement – five years.”
Further, the Buck Consultants report notes that:
“Effective March of 2001, the cost of living adjustment was set at an annual fixed rate of 3.5%”;
“PERA provides inflation protection to retirees with a 3.5% annual COLA,” and
“Post-Retirement Benefit Increases: Each year on March 1, benefits which have been paid for at least three months are increased. The increase is 3.5% compounded annually for each year of retirement.”
If Colorado PERA officials did not agree with the Buck Consultants characterization of the PERA retiree COLA as an “automatic” COLA, then why did these Colorado PERA officials not state their objections to this characterization when the Buck Consultants report was presented to the Legislative Audit Committee in 2001?
Over the years, Colorado PERA has published, and periodically updated a memorandum with a title along the lines of “History of Colorado PERA Legislation.”
The 2009 version of this memorandum is stored on the website of the Colorado General Assembly at this link:
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
Right clicking on this PDF, and then clicking on “Document Properties” reveals that the memorandum was prepared by Mr. Karl Paulson of Colorado PERA on 11/30-2009.
When it became apparent that part of PERA’s legal strategy would be to deny the “automatic” nature of the retiree COLA benefit, PERA suppressed this “History of Colorado PERA Legislation” memorandum which identifies the PERA COLA as an “automatic” COLA benefit. However, they were unable to remove the copy stored on the website of the Colorado General Assembly. Colorado PERA officials replaced the memorandum with a “scrubbed” version of the memo, striking all reference to the “automatic” COLA, as well as pre-1993 references to the “ad hoc” PERA COLA, (which the COLA was at the time.) The “scrubbed” memo is available here:
http://www.copera.org/pera/active/benefithistory.htm
The “History of Colorado PERA Legislation” memorandum from 2009 (that is, the “non-scrubbed version of the memo) describes the COLAs in HB 00-1458 as follows:
“HB 00-1458
Established 3.5% compounded annual automatic COLA effective March 2001.” “Prior to this date, the annual COLA equaled the lower of the actual inflation rate or annual 3.5% cumulative increases since retirement.” (The PERA COLA was improved from “automatic” lesser of 3.5 percent or inflation, to a flat “automatic” 3.5 percent in HB 00-1458.)
Additional PERA documents describing the PERA retiree COLA as “automatic” are available on PERA’s website at the following links:
http://www.copera.org/pdf/Newsletters/MemberReport/MR1-06.pdf
http://www.copera.org/pdf/5/5-114.pdf
http://www.copera.org/pdf/Legislation/2006/legislation2006.pdf
http://www.copera.org/pdf/Legislation/2006/LegUp2-06.pdf
http://www.copera.org/pdf/Legislation/2006/LegUp3-06.pdf
#5: OPINIONS OF COLORADO ATTORNEYS GENERAL SUPPORT COLORADO PERA PENSION COLA CONTRACTS.
November 18, 2004
Colorado Attorney General Ken Salazar Opinion (post-DeWitt): “Once a PERA member fulfills all the statutory requirements for a pension benefit and retires, the member’s fully vested pension right cannot be reduced by the General Assembly.”
http://saveperacola.files.wordpress.com/2010/01/changes_to_pera.pdf
November 17, 1975
Colorado Supreme Court in Taylor v. PERA: “As was noted in Endsley v. Public Employees Retirement Association . . . (1974) ambiguities appearing in statutes regulating pension and retirement funds are construed favorably toward the employee.”
http://scholar.google.com/scholar_case?case=11856628789716288634&q=Taylor+v.PERA&hl=en&as_sdt=2,6
August 14, 1984
Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the cardinal principle that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee”
http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984
November 30, 2008
Colorado PERA General Counsel Greg Smith: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”
http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)
December 2008
Colorado PERA Executive Director Meredith Williams commenting on Colorado Attorney General Ken Salazar’s 2004 Formal Opinion on PERA benefits (PERA Retiree Update, page 1):
“The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”.
https://www.copera.org/pdf/5/5-40-08.pdf
December 8, 2008
“Ask Meredith” column on Colorado PERA website: “That leaves the benefits being earned by members (active and inactive) as the only area to examine for savings. The Attorney General’s opinion contains the following language: ‘Once a PERA member fulfills all the statutory requirements for a pension benefit, retires and begins receiving a pension, the member’s fully vested pension right cannot be reduced by the General Assembly.’”
https://www.copera.org/pera/about/askm.htm
January 2009
Colorado PERA Executive Director Meredith Williams: “The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”
https://www.copera.org/pdf/Topics/2009/Topics1-09.pdf
February 23, 2012
Meredith Williams, Feb 23, 2012, House Finance Committee:
“What you did in 2010, with Senate Bill1, no one in the country has done anything comparable . . . and this was pretty dicey stuff, and this is why we had to walk on that razor’s edge. You can’t fix it (the PERA pension system) too much, because over 90 percent of the fix incorporated in Senate Bill 1 in 2010 came out of the hide of people in the system . . . less than ten percent of that fix came from our employers/taxpayers. No one has ever done anything quite like that. I am quite anxious for the litigation to get behind us.”
#6: COLORADO PERA OFFICIALS HAVE TESTIFIED TO THE LEGISLATURE’S JOINT BUDGET COMMITTEE: “THE COLA IS A CONTRACT.”
December 16, 2009
Colorado PERA officials in written testimony to the Joint Budget Committee: “The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
Colorado PERA General Counsel: An “actuarial emergency” occurs when a pension plan runs out of cash to pay benefits:
February 21, 2004
“PERA General Counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that’s not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.” – Rocky Mountain News, David Milstead.
Colorado PERA Board Trustee Casebolt: Colorado PERA has plenty of cash to pay benefits:
August 11, 2009
Colorado PERA Board Trustee Casebolt assures PERA retirees present at Colorado PERA Denver meeting of the PERA “Listening Tour”: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”
http://www.copera.org/pera/about/listeningtour.htm
August 17, 2005
Colorado Assistant Attorney General Heidi Dineen, Rocky Mountain News (in a four part series): “‘Everyone agrees you certainly can make changes for people you haven’t even hired yet,’ said Heidi Dineen, a state assistant attorney general retained to explore the issue for the Commission to Strengthen and Secure PERA. ‘On the other side of the spectrum is pensioners, getting their pension checks, you cannot take that away.’”
“Smith said in his opinion that ‘other (non-Colorado) courts have set a high burden to meet the necessity threshold.’”
“His (Colorado PERA General Counsel Greg Smith) briefing paper said ‘there has never been a finding in Colorado that the state has reserved its power to make changes’ in PERA’s benefit structure.”
“The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member. That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan.”
“Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem.”
http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/
January 29, 2010
Colorado PERA General Counsel Greg Smith to Senate Finance Committee: “There are few case laws that address the issue, Smith said, but one, regarding a fire and police pension plan, was litigated when the plan ran out of money and benefits were being paid for with current revenues.”
http://www.coloradostatesman.com/content/991568-pera-reform-bill-passes-first-test-capitol
December 17, 2009
Greg Smith, before the Joint Budget Committee: “The statutes are in fact binding, and they are constitutionally protected from reduction.”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
THE TOP TEN: DAMNING EVIDENCE IN THE COLORADO PERA RETIREE LAWSUIT, JUSTUS v. STATE. Part 2 of 2.
July 7, 2004
PERA response to July 5, 2004, Rocky Mountain News Editorial:
“PERA’s legal research concluded that employee contribution rates could not be raised absent a showing of fiscal necessity.”
http://www.copera.org/pera/about/newsarchives2004.htm
January 10, 2010
Senator Josh Penry, co-prime sponsor, SB10-001 appearing on Your Show, Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on at 10:30 a.m.:
“What the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity.”
February 23, 2012
Colorado PERA Executive Director Meredith Williams’ comments on February 23, 2012 to the House Finance Committee: “Those people all have a contract with their employer with the plan. You made changes to impact people like that in SB1.”
January 29, 2010
2010 Senate floor debate on SB 10-001:
Rep. Lambert: “I have heard from my constituents, as many of you have, that this proposal will breach retiree’s contracts.”
Rep. Swalm: “We’re breaking new territory in this state by trying to reduce the COLA. We’re probably going to get a lawsuit out of that. If we cut the 3.5 percent COLA there will be a lawsuit.”
Rep. Gerou: in committee, said that it is a disservice to the state to rush a bill through when her committee knew that it will go to litigation, and said what we are doing to the retirees is wrong.
Rep. DelGrosso: said that it is “tough” for him to tell people that he is going to break their contract.
Senator Harvey: “We have made a commitment. We have a contract with current retirees. That is already in place. Reforms should be made for new hires. We do not have that commitment to new hires.”
Senator Spence: “The bill places an unfair burden on retirees.”
Senator Scheffel: “We are breaching our promises to existing retirees.”
Senator Lundberg: “This bill is a deal that was cut before this body met.”
February 10, 2010
Joel Judd, Chairman, House Finance Committee, during the hearing on Senate Bill 10-001 Chairman Judd stated (near the end of the hearing) that SB 10-001 (the “COLA theft bill”) must be supported “because that’s where the money is.”
2012 House Finance Hearings:
Representative Chris Holbert – February 23, 2012, House Finance Committee, hearing on HB12-1250: “We have a contract, an obligation to the vested members of PERA, and we have to meet that . .”
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
Representative Kevin Priola – February 23, 2012, House Finance Committee, hearing on HB12-1150: ” . . . taxpayers know that in the end they’re on the hook, State of Colorado taxpayers are on the hook for any (PERA) unfunded liability down the road . . ”
House Finance Committee Chairman Brian DelGrosso, February 23, 2012:
“I voted against Senate Bill1, and I voted against Senate Bill 1 not because I felt like we didn’t need to fix PERA, I agreed with that part of it, but I voted against Senate Bill1 for the fact that it did adjust some of the COLAs and it did adjust stuff for folks that were already retired and people that were about ready to retire, and to me I felt like that was violating a contract that those people had got into . . . they played by the rules that were of the game at the time, and these folks . . . got up to where they about to retire or were retired, and now all of a sudden we were going to change the rules of game on them after they were done playing. So to me, that was why I voted against Senate Bill 1, because I felt like that violated some of the contractual issues that we had.”
Representative Jim Kerr, February 23, 2012: “The taxpayers . . . are obligated to fulfill the (PERA) benefits as soon as someone starts drawing those benefits down.”
Representative Jim Kerr, February 23, 2012: “They’ve earned those benefits . .” “. . . The taxpayers . . . they’re the ones who ultimately have to make the (PERA) fund whole . . .”
Representative Jim Kerr, February 23, 2012: “If you’re in a defined benefit program, you have a guarantee.” “PERA does have a guarantee.” “A defined benefit plan is a guarantee.”
Representative Dickey Lee Hullinghorst, February 23, 2012: “Our state employees earn retirement benefits when they work.”
Representative Spencer Swalm, February 23, 2012: “There is a contractual obligation here. This is a defined benefit plan, those benefits are guaranteed, and ultimately the taxpayers of the state are on the hook.”
Representative Dickey Lee Hullinghorst, February 23, 2012: “I would like to know exactly what that (PERA) contractual relationship is.” “We are employers and we pay into PERA as a part of a benefit that’s earned by our employees.”
Colorado PERA Executive Director Meredith Williams in response to Representative Hullinghorst’s question, February 23, 2012, (after preliminary remarks):
“We never have to answer that question. It’s not a black and white answer.”
(My comment: Why is Colorado PERA’s Executive Director, Meredith Williams now hesitant to succinctly state the contractual rights of PERA’s members? Are the employees of PERA-affiliated employers expected to work for decades without knowing clearly what their rights are under their PERA contracts? Are they expected to work each day for pension benefits that are undefined?)
Representative Hullinghorst, March 1, 2012, House Finance Committee: “My understanding is that when you go to work, and you sign up for PERA benefits, and you are required by the state to do that . . . that’s a contract, and I think that this is potentially actionable.”
Representative DelGrosso, March 1, 2012, House Finance Committee: “The problem that we ran into with Senate Bill 1 . . . is that when they start adjusting things like the COLA . . . that’s where it opens us up to lawsuits, because people are like ‘hey, I’m five years away from retirement, I’m ten years away from retirement, I’m one year away, I am retired,’ and then we go and make changes that’s where we have lawsuits, because hey this a violating a contract . . . ”
Representative Kefalas, March 1, 2012, House Finance Committee: “It still does affect those members that have signed contracts that are non-vested. Is that correct? And therefore I still have concerns about L.001.”
(My comment: Here Rep. Kefalas expressed concern about impacting PERA benefits of “non-vested” PERA members, yet he supported Senate Bill 10-001, a bill abrogating “fully-vested” Colorado PERA pension contracts . . . a bill that took one-third of the accrued public pension benefits of Colorado PERA retirees. This is stunning admission.)
Representative Kagan, March 1, 2012, House Finance Committee: “This is a benefit cut to public employees who work hard all of their lives and one of their measures of compensation is their benefits package, that’s how we manage to attract such fine public employees as we have on such low salaries is because they know ‘yeah, the salaries aren’t as high as I’d like, but I’m still very loyal to the state, I work very hard for the state for a very low salary because I do have a respectable benefits package, and I’m sure that that benefits package will be there for me when I retire.’ Now you come and you say we’re going to cut those benefits, we’re going to reduce the value of that package . . .”
Representative DelGrosso, March 1, 2012, House Finance Committee: “These new hires know what their retirement will be, so when they’re getting into the system they can choose to accept the job or not knowing what their retirement benefits will be.”
“We are still involved in lawsuits over Senate Bill 1 on whether or not those were constitutional because we made changes to people that are currently in the system that were vested, current retirees. So, Senate Bill 1 did affect people’s current retirements and those that were retired.”
Representative DelGrosso, March 1, 2012, House Finance Committee: “We have to look 25 to 30 years into the future to avoid the lawsuits that we are currently involved in because of Senate Bill 1.” “We’re forced to, to avoid lawsuits, to look that far into the future.”
Representative Hullinghorst, March 1, 2012, House Finance Committee: “The current suits are relative to COLA.” “There was some awareness that that possibly could draw some suits.” “It was much less a problem with cutting benefits than any other thing you could look at in that regard.” “This is a more difficult . . . approach than the COLA situation.”
(My comment: Incredibly, here we have Rep. Hullinhorst stating that enactment of PROSPECTIVE public pension reform for NEW HIRES is a “more difficult approach” for the Colorado General Assembly than is the outright, intentional breach of fully-vested Colorado PERA pension contracts of PERA members who had worked for PERA-affiliated employers FOR DECADES. The lobbyists earned their pay.)
Representative Kefalas, March 1, 2012, House Finance Committee: “I am concerned that this will undermine the contractual obligations that we have made with folks who are state employees and that could invite litigation and I think that’s something the state does not need.”
(My comment: Again, Rep. Kefalas defends the interests of non-vested Colorado PERA members, members who have NO contractual right to any PERA annuity.)
THE RITTER ADMINISTRATION’S “GASB LETTER.”
Why did officials in the Colorado State Controller’s Office describe Colorado PERA pension benefits as a “present obligation” arising from the “employment exchange transaction,” in a letter to federal regulators, just six months after SB10-001 was signed? Why did they write that taking the COLA benefit changes the “net economic benefit to the employee” that was “entered into” in the “exchange transaction agreement” six months after the bill was signed?
Did officials in the State Controller’s office disagree with Governor Ritter’s action on SB10-001? Were they astonished that the General Assembly would attempt to break Colorado public pension contracts? Were they prevented from speaking openly, believing that such candor would end their careers? Did they hope that their letter would be discovered in order that their view of state contractual pension obligations be known? How many state employees find themselves in this predicament? How many employees of the Colorado Attorney General’s Office, or the state Judicial Branch are in this predicament? employees of PERA-affiliated local governments?
Ritter Administration GASB Letter:
“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits [such as COLAs] . . . serve[s] to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”
Here the Ritter Administration states clearly that a reduction in a COLA benefit [that is earned in an “exchange transaction”] changes the “net economic benefit” to the employee under the employee’s pension “agreement.” Under SB 10-001, the “net economic benefit,” for an average PERA member was “reduced,” according the Ritter Administration, by “$165,000.”
Read the entirety of the Ritter Administration letter on the GASB site here:
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)
August 2, 2010
Excerpts, Ritter Administration Letter to GASB on contractual public pension obligations:
“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”
“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.”
“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits (such as COLAs), or an increase in required employee contributions both serve to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”
“The criteria suggested as the basis for differentiating these COLAs (automatic) versus ad-hoc COLAs is the statutes that exist as of the date of the employer’s financial statements.”
“The essential difference between an automatic COLA and an ad hoc COLA is the legal requirement; with this core difference there is no way for the two not to be substantively different. The legal difference in this instance is critical to the determination of whether the government is unable to avoid the surrender of resources to meet the obligation.”
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791
#7: THE TAKING OF ACCRUED PERA COLA BENEFITS WAS NOT THE RESULT OF A DELIBERATIVE PROCESS . . . IT WAS PRECONCEIVED. THE LEGISLATURE DID NOT PURSUE AN INTERROGATORY OR APPOINT AN INTERIM STUDY COMMITTEE, AS THIS WOULD HAVE INTERFERED WITH THE PLANNED COLA TAKING.
April 14, 2009
Colorado PERA Executive Director Meredith Williams testifies to the Senate Finance Committee hearing on SB09-282 (03:28 PM) stating that “the PERA Board is committed to presenting a proposal to the General Assembly that addresses retirement benefit issues for Colorado PERA.” Mr. Williams made this statement one week BEFORE the requirement for the PERA Board to provide recommendations to the Legislature regarding PERA reform was placed into SB09-282 (on April 21, 2009.) In court documents, Colorado PERA emphasizes that, in 2009, the PERA Board was simply responding to the General Assembly’s “legislative mandate” to make PERA pension reform recommendations. Response Brief submitted to the Denver District Court:
http://www.ednewscolorado.org/wp-content/uploads/2010/05/PERASuitResponse5-10-10.pdf
2009
Senator Josh Penry, in a videotaped discussion with Representative Mike May, (videocenter. denverpost.com) said ‘we can’t, can’t miss this window.’ And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . .
“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age. You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return. So that could change the specter of actuarial necessity. We gotta’ do it this year or else these other structural changes won’t be possible.”
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
Why did the Colorado General Assembly believe that market volatility in 2008/09 was a “window of opportunity” to break PERA pension contracts, but market volatility in 2001 was NOT a “window of opportunity” to break PERA pension contracts? In October 1987, U.S. stock markets fell 23 percent over ten days (beginning with “Black Monday.”) Why was this 1987 market volatility not seized by Colorado legislators as an opportunity to break PERA pension contracts? What was the reaction of the Colorado PERA Board to the market drop in 1987?
February 1, 2010
Senate “Third Reading” debate on SB10-001 (watch on the Colorado Channel):
Senator Renfroe: “Or, if you want it to go out of here with the PERA-approved document and nothing else then let’s just approve this one and vote mine down.”
http://www.coloradochannel.net/colorado-senate-2010-legislative-day-20
COLORADO PERA BOARD OF TRUSTEES CONTROLLING THE LEGISLATIVE PROCESS.
Colorado PERA’s propaganda has emphasized that the Colorado Legislature requested that the PERA Board of Directors make recommendations to shore up the PERA trust funds. I ask if this Colorado PERA assertion is an attempt to mislead. Colorado PERA went so far as to emphasize the General Assembly’s “legislative mandate” in a Response Brief submitted to the Denver District Court:
“By LEGISLATIVE MANDATE the PERA Board extensively studied the underfunding and consulted with its members . . . before proposing a solution to the General Assembly.”
Link:
http://www.ednewscolorado.org/wp-content/uploads/2010/05/PERASuitResponse5-10-10.pdf
I ask: Did Colorado PERA plant this request language into SB 09-282 at the end of the 2009 legislative session in order to lend a patina of legitimacy to what was in fact a premeditated attempt to breach pension COLA contractual obligations?
Recall Senator Lundberg’s statement on the Senate floor during the SB 10-001 debate: “This bill is a deal that was cut before this body met.”
Was Colorado PERA’s ostensible, impartial examination of pension reform options in 2009 in reality a ruse constructed by PERA lobbyists to add legitimacy to a process with a predetermined conclusion? To falsely portray a preordained conclusion to breach pension COLA contracts as the result of an extensive, deliberative process?
I wonder, did the request for a PERA study actually come from the Colorado General Assembly? Was this request the product of SB 10-001 co-prime sponsor Senator Josh Penry’s mind? Did he conceive this idea to request PERA recommendations? Or, was this idea planted in the Penry brain by PERA’s lobbyists?
In 2009, the Colorado General Assembly enacted legislation (SB 09-282) to merge Denver Public Schools with Colorado PERA (specifically, to merge the assets and liabilities of Denver Public Schools into Colorado PERA.) A provision of SB 09-282 required that the PERA Board of Trustees submit recommendations to the Colorado General Assembly regarding methods of responding to the decrease in the value of the association’s assets on or before November 1, 2009. Note that this bill asks for “possible methods” to respond to the decrease in the value of PERA’s assets. The General Assembly did not ask that the PERA Board dictate a plan that would breach PERA’s contractual pension obligations. Implicit in the request from the General Assembly was the fact that the requested “possible methods” would be constitutional.
On April 21, 2009, Senator Penry, the co-prime sponsor of SB 10-001 amended SB 09-282 on the floor of the Senate. His prepared amendment to the bill required the PERA Board to make recommendations to the Legislature regarding “possible methods” to respond to the decrease in the value of PERA’s assets. His amendment required that this report be provided to the Legislature by September 1, 2009. Two days later, Senator Sandoval amended the bill (SB 09-282) to move the deadline for submission of the report from September 1, 2009 to November 1, 2009. (The PERA Board wanted more time? It looks like the PERA Board may claim some ownership in the statutory language requiring the “study.” In fact, PERA lawyers may very well have drafted the entire amendment.)
Questions for Senator Penry: Did you originate the idea to require the PERA Board to make recommendations to the General Assembly regarding possible methods to respond to the decrease in PERA assets of your own accord? Or, did you offer this amendment on behalf of a PERA lobbyist? Another lobbyist? Another legislative member?
The drafter of SB 09-282 was a lawyer from the General Assembly’s Office of Legislative Legal Services, Nicole Myers. Questions for Ms. Myers: Who asked you to draft the amendment requesting that the General Assembly make recommendations regarding methods to respond to the decrease in PERA assets? A lobbyist? A PERA lobbyist? Did a PERA lobbyist make this request on behalf of Senator Penry? Did a PERA lobbyist provide a draft of their desired language in this regard? Please check your records.
LEGISLATIVE LEADERSHIP OF THE COLORADO GENERAL ASSEMBLY WANTED TO KEEP STATE LEGISLATORS IN THE DARK ON PERA PENSION RIGHTS.
In 2009, the General Assembly’s Leadership did not want to know the truth, and they did not want others to know the truth. Thus, Leadership did not pursue an interrogatory to the Colorado Supreme Court addressing the constitutionality of their proposal to take contracted, accrued PERA COLA benefits. The Denver Post Editorial Board encouraged the General Assembly to pursue an interrogatory. This advice was ignored by Legislative Leadership. (Better to put thousands of old people through hell.)
Leadership did not want the rank and file members to know the truth. In 2009/2010 how many members of the Colorado Legislature could tell you the difference between an “automatic” public pension COLA benefit and an “ad hoc” COLA benefit? Two? Three out of 100?
How many state legislators could tell you what an ARC is in 2009? How many knew that the General Assembly had skipped full payment of that ARC for a decade? How many can answer even the most basic questions regarding public pension contractual rights even today?
How many had read the on-point Colorado case law regarding the contractual nature of pension COLA benefits in our state? How many had even read the four page Colorado Attorney General’s opinion on the contractual nature of public pension benefits in Colorado?
Can these state legislators be blamed for their lack of knowledge in this very complex subject area, if that ignorance was by design of the Leadership of the General Assembly? That ignorance worked to the benefit of self-interested parties (public sector unions) and their 27-member troop of lobbyists pursuing the PERA pension COLA contract breach.
Why would any state legislator assume that public pension benefits in Colorado are not part of contracted compensation for public sector workers in the state? Do they expect that these employees will work for compensation that is not determined in advance, that is not “defined,” as in “defined benefit” pension plan? Did they hold the opinion that public sector workers in Colorado will give a day of labor for whatever compensation is deemed appropriate by the benevolent sovereign, the Colorado General Assembly?
November 15, 2009
Denver Post Editorial Board: “First, let court rule on PERA. Before legislators take on reforms, they should first ask the state Supreme Court to determine how much leeway they have.”
“As Colorado lawmakers prepare to consider the financial rescue of the state employees’ retirement fund, they ought to first figure out just how much legal leeway they have to overhaul it.” “Legislators need to understand how much power a designation of ‘actuarially necessary’ gives them to modify benefits paid to members.” “We think lawmakers should ask the state Supreme Court for a ruling so they know exactly what they can do.” “Administrators of the Colorado Public Employees’ Retirement Association, or PERA, recently asserted that the fund’s foundering finances give the state the legal footing to cut future cost-of-living increases for people who already are retired. But what if that were challenged in court and found to be illegal?” “On the other hand, if annual hikes for retirees can be adjusted, why can’t a case be made to increase the retirement age for many of those who are still working and contributing to PERA — a reform that is missing from the PERA board’s plan?” “It’s in Colorado’s best interest to get out in front of the PERA problem, file an interrogatory with the state Supreme Court, and get a clear fix on what legislators can and cannot do. We’re confident that PERA solutions will be far more clear after that.”
http://www.denverpost.com/opinion/ci_13776995
January 15, 2010
“PERA also is hoping the Legislature will ask the Colorado Supreme Court to review the matter through interrogatories before the end of the session.”
http://www.coloradostatesman.com/content/991527-state-retirees-ready-pounce-pera-fix
July 19, 2009
“That may include asking Colorado’s Supreme Court, via what’s called an interrogatory from the legislature, about what changes can be done legally.”
“It will complicate the situation, but given how disruptive such a change could be — imagine the accounting nightmare of changing benefits only to see the court strike it down some years later — it would be helpful if the court could answer such a question in advance of legislation.”
http://www.denverpost.com/opinion/ci_12856631
November 22, 2010
Colorado PERA General Counsel Greg Smith at 2010 PERA Shareholder meeting (10 minutes into this YouTube video): “We need to know the answer of whether this action was constitutional.” (My comment: Would it not have been simpler to send an interrogatory to the Colorado Supreme Court in 2009?)
#8: THE COLORADO LEGISLATURE OVERREACHED IN PUSHING 90 PERCENT OF THE COSTS OF SB10-001 ONTO PERA RETIREES AND IN PLACING AN UNNECESSARY 100 PERCENT FUNDED GOAL INTO THE PERA CONTRACT.
January 22, 2010
SB10-001 co-prime sponsor Senator Josh Penry and bill sponsor Senator Greg Brophy: “Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees.”
http://www.denverpost.com/search/ci_14242354
January 26, 2010
“With SB1, Shaffer and Penry have said the state can realize solvency in the PERA fund within 30 years. Previously, the Legislature had targeted a 60-year fix.”
“The difference between the past approach and SB1, Penry said, is that the new plan boldly tackles benefit reductions, which he said will constitute 90 percent of the PERA fund’s recovery and generate plenty of opposition along the way.”
http://www.chieftain.com/news/local/legislators-pera-changes-will-be-painful/article_b82cee28-328f-59ba-91c0-a480e5f719c8.html
October 26, 2011
Colorado PERA Executive Director Greg Smith, at the “Fall 2011 PERA Shareholder’s Meeting,” (thirty-six minutes into the video):”‘Only ten percent of the fix” of the [SB10-001] reforms in 2010 came from additional employer contributions.”
April 17, 2011
Senator Brandon Shaffer, co-prime sponsor, SB10-001, Denver Post: “I sponsored last year’s legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA’s current and future members and retirees.”
http://www.denverpost.com/opinion/ci_17858107
May 29, 2011
Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain:
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
http://www.chieftain.com/opinion/ideas/legislative-changes-have-put-pera-fund-on-a-solid-footing/article_3080a01c-88cd-11e0-ad01-001cc4c03286.html
COLORADO PERA GENERAL COUNSEL: TO MEET CONSTITUTIONAL MUSTER, A CHANGE TO A PENSION CONTRACT MUST BE THE “MINIMUM NECESSARY.”
February 2011
Colorado PERA General Counsel Greg Smith writes in Government Finance Review: “Adjusting public pension benefits in Colorado: a fiduciary process”: “Necessity is judged on two levels: 1) whether a less drastic modification could have been implemented; and 2) whether, even with modification, the state could have achieved its stated goals. To determine whether the changes were reasonable, the changes MUST BE THE MINIMUM CHANGES NECESSARY to solve the economic problems of the plan. (See United States Trust Co. v. New Jersey, 431 U.S. 1, 1977.)”
(The next year, [June 26, 2012] Colorado PERA’s independent actuary, Cavanaugh MacDonald Consulting, LLC, reports in the 2011 Colorado PERA CAFR: “It should be noted that the changes made to the PERA structure as a result of SB10-001 have as a goal 100% funding of the accrued liability within 30 years for all divisions. The results of the December 31, 2011, valuations combined with financial projections of all divisions, indicate that this goal, WHICH IS A MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB STANDARDS, is still achievable with the exception of the Judicial Division.”
http://www.leg.state.co.us/OSA/coauditor1.nsf/All/641A0AB5B97D073C87257A3A0072FEA3/$FILE/2067-12%20CAFR_6-26-12.pdf.)
http://www.thefreelibrary.com/Adjusting+public+pension+benefits+in+Colorado%3a+a+fiduciary+process.-a0290520595
#9: COLORADO PERA’S FUNDED RATIO HAS BEEN MUCH LOWER IN THE PAST, WHILE PERA PENSION CONTRACTS WERE HONORED.
December 31, 2009
At the time of the breach of Colorado PERA pension contracts, the Colorado PERA actuarial funded ratio (AFR) stood at 68.9 percent. This funding level is 9.1 percent below the 40-year average of the PERA actuarial funded ratio. It was 11.1 percent below an 80 percent AFR level considered “well-funded” by Fitch Ratings, 1.1 percent below a 70 percent AFR level considered “adequately-funded” by Fitch Ratings, and 3.1 percent below the Wilshire Associates average U.S. public pension actuarial funded ratio that year. At the time of the contract breach the PERA AFR stood at a level 1.1 percent below the level at which Standard and Poor’s considers public pension systems to have “above average” funding. In 2010, the General Assembly determined that the Colorado PERA pension plan faced such financial stress that PERA pension contracts must be broken at a 68.9 percent AFR. Should all U.S. public pension contracts be abrogated at that funding level?
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true
Standard and Poor’s Public Pension System Ratings:
“Standard & Poor’s, ‘U.S. State Ratings Method¬ology,’ Global Credit Portal, Jan. 3, 2011.”
“Table 25 – Pension Funded Ratio
Strong – 90% or above
Above Average – 80% to 90%
Below Average – 60% to 80%
Weak - 60% or below.”
http://www.standardandpoors.com/spf/upload/Ratings_US/US_State_Ratings_Methodology_Related_2.pdf
March 28, 2012
Fitch Ratings (one of the three large rating agencies in the United States): “Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”
http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp
From the SB10-001 hearing:
“Mr. Williams was quoted in the same report as saying ‘Most pension funds are considered sound at 80 percent funding levels.’”
“Meredith Williams ‘said at the Senate Finance Committee hearing in January that PERA needed to be funded at 100 percent. When the PERA representatives were asked by a member of the committee why in view of the fact that PERA had only been funded at 100 percent for about seven of the past thirty years (My comment, actually two of the last eighty-one years), it was necessary now. The answer was ‘it just makes things easier.’”
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
February 14, 2011
Keith Brainard, Research Director, National Association of State Retirement Administrators testifies before the a subcommittee of the U.S. House of Representatives:
“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.” “Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.” “The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.”
http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf
February 17, 2011
Fitch Ratings notes that a 70% actuarial funded ratio for public defined benefit pensions is considered an “adequate” actuarial funded ratio. “Fitch generally considers a funded ratio of 70% or above to be adequate and less than 60% to be weak.”
http://www.ncpers.org/Files/2011_enhancing_the_analysis_of_state_local_government_pension_obligations.pdf
June 3, 2003
Colorado PERA Executive Director Meredith Williams, CAFR Summary to Members, 2002, 5/21 (REV 6/03): “PERA directs its efforts at keeping the funding ratio, (the ratio of assets to accrued liabilities) for the three divisional retirement funds at a minimum of 80 percent. A funding ratio over 80 percent is considered good.”
July 7, 2004
PERA response to July 5, 2004, Rocky Mountain News Editorial:
“PERA’s funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health.”
http://www.copera.org/pera/about/newsarchives2004.htm
October 28, 2004
PERA official: Legislators say PERA is “too well-funded” at an 87 percent actuarial funded ratio. Colorado PERA Field Education Services Division Director Dennis Gatlin states: “PERA’s funding ratio was at 87 percent (in 1985) and legislators claimed that the association was ‘too well-funded.’ In 1970, the ratio was 54 percent, he added. According to Gatlin, PERA has been overfunded, when its assets equaled more than its liabilities, only twice in its 73-year [My comment: now 82-year] history, in 1999 and 2000.” Silver and Gold Record:
November 4, 2005
PERA Shareholders Meeting Presentation, Fall, 2005:
“Note that PERA’s funded status was lower 30 years ago than it is now. You may recall that there was no perceived ‘crisis’ in PERA’s funded status in 1975.” “What the PERA Board and staff would like is for the funded status curve to be flat or stable at around 80 percent. Why? Because not all benefits are due and payable today or tomorrow . . . PERA can weather the ups and downs in the markets.” “There are legal provisions that protect retirement benefits for current members and retirees, including the contract clause restrictions established by court cases in Colorado and other jurisdictions.”
http://www.copera.org/pdf/Shareholder/ShareholderPresentation05.pdf
A Federal Reserve paper, by Ronald A Wirtz, notes that public pension actuarial funded ratios in the 50 to 60 percent range were typical in the 1970s:
“From a long-term perspective, however, one can’t really pin too much of the pension problem on the recent stock market pullback . . .”. “During the 1970s, funding ratios generally hovered between 50 and 60 percent.” (Yet, public pension contracts in the United States were honored.)
February 24, 2006
“In an e-mailed statement, spokeswoman Katie Kaufmanis said PERA’s funded status at the end of 2004 ‘is the same as the funded status 20 years ago, and there was not a perceived crisis at that time. . . . PERA continues to enjoy positive cash flow and will be able to meet current and future retirement benefit payments for many decades in the future.’”
http://m.rockymountainnews.com/news/2006/feb/24/peras-red-ink-stains-colorado/
March 9, 2006
Silver and Gold Record: “Williams noted that most people don’t have enough money to pay off their mortgages, and that PERA’s assets have exceeded its total liabilities only twice in its 75-year history. ‘We have 74 percent of the mortgage, but some people are making hay out of that,’ he said. ‘They want to close down your pension fund.’” (Williams later supported the breach of Colorado PERA pension contracts when the Colorado PERA actuarial funded ratio was five points lower than this level.)
https://www.cu.edu/sg/messages/4871.html
June 5, 2006
PERA CAFR: “PERA directs its efforts to keeping the funded ratio (the ratio of assets to accrued liabilities) for the divisional retirement funds at a minimum of 80 percent.” (Page 7)
http://www.leg.state.co.us/osa/coauditor1.nsf/All/900E3922BE6A3D9A872571A4006F3245/$FILE/PERA%20CAFR%20Dec.%202005%20heard%20July%202006.pdf
October 26, 2006
Silver and Gold Record: “One attendee asked if there was any similar controversy in the 1970s, when PERA’s unfunded liability went as low as 54.7 percent. Williams said former Gov. Richard Lamm, who co-chaired the PERA commission, made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level. Williams compared the unfunded liability to having a mortgage, and asked how many people have enough money on hand at any one time to pay off all or even half of their mortgages.” “He (Meredith Williams) added, however, that since PERA is not permitted to increase member contributions without a commensurate increase in benefits, the money is technically being paid by employers, from their salary-raise pools. Williams said this ‘employer contribution’ will not affect retirees . . .”
https://www.cu.edu/sg/messages/5245.html
December 17, 2009
The Colorado General Assembly’s Joint Budget Committee (JBC) meets with representatives of Colorado PERA. Rep. Jack Pommer, Joint Budget Committee Chairman to JBC: “Are we not just saying we’re going to pick 30 years (as a PERA investment time horizon) because if we’re not balanced within 30 years that creates actuarial necessity which then let’s us change retiree benefits?”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
March 1, 2012
Colorado PERA General Counsel Greg Smith on PERA’s return assumption:
” . . if we fall short of the 8 percent, what it does is it takes us longer to pay off that unfunded liability, instead of doing it in 30 years it may take us 35 years, it may take us 38 years, it may take us 50 years.”
(My comment: Here Colorado PERA’s General Counsel admits that the 30-year time frame for amortization of PERA liabilities set in Colorado statutes is arbitrary. The 30-year period is merely an arbitrarily set goal, however this “goal” in Colorado law was used to justify the breach of Colorado PERA pension contracts in 2010. Thus, an important actuarial assumption used to justify the taking of fully-vested Colorado PERA benefits in SB10-001 was arbitrary. This assumption, put in statute by the same General Assembly that enacted SB10-001, was used to calculate projections of PERA’s future unfunded liabilities, placing unnecessary financial pressure on the PERA trust funds. Note that just 15 years ago, Colorado PERA’s “maximum amortization period” was set in statute at 60 years.
Administrators of public pension funds in the United States expect market volatility. To paraphrase the author of a recent law review: “The unanticipated severity of an anticipated event does not justify unilateral modification of a contract.” In any event, Colorado PERA pensioners, who have fully-vested pension contracts, by design bear no market risk in their DEFINED benefit pension plans.
“Courts, though, “sit to determine questions on stormy as well as calm days,” and the Constitution was upheld during the Great Depression.”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1774163
#10: THE DUBOFSKY/MARQUEZ CONNECTION.
Colorado Supreme Court Justice Monica Marquez has worked for the defense in the Colorado PERA retiree lawsuit, Justus v. State:
August 30, 2010
Attorney Jean Dubofsky, author of the Colorado PERA “COLA-taking” legal opinion: “I worked on” the case, Justus v. State, with Colorado Supreme Court Justice Monica Marquez. The author of the Colorado PERA “COLA-taking” legal opinion wrote a letter of recommendation for Monica Marquez to serve on Colorado Supreme Court: “In particular, I’ve worked on several cases where she provided superb briefing, argument and/or advice for the Attorney General’s office, including congressional redistricting, the challenges to voter-approved Amendments 41 and 54 to the Colorado Constitution, and the current challenge to the amendments to PERA (Justus v. State), the government’s pension system.”
“ . . . and Ms. Marquez would bring to the court sophistication about the numerous cases that involve, for example, TABOR, ballot titles, election issues, voter-initiated constitutional amendments, property tax, public pensions, labor law, and regulations issued by a wide variety of state agencies.”
“Sincerely, Jean E. Dubofsky.”
(Personally, I believe that Justice Marquez has such strength of character, and commitment to the rule of law, that she could hear the case, Justus v. State, objectively, in spite of her prior work on the case; however, I expect that she will recuse herself as she did in Lobato.)
http://www.scrib.com/doc/36638245/Letter-for-Monica-Marquez-by-Jean-Dubofsky
May 10, 2010
Attorney Monica Marquez’s name appears on the PERA Defendant’s Motion to Dismiss submitted to the Denver District Court on May 10, 2010:
http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf
In 2009, Colorado PERA officials told the members of the Joint Budget Committee that they had obtained outside legal counsel’s advice regarding Colorado PERA contractual rights:
December 17, 2009
Colorado PERA General Counsel Greg Smith – “We have obtained outside counsel’s opinion on this issue.”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
Sometime in 2009
Attorney Jean Dubofsky, at the request of Colorado PERA, creates a legal opinion arguing that the Colorado Legislature may legally take Colorado PERA retiree pension COLA benefits: “at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights;”
http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf
March 19, 2010
Attorney Monica Marquez (soon to be a Colorado Supreme Court Justice) advises Colorado PERA on March 19, 2010:
https://www.copera.org/pdf/Board/Minutes/2010/Minutes3-19-10.pdf
October 18, 2010
Jean Dubofsky deposition submitted to Colorado PUC stating that she is the author of a legal opinion addressing the legality of reducing the PERA COLA benefit:
“My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”
(To access this document, paste “Colorado PUC E-filing system PERA legal opinion Jean Dubofsky” into Google.)
March 7, 2013
Colorado Supreme Court Justice Marquez recuses herself in Lobato case deliberations, since she had previously worked on the Lobato case at the Colorado Attorney General’s office: “The seventh, Justice Monica Marquez, recused herself because she had worked on the Lobato case while an attorney with the attorney general’s office.”
http://www.coloradostatesman.com/content/994052-lobato-
lawsuit-could-have-major-ramifications-k-12-school-finance
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MONTANA PUBLIC SECTOR UNIONS TO SUE OVER PENSION COLA THEFT. (COLORADO’S UNIONS SUPPORTED THE TAKING OF THE COLORADO PERA COLA BENEFIT FROM PERA PENSIONERS.)
In 2010, Colorado public sector unions supported the Colorado Legislature’s breach of the contracts of Colorado PERA retirees (in SB10-001.) This bill took earned, accrued, fully-vested, contracted PERA COLA benefits from retirees, i.e., the PERA retiree’s “inflation protection” provided for in their PERA contracts. A lawsuit over this taking, Justus v. State, is now pending before the Colorado Supreme Court.
Colorado PERA Executive Director Meredith Williams recorded the names of Colorado public sector unions supporting the taking of the PERA COLA benefit here:
“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA . . . the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”
http://www.copera.org/pera/about/ask.htm
In 2010, the Colorado General Assembly colluded with those who ACTUALLY OWE the Colorado PERA pension debt, Colorado PERA-affiliated employers (the State of Colorado and Colorado local governments) and those seeking to lower future PERA pension contributions for their “dues-paying,” (non-retired) members (Colorado public sector unions.) This collusion culminated in the bill, SB10-001, breaking the pension contracts of Colorado PERA retirees.
By taking the contracted PERA COLA benefit, the Colorado Legislature is attempting to slash the PERA pension debt of Colorado state and local governments in order to further lower taxes in the state with the lowest per capita state tax burden in the nation. The Colorado Legislature is attempting to use a legal contrivance to justify the taking of one-third to one-half of the accrued PERA pension benefit from Colorado PERA retirees. The Colorado Legislature is attempting to “inflate away” its PERA pension debt, breaking the statutory requirement to pay the PERA COLA, while the Colorado PERA Board of Trustees’ own long-term actuarial inflation assumption is 3.75 percent.
In 2010, financially self-interested parties told Colorado PERA retirees that they were greedy to expect the State of Colorado and Colorado local governments to honor their Colorado PERA pension contracts.
In 2010, the Colorado General Assembly spat in the faces of those who have given their lives in public service . . . Colorado PERA retirees.
Rather than supporting the breach of pension contracts like Colorado’s public sector unions, today, Montana’s public sector unions announced that they will sue the State of Montana over the Montana Legislature’s recent taking of retiree pension COLA benefits. (In Montana, the COLA is known as the “GABA,” “guaranteed annual benefit increase.”):
MEA-MFT:
“We keep getting calls and emails asking if MEA-MFT is in fact going to litigate legislated amendments seriously truncating and delaying Guaranteed Annual Benefit Adjustments or GABAs in PERS and TRS.
The answer is YES!
MEA-MFT is right now working with other advocate organizations representing current and future retirees on a common, comprehensive legal challenge to the legislature’s GABA attacks. We have retained counsel. We are developing compelling legal arguments. We are vetting possible plaintiffs. We will file when it is the right time to file. And we expect to win.
MEA-MFT President Eric Feaver”
From helenair.com:
“Bullock signs pension fixes, school funding bill.”
“The plan is expected to face legal challenge from unhappy retirees who will argue in court that the changes unconstitutionally break the contractual obligations the state made to employees.”
“The state’s largest employee union, MEA-MFT, said it expects to support the litigation — even though it also still supports the overall fixes.”
http://helenair.com/news/state-and-regional/bullock-signs-pension-fixes-school-funding-bill/article_3502dd1e-d19b-5d69-bb25-c77671a6792f.html
Eric Feaver, President, MEA-MFT:
“There are constitutional questions, questions of contract rights that are raised by so doing (changing guaranteed annual benefit adjustments.)”
MONTANA GOVERNOR: THE COLA TAKING IS UNCONSTITUTIONAL.
From helenair.com:
“In response, Bullock’s budget director Dan Villa said the governor’s office opposed the amendment that sought to change the GABA (COLA) and questioned its constitutionality.”
“‘We understand that both current employees and retirees are considering legal challenges to address the amendments, and we support that action,’ Villa said. ‘It’s important to keep in mind that this likely unconstitutional amendment doesn’t change one important fact: by implementing the remainder of Gov. Bullock’s plan, Montana is the first state in the nation to fix our pension system without raising taxes.’”
http://helenair.com/news/legislature/feeling-betrayed-retiree-group-asks-governor-to-veto-pension-bill/article_a6b2eaac-b2eb-11e2-b352-0019bb2963f4.html
Montana pensioners:
“The Legislature’s own attorneys have repeatedly advised it that GABA is a constitutionally-protected contract with public employees and should not be broken. If the Legislature chooses to advance legislation to renege on this important commitment it has to raise concerns with all citizens as to what other contracts the state may choose to ignore. If a ‘deal’s a deal’ only when the Legislature chooses to honor it, then what about Montana’s other contract commitments?”
“The Legislature should not violate the contract it statutorily committed to with Montana’s public employees. Rather, it should honor the commitments made to current and future government retirees including fully funding GABA.”
“Unlike other states that have variable Cost of Living Adjustments in their pension plans, Montana enacted a guaranteed statutory annual percentage adjustment for its public employees.”
http://helenair.com/news/opinion/readers_alley/montana-should-keep-commitments-to-its-public-employees/article_8cee6aac-98c8-11e2-8aaf-001a4bcf887a.html
(My comment: Like Montana, Colorado has an “automatic” public pension COLA benefit, that is a contractual obligation of the Colorado PERA pension system. For every day of labor that Colorado PERA retirees provided, with every monthly PERA contribution that Colorado PERA retirees made, they paid for their contracted PERA COLA. Having benefited from this labor, Colorado PERA-affiliated employers now want to retroactively take this earned “deferred compensation” from PERA retirees.
In Colorado, the Legislature did not bother to ask its legal staff for a legal opinion addressing the taking of the Colorado PERA COLA benefit. Although encouraged to do so, prior to the taking, the Colorado Legislature did not bother to ask the Colorado Supreme Court for an opinion on the constitutionality of their PERA pension proposal (through an interrogatory.) The Colorado Legislature did not appoint an interim study committee to examine legal, PROSPECTIVE, PERA pension reform options, instead abdicating its policy-making authority in this area to lobbyists representing self-interested Colorado PERA employers trying to escape their debts.)
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NEW HAMPSHIRE JUDGE: PUBLIC EMPLOYEE PENSIONS ARE PROTECTED ON DAY ONE. COLORADO LEGISLATURE: PUBLIC EMPLOYEE PENSIONS ARE NOT PROTECTED EVEN ON DAY 10,950.
A New Hampshire judge recently determined that public employee contractual rights to their accrued pension benefits vest immediately upon employment. This conclusion seems logical. A worker wants to know what she is earning in salary and deferred pension compensation for each day of labor. If she does not know this, how can she make an informed, economic decision regarding alternative employment opportunities? It is truly immoral for an employer to change the rate of compensation (salary or deferred pension compensation) after the employer has already benefited from the worker’s labor (See the Colorado bill, SB10-001.)
This New Hampshire judge determined that public pension benefits are legally protected on Day One. Ironically, the Colorado General Assembly does not consider accrued, earned, contracted Colorado PERA pension benefits to be protected even on Day 10,950 (30 years.) Thus, the State of Colorado is a defendant in the lawsuit, Justus v. State.
In 2010, a majority of the members of the Colorado Legislature voted to support the breach of the fully-vested public pension COLA contracts of Colorado PERA retirees. Last year, the Colorado Court of Appeals agreed with the PERA retirees that the Colorado Legislature unconstitutionally seized their COLA benefits. This lawsuit, Justus v. State, is now pending before the Colorado Supreme Court.
The New Hampshire Decision.
From seacoastonline.com:
“Judge rules in union pension case: Says state workers are protected from Day One of employment.”
“CONCORD — A superior court justice has ruled in the lawsuit that state unions filed to block pension reform that state workers are contractually protected beginning at the time of employment.”
“Hillsborough County Superior Court Judge Gillian Abramson ruled May 23 in the case of Professional Fire Fighters of New Hampshire et al. vs. the State of New Hampshire and the state Retirement System that ‘vesting occurs upon commencement of permanent employee status.’ It is a position long held by the N.H. Retirement Security Coalition, but was challenged when the Republican-led Legislature crafted House Bill 2 in 2011, which made changes to the benefits of current employees.”
(My comment: In my opinion, the Colorado Coalition for Retirement Security, an organization that supported SB10-001 [the bill taking contracted COLA benefits from Colorado PERA retirees] believes that Colorado PERA retirees are more “secure” in their retirement when the State of Colorado seizes one-third to one-half of their contracted annuity stream to maintain Colorado’s status as a tax haven. How does having one’s property taken, one’s contract ignored, bring a person greater “security”?)
New Hampshire decision:
“‘Workers with five years in the system are just as committed to their work as those with 20 years in the system, and therefore shouldn’t be treated differently by the retirement system. The decision is right to rule in favor of promoting worker retention and recruitment,’ said Steve Arnold, a retired Portsmouth police officer and the current state director for the New England Police Benevolent Association.”
(My comment: Now that public sector unions in Colorado have argued that the Colorado PERA pension benefits of their (former, “non-dues paying,” retired) members are not constitutionally protected, even after 30 years, how will these public sector unions argue in the future that the PERA pension benefits of their members who have 3 or 7 or 12 years of service are constitutionally protected? Those who should defend contracted public pension benefits in Colorado argue that Colorado governments should be free to break these contracts at will.)
New Hampshire decision:
“Member unions of the coalition filed suit in court asking a judge to rule that the changes to the state budget that would affect retirement benefits are unconstitutional. They argued that certain sections of the budget bill violate the Contract and Takings Clauses of both the state and U.S. constitutions when it comes to N.H. Retirement System members who reached permanent employment status or retired as of Jan. 1, 2012.”
“‘According to a statement from the retirement coalition, the court has requested, and the coalition will provide, additional information supporting their argument of the damages the legislative changes make to workers who are ‘prepared to give a lifetime of service to the state.’”
Link to complete article:
http://www.seacoastonline.com/articles/20130530-NEWS-305300397
From the New Hampshire Retirement System website:
“Below is a brief summary of pending lawsuits regarding legislative changes to RSA 100-A, the statute governing the New Hampshire Retirement System (NHRS, the retirement system):
HB 2 Benefits suit – Filed February 2012:
Professional Fire Fighters of NH v. State of NH”
“This suit, filed in Hillsborough County Superior Court by a coalition representing active and retired public employees, teachers, police, and firefighters, challenges a number of the pension provisions in House Bill 2, passed in 2011. The State of New Hampshire and NHRS were named as defendants in this lawsuit.”
“The Plaintiffs claim HB 2 violates the New Hampshire and U.S. constitutions by substantially impairing vested contract rights, Judge Abramson issued a ruling May 24, 2013, on the pending motions for partial summary judgment filed last August. In her ruling she stated that that ‘vesting’ of the plaintiffs’ contract rights occur at the time of employment. The next step is for her to make a determination whether or not there was a substantial impairment of the contract rights of the plaintiffs. Previously, in the related HB 2 Contribution suit in Merrimack County, Judge McNamara determined that vesting occurred at 10 years of service.”
Thoughts on “substantial” impairments of public pension contracts from the Beerman paper addressing contractual public pension rights at this link:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2131481
“Amy Monahan concludes from her examination of the case law that in general, changes to the level of benefits and changes that affect the rights and responsibilities of employers are held to be substantial impairments. In her view, except perhaps in extraordinary circumstances, changing the method for calculating benefits so that lower benefits are paid is likely to be found to be a substantial impairment of the contract.”
“At the time the contract was made, had the employees’ known that their pension promises were subject to significant revision, they may not have accepted government employment or they may have demanded significantly higher current compensation.”
Link to NHRS:
http://www.nhrs.org/documents/NHRS_Legal_Update_WEB.pdf
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U.S. CENSUS BUREAU: COLORADO RENEGED ON ITS PUBLIC PENSION CONTRACTS WHILE SPENDING A MERE 2.08 PERCENT OF REVENUES ON PUBLIC PENSIONS . . .
WHILE RANKING 35TH IN THE NATION IN FINANCIAL SUPPORT FOR PUBLIC PENSIONS . . .
WHILE DEAD LAST AMONG THE “NON-SOCIAL SECURITY” STATES IN PUBLIC PENSION SUPPORT.
Colorado PERA retirees have fully performed under their Colorado PERA pension contracts. Nevertheless, in 2010, the Colorado General Assembly acted in bad faith, willfully breaching its contracts with these Colorado PERA pensioners. The Colorado General Assembly is attempting to abrogate the PERA pension COLA, “escalator” provision of the written, statutory Colorado PERA pension contract. The Colorado General Assembly is attempting to renege on one-third to one-half of its contractual obligations to pay Colorado PERA pension benefits.
In 2010, the Colorado Legislature allowed a pack of 27 lobbyists to ram a bill through the legislative process breaking the contracts of Colorado PERA pensioners. During the debate on this bill, SB10-001, lobbyists, members of the Colorado Legislature, and Colorado PERA administrators argued that if the State of Colorado and local governments were forced to honor their PERA pension contracts, this would burden Colorado taxpayers.
Yet, according to the U.S. Census Bureau, at the time of the Colorado PERA pension contract breach in 2010, Colorado ranked 35th in the nation in taxpayer support for public pension obligations. At the time of the taking of fully-vested, accrued Colorado PERA retiree pension COLA benefits by the Colorado Legislature, Colorado’s financial support for public pensions was slightly more than two percent of all Colorado public sector expenditures. (It would be interesting to examine historical data comparing Colorado’s financial support for public pensions to the level of support of other states for public pensions.)
Colorado PERA’s Chief Investment Officer, Jennifer Paquette, provided comparative data for the year 2008. In a May 22, 2011, Denver Post Guest Commentary entitled, “Careful Planning, Not Hope, Drives PERA” Jennifer Paquette writes:
“In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.”
http://www.denverpost.com/commented/ci_18100068?source=commented-
If we allow state governments in the United States to break their contracts based on flimsy, self-serving, political arguments, our Constitution will be meaningless, and the rule of law in the United States will be a myth. It is not possible for the defendants in the lawsuit, Justus v. State, to legitimately argue that contracted Colorado PERA pension benefits are a burden on taxpayers while Colorado ranks 35th in the nation in support for public pensions, and support for public pensions consumes two percent of Colorado state and local government expenditures. Two percent of expenditures is hardly a crushing burden on Colorado taxpayers. In any event, under the Colorado Constitution, Colorado state and local governments cannot escape their contractual obligations even if meeting these contractual obligations is a burden on Colorado taxpayers. Debts are by their nature “burdensome.” When Colorado state and local governments became parties to Colorado PERA pension contracts they freely assumed the contractual, financial burden of providing future deferred compensation to members of the Colorado PERA pension system. In the United States, neither individuals, nor governments, may set aside the Contract Clause of the U.S. Constitution when it is simply convenient. Governments cannot set aside their contractual obligations in order to make discretionary expenditures.
Here is a link to a recent NASRA Issue Brief reporting U.S. Census Bureau public pension expenditure data:
http://www.nasra.org/resources/NASRACostsBrief.pdf
And, some background on NASRA:
“NASRA (the National Association of State Retirement Administrators) is a non-profit association whose members are the directors of the nation’s state, territorial, and largest statewide public retirement systems. NASRA members oversee retirement systems that hold more than $2.0 trillion in assets and that provide pension and other benefits to more than two-thirds of all state and local government employees.”
http://www.nasra.org/AboutNasra/whoweare.htm
According to the U.S. Census Bureau, 34 states spend more on public pensions than does Colorado, but we see only a handful of states in breach of their public pension contracts.
“NASRA ISSUE BRIEF: Spending on Public Employee Retirement Systems, May 9, 2013.”
“Table 1: State and Local Government Contributions to Pensions as a Percentage of All State and Local Government Spending, by State, 2010.
Alabama 2.85
ALASKA 2.25
Arizona 2.42
Arkansas 3.02
CALIFORNIA 3.58
COLORADO 2.08
Connecticut 4.54
Delaware 1.99
District of Columbia 1.33
Florida 2.58
Georgia 2.14
Hawaii 3.57
Idaho 2.38
ILLINOIS 4.75
Indiana 2.82
Iowa 1.73
Kansas 2.03
Kentucky 2.58
LOUISIANA 3.31
MAINE 2.77
Maryland 3.14
MASSACHUSETTS 3.36
Michigan 2.32
Minnesota 1.62
Mississippi 2.81
Missouri 3.08
Montana 2.40
Nebraska 1.60
NEVADA 2.84
New Hampshire 2.47
New Jersey 2.03
New Mexico 2.77
New York 3.68
North Carolina 0.99
North Dakota 1.20
OHIO 2.85
Oklahoma 3.34
Oregon 1.46
Pennsylvania 1.29
Rhode Island 3.99
South Carolina 2.24
South Dakota 1.54
Tennessee 1.97
TEXAS 2.16
Utah 2.76
Vermont 1.09
Virginia 3.15
Washington 1.40
West Virginia 3.87
Wisconsin 2.07
Wyoming 1.24
U. S. weighted avg. 2.77″
(My comment: Note that Colorado’s support for public pensions [2.08 percent] was 25 percent below the national average support for public pensions [2.77 percent] in 2010. Also, I show the 10 states “where more than one-half of public employee payrolls are estimated to be outside of Social Security in ALL CAPS in Table 1.)
Source: U.S. Census Bureau
The ten states where the preponderance of public employees are outside of Social Security:
ALASKA – 2.25 percent
CALIFORNIA – 3.58 percent
COLORADO – 2.08 percent
ILLINOIS – 4.75 percent
LOUISIANA – 3.31 percent
MAINE – 2.77 percent
MASSACHUSETTS – 3.36 percent
NEVADA – 2.84 percent
OHIO – 2.85 percent
TEXAS – 2.16 percent
(My comment: Note that the average public pension support among the ten “non-Social Security” states, in 2010, was 2.79 percent, while Colorado’s level of support that year was 2.08 percent. One might expect that in states where the preponderance of public employees are not eligible to receive Social Security benefits [such as Colorado] these states would offset that detriment to public employees with more robust financial support for public pension benefits. One might have this expectation, since taxpayers in these states are spared the “burden” of making the 6.2 percent Social Security payment under FICA for these public employees. Yet, when we isolate the states where most public employees are ineligible for Social Security benefits, what do we find? Even in this select group we find Colorado at the bottom of the barrel in terms of financial support for public pensions at 2.08 percent.)
NASRA Issue Brief:
“Social Security Coverage: Twenty-five to thirty percent of state and local governments and their employees make contributions to their retirement plan instead of to Social Security. This is the case for most to substantially all of the state and local government workforce in seven states, 40 percent of the nation’s public school teachers, and a majority of firefighters and police officers. Pension benefits—and costs—for those who do not participate in Social Security are usually higher than for those who do participate in order to compensate for the absence of Social Security benefits. This higher cost should be considered in the context of the 12.4 percent of payroll, or an estimated $31.2 billion annually, these employers and employees would otherwise be paying into Social Security.”
NASRA Issue Brief:
“On a nationwide basis, pension contributions made by state and local governments account for roughly three percent of total spending (see Figure 1).”
(My comment: Note that Colorado governments contribute one-quarter less than the national average to support public pensions and yet they find this level of support so burdensome that they seek to escape their contractual obligations.)
NASRA Issue Brief:
“Three Percent Nationwide: Based on the most recent information provided by the U.S. Census Bureau, approximately three percent of all state and local government spending is used to fund pension benefits for employees of state and local government. As shown in Figure 2, pension costs since 1980 have been reliably stable, declining from around four percent to three percent in 2010.”
“Although pensions are not the state-local budget-drain that some claim they are, as shown in Table 1, spending levels for states and cities do vary from the national average, from less than one percent to more than four percent.”
“In addition, some states and cities do not contribute the amount determined actuarially to adequately fund the plan.”
(My comment: The Center for Retirement Research at Boston College compiles the “Public Plans Database,” which includes the State and Local Defined Benefit Plans dataset.
http://crr.bc.edu/data/public-plans-database/
Provided below are statistics relating to the failure of the Colorado General Assembly to pay its public pension “actuarially required contributions” [ARC], from the Center for Retirement Research at Boston College Public Plans Database:
2001 Colorado School – 100% ARC Paid
2002 Colorado School – 100% ARC Paid
2003 Colorado School – 69% ARC Paid
2004 Colorado School – 51% ARC Paid
2005 Colorado School – 48% ARC Paid
2006 Colorado School – 62% ARC Paid
2007 Colorado School – 60% ARC Paid
2008 Colorado School – 68% ARC Paid
2009 Colorado School – 65% ARC Paid
2010 Colorado School – 70% ARC Paid
2011 Colorado School – 89% ARC Paid
2001 Colorado State – 100% ARC Paid
2002 Colorado State – 100% ARC Paid
2003 Colorado State – 69% ARC Paid
2004 Colorado State – 51% ARC Paid
2005 Colorado State – 48% ARC Paid
2006 Colorado State – 58% ARC Paid
2007 Colorado State – 56% ARC Paid
2008 Colorado State – 63% ARC Paid
2009 Colorado State – 61% ARC Paid
2010 Colorado State – 62% ARC Paid
2011 Colorado State – 85% ARC Paid
2001 Colorado Municipal – 100% ARC Paid
2002 Colorado Municipal – 100% ARC Paid
2003 Colorado Municipal – 69% ARC Paid
2004 Colorado Municipal – 62% ARC Paid
2005 Colorado Municipal – 64% ARC Paid
2006 Colorado Municipal – 85% ARC Paid
2007 Colorado Municipal – 84% ARC Paid
2008 Colorado Municipal – 98% ARC Paid
2009 Colorado Municipal – 96% ARC Paid
2010 Colorado Municipal – 101% ARC Paid
2011 Colorado Municipal – 139% ARC Paid
According to the 2011 Colorado PERA CAFR [annual financial report], the dramatic increase in the percentage contributed for the Colorado PERA Local Government Division in 2011, is a “result of the changes contained in SB10-001,” [2011 PERA CAFR Financial Section, page 82.] Apparently, when the State of Colorado breaks its public pension contracts it really facilitates the payment of the full ARC in some PERA divisions.)
NASRA Issue Brief:
“The chronic failure by some pension plan sponsors to pay required contributions results in greater future contributions to make-up the difference.”
(My comment: Instead, of “making-up the difference” resulting from ignoring its public pension bills, the Colorado Legislature is trying to escape its contractual PERA pension obligations, trying to take accrued public pension COLA benefits from pensioners.)
NASRA Issue Brief:
“A variety of state and local laws and policies guide governmental pension funding practices. Most require employers to contribute what is known as the Annual Required Contribution (ARC), which is the amount needed to finance benefits being accrued each year, plus the cost to amortize unfunded liabilities from past years, minus required employee contributions.
“The average ARC received in recent years has been around 90 percent. Beneath this average ARC experience lies diversity: approximately 60 percent of plans in the Public Fund Survey consistently receive 90 percent or more of their ARC. This means that although a majority of plans have been receiving their required funding, many plans have not been adequately funded, which will result in higher future costs.”
(My comment: In 2010, when the Colorado General Assembly broke Colorado PERA pension contracts, most Colorado state legislators did not know what a pension “ARC” is. This ignorance resulted from the failure of Legislative Leadership to appoint an interim study committee on public pensions to educate the members, and the desire of Legislative Leadership break PERA retiree pension contracts. The ignorance of state legislators regarding public pension administration and contractual public pension rights served the preconceived political goals of Colorado Legislative Leadership.)
NASRA Issue Brief:
“Generally, states and cities with a history of paying their required pension contributions are in better condition and have needed more minor adjustments to benefits or financing arrangements compared to those with a history of not adequately making their contributions.”
Link to complete NASRA Issue Brief:
http://www.nasra.org/resources/NASRACostsBrief.pdf
Colorado PERA active and retired members, the argument that contracted PERA pension benefits are a burden on Colorado taxpayers is clearly specious. Support contractual public pension rights and the rule of law in Colorado. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
HOW DOES COLORADO TREASURER WALKER STAPLETON’S DUI ARREST INFORM HIS LATEST COLORADO PERA PENSION RANT?
After Colorado’s State Treasurer Walker Stapleton was arrested for driving under the influence, his honesty and integrity were called into question. In this article, I examine the circumstances of Treasurer Stapleton’s DUI arrest and ask if a pattern of personal failings relating to “honesty and integrity” have spilled over into his participation in the Colorado PERA pension reform debate.
Reform of the Colorado PERA pension system is one of our Treasurer’s favorite political topics. Perhaps, similar to Rhode Island’s State Treasurer, Stapleton believes that public pension contract breach is the route to higher political office (not working out as planned for Treasurer Gina Raimondo in Rhode Island.) Or, given the decline of defined benefit pension plans in the private sector, perhaps our State Treasurer hopes to exploit “PERA pension envy” for personal political gain. Whatever his motives, or political goals, I encourage our Treasurer to engage in a fair, open and fully-informed discussion of pension reform options for the Colorado PERA system . . . to participate in the PERA reform debate with “honesty and integrity.” I also encourage him to advocate prospective PERA pension reforms in conformance with the Contract Clause of the Colorado Constitution, similar to prospective reforms made available to Colorado county governments in SB 12-149.
In this article, I examine published materials germane to the “honesty and integrity” of our State Treasurer, and consider whether a recent article written by Treasurer Stapleton regarding Colorado education finance and public pension obligations does not again call into question our Treasurer’s forthrightness.
The Colorado PERA pension system has significant unfunded pension liabilities. These liabilities have accumulated due to the failure of the Colorado Legislature to pay its full pension bill for the last decade. Colorado PERA pension liabilities are a contractual obligation of Colorado PERA-affiliated employers, a legal debt obligation of Colorado state and local governments. Our State Treasurer should not ignore the fact that the decline in the funded ratio of the Colorado PERA pension system is the result of the failure of the Colorado Legislature to pay its pension bills for a decade.
Colorado’s Treasurer Stapleton has expressed concern regarding Colorado PERA’s unfunded liabilities, but why is our State Treasurer so concerned about this one particular form of Colorado state and local government debt, public pension debt? Why do we not see our State Treasurer concerned about all other Colorado governmental debt, all outstanding bonds issued by Colorado state and local governments? What is so special about our public pension debt obligations?
Why do we see our State Treasurer focus on Colorado’s public pension debt obligations that will come due over the next 70 years? Why does he leave the impression that PERA unfunded liabilities due over the next 70 years are somehow due immediately? A current financial “crisis,” a “shortfall”? Why have we never heard our Treasurer note that Colorado’s financial support for public pension obligations consumes less than three percent of all Colorado state and local governmental expenditures? A level far below the national average for the states? Does this key information not comport with his political agenda? Would it not be more “honest” for our State Treasurer to acknowledge this fact?
Why does our State Treasurer see the PERA pension debt service that will be paid by Colorado taxpayers in coming decades as onerous, yet he lacks any corresponding concern for the “burden” of all other Colorado state and local government debt (bonds) on taxpayers that will come due over the next 70 years?
Colorado has not “banked” the three percent of future state and local governmental expenditures that will be required to support future Colorado PERA pension obligations and that is a “crisis” in the mind of our State Treasurer. Yet, Colorado has not banked the 97 percent of state and local governmental expenditures that will be required to support all other public sector programs for the next 70 years and that IS NOT a “crisis” in the mind of our Treasurer. We see our State Treasurer ranting about Colorado PERA public pension debt in particular because this serves a political agenda.
WHAT DO THE CIRCUMSTANCES OF COLORADO TREASURER WALKER STAPLETON’S DUI ARREST TELL US ABOUT HIS “HONESTY AND INTEGRITY”?
Ellen Dumm writes in a Huffington Post article:
“Colorado’s treasurer accounts for $20 billion and manages a $6 billion investment pool of public funds annually. Integrity, responsibility and good decision making are critical to this job. So are honesty and transparency.” It is important that the person serving as Colorado’s Treasurer act with integrity, and honesty.
Here are a few excerpts from her Huffington Post article:
“In June 1999, GOP candidate state Treasurer Walker Stapleton was charged with DUI and leaving the scene of the accident in San Francisco where two women were injured.”
“He blamed the victims. (The reality is that he accepted a plea bargain down to a DUI, with three-year probation, twice weekly AA meetings and court-ordered community work.)”
“That charge was amended several days later, to charges of running a flashing light and hitting a cab in the intersection, causing injuries and leaving the scene.”
“One of the victims, Ginger Vasquez of Santa Monica, CA, was alone in the backseat of the cab that was hit by Stapleton. She describes the vehicle spinning after the impact and seeing Stapleton’s car driving away.”
“After Stapleton’s car stopped down a steep hill, she says, two cabs boxed in his vehicle to prevent him driving any farther. She has never talked to Stapleton and did not know his name until recently. She does not know the other woman injured in the accident. Stapleton never approached the cab to find out if everyone was all right. Most importantly, she has no motive to lie about events that night.”
“Stapleton, who has an obvious motive not to tell the whole truth, continues to shift the blame and will not produce police reports (unavailable to the public) of the accident.”
(My comment: Have complete police reports relating to the incident been released by our State Treasurer?)
“Ironically, Stapleton was born into one of the country’s wealthiest, best-connected families, sharing a family tree with the Bushes. He attended prep school in Connecticut and expensive colleges and universities. The truth is that Stapleton has never had to find a real job outside his wealthy family’s umbrella.”
Link to Huffington Post article:
http://www.huffingtonpost.com/ellen-dumm/why-walker-stapletons-11y_b_776122.html
From 5280.com:
“Stapleton smelled of alcohol as he allegedly walked away from the scene of an accident in San Francisco, making ‘loud and belligerent’ noises and ignoring officers, writes The Denver Post . . .”
“After his arrest, Stapleton pleaded guilty to drunken-driving after a taxi hit his Jeep Cherokee, damaging it, and forcing him to pull over a block away–which Stapleton disputes. The report claims he continued to drive away even after police attempted to stop him with lights and sirens, and that he only stopped after his Jeep could no longer continue. He was sentenced to community service. The Colorado Independent is critical of the Post’s article, saying it fails to answer some questions, such as, ‘Was anyone hurt in the accident?’ Court documents examined by the Independent list two victims, but the Post, citing California police, writes that ‘no pedestrians’ were injured in the collision.”
http://www.5280.com/blogs/2010/11/24/treasurer-elect-walker-stapletons-dui-records-continue-raise-questions
From the Denver Post:
“Stapleton, now 36, was arrested in the early hours of June 20, 1999, in San Francisco on complaints of driving under the influence and hit-and-run. He later pleaded guilty only to drunken driving, for which he was sentenced to community service.”
“When police arrived, they asked if he had been drinking, and he admitted he had, prompting officers to arrest him, Stapleton said.”
“According to the report, witnesses said that after the two vehicles collided at the intersection of Bush and Jones streets, Stapleton continued to drive away. Police caught up with his Jeep down the street.”
“‘We then attempted to stop the vehicle with lights and siren,’ the report said. The car ‘then failed to pull over and continued southbound on Jones St. (The Jeep) having been damaged by the collision, could no longer continue and came to rest.’”
“A strong odor of alcohol beverage could be detected emanating from Stapleton’s breath and clothing. He spontaneously stated, ‘I had the yellow light, he ran the light.’”
“‘He was unsteady on his feet, and loud and belligerent.’”
http://www.denverpost.com/legislature/ci_16688120
The records indicate that a plea of no contest was entered. Walker Stapleton placed his initials after the following on the Superior Court of California, County of San Francisco, “Waiver of Rights/Plea Form”:
“Charges: I understand that I am accused of violating Vehicle Code section 2352(a), driving under the influence (DUI) of an alcoholic beverage and/or drugs.”
“No Contest Plea: I understand that if I plead no contest, the Court will make a finding that I am guilty and the effect in this case is the same as a guilty plea.”
“Probation Revocation: I understand that if I violate any of the terms or conditions of probation or conditional release (see 22a-o below), a Judge after a hearing but without a jury trial, may revoke my probation or conditional release and order me to serve out my suspended sentence in jail.”
“Costs of Restitution and Public Agency Response: I understand that in addition to the fine imposed, I may also be ordered to make restitution to the victim(s), if any, and to pay the expenses incurred by a public agency that responded to any incident caused by my vehicle at the time of my arrest.”
“Jail: I understand that the maximum penalty for a first offense is 6 months in the county jail, a mandatory minimum sentence of 96 hours, a fine of $1,000 plus penalty assessments, and suspension of my driving privilege for 6 months. I understand that if I plead guilty (or no contest), 1 year in the county jail will be suspended, . . .”
“Probation: I will be placed on FORMAL SUPERVISED PROBATION for 3 years and I will have to pay probation costs of up to $40 per month. These probation costs are not a condition of my probation, but failure to pay may result in my civil liability. My probation has the following initialed terms and conditions:”
“I must obey all laws.”
“2 AA mtgs./week progress rept. 6 months”
Link to Colorado Treasurer Walker Stapleton’s court records:
http://strongcolorado.org/wp-content/uploads/2010/10/Walker-Stapleton-Court-Docs.pdf
From the Denver Post:
“They asked if I’d been drinking, and I said I had been drinking,” Stapleton said, adding he was charged with a DUI and a hit-and-run charge.
“The hit-and-run charge was dropped later after he explained how the accident occurred, Stapleton said. He was sentenced to community service, which included ‘a fantastic period of time that involved me cleaning up garbage in the Tenderloin district of San Francisco’ and working at a nursing home.”
http://blogs.denverpost.com/thespot/2010/09/30/stapleton-admits-to-dui-during-debate/15478/
From brandeisbulletin.blogspot.com:
“Most of you know that he comes from a rich and powerful Colorado family (hence, the old Stapleton Airport, etc), and that he used millions from his family trust to buy a whole bunch of premium land and had expensive properties developed. That allowed him to call himself a ‘developer/businessman’ instead of a trust-fund baby.”
“But, I’ll bet none of you knew, until the Denver Post printed it today, that Walker Stapleton has a third job: that of Gentleman Farmer. Yes, in Colorado alone, Farmer Stapleton owns 180 acres of primo real estate near Castle Rock, worth millions right now, which will be worth tons more, after he’s done speculating and decides to actually develop it. No, no crops are actually grown on the land. A cow or two were most certainly plopped down on the fenced property to eat the weeds for a day or two and were then removed, never to return.”
“But the ‘rent-a-cow’ thingy was enough to allow Walker Stapleton to have this pre-development acreage classified as ‘agricultural’, and so he paid exactly $116 in property taxes last year.”
“Add the $336 million lost to Gentleman Farmers last year, to the $300 million we needlessly donated to the obscenely rich oil companies, to the $300+ million in welfare checks for the equally rich mega-agricorps, to the $8.8 million un-earned bonus to Wal-Mart, (the world’s largest retailer) and then you can plainly see why we have a $1 billion budget shortfall (in 2011.)”
http://brandeisbulletin.blogspot.com/2011/03/walker-stapleton-gentleman-farmer.html
(My comment: The State of Colorado can afford to lose millions in tax revenues to “Gentlemen Farmers,” but cannot afford to honor state contracts?)
TREASURER STAPLETON’S MOST RECENT COLORADO PERA PENSION RANT.
So, what is the connection between Colorado Treasurer Walker Stapleton’s DUI arrest and his latest rant regarding the Colorado PERA pension system? In my opinion, Treasurer Stapleton’s personal failings relating to “honesty and integrity” are spilling over into the Colorado PERA pension reform debate.
Now that we have increased our knowledge of Colorado Treasurer Walker Stapleton, we’ll examine his recent article addressing Colorado education funding and the underfunding of the Colorado PERA pension system. The May 30, 2013 issue of the Colorado Springs Gazette Telegraph includes an article written by Colorado Treasurer Walker Stapleton addressing the Colorado education finance measure on the Fall 2013 ballot.
Here is a link to the article, a few excerpts and my comments:
http://gazette.com/education-finance-reform-buyer-beware/article/1501394
Treasurer Walker Stapleton:
“This November, Colorado will be given the opportunity to vote for a more than $1 billion tax increase to fund Colorado education.”
“But, as voters take a closer look, this tax increase, masked as education funding, is also another mechanism to keep our sinking public pension system afloat.”
(My comment: Colorado’s PERA public pension debt is independent of public school finance in the state. This state debt would remain even if Colorado’s K-12 education system were completely privatized, or eliminated for that matter. Also, Colorado PERA-affiliated employers hire workers in hundreds of professions other than teaching.
It is not entirely “honest” of our Treasurer to refer to the PERA pension system as “sinking” in light of recent double digit portfolio returns [to be augmented by a report of yet another double digit return in the coming weeks]. Further, our Treasurer had an opportunity here to note that the Colorado Legislature’s historical failure to pay its pension bills has caused the financial pressure on PERA’s trust funds. By fully disclosing this information in his article our Treasurer could act with “integrity.”)
Treasurer Walker Stapleton:
“While PERA is currently $20 billion underfunded, its debt grows every year it does not achieve an 8 percent return on its portfolio. This 8 percent return is not an inflated conclusion simply contested along partisan lines.”
(My comment: Here our Treasurer fails to note that the average return assumption for private sector defined benefit plans in the U.S now exceeds 8 percent. Good enough for the private sector, not good enough for the public sector?
Also, Stapleton, in his article, does not mention the fact that many private sector employers make Social Security contributions on behalf of their workers, in addition to 401K contributions. He makes no mention of the fact that Colorado PERA members are not eligible to participate in the Social Security system, and thus rely entirely on their contracted PERA pension benefits for retirement security. By omitting this information our State Treasurer is not acting with complete “honesty.”)
Treasurer Walker Stapleton:
“We cannot allow more taxpayer money to be taken out of our children’s classrooms in order to backfill obligations in a bankrupt retirement system.”
(My comment: Here our Colorado Treasurer presents a “false choice,” again displaying a lack of integrity. When the State of Colorado or Colorado local governments pay their debts, when these governments meet their contractual obligations, they are not “taking money out of children’s classrooms” anymore than they are taking money out of law enforcement or road construction. He presents an emotional argument with the intent to deceive the reader.
Colorado PERA-affiliated employers are contractually obligated to pay deferred compensation to Colorado PERA retirees for work completed over the course of their careers. Rather than encouraging the Colorado Legislature to actually meet its Colorado PERA pension obligations by paying the full actuarially required contribution [ARC,] our Treasurer assumes, in his article, that these obligations will be met by taking money from public school budgets, a false choice. Here we have the Washington Post condemning such tactics:
“It’s time to retire the false choice. As a rhetorical device, particularly as a political rhetorical device, the false choice has outlived its usefulness, if it ever had any. The phrase has become a trite substitute for serious thinking. It serves too often to obscure rather than to explain.”
http://articles.washingtonpost.com/2011-03-31/opinions/35208590_1_financial-reform-false-choice-false-choice
Also, Walker Stapleton, as State Treasurer, should know that state governments are not eligible to file for “bankruptcy” under federal law.)
Treasurer Walker Stapleton:
“When I explained the funding shortfall to different stakeholders and legislators crafting this bill they told me that PERA was off the table.”
(My comment: Here our Treasurer again laments the underfunding of the Colorado PERA pension system. Complete honesty demands that he inform the reader that the Colorado General Assembly is the author of this “shortfall.”
Our State Treasurer refers to Colorado PERA unfunded liabilities as a “shortfall.” Yet, these Colorado PERA unfunded liabilities will come due over the next seven decades, consuming approximately three percent of total Colorado state and local government resources. How is it that our Treasurer sees the failure of Colorado state and local governments to set aside an amount equivalent to three percent of their future revenues as a “shortfall,” a pressing financial matter for Colorado PERA, but the failure of Colorado state and local governments to set aside an amount equal to 97 percent of their future revenues to meet all other future Colorado public expenditures is inconsequential, not a “shortfall”? Is it simply politically convenient for our State Treasurer to label certain revenues needed in the future, for a public program he does not support a “shortfall,” while the remaining revenue needed for all other future state and local government expenditures are not a “shortfall”? If so, again this is not being “honest” with the reader.
In his Gazette Telegraph article, it appears that our State Treasurer intends to deceive the reader, withhold information critical to the debate from the reader to advance a political agenda (elimination of public defined benefit pension plans in the United States, see ALEC), and he presents a false choice to the reader. As Ellen Dumm wrote in the Huffington Post, it is important that the person serving as Colorado’s Treasurer act with integrity, and honesty.
Colorado PERA active and retired members, many Colorado legislators supported the breach of Colorado PERA pension contracts in 2010 out of ignorance. Many state legislators did not have sufficient information to make an informed decision regarding SB10-001 in 2010, because Legislative Leadership at the time did not want them to have complete information. As with our State Treasurer’s article, Legislative Leadership intended that members be deceived and accordingly served up uninformed legislators to a pack of 27 lobbyists promoting PERA pension contract breach.
Leadership could have appointed an interim study committee to ensure that the members had complete information regarding Colorado contractual public pension rights. Legislative Leadership could have sent an interrogatory to the Colorado Supreme Court, but instead opted to squander millions of taxpayer dollars on protracted litigation. Do your part to support public pension contractual rights in Colorado, contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook.
COLORADO TREASURER AND PERA BOARD TRUSTEE WALKER STAPLETON:
HAVING ENACTED SB10-001, THE COLORADO LEGISLATURE WILL CONTINUE TO BREAK COLORADO PERA PENSION CONTRACTS IN THE FUTURE, AS NEEDED.
TREASURER STAPLETON: THERE WAS NO “ACTUARIAL EMERGENCY” IN 2010 WHEN SB10-001 WAS ENACTED BY THE COLORADO LEGISLATURE.
COMMENTS FROM: REPRESENTATIVE PRIOLA, LABUDA, DELGROSSO, HOLBERT, JIM KERR, HULLINGHORST, SWALM, AND KEFALAS;
COMMENTS OF COLORADO PERA DIRECTOR WILLIAMS, PERA TRUSTEE CAROLE WRIGHT, PERA GENERAL COUNSEL SMITH, AND TREASURER STAPLETON.
In 2010, the Colorado Legislature enacted legislation breaking Colorado PERA pension contracts. Members of the Colorado Legislature, generally, have little respect for Colorado PERA pension contracts. Thus, in 2010, the Colorado Legislature recognized no constraints on its power to take property from Colorado PERA pensioners.
Offering low public sector salaries in order to maintain Colorado’s status as a “tax haven” is one thing. No one is forced to accept a job with a Colorado PERA-affiliated employer, but taking back compensation that has already been earned crosses both moral and legal lines. For some reason, in 2010, lobbyists were able to push a majority of Colorado legislators across these lines. Twenty-seven lobbyists successfully persuaded state legislators that breaking pension contracts is acceptable here in Colorado.
A century ago, public pensions in the United States were considered “gratuities granted by a benevolent sovereign.” Although this idea was eradicated from public pension jurisprudence nearly a century ago, it remains predominant at the Colorado Legislature well into the twenty-first century.
In 2009, members of the Colorado Legislature were unlikely, of their own accord, to plumb the depths of public pension contractual obligations. It was incumbent on the Leadership of the Colorado Legislature that year to perform due diligence . . . to appoint an interim study committee to explore legal, prospective pension reform options for the Colorado PERA pension system, but no interim study committee was appointed. The Leadership of the Colorado Legislature, recognizing that well-informed Colorado legislators would not support a planned breach of Colorado PERA pension contracts, opted against legislative examination of prospective pension reform options. Colorado PERA’s hired lobbyists would be unable to manipulate state legislators who might easily refute specious arguments relating to public pension contractual rights. In early 2009, the Colorado PERA Board was already shopping for a law firm willing to create a legal rationale for breaking Colorado PERA’s contractual obligation to provide total, accrued pension benefits via a pension “escalator,” i.e., a COLA. Why should Legislative Leadership and the Colorado PERA Board work against their own interests in taking COLA benefits by educating the members?
Therefore, Leadership controlled the flow of information relating to public pension contractual rights in 2009 and 2010; by failing to appoint an interim study committee to examine prospective reforms, by abdicating policy-making authority in this area to outside groups with an agenda to protect their own financial interests, and by failing to send an interrogatory to the Colorado Supreme Court requesting an opinion on the constitutionality of SB10-001′s proposed changes to PERA contracts.
There is an apparent disconnect between the prevailing view of Colorado state legislators regarding contractual public pension obligations, and the sanctity of public pension contractual obligations as recognized in case law across the United States. The nonchalant treatment of public pension contractual rights by Colorado legislators conveniently aligns with their desire to break Colorado PERA pension contracts . . . their desire to force a group of elderly Coloradans to pay for the Colorado General Assembly’s past public pension mismanagement.
In 2010, 27 lobbyists told our state legislators that they were free to break the state’s contractual obligations; hence, it must be true.
The Colorado PERA pension system is an alternative to Social Security for Colorado state and local government workers. These workers are not eligible to participate in the Social Security system, they are completely dependent on the Colorado General Assembly to ensure that contractual obligations of Colorado state and local governments are honored. Instead of acting responsibly, and paying its annual pension bills, the Colorado Legislature has mismanaged its pension system, and enacted legislation, SB10-001, under which Colorado PERA pension benefits are no longer “definitely determinable” under IRS regulations.
According to our State Treasurer, (a Trustee on the Colorado PERA Board of Trustees) the Colorado Legislature, having abrogated Colorado PERA pension contracts in 2010, will continue to break Colorado PERA pension contracts in the future at its convenience. Here are Colorado Treasurer Walker Stapleton’s comments made in testimony to a committee of the Colorado Legislature (recorded March 1, 2012, House Finance Committee):
“That’s what happened in Senate Bill 1, and if the plan becomes insolvent or the liabilities grow again, it will happen in ‘Senate Bill 2,’ and who knows how many more bills.”
” . . . make no mistake that will happen.”
“And all you have to do is go back to 2008 and look at our portfolio which lost billions of dollars in one year alone and ALMOST had an actuarial emergency as a result of it.”
If the Colorado Legislature’s breach of Colorado PERA public pension contracts is upheld by the Colorado Supreme Court, Colorado’s Treasurer assures us that the Colorado Legislature will break Colorado PERA pension contracts repeatedly. Future breach of Colorado PERA public pension contracts by the Colorado Legislature will occur in accordance with the following formula that was employed for the 2010 PERA contract breach: “Underfund the PERA pension to lower its funded ratio, claim that the low funded ratio represents a ‘fiscal crisis’ justifying seizure of accrued PERA pension benefits, break PERA pension contracts to lower taxpayer obligations, repeat . . .”
Recently, I discovered that Senate Bill 10-001, the legislation enacted by the Colorado General Assembly in 2010, breaking “fully-vested” Colorado PERA pension contracts and taking PERA COLA benefits, was discussed at length during hearings of the Colorado Legislature’s House Finance Committee in 2012. A number of comments relating to SB10-001 were made by members of the Colorado General Assembly (on the record) who voted in favor of SB10-001 during the 2010 Colorado legislative session, as well as other witnesses. (PERA members and retirees, I apologize for my failure to discover these comments by SB10-001 proponents made at 2012 House Finance Committee hearings earlier.)
Below, I provide quotations of state legislators, and witnesses from testimony relating to Colorado PERA contractual pension rights given during 2010 House Finance Committee hearings. Note that the bulk of the comments presented in this article, (many demonstrating a somewhat limited grasp of public pension contractual obligations) were made by members of the Colorado House Finance Committee. The Finance Committees of the Colorado General Assembly are designated as the committees of reference of the Legislature with oversight responsibility for Colorado public pension systems. The members of these committees ostensibly possess the greatest degree of sophistication on the subject of public pensions at the Colorado General Assembly.
It is important, (not just for litigation of the breach of public pension contractual rights in SB10-001), but for the integrity of the Colorado legislative process, that these comments be readily available for those who will, in the future, consider reforms addressing Colorado legislative ethics, legislative procedure, and administration.
2012 HOUSE FINANCE HEARINGS ON PERA LEGISLATION:
Representative Chris Holbert – Feb 23, 2012, House Finance Committee, hearing on HB12-1250: “We have a contract, an obligation to the vested members of PERA, and we have to meet that . .”
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
Representative Kevin Priola – Feb 23, 2012, House Finance Committee, hearing on HB12-1150: ” . . . taxpayers know that in the end they’re on the hook, State of Colorado taxpayers are on the hook for any (PERA) unfunded liability down the road . . ”
Colorado PERA Executive Director Meredith Williams’ comments on February 23, 2012 to the House Finance Committee: “Those people all have a contract with their employer with the plan. You made changes to impact people like that in SB1.”
“The only reason you could do that in Senate Bill1 . . . and to unilaterally change the terms of the contract, is because the sustainability of PERA was significantly in question.”
(My comment: Sustainability? Here, Colorado PERA’s Executive Director Meredith Williams tells us that the sustainability of PERA was in question in 2010 when the Colorado PERA actuarial funded ratio [AFR] stood at 69 percent. Yet, Meredith Williams has informed us earlier, that the sustainability of PERA was not in question when the Colorado PERA AFR was at 54 percent.
From the Silver and Gold Record:
“One attendee asked if there was any similar controversy in the 1970s, when PERA’s unfunded liability went as low as 54.7 percent. Williams said former Gov. Richard Lamm, who co-chaired the PERA commission, made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level. Williams compared the unfunded liability to having a mortgage, and asked how many people have enough money on hand at any one time to pay off all or even half of their mortgages.”
https://www.cu.edu/sg/messages/5245.html
When one compares the past comments of Meredith Williams arguing that a PERA funded ratio [AFR, not "market-based"] in the mid-50s is not a crisis, with recent comments of Meredith Williams that a 69 percent PERA AFR IS a crisis of sufficient proportion to warrant the breach of contracts, only herculean restraint allows one to limit one’s characterization of Meredith Williams comments to simply “disingenuous.”
Why did Meredith Williams support the breach of Colorado PERA pension contracts in 2010? Was he embarrassed that, on his watch, the Colorado Legislature underfunded the PERA pension? Embarrassed that he failed to do his job, to impress upon the Legislature the importance of paying its public pension bills? Did the PERA Board and education establishment lobbyists persuade him that historical PERA underfunding should be solved by taking money from PERA retirees?
At the end of 2009, just prior to the breach of Colorado PERA pension contracts, the actuarial funded ratio of the Colorado PERA trust funds was nine percent below its 40-year average, and three percent below the national average actuarial funded ratio of public pension funds. If public pension funds are in crisis at this funding level [a 69 percent AFR] should half of the pension contracts in the United States be abandoned at this funding level?)
Colorado PERA Executive Director Meredith Williams’ comments on February 23, 2012 to the House Finance Committee relating to the Legislature’s historical underfunding of its PERA pension obligations:
“We’ve had a significant problem over the years, in that . . . contributions, payments by (PERA) employers into PERA have been kind of the last thing in the budget building process, and we have not made the required payments. Unfortunately, in our line of work, where we’re involved in compounding shortfalls grow, particularly when the shortfalls continue year after year after year.”
(My comment: Recall the words of Colorado PERA’s General Counsel Greg Smith. On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s General Counsel Greg Smith blamed the Colorado General Assembly for the decline PERA’s actuarial funded ratio: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”
http://www.copera.org/pera/about/listeningtour.htm
So, here we have Colorado PERA officials acknowledging that the Colorado General Assembly has not paid its public pension bills. Instead of proposing that the Colorado General Assembly make the PERA trust funds whole, and commit to meeting its future pension obligations, these PERA officials propose that money be taken by force of government from a relatively small group of Colorado’s pensioners. These are our leaders in Colorado state government.)
Colorado PERA Executive Director Meredith Williams’ comments on February 23, 2012 to the House Finance Committee on SB10-001:
“What you did in 2010, with Senate Bill1, no one in the country has done anything comparable . . . and this was pretty dicey stuff, and this is why we had to walk on that razor’s edge. You can’t fix it (the PERA pension system) too much, because over 90 percent of the fix incorporated in Senate Bill 1 in 2010 came out of the hide of people in the system . . . less than ten percent of that fix came from our employers/taxpayers. No one has ever done anything quite like that. I am quite anxious for the litigation to get behind us.”
(My comment: Meredith Williams states that the SB10-001 “90 percent” cost-shift from PERA employers onto PERA retirees was “dicey.” Webster’s dictionary defines “dicey” as “risky.” I consider this unnecessary, planned breach of public pension contracts beyond “dicey,” I consider this action to be immoral, ill-advised and foolhardy.
From “Colorado PERA on the Issues”:
“In all, about 90 percent of the changes enacted by Senate Bill 1 will fall on the shoulders of current and future PERA members and retirees – not other taxpayers.”
http://www.copera.org/pera/about/issues.htm
Senator Brandon Shaffer, in the Denver Post, April 17, 2011:
“I sponsored last year’s legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA’s current and future members and retirees.”
http://www.denverpost.com/opinion/ci_17858107
Meredith Williams, PERA Executive Director, in the Pueblo Chieftain, May 29, 2011:
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
http://www.chieftain.com/opinion/ideas/legislative-changes-have-put-pera-fund-on-a-solid-footing/article_3080a01c-88cd-11e0-ad01-001cc4c03286.html
SB 10-001 co-prime sponsor Senator Josh Penry and sponsor Senator Greg Brophy in the Denver Post, January 22, 2010:
“Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees . . .”
http://www.denverpost.com/search/ci_14242354
Colorado PERA Executive Director Greg Smith, at the “Fall 2011 PERA Shareholder’s Meeting,” [thirty-six minutes into the video]:
“‘Only ten percent of the fix” of the [SB10-001] reforms in 2010 came from additional employer contributions.
http://www.copera.org/pera/about/shareholder.htm.)
Back to the House Finance Committee hearings:
Colorado PERA Executive Director Meredith Williams’ comments on February 23, 2012 to the House Finance Committee:
“I had something cross my desk earlier this week that appears that it could be the beginnings of another Senate Bill 1 lawsuit, on a completely different and very bizarre issue.”
(My comment: What is that about? PERA retirees?)
House Finance Committee Chairman Brian DelGrosso, February 23, 2012:
“I voted against Senate Bill1, and I voted against Senate Bill 1 not because I felt like we didn’t need to fix PERA, I agreed with that part of it, but I voted against Senate Bill1 for the fact that it did adjust some of the COLAs and it did adjust stuff for folks that were already retired and people that were about ready to retire, and to me I felt like that was violating a contract that those people had got into . . . they played by the rules that were of the game at the time, and these folks . . . got up to where they about to retire or were retired, and now all of a sudden we were going to change the rules of game on them after they were done playing. So to me, that was why I voted against Senate Bill 1, because I felt like that violated some of the contractual issues that we had.”
House Finance Hearing on HB 12-1179:
Representative Jim Kerr, February 23, 2012: “The taxpayers . . . are obligated to fulfill the (PERA) benefits as soon as someone starts drawing those benefits down.”
Rep. Jim Kerr, February 23, 2012: “They’ve earned those benefits . .” “. . . The taxpayers . . . they’re the ones who ultimately have to make the (PERA) fund whole . . .”
(My comment: According to Representative Jim Kerr, Colorado taxpayers are obligated to meet the state’s contractual obligations to Colorado PERA retirees. So, why is the Colorado General Assembly attempting to shift 90 percent of the costs of their 2010 pension reform bill from Colorado taxpayers onto PERA retirees?)
Rep. Jim Kerr, February 23, 2012: “If you’re in a defined benefit program, you have a guarantee.” “PERA does have a guarantee.” “A defined benefit plan is a guarantee.”
Rep. Dickey Lee Hullinghorst, February 23, 2012: “Our state employees earn retirement benefits when they work.”
(My comment: Representative Hullinghorst agrees with officials of the Ritter Administration who write:
“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits [such as COLAs] . . . serve[s] to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”
Here the Ritter Administration states clearly that a reduction in a COLA benefit [that is earned in an “exchange transaction”] changes the “net economic benefit” to the employee under the employee’s pension “agreement.” Under SB 10-001, the “net economic benefit,” for an average PERA member was “reduced,” according the Ritter Administration, by “$165,000.”
Read the entirety of the Ritter Administration letter on the GASB site here:
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)
Colorado PERA Board Trustee Carole Wright, February 23, 2012: “Only 18 percent of the money that comes into the (PERA) trust comes from taxpayers or from employers.”
(My comment: PERA Trustee Carole Wright knows that the taxpayers provide a mere 18 percent of the resources that support the Colorado PERA pension system. In light of this relatively small burden on Colorado taxpayers, [amounting to just 2-3 percent of all Colorado state and local government expenditures] why did PERA Trustee Wright support a further diminution of the taxpayer’s PERA contribution in 2009 by shifting 90 percent of the costs of the PERA Board’s pension reform proposal onto PERA retirees?)
Representative Spencer Swalm, February 23, 2012: “There is a contractual obligation here. This is a defined benefit plan, those benefits are guaranteed, and ultimately the taxpayers of the state are on the hook.”
Colorado PERA Executive Director Meredith Williams, February 23, 2012, on the Colorado PERA Board’s historical investing mistakes, and the impact of these mistakes on the Colorado PERA Trust Funds:
“Ten years ago we were pretty aggressive in real estate, very aggressive might be a better characterization. We were very aggressive in what I’ll call private equity or alternatives. At the board’s direction we’ve pulled in our horns substantially, about seven and a half of the portfolio in each of those two, used to be fifteen in each. I think that the portfolio as we headed into the dotcom bust was far riskier than it is today. We paid the price for that.”
(My comment: Meredith Williams tells us here that PERA “paid the price” for its past investing mistakes. Here he admits that the Colorado PERA Board of Trustees has historically made mistakes in setting the asset allocation of the Colorado PERA trust funds. I ask: Why should Colorado PERA retirees, who bear no “market risk” in their “defined benefit” pension plan, whose contractual public pension rights are “fully-vested,” why should these Colorado PERA retirees pay the cost of the PERA Board’s past investing mistakes by relinquishing their contracted pension benefits?)
Rep. Dickey Lee Hullinghorst, February 23, 2012: “I would like to know exactly what that (PERA) contractual relationship is.” “We are employers and we pay into PERA as a part of a benefit that’s earned by our employees.”
Colorado PERA Executive Director Meredith Williams in response to Representative Hullinghorst’s question, February 23, 2012, (after preliminary remarks):
“We never have to answer that question. It’s not a black and white answer.”
(My comment: Why did Colorado PERA’s Executive Director, Meredith Williams refuse to answer Rep. Hullinghorst’s question? One might expect a more sophisticated response from the head of an organization that recently recommended a breach of PERA pension contracts to the Colorado Legislature. During his many years in public pension administration one might have expected Meredith Williams to explore such a foundational question in depth.
Why is Colorado PERA’s Executive Director, Meredith Williams unable to succinctly state the contractual rights of PERA’s members? Are the employees of PERA-affiliated employers expected to work for decades without knowing clearly what their rights are under their PERA contracts? Are they expected to work each day for pension benefits that are undefined?
Why did Representative Hullinghorst vote for SB10-001 in 2010 without knowing the contractual rights of persons impacted by the bill? Without this knowledge, how could she be certain that she was not violating her oath of office to act only within the strictures of the Colorado Constitution?)
THE HOUSE FINANCE COMMITTEE DEBATES PROSPECTIVE, LEGAL PENSION REFORM THAT WOULD IMPACT ONLY “NON-VESTED” PERA MEMBERS.
March 1, 2012, House Finance Committee, comments of members of the House Finance Committee made during the amendment phase of the committee’s hearing on HB 12-1150:
Rep. Priola: “I would draw your attention to L.001.” “This amendment simply moves the universe of folks that the three to seven years would apply to, to new hires and to folks that are not yet vested, meaning five years of service credit or less.” “I think it strikes a fair balance to not change the rules of the game on people later in their working years.”
(My comment: This amendment proposed a change to the method of calculation of the “highest average salary” used to determine Colorado PERA base pension benefits. The change would affect ONLY new hires and those without vested PERA pension contracts.)
Rep. Hullinghorst: “My understanding is that when you go to work, and you sign up for PERA benefits, and you are required by the state to do that . . . that’s a contract, and I think that this is potentially actionable.”
(My comment: If this is Representative Hullinghorst’s “understanding,” why did she support the breach of Colorado PERA public pension contracts when she voted for SB10-001?)
Rep. Labuda: “In 40-50 years they’re going to be seniors, and they’re going to be living on less because of this amendment, and I can’t support that.”
(My comment: Here, Rep. Labuda tells us that she cannot support a prospective change FOR NEW HIRES and non-vested PERA members because they will be “seniors” forced to “live on less” in 40-50 years! Yet, she voted for SB10-001 in 2010, forcing current “seniors” [who have fully-vested PERA contractual rights] to “live on less” when SB10-001 was signed into law. I see two possible explanations for the inconsistency of Representative Labuda’s position. First, she was persuaded to abandon her belief system by the 27 SB10-001 lobbyists. Second, her vote in favor of SB10-001 was entirely arbitrary.)
Rep. Priola: “Representative Labuda, that brings to mind something that I need to correct the record on as well. When I was in testimony a week or so ago, I had stated that I voted for SB 1, I then checked the voting record, and realized that I voted against it, and I tried to think back to what was in my mind at the time. Then I refreshed my memory that although I thought it was a much needed step in the right direction, I wasn’t willing to make the vote that bought it lock stock and barrel.”
(My comment: Two years after a legislator considers legislation that abrogates Colorado State contracts, the legislator cannot recall whether he supported or opposed the legislation?)
Rep. DelGrosso: “The problem that we ran into with Senate Bill 1 . . . is that when they start adjusting things like the COLA . . . that’s where it opens us up to lawsuits, because people are like ‘hey, I’m five years away from retirement, I’m ten years away from retirement, I’m one year away, I am retired,’ and then we go and make changes that’s where we have lawsuits, because hey this a violating a contract . . . ”
Rep. Kefalas: “It still does affect those members that have signed contracts that are non-vested. Is that correct? And therefore I still have concerns about L.001.”
(My comment: Here Rep. Kefalas expresses concern about impacting PERA benefits of “non-vested” PERA members, yet he supported Senate Bill 10-001, a bill abrogating “fully-vested” Colorado PERA pension contracts . . . a bill that took one-third of the accrued public pension benefits of Colorado PERA retirees. This is stunning admission.
Again, in 2010 the Leadership of the Colorado General Assembly decided against appointing an interim study committee to examine prospective pension reform options in order to keep its members in the dark. This is apparent from comments made by members of the House Finance Committee who supported SB10-001.)
Rep. Hullinghorst: “We got ourselves into this mess in the 1980s to begin with, in the 1980s and 1990s, when the Legislature just on a whim decided they were going to do this and that with PERA, and made some changes that were very detrimental to the system.”
(My comment: Here, Rep. Hullinghorst adds her voice to the many voices that have condemned the Colorado General Assembly’s historical mismanagement of the PERA pension system.)
Rep. Kagan: “This is a benefit cut to public employees who work hard all of their lives and one of their measures of compensation is their benefits package, that’s how we manage to attract such fine public employees as we have on such low salaries is because they know ‘yeah, the salaries aren’t as high as I’d like, but I’m still very loyal to the state, I work very hard for the state for a very low salary because I do have a respectable benefits package, and I’m sure that that benefits package will be there for me when I retire.’ Now you come and you say we’re going to cut those benefits, we’re going to reduce the value of that package . . .”
Rep. Kagan: “(In adopting SB10-001) we had put PERA . . . on an actuarial sound footing without waiting for a crisis to hit, without waiting for exposés and pressure . . .”
(My comment: Here, Rep. Kagan notes that the Colorado General Assembly adopted SB10-001 in 2010, breaking PERA pension contracts, while Colorado PERA faced no financial “crisis.” Like Representative Labuda and Kefalas above, Rep. Kagan expresses concern regarding changes to “non-vested” Colorado PERA pension contracts, while he supported the breach of “fully-vested” PERA contracts in SB10-001. Such inconsistency of logic is not found among persons with knowledge of public pension contractual rights. It is truly surprising that such an argument is propounded by a man of such discernment.)
Rep. DelGrosso: “These new hires know what their retirement will be, so when they’re getting into the system they can choose to accept the job or not knowing what their retirement benefits will be.”
“We are still involved in lawsuits over Senate Bill 1 on whether or not those were constitutional because we made changes to people that are currently in the system that were vested, current retirees. So, Senate Bill 1 did affect people’s current retirements and those that were retired.”
Rep. DelGrosso: “We have to look 25 to 30 years into the future to avoid the lawsuits that we are currently involved in because of Senate Bill 1.”
“We’re forced to, to avoid lawsuits, to look that far into the future.”
(My comment: Here Rep. DelGrosso notes that prospective, legal public pension reform options are available to the Colorado General Assembly. In fact, just six weeks after Rep. DelGrosso made these remarks, the House Finance Committee [on April 19, 2012] adopted such legal, prospective pension reform options for thousands of members of Colorado county public pension systems [when the committee referred out SB12-149.]
Language from SB12-149:
“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”)
Link to SB12-149, the Act:
http://www.leg.state.co.us/clics/clics2012a/csl.nsf/fsbillcont3/0E9F894D31C081EF87257981007DAF5A?open&file=149_enr.pdf
Note that House Finance Committee members, Representatives Priola, Jim Kerr and Labuda co-sponsored this legislation making prospective pension reform options available to Colorado county governments. Note that Representative Labuda co-sponsored SB12-149, providing prospective pension reform options to Colorado county governments, AND voted in favor of SB10-001, breaking “fully-vested” Colorado PERA retiree pension contracts. Completely arbitrary.)
Link to meeting summary of House Finance Hearing on SB12-149 (excerpts from hearings on this bill are available at saveperacola.com):
http://www.leg.state.co.us/clics/clics2012a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/b695bc1290e34d25872579e4006ba1bd?OpenDocument)
Rep. Hullinghorst: “The current suits are relative to COLA.” “There was some awareness that that possibly could draw some suits.” “It was much less a problem with cutting benefits than any other thing you could look at in that regard.”
Representative Hullinghorst: “This is a more difficult . . . approach than the COLA situation.”
(My comment: Incredibly, here we have Rep. Hullinhorst stating that enactment of PROSPECTIVE public pension reform for NEW HIRES is a “more difficult approach” for the Colorado General Assembly than is the outright, intentional breach of fully-vested Colorado PERA pension contracts of PERA members who had worked for PERA-affiliated employers FOR DECADES. Here we see, manifest in Rep. Hullinghorst’s remarks, the work of 27 lobbyists hired to enact SB10-001. It is sickening that lobbyists have gained such control over the minds of Colorado legislators. In 2010, Legislative Leadership served up pliable members for the 27 SB10-001 lobbyists . . . members who were ignorant of public pension contractual rights.)
Rep. Kefalas: “I believe that a fundamental premise, principle, value of this great State of Colorado, of this great country, is this idea of some semblance of retirement security.”
“I am concerned that this will undermine the contractual obligations that we have made with folks who are state employees and that could invite litigation and I think that’s something the state does not need.”
(My comment: Again, Rep. Kefalas defends the interests of non-vested Colorado PERA members, members who have NO contractual right to any PERA annuity. Two years earlier, he voted to take one-third of the accrued public pension benefits of PERA retirees with fully-vested pension contracts.)
Rep. Labuda: “I don’t want to penalize anybody who is thinking of coming to work for PERA, or someone who is newly started for PERA.”
(My comment: Again, note the members of the House Finance Committee who aggressively defend the interests of persons who have no vested PERA contractual pension rights, while having voted to take fully-vested PERA public pension benefits in SB10-001.)
Rep. DelGrosso: “This has nothing to do with those that are in the system, that are moving through the system, that are retired or not retired.” “This puts more money into PERA’s coffers, this will actually put more money in there to shore up the sustainability of PERA.”
(My comment: Here Rep. DelGrosso attempts to educate the members of the House Finance Committee. He attempts to do the job that should have been done by the Leadership of the Colorado General Assembly during the 2009 interim.)
The amendment to HB12-1150, (L.001), passed, the bill was then postponed indefinitely.
House Finance Committee, March 1, 2012, Hearing on HB12-1142:
COLORADO TREASURER STAPLETON: THE LEGISLATURE’S SB10-001 PERA CONTRACT BREACH WILL BE REPEATED.
Colorado Treasurer Walker Stapleton:
“It’s incumbent on a plan to make promises that are conservative to our public workers, so that at the end of the day . . . the plan is in a position that it’s making promises that it can afford to make and it’s not putting the plan at risk of having benefits cut and amended and retirement lengthened by the Legislature, because make no mistake that will happen. That’s what happened in Senate Bill1, and if the plan becomes insolvent or the liabilities grow again, it will happen in “Senate Bill 2,” and who knows how many more bills.”
(My comment: Here, the Colorado Treasurer assumes that state worker contracts are inferior to the state’s contracts with corporations, that state worker contracts may be freely abrogated while other state contracts remain untouched. The Treasurer assumes that the Colorado Legislature possesses power permitting it to ignore the provisions of the Colorado Constitution, that the Colorado Legislature is the one branch of government that is unrestrained by the Colorado and U.S. Constitutions. The Treasurer assumes, erroneously, that the members of the Colorado PERA pension system are somehow subject to “market risk” in their “defined” benefit plan. The Treasurer notes that no actuarial emergency existed in 2010 when the Colorado Legislature broke Colorado PERA public pension contracts. In 2010, the Colorado General Assembly refused to act responsibly, refused to explore legal, prospective pension reform options. The Colorado Legislature has ignored its PERA pension bills. Having ignored its contractual public pension obligations, the Colorado Legislature finds a cavalier attitude toward the contracts of Colorado PERA retirees to be quite convenient. The Colorado Treasurer anticipates that members of the Colorado General Assembly will again break Colorado PERA contracts in the future at their pleasure.
Thus, if the Colorado General Assembly’s legislation breaking Colorado PERA pension contracts, SB10-001, is upheld by Colorado courts, the Colorado PERA pension system becomes, for all practical purposes, a “gratuity.” In that event, Colorado public sector workers who are members of the PERA pension system will work each day for compensation that will be determined after the fact by their Colorado PERA-affiliated employers.)
COLORADO TREASURER AND PERA BOARD TRUSTEE WALKER STAPLETON: THERE WAS NO ACTUARIAL EMERGENCY IN 2010 WHEN SB10-001 WAS ENACTED BY THE COLORADO LEGISLATURE.
Colorado Treasurer Stapleton:
“And all you have to do is go back to 2008 and look at our portfolio which lost billions of dollars in one year alone and ALMOST had an actuarial emergency as a result of it.”
(My comment: This statement by our State Treasurer is in conformance with the failure of the Colorado General Assembly to declare an “actuarial emergency” prior to adoption of SB10-001 in 2010. Our State Treasurer observed no PERA “actuarial emergency,” and the Colorado Legislature declared no “actuarial emergency.” And, why would the Colorado General Assembly declare an actuarial emergency in 2010? That year, the actuarial funded ratio of the Colorado PERA trust funds was only nine percent less than the average PERA AFR over the prior 40 year period.)
Colorado PERA General Counsel Greg Smith on PERA’s return assumption:
” . . if we fall short of the 8 percent, what it does is it takes us longer to pay off that unfunded liability, instead of doing it in 30 years it may take us 35 years, it may take us 38 years, it may take us 50 years.”
(My comment: Here Colorado PERA’s General Counsel admits that the 30-year time frame for amortization of PERA liabilities set in Colorado statutes is arbitrary. The 30-year period is merely an arbitrarily set goal, however this “goal” in Colorado law was used to justify the breach of Colorado PERA pension contracts in 2010. Thus, an important actuarial assumption used to justify the taking of fully-vested Colorado PERA benefits in SB10-001 was arbitrary. This assumption, put in statute by the same General Assembly that enacted SB10-001, was used to calculate projections of PERA’s future unfunded liabilities, placing unnecessary financial pressure on the PERA trust funds. Note that just 15 years ago, Colorado PERA’s “maximum amortization period” was set in statute at 60 years.)
Don Schaeffer, Colorado PERA retiree, “I actually worked at PERA for 20 years.” “In my job at PERA, I was the Communications Director, and that started somewhere back in the early 80s.”
“In the year 2000 . . . we (PERA) were fully funded and they (the General Assembly) said ‘Oh, we have too much money,” and so then we had (pension contribution) cuts, and we had benefits added and so forth.”
“If you look at the . . . State Division trust fund it is more underfunded than the School Division, because the School Division doesn’t have choice (of a defined contribution alternative).” “It’s expensive to give choice.”
(My comment: Here, Don Schaeffer, former Colorado PERA Communications Director, points out that legislation enacted by the Colorado General Assembly, allowing a defined contribution choice for certain members of that PERA Division, places an additional burden on members of the Division, and results in the underfunding of that PERA Division’s trust fund. I ask: Why should Colorado PERA retirees, who have fully-vested public pension contracts relinquish their constitutional rights to compensate for such policy decisions of the Colorado General Assembly?)
Dan Chapman, Legislative Advocate, AARP Colorado: “I am here today solely as a represent of AARP Colorado and its members.”
“AARP also supports pension reform, but believes that modification to pension plans or plan formulas should have as a key objective to hold harmless current beneficiaries and employees . . .”
(My comment: Here we have a representative of AARP Colorado informing the House Finance Committee of AARP’s position that public pension reforms should hold harmless current public pension beneficiaries. In light of this AARP position, why did AARP Colorado fail to defend the contractual rights of Colorado PERA retirees in 2010? Are Colorado PERA retirees an exception to AARP Colorado’s policy that current public pension beneficiaries should be held harmless in pension reform legislation?
Does AARP Colorado support public pension contractual rights? or do they not support public pension contractual rights? Or, did it happen in 2010, that certain self-interested parties successfully lobbied AARP Colorado officials, persuading AARP Colorado to remain on the sidelines while SB10-001 was pushed through the legislative process, that is, while one-third of the accrued public pension benefits of Colorado PERA retirees were seized by the Colorado Legislature?
In 2009/2010, the Colorado AARP decided to do nothing to defend Colorado PERA retiree constitutional rights. Here is a statement from an AARP Colorado representative on SB10-001: “The (Colorado) AARP state office, with input from our volunteer leadership, reached the decision to monitor SB10-001.” I ask: How does the “monitoring” of a breach of contract protect the interests of retirees?)
Colorado PERA active and retired members, in 2010, we observed a willful, deliberate, breach of public pension contracts by the Colorado General Assembly. If Colorado legislators did not take Colorado PERA statutory contracts seriously in 2010, as our State Treasurer warns, they will never take Colorado PERA statutory contracts seriously in the future. Support public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!
NATIONAL ASSOCIATION OF STATE BUDGET OFFICERS – THE COMMON FUNDING BENCHMARK FOR PUBLIC PENSIONS IS 80 PERCENT – SO WHY IS THE COLORADO LEGISLATURE TAKING CONTRACTED PERA PENSION BENEFITS UNTIL A 100 PERCENT FUNDING RATIO IS ATTAINED? CLEARLY LEGISLATIVE OVERREACH.
Last year, the National Association of State Budget Officers published an Issue Brief that places public pension funding in a state budgetary perspective. The Issue Brief brings perspective to the Colorado General Assembly’s breach of Colorado PERA public pension COLA contractual obligations in 2010. A lawsuit contesting this state taking of PERA public pension benefits, Justus v. State, is currently pending before the Colorado Supreme Court.
“For over 60 years, the National Association of State Budget Officers (NASBO) has been the professional membership organization for state budget and finance officers.”
http://www.nasbo.org/about-nasbo
The Issue Brief, “A State Budgeting Perspective on Public Pensions,” is available at the following link:
http://www.nasbo.org/sites/default/files/pdf/A%20State%20Budgeting%20Perspective%20on%20Public%20Pensions.pdf
Below, I provide a few important excerpts from the NASBO public pension Issue Brief (and my observations):
“This brief examines a number of pension issues from a budgetary perspective. A budgetary perspective considers long term pension funding adequacy, and the financial cost of promised benefits in relation to the rest of current state spending.”
“Most public pensions have retained a defined benefit status in which retiree payments are guaranteed under state statute, constitution, or contract law.”
(My comment: When the Colorado General Assembly enacted the bill breaking Colorado PERA retiree pension contracts in 2010 [SB10-001], scant attention was given to the fact that the issue of governmental taking of contracted public pension COLA benefits had been previously litigated in Colorado. Decades ago the Colorado Supreme Court invalidated the taking of contracted COLA benefits by Colorado governmental employers as a means of escaping their contracted public pension debt. Colorado state and local government employers cannot “define” their way out of their contractual public pension COLA obligations in statute or ordinance. How did the Colorado PERA Board of Trustees and Colorado’s public sector unions arrive at the conclusion that state and local government employers, after benefiting from the labor of their employees, did not have to pay contracted current and deferred compensation for that labor? This notion defies Colorado case law, and common sense.
Although, many state legislators were generally aware of the recent Colorado Attorney General’s Opinion stating that impairment of contracted PERA benefits would be unconstitutional (during debate of SB10-001), few had read the on-point case law, Bills or McPhail. In 2009/2010 the Leadership of the Colorado General Assembly, encouraged by self-interested public sector unions, preferred to keep rank and file members of the General Assembly in ignorance. Thus, Leadership abdicated legislative policy-making authority in this area to the state’s pension administrator, Colorado PERA. The Colorado PERA Board of Trustees conducted a statewide campaign to persuade Colorado PERA retirees to relinquish their contractual pension rights. As planned, the PERA Board of Trustees presented a preordained conclusion to take “fully-vested” PERA retiree pension COLA benefits to the Legislature prior to the 2010 legislative session.
Although encouraged to do so, the Leadership of the General Assembly did not pursue an interrogatory to the Colorado Supreme Court requesting an opinion on the constitutionality of their proposed taking of PERA retiree public pension benefits. The Leadership of the General Assembly did not propose that an interim study committee be appointed to examine potential PERA pension reforms that would comply with Colorado Constitution. Such actions on the part of the General Assembly’s Leadership would have resulted in a level of knowledge of public pension contractual rights on the part of the members sufficient to prevent even 27 statehouse lobbyists from pushing SB10-001 through the legislative process.)
NASBO:
“The yearly . . . employer contribution to the fund comes directly from the state’s operating budget and is called the annual required contribution or (ARC). The ARC represents the level of payment needed for the state to keep pace with the accumulation of benefits.”
“When states contribute significantly less than the ARC, assets in the pension fund may not be able to meet the liabilities that accrue, which can necessitate future taxpayer dollars to cover
the cost of benefits for services delivered in the past. States must consider the issue of equity because, as the Government Accountability Office points out, ‘When the ARC is not paid in full
each year, future generations must make up for the costs of benefits that accrued to employees in the past.’”
(My comment: On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s General Counsel Greg Smith blamed the Colorado General Assembly for the decline PERA’s actuarial funded ratio: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”
Link: http://www.copera.org/pera/about/listeningtour.htm)
This legislative habit of failing to pay annual public pension bills [the ARC deficiency] has been referred to as “taking a pension holiday,” or “putting state expenditures on a credit card.” Skipping out on required PERA pension bills allowed the Colorado General Assembly to redirect this money to discretionary state programs. Colorado state legislators have racked up their PERA credit card balance on an extended “pension holiday.” Rather than acting responsibly and facing the consequences of their negligence, state legislators now seek to raid Grandma’s bank account to pay off their credit card debt. These are our state leaders . . . setting a example for today’s youth.)
NASBO:
“The amount owed on unfunded liabilities can be paid over time because the obligations are amortized much like a mortgage payment.”
(My comment: Colorado PERA Executive Director Meredith Williams in “Setting the Record Straight”:
“PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years.”
https://www.copera.org/pera/about/issues.htm
Silver and Gold Record, March 9, 2006:
“Williams noted that most people don’t have enough money to pay off their mortgages, and that PERA’s assets have exceeded its total liabilities only twice in its 75-year history. ‘We have 74 percent of the mortgage, but some people are making hay out of that,’ he said.”
https://www.cu.edu/sg/messages/4871.html)
NASBO:
“When a pension plan’s accrued actuarial liability exceeds the actuarial valuation of assets the plan is said to have an unfunded actuarial accrued liability (UAAL) or unfunded liabilities.”
“The ratio of liabilities to assets is depicted as a pension plans’ funding ratio, which indicates the level of funds available for paying accrued benefits. The benchmark for many state and local plans is to maintain an 80 percent funding ratio or enough assets to cover 80 percent of accrued liabilities.”
(My comment: “Mr. [Meredith] Williams was quoted in the same report as saying ‘Most pension funds are considered sound at 80 percent funding levels.’”
“Meredith Williams ‘said at the Senate Finance Committee hearing [on SB10-001] in January that PERA needed to be funded at 100 percent. When the PERA representatives were asked by a member of the committee why in view of the fact that PERA had only been funded at 100 percent for about seven of the past thirty years [actually two of the last eighty-one years], it was necessary now. The answer was ‘it just makes things easier.’”
Link:
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
In February 2011, Colorado PERA’s General Counsel wrote in the periodical “Government Finance Review,” that, in order for a PERA pension reform to be found “reasonable” under the law, changes to the Colorado PERA pension must be “the minimum changes necessary.” The next year, June 26, 2012, Colorado PERA’s independent actuary, Cavanaugh MacDonald Consulting, LLC, wrote in the 2011 Colorado PERA CAFR: that the 100 percent funding threshold put into Colorado law by SB10-001 is much stronger than is necessary [i.e., not "the minimum change necessary"] to meet public pension regulatory [GASB] standards. Alteration of the statutory Colorado PERA pension contract in 2010 [SB10-001] by incorporation of this 100 percent PERA pension funding threshold placed unnecessary financial pressure on the PERA pension trust funds, creating the Legislature’s desired rationale for breaking pension contracts, and does not represent the “least drastic” reform option available to the Colorado General Assembly.
You can see that, in 2010, when Leadership decided to attempt a Colorado PERA pension contract breach, they were determined to “go big.” If they were going to use recent [2008/2009] market volatility as a “window” to attempt to slash state and local government pension debt, why not roll the dice and slash the PERA pension debt dramatically? Why not push 90 percent of the cost-shift in their bill, SB10-001, onto PERA retirees? PERA retirees were weak and unrepresented . . . an easy target for PERA’s hired lobbyists. Instead of placing a PERA pension funded ratio of 80 percent in the title of SB10-001, why not bet the farm and stick in a 100 percent funded ratio threshold? [Note that another state that has been condemned for its attempt to take public pension COLA benefits, Rhode Island, proposes to continue its own pension theft until just an 80 percent funding threshold is achieved. The Rhode Island theft is thus, comparatively, the lesser crime.] This is what happens when lobbyists run the legislative show. Greed takes over.
Note this 2012 Fitch Ratings position on public pension funding levels: “Fitch generally considers pensions with funded ratios 80% and above to be well-funded.” Also, in a 2011 Fitch Ratings report, Fitch notes that a 70 percent actuarial funded ratio for public defined benefit pensions is considered an “adequate” actuarial funded ratio.
Link:
http://www.ncpers.org/Files/2011_enhancing_the_analysis_of_state_local_government_pension_obligations.pdf)
Back to NASBO:
“In the past, pension dollars accounted for a much greater share of state budgets than they do today (See graph at Save Pera Cola on Facebook.)”
“Overall, pension contributions represent a small percentage of states’ operating budgets at roughly 3.8 percent.”
(My comment: Jennifer Paquette, Colorado PERA Chief Investment Officer, May 22, 2011, Denver Post:
“In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.”
Note that according to the NASBO graph, in the 1980s, U.S. state and local government expenditures to meet public pension obligations reached six percent of total state and local government expenditures, nearly three times Colorado’s public pension burden in 2008 as identified by Colorado PERA’s Chief Investment Officer above.)
NASBO:
“Center for Retirement Research at Boston College, October 2010 – Public Pension Contributions as a Percent of State and Local Government Budgets.”
NASBO:
“Pension liabilities can also be viewed as a debt structure component, comprising one aspect of a state’s long-term outstanding debt. Therefore, state pension systems are a factor that rating agencies consider before issuing an opinion on a state’s ability to repay debt obligations. The degree to which states consistently pay their ARC indicates that other debt obligations will likely be met through the normal budget process.”
“Pension obligations are referred to as ‘riskless’ because the payments are guaranteed to beneficiaries.”
Link to complete NASBO public pension Issue Brief:
http://www.nasbo.org/sites/default/files/pdf/A%20State%20Budgeting%20Perspective%20on%20Public%20Pensions.pdf
Colorado PERA active and retired members, the proponents of SB10-001 would have you, and Colorado courts, believe that your accrued pension benefits are a burden on Colorado state and local governments. In reality, pension contributions made by Colorado governments are a fraction of public pension contributions in other states. The Colorado General Assembly and self-interested lobbyists want to conceal many truths from you and the courts. Help bring the truth to light in our state. Do your part to preserve the rule of law in Colorado. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
DO COLORADO PERA RETIREES HAVE A DUTY TO DIE?
The average age of a Colorado PERA retiree has now passed 70 years. In 2010, a majority of the members of the Colorado General Assembly determined that these Colorado residents were no longer full “citizens” of Colorado. They no longer deserved protections afforded by the Colorado Constitution.
Agreeing with lobbyists in 2010, a majority of Colorado legislators decided that this group of elderly Coloradans should have no voice. They were a burden on Colorado. Lifetimes that had been spent serving Coloradans deserved no recognition. Thousands of these PERA retirees were in hospitals or nursing homes. Under no circumstances would these PERA retirees ever show up at the Colorado Capitol’s lobbies to defend their constitutional rights. The State of Colorado’s contracts with these “residents” were inferior to the state’s contracts with corporations. Colorado PERA retiree contracts could be casually discarded.
“You’ve got a duty to die and get out of the way,” said former Colorado Governor Dick Lamm decades ago. The former Colorado Governor was speaking in support of physician-assisted suicide; nevertheless, his words came to mind in 2010 when the Colorado General Assembly voted to break Colorado’s contracts with elderly Colorado PERA pensioners.
http://en.wikipedia.org/wiki/Richard_Lamm
The State of Colorado, the 15th wealthiest state in the nation, a state with an unexpected billion dollar tax bonus in next year’s budget, a state that pumps $700 million into pensions that are not its responsibility while ignoring its own pension contracts, a state that recently granted $105 million in discretionary property tax relief . . . that state is burdened by its elderly and therefore must illegally seize their property.
As Colorado PERA officials have informed us, Colorado legislators have skipped out on their pension obligations for a decade . . . they haven’t paid their pension bills (ARC). In 2010, a majority of Colorado legislators decided to try and use recent market volatility as an excuse to take money from this group of PERA retirees (who, by the way, bear no “market risk” in their “defined” benefit pension plan.) Colorado legislators decided to inflict a compulsory “shared sacrifice” on PERA retirees. This “shared sacrifice” was put into Colorado law, to help keep taxes low in the state with the lowest per capita tax receipts in the country. Each new year finds thousands of criminals convicted in the United States for misappropriating the assets of the elderly . . . tapping an old man’s bank account for a “compulsory shared sacrifice.”
IS THE STATE OF COLORADO OBLIGATED UNDER COLORADO LAW TO REPORT ITSELF FOR “ELDER FINANCIAL ABUSE”?
I find tremendous irony in the fact that the Colorado General Assembly has recently enacted legislation that requires reports of financial abuse of Colorado residents over 70 years of age.
“SB 13-111: Requiring Certain Mandatory Reporters to Report Suspected Abuse of Persons 70 Years of Age or Older.”
(My comment: The taking of one-third of an at-risk elder’s contracted, accrued, earned, “fully-vested” pension benefits to maintain Colorado’s position as a “tax haven” is undeniably abusive.)
“Under the bill, on and after July 1, 2014, certain professionals (mandatory reporters) who observe the abuse or exploitation of a person who is 70 years of age or older (at-risk elder) or who have reasonable cause to believe that an at-risk elder has been abused or has been exploited and is at imminent risk of abuse or exploitation are required to report such fact to a law enforcement agency within 24 hours after making the observation or discovery. A mandatory reporter who fails to report commits a class 3 misdemeanor.”
(My comment: Under this legislation, a person who steals a paltry $1,000 from an at-risk elder must be reported. Why should an organization that illegally takes one-third of an at-risk PERA retiree’s pension not also be reported?)
“A person who exercises undue influence to convert or take possession of an at-risk elder’s money, assets, or other property commits statutory theft.”
“Within 24 hours after receiving a report of abuse or exploitation of an at-risk elder, a law enforcement agency shall notify the at-risk elder’s county department and district attorney’s office of the report. The law enforcement agency shall complete a criminal investigation when appropriate. Upon completion of an investigation, the law enforcement agency shall provide a report of the investigation to the at-risk elder’s county department and a district attorney’s office.
“On or before January 1, 2014, the peace officers standards and training board (P.O.S.T. board) shall create and implement a training curriculum to prepare peace officers to recognize and address incidents of abuse and exploitation of at-risk elders.”
http://cbaclelegalconnection.com/tag/elder-law/
From the SB13-111:
“(e) The general assembly should study and implement specific recommendations for combating financial exploitation of elder adults . . .”
(10) “EXPLOITATION” MEANS AN ACT OR OMISSION COMMITTED BY A PERSON WHO: (a) USES DECEPTION, HARASSMENT, INTIMIDATION, OR UNDUE INFLUENCE TO PERMANENTLY OR TEMPORARILY DEPRIVE AN AT-RISK ELDER OF THE USE, BENEFIT, OR POSSESSION OF HIS OR HER MONEY, ASSETS, OR PROPERTY;
(My comment: “Deception . . . undue influence to permanently . . . deprive an at-risk elder . . . of her money.” This phrase perfectly encapsulates the Colorado PERA legal, lobbying, and political campaigns to break Colorado PERA retiree pension contracts in 2009/2010.)
(12) “Position of trust” means assuming a responsibility, duty, or FIDUCIARY relationship toward an at-risk adult . . .
(My comment, Colorado PERA statutes: “As FIDUCIARIES, such [PERA Board] trustees shall carry out their functions solely in the interest of the members and benefit recipients and for the exclusive purpose of providing benefits and defraying reasonable expenses incurred in performing such duties as required by law.”)
“THEFT FROM THE PERSON OF AN AT-RISK ELDER BY MEANS OTHER THAN THE USE OF FORCE, THREAT, OR INTIMIDATION IS A CLASS 4 FELONY WITHOUT REGARD TO THE VALUE OF THE THING TAKEN.
(7.5) ANY PERSON WHO EXERCISES UNDUE INFLUENCE TO CONVERT OR TAKE POSSESSION OF AN AT-RISK ELDER’S MONEY, ASSETS, OR OTHER PROPERTY COMMITS THEFT . . .”
(My comment: Colorado Court of Appeals on PERA pensioner property rights: “See Lynch v. United States, 292 U.S. 571, 579 (1934) (contract rights can constitute property interests protected by the Takings Clause) . . . In light of our conclusion that the court erred in that regard, we also reverse the summary judgment on the Takings Clause claim.”
http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf
For the complete bill, SB13-111, visit this link:
http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/3006FD57CDD34B8287257AEE00570CDC?open&file=111_rer.pdf
In an eleven-page letter, dated August 2, 2010, from the Ritter Administration (Office of the Colorado State Controller) to the Governmental Accounting Standards Board, GASB, (the national regulator for public pension plans) officials of the Ritter Administration note that SB10-001 will cost every Colorado PERA retiree $165,000 over the next 20 years. Ritter Administration officials in 2010:
“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.” You can read the entirety of the letter on the GASB site here:
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791
Colorado Coalition for Elder Rights and Abuse Prevention:
“Our mission: to promote state-wide understanding of elder/at-risk adult abuse and the rights and protections available to elder and at-risk adults.”
“What is financial exploitation? The improper use of an elder’s funds, property or assets constitutes financial exploitation or abuse.”
“By far, the greatest number of elder abuse cases involves some type of financial exploitation.”
http://ccerap.org/
Not even the retiree organization, Colorado AARP, will defend the constitutional rights of Colorado PERA retirees. In 2009/2010, the Colorado AARP decided to do nothing to defend PERA retiree constitutional rights. Here is a statement from an AARP representative: “The (Colorado) AARP state office, with input from our volunteer leadership, reached the decision to monitor SB10-001.” How does the “monitoring” of a breach of contract protect the interests of retirees?
“AARP ElderWatch is designed to operate as a clearinghouse for complaints, educational information, and training materials dealing with the financial exploitation of elderly Coloradoans.”
http://hotline.aarpelderwatch.org/public/home.html
Colorado PERA active members, is this the future you desire? A future in which contractual rights to your accrued benefits can be casually ignored by your employer?
Colorado PERA retirees, when state legislators ignore the Colorado Constitution they have sworn to uphold, courts must necessarily intervene to defend that constitution. Support the rule of law in Colorado. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
HICK SIGNS NEXT YEAR’S STATE BUDGET; PROVIDES MORE EVIDENCE THAT THE STATE FACES NO FINANCIAL “CRISIS” WARRANTING BREACH OF ITS PENSION CONTRACTS.
STATE LAWYERS ARGUE THAT COLORADO CANNOT MEET ITS OWN CONTRACTUAL PENSION OBLIGATIONS. IF THIS IS TRUE, HOW HAS THE STATE MANAGED TO PAY $700 MILLION FOR PENSIONS THAT ARE NOT ITS CONTRACTUAL OBLIGATION?
Three years ago, a mob of statehouse lobbyists (paid by self-interested parties) set their sights on breaking Colorado state and local government pension contracts. These 27 lobbyists successfully persuaded a majority of Colorado state legislators to attempt to break the contracts of Colorado PERA pensioners. In effect, the lobbyists intend to use the force of government to take money from older Coloradans to subsidize state and local government budgets.
The pensioners whose property was seized immediately filed a lawsuit, Justus v. State. A defendant in the case, the Colorado PERA pension system, notes (in its May, 2010 Motion to Dismiss, page 12) that even the prime sponsor of the legislation they are attempting to defend considers Colorado PERA’s pension debt to be a “financial liability” of the State of Colorado.
From the PERA Defendant’s Motion to Dismiss:
“Senate Minority Leader Penry, another co-sponsor of the bill, called PERA’s unfunded pension liability the ‘single largest financial liability facing the State of Colorado.’ Id. at 9-10 (statement of Sen. Joshua Penry, Senate Minority Leader).”
The PERA Defendants also note, on page 27 of their Motion to Dismiss, that ” . . . PERA is . . . an instrumentality of the state . . .”
http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf
The PERA Defendants highlight the fact that Colorado PERA pension debt is a financial liability of the State of Colorado in legal briefs, so why have they bothered appealing a recent Colorado Court of Appeals decision making this same finding?
The PERA Defendants would have us believe that meeting contractual public pension obligations is a financial burden on the State of Colorado. The defendants would have us believe that the State of Colorado has insufficient financial resources to perform under the Colorado PERA pension contract.
If meeting contractual Colorado PERA pension obligations is such a burden on the State of Colorado, why has the Colorado General Assembly recently and voluntarily agreed to finish paying off $700 million of public pension liabilities that ARE NOT its contractual obligation?
The State of Colorado, the 15th wealthiest state in the nation, is fortunate to find itself with an extra $1 billion in next fiscal year’s budget. Yet, the defendants in the case, Justus v. State, would have us believe that the State of Colorado faces such a severe financial “crisis” that it cannot afford to meet its contractual pension obligations.
Further, if the State of Colorado is indeed confronted by a “financial crisis,” how has the Colorado General Assembly managed to give away $105 million in discretionary property tax relief in next year’s state budget? The PERA Defendant’s arguments continue to defy logic.
When a person hires a lawyer to file a civil case, isn’t it generally safe to assume that the person will try to help their lawyer win the case? That the person will avoid, to the extent possible, actions that are contrary to his legal interests? If an organization is sued and hires a law firm to defend its interests, is it not generally expected that the organization will act in its own defense, and assist the law firm in building a defense?
The State of Colorado is an organization that is currently being sued by its retired workers. The State of Colorado and its pension-administering arm, Colorado PERA, have in-house attorneys, state attorneys general, and an outside, hired law firm defending their breach of Colorado PERA pension contracts. You might expect that the Colorado General Assembly, as a branch of Colorado state government, would assist this host of lawyers in building a case.
You would be wrong.
When the Colorado General Assembly broke the state’s pension contracts in 2010, politics was in the driver’s seat. Is it really a surprise that short-term political considerations predominate in the minds of politicians? Nevertheless, one might expect that Colorado state legislators would at least temporarily attempt to set political considerations aside in order to help Colorado PERA’s in-house and outside hired attorneys build a defense in the case, Justus v. State, i.e., establish “actuarial necessity.”
One would be disappointed.
In 2010, when a majority of state legislators violated Colorado PERA pension contracts, politics controlled. Political calculations and ambitions continue to control in 2013. At the recently concluded legislative session, Colorado legislators could not (even temporarily) resist the impulse to provide political favors to constituents and lobbyists in order to avoid harming the state’s case in the PERA COLA lawsuit. Thus, while their lawyers are trying to establish an atmosphere of “financial crisis,” state legislators are using this year’s billion dollar tax bonus to provide a gift to local governments, paying off local government legacy pension liabilities. With an extra billion dollars in their pockets, we did not see a single Colorado legislator propose that the General Assembly meet ITS OWN contractual pension obligations. At the recently concluded 2013 legislative session, not a single state legislator suggested that a good faith effort be made to catch up with a decade of underfunded PERA pension contributions. Instead, we see a $105 million purchase of votes in the form of a discretionary grant of property tax relief. We see local government lobbyists persuade state legislators to use state government resources to meet local government legacy pension debt.
I have no objection to discretionary expenditures that are deemed appropriate by the Colorado General Assembly. However, I do object to arguments by attorneys representing the State of Colorado that the state cannot meet its own contractual pension obligations while it is giving away revenues to pay off local government pension obligations. Having made such appropriations, representatives of the Colorado General Assembly cannot legitimately argue in court that financial need has forced the Legislature to break Colorado PERA pension contracts.
Business Week:
“Lawmakers are also paying down $140 million in state debt for police and firefighter pensions, and adding $30 million for water storage projects in rural Colorado.”
http://www.businessweek.com/ap/2013-04-29/hickenlooper-signs-next-years-budget-for-colo-dot
Note again, that this $140 million is not “state debt,” in spite of the effort of politicians to portray these local government pension liabilities as “state debt.” This deception serves their political purposes.
September 19, 2012, FPPA testimony (Dan Slack, CEO, FPPA) regarding the obligation of the State of Colorado to pay for local government “Old Hire Police Officers Pension Plans” to the Colorado General Assembly’s Police Officers and Firefighters Pension Reform Commission (29 minutes into the hearing):
“So the State has made certain commitments, but has been very careful not to make binding obligations upon itself as the state to provide some assistance with funding for these plans.”
Link:
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage)
The fact that FPPA Old Hire Pension Plan unfunded liabilities are not a contractual obligation of the State of Colorado is also made clear in Colorado statutes and in the language of Referendum C.
The discretionary nature of state grants to fund Colorado local government pensions is stated clearly in the “Legislative Declaration” (preceding Section 31-31-101, C.R.S. ) in Colorado law. Section 31-31-101, C.R.S. Legislative Declaration:
“The general assembly further declares that state moneys provided to municipalities, fire protection districts, and county improvement districts DO NOT CONSTITUTE A CONTINUING OBLIGATION OF THE STATE to participate in the ongoing normal costs of pension plan benefits, except for state funding of death and disability benefits as specified in this article, but are provided in recognition that the local governments are currently burdened with financial obligations relating to pensions in excess of their present financial capacities.”
http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/70EFF65CF1F144CF87257B34007B5B95?Open&file=SB234_r1.pdf
A few years ago, a Colorado Department of Treasury JBC Budget Briefing document provided an accounting of the Colorado General Assembly’s historical discretionary grants to meet local government public pension obligations:
http://www.state.co.us/gov_dir/leg_dir/jbc/2011-12/trebrf.pdf
Here are a few excerpts:
“State Contributions for Local Fire and Police Pension Plans: Since 1980, the State has contributed almost $540 million to the FPPA to eliminate the unfunded liability of the ‘old-hire’ pension plans.”
From page 29 of the JBC document:
“To put this figure in perspective, the total state General Fund operating budget in the FY 1978-79 Long Bill was just over $1.0 billion. Thus the $500 million shortfall in local plans represented nearly half of the annual state General Fund budget. If the magnitude of this shortfall were adjusted for inflation, it would exceed $1.8 billion.”
From page 31 of the JBC document:
“During the ensuing years, the State’s contribution to the old hire plans equaled about 41 percent of the total combined contributions of the state, local governments and employees.”
From Senate Bill13-234 – $132.4 million to pay off local government pension obligations (this appropriation, coupled with funding in next year’s Long Bill brings total state appropriations to pay off local government pension obligations to approximately $700 million):
SB13-234, CONCERNING THE STATE’S AUTHORITY TO PREPAY ITS OBLIGATION FOR THE UNFUNDED ACCRUED LIABILITY OF OLD HIRE PENSION PLANS THAT ARE AFFILIATED WITH THE FIRE AND POLICE PENSION ASSOCIATION.
(My comment: Note the deception present even in the title of the bill. As with SB10-001, the rank and file membership did not bother to root out deception.)
Page 2:
“(b) ON MAY 31, 2013, THE STATE TREASURER SHALL TRANSFER ONE HUNDRED THIRTY-TWO MILLION FOUR HUNDRED NINE THOUSAND THREE HUNDRED THIRTY-NINE DOLLARS FROM THE GENERAL FUND TO THE OLD HIRE PLAN MEMBERS’ BENEFIT TRUST FUND CREATED IN SECTION 31-31-701 (6).”
http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/70EFF65CF1F144CF87257B34007B5B95?Open&file=234_enr.pdf
Next year’s property tax relief grant, from the Colorado Long Bill – $105 million in property tax relief:
Colorado State Budget 2013/2014 (Long Bill SB13-230), page 238, “Homestead” property tax relief grant: $105,200,000
http://www.leg.state.co.us/CLICS/CLICS2013A/csl.nsf/BillFoldersSenate?OpenFrameSet
Denver Post:
“But Joint Budget Committee vice-chairwoman Rep. Claire Levy, D-Boulder, lauded her colleagues on the committee and noted that with Colorado’s economic recovery, the state is no longer in a position that requires it to cut programs.”
http://www.denverpost.com/breakingnews/ci_23131374/hickenlooper-sign-next-years-20-5-billion-colorado
HICK’S LETTER TO THE GENERAL ASSEMBLY ON THE 2013/14 STATE BUDGET.
April 29, 2013:
“With thanks to the members of the sixty-ninth General Assembly, this budget is the result of a bipartisan dedication to Colorado’s values. We are enacting this budget at a unique time in our
history. After enduring a significant economic downturn, Colorado’s economy is outperforming the nation’s. The resulting recovery is allowing us the opportunity to allocate resources for the common good.”
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheadername1=Content-Disposition&blobheadername2=Content-Type&blobheadervalue1=inline%3B+filename%3D%22A+letter+to+the+general+assembly+from+Hickenlooper.pdf%22&blobheadervalue2=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251854377268&ssbinary=true
Denver Business Journal:
“Colorado Gov. John Hickenlooper on Monday signed into law the $20.5 billion state budget for the 2013-14 fiscal year . . . ”
“The new eco-devo money — a priority for Hickenlooper since he introduced his proposed budget in November — includes:
• $2.9 million more for incentives for relocating and expanding companies.
• $1 million for increased film incentives.
• $2 million for increased tourism marketing and development of a state branding campaign to attract tourists and entrepreneurs.
http://www.bizjournals.com/denver/news/2013/04/29/hickenlooper-signs-state-budget-with.html
Boulder Daily Camera:
“Lawmakers are also paying down $140 million in state debt for police and firefighter pensions, and adding $30 million for water storage projects in rural Colorado.”
“We’re in the happy position of no longer having to cut programs,” said Rep. Claire Levy, D-Boulder, one of six budget writers.
http://www.dailycamera.com/nation-world-news/ci_23135284/hickenlooper-signs-next-years-state-budget
KDVR:
“Republicans support those pieces of the budget, as well as a measure House Republicans fought for to pay off a long-standing debt to the Fire and Police Protection Association.”
http://kdvr.com/2013/04/29/hickenlooper-signs-next-years-20-5-billion-budget-into-law/
(My comment: Can you believe the voracity with which Colorado media will gobble up the propaganda?)
COLORADO COURTS: MEMBERS OF BOTH MAJOR PARTIES HAVE BEEN LOBBIED HARD AND PERSUADED TO TAKE MONEY FROM PENSIONERS, SO PLEASE GIVE IT YOUR BLESSING.
Much has been made in the press (and in legal briefs) of the fact that both Democrats and some Republicans voted for SB10-001 in 2010.
From the Colorado PERA Defendant’s Motion to Dismiss:
“In a BIPARTISAN effort to address this critical funding shortfall, the General Assembly enacted Senate Bill 10-001 to make changes to the state pension system.”
http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf
Of course, the term “shortfall” implies that PERA-affiliated employers need the ability to “pay off the mortgage” today, which is untrue. If a Colorado PERA “critical shortfall” existed in 2010, as we have seen, the General Assembly is itself the author of that “critical shortfall.”
This PERA Defendant argument distills to: “Colorado courts we both want to take money from old people, so please give it your blessing.” The fact that both a Republican and a Democrat support a bill does not necessarily place the stamp of morality or constitutionality on the legislation.
If a lobbyist persuades one Democrat and one Republican to mug an old lady, is the mugging thereby rendered “moral” because it was a “bipartisan” mugging? If a lobbyist persuades both a Republican and a Democrat to raid an old lady’s bank account, will the theft conform with statutory or constitutional law in the United States? After all, it was a “bipartisan” theft.
Occasionally, “bi-partisan” collusion serves the political interests of both parties. Many Colorado conservatives would like to see the Colorado PERA defined benefit plan eliminated entirely. A fraction of these conservatives will look the other way if constitutional rights are trampled in the process (as we know, not all conservatives will look the other way.) Many Colorado Democrats naturally want to serve the interests of organized labor. In 2009, Colorado’s public sector unions decided that the breach of Colorado PERA retiree pension contracts would help to minimize future pension contributions from their dues-paying membership. So, the unions supported SB10-001, and convinced some of their legislative friends to ignore their oaths of office. As always, follow the money.
In 2010, it happened that “bi-partisan” Colorado political interests intersected on immoral and unconstitutional ground. Collusion benefited some Democrats and some Republicans. In this environment, a collective push from 27 lobbyists was sufficient to enact SB10-001.
Colorado PERA active and retired members, politics can be a filthy business. Don’t let dirty politics rob you of your constitutional rights. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
ARGENTINE AND COLORADO PENSION PIRACY . . . MORALLY EQUIVALENT?
In 2008, the Argentine Legislature passed a bill taking $25 billion in pension assets in which millions of Argentines held a property interest. This taking bolstered Argentina’s financial condition.
In 2010, the Colorado Legislature passed a bill abrogating the contractual obligation of Colorado PERA employers to pay approximately one-third of a PERA member’s accrued PERA pension benefits over the next 70 years. Thousands of Colorado pensioners hold a property interest in this PERA contracted annuity. This taking bolstered Colorado’s financial condition.
Which government has the greater respect for property rights? How is Colorado’s taking of pension property rights not the moral equivalent of Argentina’s taking of pension property rights?
From the organization “Friends of PERA”:
“There is a misconception that the ‘taxpayers’ are owners of the (PERA pension) fund; the trust fund is owned by the beneficiaries of the fund . . .”
http://www.friendsofpera.com/facts/index.html
These two instances, in which pension contracts were breached by a legislative body (the Argentine National Congress and the Colorado General Assembly), are not factually identical, but they are quite similar. In both cases pension contracts were violated to make additional funds available to a government for that government’s discretionary expenditures, and to curry political favor.
If contracts are meaningless in the United States, if U.S. state and local governments are permitted to take accrued pension benefits with impunity, the moral standing of our nation is diminished. We will find ourselves on the same moral plane with governments that brush aside the rule of law. How exceptional will we find a United States that takes, by force, property earned by its citizens over decades? Does the theft of contracted pension benefits not somewhat diminish the luster of that “shining city upon a hill”?
The Wall Street Journal on the Argentine pension taking:
“‘With the [latest, Argentine] announcement, the custom of violating the rules of the game has been repeated, which deepens the lack of confidence,’ political analyst Rosendo Fraga wrote in the Buenos Aires daily La Nacion.”
http://online.wsj.com/article/SB122460155879054331.html
Professor Secunda of Marquette University on U.S. state government takings of accrued pension benefits:
“What the states are trying to do is change the rules in the middle of the game.”
http://truth-out.org/news/item/13498-pensions-a-promise-is-a-promise-unless-its-inconvenient
Colorado Supreme Court in Bills:
“Whether it be in the field of sports or in the halls of the legislature it is not consonant with American traditions of fairness and justice to change the ground rules in the middle of the game.”
Wall Street Journal:
“Buenos Aires economist Aldo Abram, among many other economists, wasn’t buying that argument. ‘They were in a tight situation and this was an accessible source of funds,’ he said.”
“Opposition leader Elisa Carrió vowed to contest it, saying, ‘The government measures aren’t designed to better the retirement system but rather to plunder the funds of the retirees.’”
Washington Post:
“The proposal by (Argentine) President Cristina Fernández de Kirchner last month to nationalize about $25 billion in private pension funds provoked an outburst of criticism that the government was seizing retirement savings for cash to shore up its finances.”
“‘The announced nationalization-expropriation of the Argentine pension funds constitutes one of the most blatant acts of financial piracy in the country’s recent history,’ wrote Claudio Loser, senior fellow at the Inter-American Dialogue, in the Latin American Advisor newsletter.”
“Sen. Ernesto Sanz of Mendoza, who opposed the nationalization, said: ‘We don’t have any doubt that this is violating the right to private property. Not just for us, but for all society and the world. This is clearly confiscation.’”
http://articles.washingtonpost.com/2008-11-21/world/36794754_1_pension-system-pension-funds-private-pension
Colorado Court of Appeals on PERA pensioner property rights:
“See Lynch v. United States, 292 U.S. 571, 579 (1934) (contract rights can constitute property interests protected by the Takings Clause) . . . In light of our conclusion that the court erred in that regard, we also reverse the summary judgment on the Takings Clause claim.”
http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf
New York Times:
“The (Argentine) measure . . . was criticized by political opponents and analysts as a move to shore up government coffers to try to head off a fiscal crisis in 2009 . . .”
“The announcement . . . led analysts to question whether the nationalization, which is subject to approval by the Argentine Legislature, puts property rights at risk and threatens the rule of law in the country.”
“It may be the first time a Latin American government has expropriated cash.”
Argentina’s President, Mrs. Kirchner: ” . . . we are protecting our retirees and our workers.”
“She dismissed criticism that the move was simply a grab for cash . . .”
“The opposition leader Elisa Carrio . . . told radio Mitre on Tuesday that the government was trying to ‘loot the funds of retirees.’”
“By taking over the pension funds the government can continue to spend on programs that help it retain political support.”
“If the move is approved, her government may have secured an important electoral asset, which could help guarantee Mrs. Kirchner’s political survival.”
http://www.nytimes.com/2008/10/22/business/worldbusiness/22argentina.html
Lebanon, Pennsylvania Daily News Editorial:
“The reasons for the pirating of deposits or the nationalization of pensions don’t matter nearly as much as the demonstrated willingness of government to treat money – privately held money, money earned by individuals – as a state resource, as needed.”
“And we have to wonder, again, who might be paying attention in this country (the USA); how good are our protections against such a thing. Forget lip service and what anyone may claim ‘could never happen.’”
(My comment: As we have seen, it not only can happen, it is happening . . . in Colorado.)
“How good are our protections? How strong are the underpinnings of our individual rights against such demonstrable government-first thinking?”
http://www.ldnews.com/editorial/ci_22872828/argentina-private-pension-holders-well-just-take-that
The Colorado Legislator’s Oath of Office: “I do solemnly swear by the everliving God, that I will support the Constitution of the United States and of the State of Colorado . . .”
The Colorado Constitution: “No ex post facto law, nor law impairing the obligation of contracts, or retrospective in its operation . . . shall be passed by the general assembly.”
Support contractual public pension rights and the rule of law in the United States. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook.
BLOOMBERG COLUMNIST: RHODE ISLAND’S TAKING OF CONTRACTED PENSION COLA BENEFITS COST THE STATE’S PENSIONERS ONE-THIRD OF THEIR ACCRUED PENSION BENEFITS.
GOVERNOR CHAFEE: “I’LL HAVE TO THINK ABOUT” WHY THE STATE CAN TAKE A PENSIONER’S CONTRACTED COLA, BUT CAN’T DEFAULT ON MORAL OBLIGATION BONDS.
GOVERNOR CHAFEE: “WE WERE TOO AGGRESSIVE,” IN OUR 2011 PENSION REFORM. I WAS AFRAID THEY WOULD OVERRIDE MY VETO.
IF RHODE ISLAND CAN’T HONOR ITS PENSION COLA DEBT TO PUBLIC PENSIONERS, WHY IS IT HONORING ITS PRIVATE SECTOR MORAL OBLIGATION BONDS ISSUED FOR A BANKRUPT PRIVATE COMPANY?
Josh Barro of Bloomberg writes on May 1, 2013:
“Under Chafee, Rhode Island has drawn national attention for two major fiscal events. First, the state legislature passed (and Chafee signed) the country’s most sweeping public employee pension reform. The measure included a provision discharging about $1 billion in existing pension liabilities by freezing retirees’ cost of living adjustments (COLAs) for 15 years. This wasn’t a small cut; by the time the freeze is over, many retirees’ payments will be one-third smaller than initially promised.”
http://www.bloomberg.com/news/2013-05-01/chafee-s-confusion-about-moral-obligation.html
http://www.bloomberg.com/view/bios/josh-barro/
“Second was the implosion of 38 Studios, former Red Sox pitcher Curt Schilling’s video game enterprise. Rhode Island offered the company a loan guarantee to relocate from Massachusetts. Now, the venture is bankrupt, and the state is on the hook to bondholders for $112 million.”
Columnist Josh Barro:
“That raises a question that many state residents — especially retired employees — would like to see answered: If Rhode Island can’t afford to keep its promises to retirees, how can it afford to keep its promise to the 38 Studios bondholders? Chafee isn’t prepared to answer.”
How is it that RI can afford to honor its obligations to a bankrupt video game company, but cannot afford to honor its contractual obligations to its retired public workers? How can the State of Colorado afford to pay $700 million for local government pension obligations that ARE NOT the state’s contractual obligation (Old Hire Fire and Police pensions,) and (this session) provide $104 million in discretionary property tax relief, but the State of Colorado cannot afford to honor its contractual obligations to its retired public workers?
How is it that Colorado, the 15th wealthiest state in the nation, a state with an extra billion dollars for the next fiscal year, can’t afford to honor its pension contracts? Why does the State of Colorado propose to break public pension contracts, but honors its other bonded moral obligations?
Governor Chaffee dismisses the idea of defaulting on the 38 studios moral obligation bonds.
Chaffee: “The words moral obligation speak for themselves.”
Columnist Josh Barro:
“But aren’t the pensions a moral obligation, too? After all, people spent their careers working for state and local governments in exchange for specific pension benefits. I asked Chafee, why it was acceptable to freeze the COLAs and unacceptable to break the moral obligation on the bonds.”
“He responded: ‘Good question. A lot of discussion about that and, in fact, we’re in court on that issue with the unions.’ But he never got around to explaining why his position is right and the unions’ is wrong.” “Instead, he sought to disclaim ownership of the COLA freeze, which was part of the 2011 pension reform law and the key issue the unions are suing over.”
Chaffee: I took the COLA because the Legislature would have overridden my veto:
“Asked why he signed, he responded that he had to weigh costs and benefits, and that a key concern was that a veto would have been overridden by the large legislative majority that had passed the bill.”
Yet, in 2011, Governor Chaffee supported the proposed pension COLA taking:
“Chafee urged the legislature to pass pension reform, and helped build the veto-proof majorities that got the bill to his desk. I witnessed this: In October 2011, I spoke on a panel after a joint presentation by Chafee and state Treasurer Gina Raimondo in which they advocated the pension reform plan that eventually became law. At the time, Chafee also called for additional reforms that would have drawn more litigation by cutting benefits in locally run pension plans that were left untouched by his joint reform with Raimondo.”
Columnist Josh Barro:
“Now, Chafee says he was the voice of caution: ‘We got a little too aggressive. The treasurer was very aggressive, I was more, ‘we need buy-in, avoid litigation.’”
“This would repeat a pattern that we’ve often seen in state level pension reforms — a law that looks like it will produce big cost savings gets unwound years later for political or legal reasons.”
“As the interview ended, Chafee remarked, ‘I’ll have to think a little more about Josh’s question’ — the one about why you can freeze COLAs but can’t default on 38 Studios.”
http://www.bloomberg.com/news/2013-05-01/chafee-s-confusion-about-moral-obligation.html
Support contractual public pension rights. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
ALL MANNER OF CONTRADICTORY PUBLIC POLICY POSITIONS FIT UNDER A BIG SKY.
MONTANA PUBLIC SECTOR UNIONS: WE SUPPORT THE LEGISLATURE’S TAKING OF THE CONTRACTED PENSION COLA BENEFIT, AND WE SUPPORT A RETIREE LAWSUIT OVER THE LEGISLATURE’S TAKING OF THE CONTRACTED COLA BENEFIT.
MONTANA GOVERNOR: I’M SIGNING THE BILL TO TAKE THE CONTRACTED COLA; HOWEVER, IT’S ILLEGAL, AND I SUPPORT THE COMING RETIREE LAWSUIT OVER THE COLA TAKING.
MONTANA LEGISLATIVE ATTORNEYS: TAKING THE COLA IS ILLEGAL.
In 2010, Colorado public sector unions, 27 lobbyists, and a majority of “low information” Colorado legislators (on public sector pensions anyway) conspired to erase Colorado state and local government debt by taking accrued pension benefits from Colorado PERA retirees.
Montana public sector unions are now in the pension theft game; however, they should have taken the time to get their story straight up front.
From helenair.com:
“Bullock signs pension fixes, school funding bill.”
“The plan is expected to face legal challenge from unhappy retirees who will argue in court that the changes unconstitutionally break the contractual obligations the state made to employees.”
“The state’s largest employee union, MEA-MFT, said it expects to support the litigation — even though it also still supports the overall fixes.”
http://helenair.com/news/state-and-regional/bullock-signs-pension-fixes-school-funding-bill/article_3502dd1e-d19b-5d69-bb25-c77671a6792f.html
Eric Feaver, President, MEA-MFT:
“There are constitutional questions, questions of contract rights that are raised by so doing (changing guaranteed annual benefit adjustments.)”
“Guaranteed annual benefit adjustments (GABA), as necessary as they are for retirees, are not themselves the pension.”
(My comment: This is deceit. Public pension COLAs are simply a method of delivering a defined, determinable, accrued public pension benefit. Should your mortgage company be able to retroactively hike your mortgage rate, breaking your contract, because the mortgage rate “is not itself the mortgage”? As in Colorado, Montana public sector unions are embracing a ludicrous [but convenient] contrivance.)
From helenair.com:
“In response, Bullock’s budget director Dan Villa said the governor’s office opposed the amendment that sought to change the GABA (COLA) and questioned its constitutionality.”
“‘We understand that both current employees and retirees are considering legal challenges to address the amendments, and we support that action,’ Villa said. ‘It’s important to keep in mind that this likely unconstitutional amendment doesn’t change one important fact: by implementing the remainder of Gov. Bullock’s plan, Montana is the first state in the nation to fix our pension system without raising taxes.’”
http://helenair.com/news/legislature/feeling-betrayed-retiree-group-asks-governor-to-veto-pension-bill/article_a6b2eaac-b2eb-11e2-b352-0019bb2963f4.html
Montana pensioners:
“The Legislature’s own attorneys have repeatedly advised it that GABA is a constitutionally-protected contract with public employees and should not be broken. If the Legislature chooses to advance legislation to renege on this important commitment it has to raise concerns with all citizens as to what other contracts the state may choose to ignore. If a ‘deal’s a deal’ only when the Legislature chooses to honor it, then what about Montana’s other contract commitments?”
“The Legislature should not violate the contract it statutorily committed to with Montana’s public employees. Rather, it should honor the commitments made to current and future government retirees including fully funding GABA.”
“Unlike other states that have variable Cost of Living Adjustments in their pension plans, Montana enacted a guaranteed statutory annual percentage adjustment for its public employees.”
http://helenair.com/news/opinion/readers_alley/montana-should-keep-commitments-to-its-public-employees/article_8cee6aac-98c8-11e2-8aaf-001a4bcf887a.html
Colorado PERA active and retired members, I am speechless. Thankfully, I am still able to type. Support public pension contractual rights in the USA. Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!
MORE ON THE MONTANA PENSION COLA-TAKING. AGAIN, THE GOVERNOR SAYS TAKING THE COLA IS ILLEGAL, BUT HE’S SIGNING THE BILL ANYWAY.
COME AGAIN?
MONTANA GOV. BULLOCK: STATE PENSIONERS WILL WIN THEIR LAWSUIT OVER THE COLA TAKING.
If Colorado’s former Governor Ritter (an attorney) had such views, he wasn’t sharing them in 2010. Many states just want to roll the public pension dice. If they lose their pension contract breach case, they have the status quo, and the courts become the “bad guys.”
From mtprnews.wordpress.com:
“‘We believe that ultimately when current and retired employees bring challenge to them that they will be successful,’ (Gov. Bulllock’s Budget Director Dan) Villa said, adding the bill fixes the retirement system with or without the reduction in yearly raises which he said just make the fix more aggressive.”
“(Association of Montana Retired Public Employees President Russell) Wrigg said he wants the pension fix bills to pass without the raise reductions (COLA taking) – he would prefer that to them (pension reform bills) dying through a veto. He says the group will consider legal actions against the bills if the governor signs them, which is expected. But, he doesn’t approve of the tactic.”
“‘Legislation through litigation is really not the way to solve our problems in this state,’ he said.”‘
http://mtprnews.wordpress.com/2013/05/03/fix-to-state-retirement-systems-opposed-by-retirees/
My comment: “Legislation through litigation” is the strategy employed by the proponents of our Colorado COLA-theft bill, SB10-001. Recall Colorado Deputy Attorney General for Legal Policy and Government Affairs Geoff Blue’s comments [he's now in private practice.] Geoff Blue notes that since Colorado’s education establishment has failed to win new revenues at the polls lately, they are now seeking to “legislate through the courts.” “They’ve been losing so they’re trying to legislate through the courts.” Breaking PERA pension contracts frees up funds for Colorado’s education establishment.
This Montana situation is a first for me . . . I can’t recall another instance, in which a Governor believes that a bill is unconstitutional, but signs it anyway. When the Montana pensioner’s case is filed it will be interesting to see how Montana’s Attorney General goes about defending it. The plaintiffs will certainly bring the Governor’s position on the constitutionality of the pension COLA taking to the attention of the court. The State of Montana as a defendant will have to argue in defense of statutory provisions that the Chief Executive of the State of Montana deems a breach of state contracts.
In the Colorado case, Justus v. State, there is a parallel in that officials from Governor Ritter’s administration wrote a letter to federal regulators (GASB) after the 2010 COLA-taking contravening legal arguments made by the defendants.)
You can read the entirety of the letter on the GASB site here:
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791
Colorado PERA active and retired members, are you as appalled as I am about the irrationality of the public pension debate in the United States? Support public pension contractual rights at saveperacola.com. Friend Save Pera Cola on Facebook.
MONTANA DECIDES TO ATTEMPT A PENSION COLA-THEFT. GOVERNOR BULLOCK “QUESTIONS THE CONSTITUTIONALITY” OF TAKING THE COLA.
BULLOCK, INCREDIBLY, SUPPORTS A PENSIONER LAWSUIT AGAINST THE STATE, BUT WILL LIKELY SIGN THE BILL ANYWAY.
Theatre of the absurd in Montana.
The Montana Legislature has enacted a bill to retroactively take public pension COLA benefits from the state’s public pensioners. Like the Colorado education establishment in 2010, education lobbyists in Montana have their fingerprints all over the Montana Legislature’s attempt to break public pension COLA contracts. (If employers affiliated with the public pension system can break pensioner contracts, that minimizes future pension contributions for dues-paying union members and local government employers. If the bill gets struck down in court, the judges become “the bad guys.”)
Governor Bullock didn’t support the COLA-theft amendment to the bill. Although Bullock thinks the COLA-theft provision in the bill is illegal, it appears he’ll sign the bill into law. (Odd that his primary concern is the taxpayers, but he doesn’t seem to mind squandering millions of taxpayer dollars on litigation.)
Here’s Montana Governor Steve Bullock in his State of the State address:
“We must also meet our responsibility to fix a long-term problem created by our predecessors. I’ve outlined a detailed plan that will shore up our public retirement systems and do so without raising taxes. I look forward to working with this body to ensure that we craft a plan that honors our commitment to Montana’s public servants. A plan that doesn’t go back on the promises we’ve made to our snow plow drivers, prison guards, teachers and other middle class workers who are our friends and our neighbors.”
Link to Governor Bullock’s State of the State speech:
http://watch.montanapbs.org/video/2331212142?starttime=1200000
From helenair.com:
“Feeling betrayed, retiree group asks governor to veto pension bill.”
“Saying it was betrayed by Gov. State Bullock’s office, a group representing retired Montana public employees is urging him to veto the bill that seeks to fix pensions for public employees.”
“We understand that the bill is your bill, and it would be highly unusual for you to veto it at this point, but that is what we are asking,” Russell E. Wrigg, president of the Association of Montana Retired Public Employees, said in the letter Saturday to Bullock. “House Bill 454 tramples on the statutory and constitutional rights of retirees and has the potential to inflict severe harm to current and future retirees.”
“About 2,000 retirees in the Public Employees’ Retirement System belong to the association.”
“At issue was an amendment to the Guaranteed Annual Benefit Adjustment (GABA), to reduce the current 3 percent annual cost of living pension raises.”
“In response, Bullock’s budget director Dan Villa said the governor’s office opposed the amendment that sought to change the GABA and questioned its constitutionality.”
“‘We understand that both current employees and retirees are considering legal challenges to address the amendments, and we support that action,’ Villa said. ‘It’s important to keep in mind that this likely unconstitutional amendment doesn’t change one important fact: by implementing the remainder of Gov. Bullock’s plan, Montana is the first state in the nation to fix our pension system without raising taxes.’”
“‘Moreover, we were shocked to find out that the 1 percent contribution by the employees and the employers would only last six months, and would be eliminated Jan. 1, 2014,’ Wrigg said.”
(My comment: Employers affiliated with a public pension system collude with public sector unions to reduce their future pension contributions by taking money from pensioners. Been there.)
http://helenair.com/news/legislature/feeling-betrayed-retiree-group-asks-governor-to-veto-pension-bill/article_a6b2eaac-b2eb-11e2-b352-0019bb2963f4.html
Montana pensioners:
“The Legislature’s own attorneys have repeatedly advised it that GABA is a constitutionally-protected contract with public employees and should not be broken. If the Legislature chooses to advance legislation to renege on this important commitment it has to raise concerns with all citizens as to what other contracts the state may choose to ignore. If a ‘deal’s a deal’ only when the Legislature chooses to honor it, then what about Montana’s other contract commitments?”
“The Legislature should not violate the contract it statutorily committed to with Montana’s public employees. Rather, it should honor the commitments made to current and future government retirees including fully funding GABA.”
http://helenair.com/news/opinion/readers_alley/montana-should-keep-commitments-to-its-public-employees/article_8cee6aac-98c8-11e2-8aaf-001a4bcf887a.html
Meanwhile, in Pennsylvania, Governor Tom Corbett’s proposal for legal, prospective changes in the state’s pension system is moving along:
From lvb.com:
“The governor also wants to change the formula for future benefits in current employees’ plans. Beginning in 2015, he has proposed reducing the multiplier used to determine future benefits by 0.5 percent.”
(Recall that the Colorado Legislature adopted a bill last year, SB12-149, providing such prospective, legal public pension reform for certain Colorado county governments. This bill honored the accrued public pension benefits of thousands of Colorado government workers and retirees, while two years earlier, the Colorado Legislature passed a bill to seize up to one-third of the accrued pension benefits of Colorado PERA retirees.)
http://www.lvb.com/article/20130501/LVB01/130509987
I believe that this solution of prospective pension reform, reducing the rate of accrual of future pension benefits will ultimately prevail in the United States. It is emerging as a logical and legal pension reform alternative increasingly embraced by public pension legal scholars. Many politicians will not act responsibly unless forced to do so by the courts.
Colorado PERA active and retired members. Contribute at saveperacola.com, and Friend Save Pera Cola on Facebook!
COLORADO LEGISLATURE . . . PAY YOUR DEBTS!
THE COLORADO PERA COLA IS SIMPLY A METHOD OF DELIVERING A DEFINED PERA PENSION BENEFIT.
USE OF THIS METHOD DOES NOT JUSTIFY BREACH OF PENSION CONTRACTS.
Three years ago, a majority of Colorado legislators decided to attempt to break state contracts to cut the debt of Colorado state and local governments. In 2010, Colorado legislators passed a bill, SB10-001, that attempts to discard the obligation of Colorado governments and the state’s pension system, Colorado PERA, to pay cost-of-living (COLA) increases due retirees under their state pension contracts. Retirees in the Colorado PERA pension system, unwilling to allow the State of Colorado to take one-third of their contracted PERA pension benefits, immediately filed a lawsuit (Justus v. State.) Last year, the Colorado Court of Appeals agreed with the retirees that Colorado state and local governments have a contractual obligation to pay the annual cost-of-living adjustments due under the retiree’s contracts. The Court of Appeals also decided that (since the matter has not yet been heard by a jury) the retiree’s lawsuit should be sent back to the trial court (Denver District Court.) The trial court was ordered to determine if the Colorado General Assembly’s breach of Colorado PERA contracts in 2010 was “reasonable,” or “necessary.” Immediately after the Court of Appeal’s ruling last year, both the PERA retirees and the State of Colorado appealed the Court of Appeal’s decision to the Colorado Supreme Court. Both the plaintiffs and the defendants in the case are currently waiting to see if the Colorado Supreme Court will take the case, or send it back to the Denver District Court to make a determination as to “reasonableness” and “necessity.”
http://saveperacola.com/
In 2010, a majority of Colorado legislators decided to attempt to break Colorado PERA pension contracts to free up money for “discretionary” state and local public programs. Although the constituents of these state legislators want public services (good roads, education, police and fire protection) they do not want to pay for these services. Incredibly, many of the constituents of Colorado legislators do not want to pay for public services that they have already consumed. Therefore, they encouraged Colorado legislators to break Colorado PERA pension contracts.
For some reason, in 2010, a majority of Colorado state legislators arrived at the conclusion that Colorado’s public pension contracts are inferior to the state’s corporate contracts. If there is a threat to the financial well-being of the State of Colorado (i.e., the state with an extra billion dollars to spend next year) all Colorado contracts should be on the table, not just one set of contracts.
Like salary, Colorado PERA pension COLA benefits are compensation for work performed; specifically “deferred compensation,” presently earned. When a Colorado PERA member has completed the job, and finished earning her salary, her employer cannot retroactively take that salary from her. Her right to receive her earned salary is plainly a contractual obligation of her employer. The pension benefits that this PERA member earns each day are, similarly, a contractual obligation of her employer.
For each day that a Colorado PERA member works she is entitled to know precisely what she is earning that day. She deserves to know both the salary and the pension benefit that she earned in exchange for her day of labor. When her day of work is complete, her employer cannot retroactively change the agreement. Her compensation for the day of work is defined, just as her deferred pension compensation is defined in Colorado law. As we have seen, deferred compensation due Colorado PERA members must stand “immutable for work already performed.”
A public pension COLA is simply a method by which a defined pension benefit is provided. There is nothing inherent in this “method” (provision of a pension COLA) that negates its essence as a contractual obligation of Colorado PERA-affiliated employers.
The Colorado Legislature has placed into Colorado law an agreement to provide an “automatic,” fixed, pension COLA “escalator” to PERA members upon retirement. When the Colorado Legislature created the Colorado PERA contract in statute, the Legislature could just as well have offered PERA members a higher total pension benefit and no COLA escalator. Instead, Colorado legislators chose to deliver accrued Colorado PERA pension benefits by means of a pension COLA “escalator.”
If I buy an annuity from a private insurance company, and I opt to have my purchased income stream delivered via a cost-of-living escalator, does the insurance company that sold the annuity to me have the right to eliminate that purchased COLA benefit after the fact? Does the insurance company have the right to retroactively diminish the total value of my purchased, contracted income stream simply because I selected an escalator as a method of receiving the income stream? Perhaps the insurance company wants to use the money made available by breaking the COLA contractual provision to make desired discretionary expenditures. Perhaps the insurance company wants to construct a new headquarters building or increase the compensation of its executives. What court would permit this private sector insurance company to ignore its contractual COLA obligations? Why do we not see insurance companies in the United States attempting to escape their contractual COLA obligations? We do not see this happening because attorneys working for these insurance companies recognize such arguments as ridiculous, self-serving contrivances. Why should the State of Colorado be permitted to retroactively take a COLA benefit that has been paid for (through paycheck deductions and labor) by Colorado PERA members for decades?
Purchased annuity COLA benefits in the private sector:
“One way to address this problem is by purchasing a cost-of-living adjustment (COLA) option with the immediate annuity. The COLA option increases the dollar amount of future payments to keep up with inflation, with the goal of preserving the buying power of the immediate annuity payments.”
http://www.myretirementpaycheck.org/savings-investments/immediate-annuities.aspx
The contractual obligation of an accrued pension benefit does not disappear simply because state legislators have agreed to use a particular method of delivering the benefit. If the Colorado Legislature had, historically, placed into statute a Colorado PERA pension contract setting the initial Colorado PERA pension benefit at a maximum 20 percent of highest average salary (HAS), with a 10 percent annual COLA escalator, could the Colorado Legislature retroactively take 90 percent of the total contracted benefit by simply striking the COLA provision from Colorado law? The contractual obligation of Colorado PERA-affiliated employers to honor statutory COLA provisions does not disappear due to the fact that Colorado statutes mandate payment of a PERA member’s accrued pension benefit by means of a COLA escalator. This contrivance was embraced by the proponents of SB10-001 in 2010 in the hope that Colorado PERA-affiliated employers could somehow escape their pension debt.
For fifty-two years, (since the Bills and McPhail cases) the Colorado Legislature has known that public pension COLA benefits are contractual obligations in our state. They cannot claim ignorance of this fact, they are obligated to read case law and know the implications of legislation they enact. For fifty-two consecutive legislative sessions, Colorado legislators have had opportunities to adopt any legal, prospective public pension reform they feel is appropriate. They have had many decades of opportunity to reform the Colorado PERA pension without breaking PERA contracts. While U.S. equity markets have endured extreme volatility over these decades (1987 and 2001) Colorado PERA contracts were honored. As Colorado PERA officials have noted many times, pension administrators expect market volatility. The State of Colorado cannot legitimately argue in court that the “unanticipated severity of an anticipated event” justifies the breach of Colorado PERA pension contracts.
Note that critics of public pensions focus on a single aspect of future state and local government expenditures (public pension obligations) when they argue that these governments are in “crisis.” The critics argue that public pensions are in “crisis,” because states and cities have not banked the three or four percent of future state revenues that will be needed to meet these pension obligations. The critics call this a public pension “shortfall.” State and local governments have not banked sufficient funds to cover the other 95 percent of expected future expenditures and yet, somehow, this lack of accumulated resources is not a “crisis.” As we know, public pension obligations to current workers will come due over the next 70 years, like a mortgage, they are not due tomorrow.
What entity on high has decreed that a government’s lack of current resources to immediately cover all of its accumulated pension obligations is a “crisis,” while a government’s failure to set aside resources sufficient to meet all other future expenditures is just standard operating procedure? Is the State of Colorado in “crisis” because it has bonds outstanding? Why are accumulated state financial obligations in the form of bonded debt not a “crisis,” but accumulated state financial obligations in the form of public pension debt are a “crisis”? Who decided that one of these state debt obligations has inferior legal status?
Colorado PERA active and retired members. Help restore some degree of rationality to discussion of Colorado PERA public pensions. Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!
2013 MORITZ COLLEGE OF LAW PUBLIC PENSION ROUNDTABLE.
PROFESSOR AMY MONAHAN: THE U.S. SUPREME COURT TELLS US THAT PUBLIC PENSION PLAN REFORMS MUST BE THE “LEAST DRASTIC” ALTERNATIVE TO MEET CONSTITUTIONAL MUSTER.
TAKING PUBLIC PENSION RETIREE BENEFITS CARRIES THE GREATEST LEGAL RISK OF ALL PUBLIC PENSION REFORMS.
MOST PEOPLE THINK OF PUBLIC PENSION COLAS AS AN ACCRUED PUBLIC PENSION BENEFIT.
On February 22, 2013, the Ohio State University Moritz College of Law hosted a “Roundtable on Public Pension Reform.”
The first panel of the Roundtable was entitled: “Recent Pension Reform Efforts.” Panelists were; Professor Amy Monahan of the University of Minnesota School of Law, Karen Carraher of the Ohio Public Employees Retirement System (OPERS), and Luke Martel of the National Conference on State Legislatures.
http://moritzlaw.osu.edu/programs/capital-markets/roundtable-on-public-pension-reform-video-archive/
(My comment: For Professor Monahan’s paper, “Public Pension Reform: The Legal Framework,” visit the link below. In her paper, Monahan concludes:
“This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
Link to Monahan law article:
http://www.law.umn.edu/facultyprofiles/monahana.html)
Video of the Moritz College of Law Roundtable is available on the Moritz Law website in two parts. (Note that Professor Monahan’s presentation consumes the last five minutes of Part 1, and concludes in Part 2.)
Below, I provide quotations from the panel presentation of interest to Colorado PERA retirees:
Karen Carraher, OPERS (19 minutes into Part 1): “The minute any individual in our system retires, we actually transfer dollars equal to their lifetime payoff at that point into a fund. So, they are 100 percent funded, every person who has retired. Who we’re working on funding are the folks who are still working.”
(Note that combined employee and employer pension contributions in the OPERS pension system currently total 24 percent of salary.)
Professor Amy Monahan:
“I’m not aware of any case, where a court has said that once a participant has retired, and completed all of the necessary ingredients to receive a pension that that pension is not contractual.”
“Even in some liberal states, once you’ve retired, you have a vested, contractual right to the benefit.”
Amy Monahan on the relative legal risk of legislative enactment of various reforms to public pension systems:
“I think it’s fair to generalize that there is a sort of risk hierarchy here.”
“So, I’m going to start with the most risky and go down to the least.”
Pension Changes Impacting:
Public Pension Retiree Accrued Benefits
” . . . benefits being paid to retirees are the riskiest thing to touch.” “The idea is that they have completed their side of the bargain, and so any changes to those individuals usually get the highest level of scrutiny.”
Active Pension Member Accrued Benefits
“Next, is touching accrued benefits for people who haven’t retired. So, they’re still working, but you’re reducing what they’ve already earned to date. That’s also pretty risky. Basically, the analogy here is to salary. You can’t retroactively reduce someone’s salary. The court’s going to easily imply a contract here, for the same reasons reducing accrued benefits are risky.”
Future Benefit Accruals
“Future benefit accruals in most states, should be less risky.”
(My comment: Note that the Colorado General Assembly adopted prospective changes to future benefit accruals of certain Colorado county government pension systems in 2012 [SB12-149]. The Colorado Legislature adopted these prospective pension reforms, honoring the accrued pension benefits of thousands of Colorado county government retirees two years after having retroactively seized accrued contracted public pension benefits of Colorado PERA retirees. In 2010, most members of the Colorado Legislature were unaware of Monahan’s “hierarchy of legal risk” of various public pension reform options. This lack of knowledge is attributable to the fact that, in 2009 and 2010, the Colorado Legislature permitted self-interested outside parties to develop public pension policy for the State of Colorado [through lobbyists].)
New Hires
“New hires are easy.”
Monahan on public pension COLAs:
“I think that most people in the pension world, when they think of COLAs, think of it as part of the participant’s accrued benefit.”
Monahan on the “Reasonable and Necessary” standard to break public pension contracts:
“That sounds like an easy test.” “It’s not.” “The U.S. Supreme Court tells us that it has to be the least drastic way of achieving the policy goal.”
(My comment: In February 2011, Colorado PERA’s General Counsel wrote in the periodical “Government Finance Review,” that, in order for a PERA pension reform to be found “reasonable,” changes to the Colorado PERA pension must be “the minimum changes necessary.” [The next year, June 26, 2012, Colorado PERA’s independent actuary, Cavanaugh MacDonald Consulting, LLC, wrote in the 2011 Colorado PERA CAFR: that the 100 percent funding threshold put into Colorado law by SB10-001 is much stronger than is necessary [i.e., not "the minimum change necessary"] to meet public pension regulatory (GASB) standards. Alteration of the statutory Colorado PERA pension contract in 2010 [SB10-001] through incorporation of this 100 percent PERA pension funding threshold placed unnecessary financial pressure on the PERA pension’s trust funds, creating the Legislature’s desired rationale for breaking pension contracts, and does not represent the “least drastic” reform option available to the Colorado General Assembly.
http://www.leg.state.co.us/OSA/coauditor1.nsf/All/641A0AB5B97D073C87257A3A0072FEA3/$FILE/2067-12%20CAFR_6-26-12.pdf.)
Professor Amy Monahan:
“Colorado is a closely watched case that’s been going on for awhile now. Colorado reduced COLAs. Most recent ruling there is the Appellate Court which just ruled that there is a contractual right to COLAs.”
Colorado PERA active and retired members. It is clear that the Colorado General Assembly willfully ignored on-point Colorado public pension contract case law when adopting SB10-001 in 2010. Support public pension contractual rights and the rule of law in Colorado.
Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
ANATOMY OF A COLORADO PERA PENSION CONTRACT BREACH. (Part 1 of 2.)
In this article I have compiled an extensive (but, incomplete) chronology of events and statements surrounding the Colorado General Assembly’s breach of Colorado PERA pension COLA contracts in 2010. Colorado PERA retirees have filed a lawsuit, Justus v. State, asking that Colorado courts protect the retiree’s accrued, earned, contracted Colorado PERA public pension benefits. (More complete information germane to this lawsuit may be obtained only through formal discovery.)
Readers of the article should note the abrupt transition of the organization, Colorado PERA, in 2009, from an organization that has historically defended the contractual rights of PERA members, to an organization influenced by self-interested parties . . . parties that successfully induced the Colorado PERA Board of Trustees to attempt a breach of the pension plan’s contractual obligations in 2010.
Many Colorado politicians are primarily engaged in seeking votes, and bestowing political favors . . . compliance with constitutional provisions for these politicians is an afterthought. The prevailing legislative sentiment at the Colorado General Assembly in 2010 was that, since the idea of breaking Colorado PERA pension contracts was popular with influential self-interested groups and many constituents . . . those contracts should be scrapped. Colorado Constitution be damned! In 2010, political considerations trumped respect for the State of Colorado’s contractual obligations.
Colorado PERA retirees (the target of the SB10-001 contract breach) have many unanswered questions regarding the 2010 breach of their pension contracts by the State of Colorado:
Was the Colorado PERA Board of Trustees “opinion shopping” for a legal rationale to break PERA pension contracts in 2009? How was Jean Dubofsky’s firm selected to create this legal opinion? On her resume, Jean Dubofsky writes that Colorado PERA “requested” that she provide an opinion to PERA arguing that the Colorado General Assembly could “repeal” the PERA COLA benefit “without violating the vested rights” of PERA members. When exactly, in early 2009, did the Colorado PERA board decide to seek a legal opinion that would justify taking contracted PERA COLA benefits?
Colorado PERA retirees should grasp the full implications of this statement Jean Dubofsky makes on her resume. This statement on Jean Dubofsky’s resume proves that the Colorado PERA Board intended to attempt a taking of PERA COLA benefits prior to the 2009 PERA “Listening Tour,” prior to the placement into Colorado statute of the “requirement” for the Colorado PERA Board to recommend pension reforms to the General Assembly, and prior to any sort of objective contemplation of pension reform options.
In 2009, we do not see the Colorado PERA Board of Trustees seeking a legal opinion regarding changes in the rate of accrual of PERA pension benefits to be earned in the future. We don’t see the PERA board searching for a legal rationale to increase the retirement age of active PERA members, or increase the number of years over which active PERA member base pension benefits are calculated (increasing years in the HAS calculation).
We DO see the PERA board ignoring “less drastic” impairment of PERA pension contracts, and targeting “fully-vested” PERA pension COLA benefits. We DO see the PERA board seeking a legal opinion regarding their FIRST CHOICE for PERA pension reform, breach of “fully-vested” pension COLA contracts. (Or, perhaps this option was the first choice of PERA employer lobbyists.)
Given the numerous previous statements of Colorado PERA officials (that have been reported in the press and in Colorado PERA publications) supporting the contractual pension rights of PERA members, why would the Colorado PERA Board of Trustees actively seek a legal opinion contravening this legal advice?
What was the initial reaction of Colorado PERA’s in-house attorneys to the PERA board’s objective to break PERA pension contracts? Were these in-house attorneys charged with the task of finding an attorney who might create the board’s desired legal opinion? Or, was Jean Dubofsky recommended to the PERA board by outside lobbyists (perhaps education lobbyists, or other representatives of PERA-affiliated employers?)
If the Colorado PERA board sought a legal opinion regarding PERA COLA contractual rights in early 2009, it follows that the PERA board anticipated litigation in early 2009, and thus the organization, Colorado PERA, should have had a “litigation hold” in place at that point in time on all materials relevant to the COLA taking. Why bother seeking a legal opinion if you are on solid legal footing?
Why would a board, that has a fiduciary duty to act only in the interests of the beneficiaries of the pension trust, actively seek a legal opinion that would rationalize contemplated harm to the rights of those beneficiaries?
Who made the original proposal to attempt to break PERA COLA contracts? A member of the PERA Board of Trustees? Education lobbyists? Colorado PERA staff? When was this suggestion first proposed to the PERA Board?
Did Executive Director Meredith Williams leave PERA due to a disagreement with the PERA Board over the COLA-taking? As we have seen, he was a finalist for a pension job in Texas in November 2010 . . . nine months after SB10-001 was signed. Were Meredith Williams and General Counsel Greg Smith forced to defend a PERA Board decision to attempt a contract breach against their will? Or, did they personally support the contract breach attempt?
Apparently, Colorado PERA officials wanted the Colorado General Assembly to submit an interrogatory to the Colorado Supreme Court seeking clarification regarding PERA contractual public pension rights. Was this idea quashed by legislative leadership? Why was this responsible step ignored in 2009?
How did the Colorado General Assembly reach the conclusion in 2010 that the state’s public pension contracts are inferior to the state’s contracts with corporations?
By what means did the Colorado General Assembly conclude that it is free to pump $700 million of state revenue into local government pensions that ARE NOT the contractual obligation of the State of Colorado, while ignoring the funding of the state’s own contractual PERA public pension obligations?
Did lobbyists for PERA-affiliated employers pressure the PERA board to attempt a taking of fully-vested pension benefits from retirees in order to prevent changes to the partially-vested pension benefits of their union dues-paying members?
As late as December of 2009, Colorado PERA officials provided written testimony to the Colorado General Assembly stating that PERA members have a contractual right to their PERA pension COLA benefits. In light of this, why is Colorado PERA currently appealing a Colorado Court of Appeals decision with this same finding?
Did the Colorado PERA Board (through PERA lobbyists) actually “ask itself” to make pension reform recommendations to the General Assembly? Did PERA lobbyists initiate the amendment (request drafting of this 2009 bill amendment through a legislator)? Did PERA lobbyists seek the amendment to the bill, SB09-282, at the end of the 2009 legislative session in order to make a preordained conclusion to attempt to take PERA COLA pension benefits appear to be the product of extensive deliberation on the part of the PERA Board? Was this amendment adopted in anticipation of the coming litigation over the PERA COLA, to potentially benefit the defendants? The PERA defendants have emphasized in their pleadings that PERA board recommendations were made in conformance with this “legislative mandate.”
Many aspects of the Colorado General Assembly’s breach of Colorado PERA pension contracts in 2010 are revealed in the chronological compilation of events and statements provided in this article.
“The Preordained Colorado PERA COLA Contract Breach.”
We see the co-prime sponsor of SB10-001 and Colorado PERA’s attorneys stating that the COLA is a Colorado PERA contractual obligation. We see members of the Legislature stating that SB10-001 breaks PERA contracts.
We see officials of Governor Bill Ritter’s administration describing the Colorado PERA COLA benefit as a “present obligation” arising from the “employment exchange transaction,” which will result in an average loss of $165,000 for PERA retirees over the next twenty years (a substantial loss.)
We see numerous statements by Colorado PERA officials that PERA pension benefits are “guaranteed.”
We see a former Colorado Assistant Attorney General, and numerous Colorado PERA retirees, warn the Colorado PERA board and the General Assembly against an attempted PERA COLA contract breach.
We see state legislators using market volatility to justify the breach of Colorado PERA pension contracts, retroactively take accrued pension benefits, slash the pension debt of PERA employers, and seize what they believe is a “window of opportunity” to break pension contracts.
We see Colorado PERA attempting to deceive Colorado courts by conflating constitutionally permissible improvements to the contracted PERA COLA benefit, with retrospective legislative takings of accrued PERA COLA benefits in 2010.
We see Colorado PERA attempting to confuse Colorado courts regarding the distinction between “ad hoc” public pension COLA benefits and “automatic” pension COLA benefits.
We see Colorado PERA attempting to exaggerate the financial condition of the Colorado PERA trust funds by employing “market-based” public pension funding ratios in legal briefs, while Colorado PERA has used “actuarial funded ratios” historically (as is common practice in public pension administration.)
We see documentation of legal research conducted by Colorado PERA attorneys supporting the contractual pension rights of PERA members. (I doubt that PERA’s General Counsel originated the idea to attempt the COLA contract breach given his numerous previous statements and his legal briefs [cited in the press] that militate against such an attempt.)
We see Colorado PERA officials emphasize the fact that PERA members are not eligible to receive Social Security benefits, and are accordingly particularly vulnerable to state breach of pension contracts.
We see the Colorado General Assembly enact “prospective” pension reform for thousands of Colorado county government retirees, honoring their accrued pension benefits, after having retroactively seized the accrued pension benefits of Colorado PERA retirees in 2010.
We see the adoption of legislation in the past by the Colorado General Assembly in which PERA employee pension contributions are “technically being paid by employers, from their salary-raise pools” in order to AVOID the breach of PERA member pension contracts.
“The Colorado PERA SB10-001 Lobbying Juggernaut.”
We see a member of the Colorado Legislature stating that SB10-001 was “a deal cut before this body met,” (that is, prior to legislative deliberation of PERA pension reform alternatives.) We see PERA lobbyists orchestrating debate on SB10-001.
We see the co-prime sponsor of SB10-001 stating that the Colorado PERA Board of Trustees “needs to make it toxic” (through lobbyists) for anyone to challenge Colorado PERA in the legislative arena.
We see a Deputy Colorado Attorney General stating that the Colorado education establishment is attempting to raise education funding by “legislating through the courts.”
We see PERA officials (in 2009) blaming the Colorado General Assembly for the decline in the actuarial funded ratio of the PERA trust funds.
We see a member of the PERA Board state that the PERA trust funds are in no immediate danger, and that benefits can be paid for decades.
We see a 27-member team of lobbyists assembled to push the pension contract breach through the legislative process. We see the Colorado PERA Board of Trustees spending the resources of PERA trust fund beneficiaries in an attempt to take the contracted benefits of those same beneficiaries.
“Chronic Legislative Mismanagement of the Colorado PERA Pension Plan.”
We see historical and ongoing mismanagement of the Colorado PERA pension plan by the Colorado General Assembly, a preference to shortchange the pension in order to lower PERA employer pension contributions, regular cuts to employer contribution rates, enactment of “early retirement incentives” to shift labor costs from Colorado governments to the PERA pension, enactment of pension benefit enhancements without paying for the enhancements, and a lack of respect for the state’s contractual obligations.
We see the 15th wealthiest state in the nation, a state with $1 billion in new revenue, a state that has pumped $700 million into local government public pensions that ARE NOT its contractual obligation, a state that makes $100 million grants in discretionary property tax relief, a state with (nearly) the lowest per capita state tax revenue in the country, attempting to escape its contractual obligations.
We see PERA officials and the prime sponsors of SB10-001 stating that 90 percent of the “cost” savings in SB10-001 derive from those who do not “owe” the debt, i.e., PERA members, rather than from the Colorado governments that are bound contractually to pay the debt. We see Colorado PERA officials and legislative sponsors of SB10-001 boasting that their PERA reform plan pushes 90 percent of the costs onto parties who do not legally owe the debt.
We see the Speaker of the House state that he has no intention of allowing increased Colorado PERA employer pension contributions to be a significant part of the planned pension reform.
We see the Colorado General Assembly cutting its revenue stream beyond the requirements of the 1992 TABOR amendment, and later claiming that limited state revenues constitute a “crisis” justifying the breach of Colorado PERA pension contracts.
We see officials from Colorado PERA and the National Council on Teacher Retirement (former Colorado PERA Executive Director Meredith Williams’ current employer) stating that public pension systems consume under three percent of all state and local government spending.
We see a 2002 veto of a bill that would have improved Colorado PERA’s funded ratio by Governor Bill Owens.
We find that the Colorado PERA Board has considered the use of pension obligation bonds (POB) in the past, that a PERA official considers POBs a “useful tool” for addressing unfunded pension liabilities, and we find this “less drastic” means of bolstering the PERA trust funds (re-amortization of the pension debt) off the table in 2010.
“Jean Dubofsky: Author of the 1999 ‘Requested’ Colorado PERA COLA-taking Legal Opinion.”
We see the author of the Colorado PERA COLA-taking legal opinion write a letter of recommendation for attorney Monica Marquez to serve on the Colorado Supreme Court. The letter states that the author of the COLA-taking legal opinion “worked on the case,” Justus v. State, with attorney Monica Marquez. The letter further states that attorney Monica Marquez will “bring sophistication” to the Colorado Supreme Court on “public pensions.”
We see attorney Monica Marquez advising Colorado PERA, prior to her appointment to the Colorado Supreme Court.
(In my view, the State of Colorado is fortunate that a talented jurist, Monica Marquez, has recently joined the Colorado Supreme Court. However [although I have complete confidence in Justice Marquez's objectivity and dedication to the rule of law] it appears unlikely that our new Supreme Court justice will be able to participate in the coming decision in the case, Justus v. State, since she has worked on the case.)
“Actuarial Funded Ratios” vs. “Market-based” Funded Ratios.”
Note that, historically, Colorado PERA has used “actuarial funded ratios” (almost) exclusively in its written communications to gauge the financial soundness of the PERA divisions. In 2010, we see Colorado PERA begin to use “market-based” funded ratios (in an attempt to exaggerate the financial condition of the pension plan) only after the commencement of the legal, political and lobbying campaign to break Colorado PERA pension contracts.
We see PERA officials in the past stating that an 80 percent PERA actuarial funded ratio is “sound.”
We see numerous statements by Colorado PERA officials indicating that the Colorado PERA Board of Trustees finds an 80 percent actuarial funded ratio (AFR) for the pension plan acceptable, as well as documentation that the PERA Board seeks to cap the AFR at a 90 percent level.
We see PERA officials condemning employer contribution cuts by the Colorado General Assembly. We see PERA officials stating that a PERA AFR under 60 percent is not a “crisis.”
We see the Colorado General Assembly modify the Colorado PERA pension statutory contract in SB10-001 through the introduction of an absurd “100 percent” pension funding threshold.
We learn that, in the past, Colorado legislators argued that an 87 percent PERA actuarial funded ratio is “too well-funded,” and yet current legislators intend in SB10-001 to retroactively take contracted PERA COLA benefits until a 100 percent AFR is achieved.
We see the firm, Fitch Ratings, state that a 80 percent actuarial funded ratio (AFR) for public defined benefit pensions is considered “well-funded,” and that an AFR of 70 percent or above is an “adequate” actuarial funded ratio.
We learn that, for the entire decade of the 1970s, the Colorado PERA actuarial funded ratio remained lower than its level at the time of the breach of PERA COLA contracts in 2010 (a low of 54.5 percent.) There was no concern about a PERA financial “crisis” that decade.
We see public pensions in the United States with actuarial funded ratios as low as the 30s (in the 1970s) and yet public pension contracts were honored.
We see Colorado PERA’s General Counsel stating that in order for a pension reform to be found “reasonable” under the Colorado Constitution, such changes to the Colorado PERA pension must be “the minimum changes necessary.” We see Colorado PERA’s actuaries stating that the 100 percent funding threshold in SB10-001 is much stronger than is necessary (not “the minimum changes necessary”) to meet public pension regulatory (GASB) standards.
“Maximum Amortization Period.”
We see Colorado PERA officials stating that the pension’s investment time horizon extends to 70 years.
We see the Colorado General Assembly arbitrarily cut Colorado PERA’s “maximum amortization period” in half (from 60 years to 30 years) putting pressure on PERA’s funded ratio. There is no federal statutory mandate for this change, it is merely a “recommendation.”
We find the Chairman of the Joint Budget Committee asking his colleagues: “Are we not just saying we’re going to pick 30 years (as a PERA investment time horizon) because if we’re not balanced within 30 years that creates actuarial necessity which then let’s us change retiree benefits?”
“Service Credit Purchase Contracts.”
We see Colorado PERA officials encouraging PERA members to send in checks for the purchase of “service credit” in 2002, only to later renege on those pension contracts. Much of this money was taken from the PERA member’s separate retirement accounts (401Ks, 457 plans.) The value of these “service credit purchases” was dramatically reduced by SB10-001, after Colorado PERA had their member’s money. The purchase of a defined pension benefit, “service credit,” by Colorado PERA members is a separate Colorado PERA pension contract that was broken by SB10-001.
The entries in this article (below) summarize material that is posted at saveperacola.com on the internet, “Save Pera Cola” on Facebook, and also on Coloradopols.com. Additional information on the subject of each entry is generally available through a search of these sites. Many Coloradans know the answers to the questions posed in this article, I encourage such persons to post their answers to the questions (even anonymously) on these three sites.
I believe that complete revelation of the truth regarding the political machinations that resulted in the breach of Colorado PERA pension contracts in 2010 would benefit the Colorado state legislative process in the future.
I don’t believe that accrued Colorado PERA COLA benefits can be successfully taken by Colorado PERA lobbyists, PERA employer lobbyists, or members of the Colorado General Assembly. I don’t believe that such a taking is possible under Colorado case law, McPhail, Bills or even DeWitt . . . (if that case is applicable.)
The chronology:
August 1, 1876
The Colorado Constitution takes effect upon statehood: Colorado: Art. II, § 11: “No ex post facto law, nor law impairing the obligation of contracts, or retrospective in its operation, or making any irrevocable grant of special privileges, franchises or immunities, shall be passed by the general assembly.”
http://www.colorado.gov/dpa/doit/archives/constitution/1876.pdf
May 26, 1905
Franklin MacVeagh, U.S. Secretary of Treasury: “There is no moral exemption for any man or body of men that breaks contracts. Nor is there any hope of public or private respect for a contract breaker. A contract breaker is an utter misfit as a citizen or a business man.”
http://www.senatedem.ilga.gov/phocadownload/PDF/PensionDocs/madiarrevisedpensionclausearticle.pdf
June 28, 1954
Hickey v. Pittsburgh Pension Board: “But WHEN THOMAS HICKEY STARTED CONTRIBUTING TO THE CITY PENSION FUND IN 1915, THERE APPEARED ON THE HORIZON NOT THE SLIGHTEST SUGGESTION OF A CLOUD TO IMPERIL THE PENSION TOWARD WHICH HE WAS FAITHFULLY TO PLOD FOR 31 YEARS. It is not reasonable or logical to suppose that, given the liberal attitude that the General Assembly has assumed in this field of legislation, that it would impose restrictions so fundamentally contrary not only to its policy but to the elemental rules of fairness ‘WHETHER IT BE IN THE FIELD OF SPORTS OR IN THE HALLS OF THE LEGISLATURE IT IS NOT CONSONANT WITH AMERICAN TRADITIONS OF FAIRNESS AND JUSTICE TO CHANGE THE GROUND RULES IN THE MIDDLE OF THE GAME.’”
http://scholar.google.com/scholar_case?case=13490833546797588256&q=Hickey+v.+Pittsburgh+Pension+Board&hl=en&as_sdt=2,6
May 4, 1959
Colorado Supreme Court, Police Pension and Relief Board of Denver v. McPhail:
“ . . .we believe that in a case, such as that before us, involving a contributory system it is the only reasonable conclusion that can be reached (the contract principle.)”
“It would be unjust and contrary to our basic notions concerning the validity of contracts to hold that this provision could be changed by the lawmakers.”
“We conclude that the (Colorado constitutional Contract Clause) applies to the status of the plaintiffs here and prevents the enforcement of the (Denver Charter Amendment) against them.”
http://scholar.google.com/scholar_case?case=14051800929013625867&q=McPhail+v.+Denver+Pension+Relief+Board&hl=en&as_sdt=2,6
December 11, 1961
Colorado Supreme Court, Police Pension and Relief Board of Denver v. Bills: “We now hold that not only prior to their actual retirement, but also prior even to their eligibility to retire, there was a limited vesting in these plaintiffs of their pension rights to the end that although prior to their eligibility to retire the pension plan could be changed, it could not be abolished NOR COULD THERE BE A SUBSTANTIAL CHANGE OF AN ADVERSE NATURE, WITHOUT A CORRESPONDING CHANGE OF A BENEFICIAL NATURE.” “Hence, prior to eligibility for retirement, changes may properly be made in a pension plan if these changes strengthen or better it, or if they are actuarially necessary.”
“The charter amendment with which we are here concerned constituted an adverse change in the overall pension plan which deprived plaintiffs of a very substantial right, was unaccompanied by a corresponding change of a beneficial nature, was not shown to be actuarially necessary, nor that it in anywise strengthened or bettered the pension plan.”
http://scholar.google.com/scholar_case?case=3470001684402878070&q=Bills+v.+Denver+Pension+Relief+Board&hl=en&as_sdt=2,6
1969
SB 69-144, SB 69-311, HB 69-1230, and HB 69-1247 (Colorado PERA notes that the PERA COLA benefit in 1969 was an “ad hoc” COLA in its publication “History of Colorado PERA Legislation,” later we find Colorado PERA describing the PERA COLA benefit as “automatic” in this same PERA publication.)
- New annual post-retirement increase (COLA) adopted provided maximum 1.5% per year, in addition to AD HOC COLA increases that were based on the year in which the retirement benefit had begun.
- Legislature declared its intent to establish employer contribution rates to provide adequate funding of PERA’s accrued retirement benefits. (In later years [2010], the Legislature finds it more convenient to break PERA pension contracts to erase its public pension debt.)
- Amortization of PERA’s actuarial liabilities over a 60 year period was deemed adequate to maintain the retirement fund’s actuarial stability. (In later years, this “maximum amortization period” is arbitrarily cut in half. There is no federal statutory mandate for this change, it is merely a “recommendation.”)
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
December 31, 1973
The Colorado PERA actuarial funded ratio reaches its nadir of 54.5 percent. There are no concerns at the Colorado General Assembly regarding a Colorado PERA financial “crisis.” For the balance of the decade of the 1970s, the Colorado PERA actuarial funded ratio remains lower than its level at the time of the breach of PERA COLA contracts in 2010.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true
1975
HB 75-1364 (Colorado PERA notes that the PERA COLA benefit in 1975 was “ad hoc,” later we find Colorado PERA describing the PERA COLA benefit as “automatic” in its publication “History of Colorado PERA Legislation.”)
- Improved AD HOC post-retirement benefit increases.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
November 17, 1975
Colorado Supreme Court in Taylor v. PERA: “As was noted in Endsley v. Public Employees Retirement Association . . . (1974) ambiguities appearing in statutes regulating pension and retirement funds are construed favorably toward the employee.”
http://scholar.google.com/scholar_case?case=11856628789716288634&q=Taylor+v.PERA&hl=en&as_sdt=2,6
August 14, 1984
Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the cardinal principle that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee”
http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984
1987
SB 87-239 (Cuts to PERA employer pension contributions.)
- Legislature reduced FY88 PERA employer payroll contribution rates to:
- 10.2% from 12.2% for the State Division;
- 11.2% from 13.2% for State Troopers (also in the State Division);
- 11.5% from 12.5% for the School Division;
- 13.0% from 15.0% for the Judicial Division.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
1992
HB 92-1335 (Cuts to PERA State and School Division pension contributions.)
- Reduced the School Division employer contribution rate by 0.6% to 11.6% of payroll.
- Temporarily reduced the State Division employer contribution rate by 1.0% of payroll in FY92.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
1993
HB 93-1324 (“Automatic” PERA COLA benefit enacted. The auto COLA was later improved by the Legislature to a fixed 3.5 percent. Legislative improvements in the contracted COLA are permissible as there is no impairment of existing contracts. Colorado PERA members began paying for this automatic COLA benefit out of each paycheck, and earning this PERA benefit for each day worked.)
- Changed annual COLA to 3.5% maximum, compounded annually, based on the CPI, and folded the PERA CLSF into the PERA pension trust funds.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
March 24, 1993 (1:32 PM – 2:28 PM)
Rob Gray, Director of Government Relations, Colorado PERA testifying to the Legislature’s House Finance Committee in regard to the “automatic” PERA COLA benefit under consideration (in House Bill 93-1324): “The PERA Board does support this bill.” “We felt like it is something that is good pension policy . . . that it makes sense . . . THAT IT IS MAKING PERMANENT CHANGES, and also that it does help employers which is one of the goals of the bill.” Rob Gray states that the proposed COLA “adds predictability for current and future retirees, people looking at leaving might look at this and say now I know how my future increases are going to be determined . . .”. Rob Gray characterizes the “automatic” PERA COLA benefit as a Colorado PERA liability: “when a change in benefits is added, like this bill, it extends out the period for paying off that unfunded liability.” If you listen to the recording of this meeting, you will also hear a member of the House Finance Committee refer to the Colorado PERA COLA provision under consideration as a pension benefit that is “guaranteed,” “now and in the future.” (Note that the contracted PERA COLA benefit adopted by the committee was in later years improved by the Colorado General Assembly to flat 3.5 percent level [constitutionally permissible as this "improvement" did not impair PERA pension contracts.])
1997
HB 97-1082 (PERA employer pension contribution cuts, benefit enhancements.)
- Increased retirement formula from 1.5% to 2.5% per year of HAS on 20-40 years service, with 100% HAS maximum benefit. Benefits were recalculated for current benefit recipients on a prospective basis.
- One year HAS adopted for Judicial Division’s future retiring judges.
- Combined the State Division’s and the School Division’s trust funds, and reduced the State and School Division employer contribution rate by 0.1% to 11.5% of payroll.
HB 97-1114 (Statutory timeframe for meeting PERA obligations cut by one-third, in later years, the Legislature continues to arbitrarily cut this timeframe to half of the 1997 standard.)
- Reduced PERA’s maximum amortization period to 40 years from 60 years.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
1998
HB 98-1242 (Cuts to PERA employer pension contributions in State and School Divisions.)
- State and School Division employer payroll contribution rate was reduced from 11.5% to 11.4%.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
1999
SB 99-90 (Cuts to PERA employer and trooper pension contributions.)
- Permanent 1% employer payroll contribution rate cut for state, school, and judicial employers authorized when PERA is fully funded in the State and School Division, and in the Judicial Division.
- Municipal employer payroll contribution rate cut authorized when Municipal Division is fully funded.
- Reduced State Trooper member contribution rate from 11.5% to 10.0% of salary, effective 7/1/99.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
1999
George K. Baum study performed under the auspices of Colorado PERA (presented on Colorado PERA letterhead) for State Treasurer Mike Coffman asks: “Why does PERA appear to have a policy to keep a 10% unfunded liability?” (If Colorado PERA had a policy, in the past, to cap the funded ratio of the PERA pension at 90 percent, why does the PERA Board propose to break PERA contracts in SB10-001 until a 100 percent funded ratio is achieved? As PERA officials have noted, the pension debt comes due over up to 70 years, it is not “due tomorrow.”)
2000
December 31, 2000
The Colorado PERA actuarial funded ratio reaches a peak of 105.2 percent. The General Assembly determines that PERA is overfunded, and the effort to bring down the PERA actuarial funded ratio accelerates. (The General Assembly enacts legislation shifting labor costs to the pension through “early retirement incentives,” and employer contribution cuts and benefit enhancements continue.)
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true
2000
HB 00-1458 (Cuts to PERA employer pension contributions, PERA COLA set at automatic 3.5%.)
- Moved date of 1% reduction in employer payroll contribution rate forward from 1/1/01 to 7/1/00 since PERA was now fully funded, to 10.4% for the State and School Division, and to 14.0% of payroll for the Judicial Division.
- Established an additional minimum 0.25% employer payroll contribution rate cut.
- 20% of any PERA overfunding amortized over 10 years, would be allocated for further employer payroll contribution rate cuts.
- 30% of PERA overfunding amortized over 10 years, would be allocated to the HCTF for retiree health care premium subsidy increases.
- Established 3.5% compounded annual automatic COLA effective March 2001.
- Prior to this date, the annual COLA equaled the lower of the actual inflation rate or annual 3.5% cumulative increases since retirement.
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
2001
November 20, 2001
Buck Consultants study presented to the Colorado General Assembly’s Legislative Audit Committee. (The report provided the results of a retirement plan study for Colorado PERA, conducted pursuant to SB 01-149.) Six of the seven members of the Audit Committee sitting at the table had sponsored [the prior year] the bill enacting the 3.5 percent fixed, automatic PERA COLA, HB 00-1458 the prior year.) The Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “guaranteed benefits at retirement,” the “fixed” COLA, that is “compounded annually for each year of retirement,” and contrasts the PERA COLA with an “ad hoc” COLA “as approved by Legislature.” If Colorado PERA officials did not agree with the Buck Consultants characterization of the PERA retiree COLA as an “automatic” COLA, then why did these Colorado PERA officials not state their objections to this characterization when the Buck Consultants report was presented in 2001?
http://www.nctr.org/pdf/coloradodcdbstudy.pdf
December 31, 2001
Colorado PERA Executive Director Meredith Williams:
“Be assured that your PERA account is safe, and that the benefit you receive when you retire is not affected by PERA’s short-term return on investments.”
http://www.copera.org/pdf/5/5-21-01.pdf
2002
February 15, 2002
Kim Natale, Chairman, Colorado PERA Board of Trustees: “As a comprehensive retirement plan, PERA benefits are guaranteed for life.” “However, the loss . . . does not affect our ability to pay guaranteed lifetime benefits to you.”
http://www.copera.org/pdf/Newsletters/MemberUpdate3-02.pdf
February 25, 2002
From Colorado PERA News Release: “Colorado PERA’s monthly retirement benefits are guaranteed for life and purchasing time makes good sense for many of our members.”
https://www.copera.org/pdf/NewsReleases/2002/Purchasing.pdf
July 18, 2002
“PERA’s Funding Status”: “Because Colorado PERA is a defined benefit plan, members and retirees will receive a guaranteed benefit. Those members who are planning on retiring should not be alarmed by the underfunded status of PERA. Retirement benefits will be calculated and paid, in the same manner, regardless of PERA’s funded status.”
http://www.copera.org/pera/about/newsarchives2002.htm
2003
Colorado PERA: “In any event, members and retirees with fully vested rights and entitlements provided by the PERA statutes will not suffer any impairment of those rights and the Board of Trustees will continue to fight to protect the PERA membership.”
https://www.copera.org/pera/about/newsarchives2003.htm
June 3, 2003
Colorado PERA Executive Director Meredith Williams, CAFR Summary to Members, 2002, 5/21 (REV 6/03): “PERA directs its efforts at keeping the funding ratio, (the ratio of assets to accrued liabilities) for the three divisional retirement funds at a minimum of 80 percent. A funding ratio over 80 percent is considered good.”
http://www.copera.org/pdf/5/5-21-02.pdf
October 9, 2003
“Colorado PERA Fund Secure, Board of Trustees Seeks to Improve Funded Status.”
“It is our opinion that PERA continues to have a relatively good funded ratio of 88 percent (based on the actuarial value of assets).”
“PERA believes that state constitutional provisions that prohibit the reduction of benefits to existing retirees and restrict the changes which can be imposed on vested members of PERA further limit alternatives.”
“The funding reductions enacted as a result of the up markets of the 1990s must end. The State must return to fully funding future obligations to PERA members and retirees.”
“PERA Benefits being paid are guaranteed . . .”
“PERA staff is in the process of fully researching and analyzing the issue of changing benefits and has not recommended anything to the Board regarding such changes. PERA has not made the decision to propose legislation that would change the current benefit levels of vested members.”
“In any event, members and retirees with fully vested rights and entitlements provided by the PERA Statutes will not suffer any impairment of those rights and the Board of Trustees will continue to fight to protect the PERA membership.”
“With PERA, Las Animas employees have a guaranteed benefit for life.”
http://www.copera.org/pera/about/newsarchives2003.htm
October 10, 2003
“In 2003, (Treasurer) Coffman warned that the state’s pension fund may be in jeopardy after legislators lowered the state’s contribution from the general fund. [Associated Press, 10/10/03]”
http://mediatrackers.org/wp-content/uploads/2012/07/DCCC2012MikeCoffmanCO06-ResearchBook.pdf
“Adding to the problem is the fact that the legislature voted to reduce the amount of the state’s contribution into the program from 12.2 percent in 1991 to 10.15 percent in 2004, Coffman said.” (October 10, 2003, Rocky Mountain News)
December 4, 2003
“Williams responded that by law, the association may only ask employees to contribute more if the increase would provide a greater retirement benefit, which is not being proposed at this time.”
https://www.cu.edu/sg/messages/2718.html
December 4, 2003
“JBC members questioned why PERA is asking for an increase in the employer contribution but not asking employees to contribute more. Williams responded that by law, the association may only ask employees to contribute more if the increase would provide a greater retirement benefit, which is not being proposed at this time.”
https://www.cu.edu/sg/messages/2718.html
2004
February 21, 2004
“PERA general counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that’s not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.” – Rocky Mountain News, David Milstead.
July 2004
“PERA Benefits at a Glance”: “Receive an annual automatic increase of 3.5 percent in your monthly retirement benefit to help keep up with the cost of living.” (PERA Document 5/58 (REV 7-04)
July 7, 2004
PERA response to July 5, 2004, Rocky Mountain News Editorial:
“PERA’s funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health.”
“The fact is that benefits guaranteed to PERA members are of a contractual nature, and that means that unless benefits are increased, contribution rates for members cannot be increased.”
“The PERA Board agrees with the Treasurer that a 40-year period should be used as a standard for amortizing the unfunded liability.”
“PERA’s legal research concluded that employee contribution rates could not be raised absent a showing of fiscal necessity.”
http://www.copera.org/pera/about/newsarchives2004.htm
October 28, 2004
PERA official: Legislators say PERA is “too well-funded” at 87 percent actuarial funded ratio. Colorado PERA Field Education Services Division Director Dennis Gatlin states: “PERA’s funding ratio was at 87 percent (in 1985) and legislators claimed that the association was ‘too well-funded.’ In 1970, the ratio was 54 percent, he added. According to Gatlin, PERA has been overfunded, when its assets equaled more than its liabilities, only twice in its 73-year [My comment: now 81-year] history, in 1999 and 2000.” Silver and Gold Record:
https://www.cu.edu/sg/messages/3851.html
November 18, 2004
Colorado Attorney General Ken Salazar Opinion (post-DeWitt): “Once a PERA member fulfills all the statutory requirements for a pension benefit and retires, the member’s fully vested pension right cannot be reduced by the General Assembly.”
http://saveperacola.files.wordpress.com/2010/01/changes_to_pera.pdf
2005
May 12, 2005
“Befort also noted that several years ago, the Legislature and Gov. Bill Owens decided to encourage higher-paid employees to retire early. Payroll expenses went down for the state, but PERA’s costs increased, he explained.”
https://www.cu.edu/sg/messages/4405.html
July 14, 2005
Colorado PERA would rather break pension contracts than issue pension obligation bonds at historically low interest rates: “Rob Gray, PERA government relations director, told S&GR this week that the PERA board has looked at pension obligation bonds and will meet later this week with its regular actuary and an outside actuarial company that did its own review of PERA’s unfunded liability, and which may make recommendations on additional steps PERA could take to cover the liability.” “PERA has been approached by investment firms about POBs during the past several years, Gray said this week. He agreed with Doherty’s assessment that POBs could be a useful tool to cover the liability and improve PERA’s funding situation, and Gray noted that the independent actuarial firm also is reviewing POBs as a solution.”
https://www.cu.edu/sg/messages/4467.html
August 13, 2005
Colorado PERA Executive Director Meredith Williams,. “The liabilities of the system, frankly, will be paid out over multiple decades, and we’re talking 70 or 80 years. We’re kind of designed for the long haul and we know we’re going to experience ups and downs in the marketplace.”
http://www.chieftain.com/metro/slow-stock-market-retiree-boom-hurts-pension-system/article_da58863b-1799-50b4-8ff3-0548d16be68c.html
August 17, 2005
Colorado Assistant Attorney General Heidi Dineen, Rocky Mountain News (in a four part series): “‘Everyone agrees you certainly can make changes for people you haven’t even hired yet,’ said Heidi Dineen, a state assistant attorney general retained to explore the issue for the Commission to Strengthen and Secure PERA. ‘On the other side of the spectrum is pensioners, getting their pension checks, you cannot take that away.’”
“Smith said in his opinion that ‘other (non-Colorado) courts have set a high burden to meet the necessity threshold.’”
“His (Colorado PERA General Counsel Greg Smith) briefing paper said ‘there has never been a finding in Colorado that the state has reserved its power to make changes’ in PERA’s benefit structure.”
“The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member. That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan.”
“Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem.”
http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/
September 14, 2005
Colorado Treasurer’s “Commission to Strengthen and Secure PERA,” co-chaired by former Colorado Senator Hank Brown (who later supported a retroactive taking of PERA COLA benefits):
“For those Coloradans already collecting benefits from PERA, their retirement funds must be protected. The commission may not make any recommendations that materially affect current retirees.”
https://www.copera.org/pdf/Misc/CommissionReport.pdf
November 4, 2005
PERA Shareholders Meeting Presentation, Fall, 2005:
“Note that PERA’s funded status was lower 30 years ago than it is now. You may recall that there was no perceived ‘crisis’ in PERA’s funded status in 1975.” “What the PERA Board and staff would like is for the funded status curve to be flat or stable at around 80 percent. Why? Because not all benefits are due and payable today or tomorrow . . . PERA can weather the ups and downs in the markets.” “There are legal provisions that protect retirement benefits for current members and retirees, including the contract clause restrictions established by court cases in Colorado and other jurisdictions.”
http://www.copera.org/pdf/Shareholder/ShareholderPresentation05.pdf
2006
SB 06-235
- Reduced PERA’s statutorily prescribed maximum amortization period (MAP) from 40 years to 30 years. (In 1997, the PERA MAP was set in law at 60 years.)
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
2006
Federal Reserve paper, by Ronald A Wirtz, notes that public pension actuarial funded ratios in the 50 to 60 percent range were typical in the 1970s:
“From a long-term perspective, however, one can’t really pin too much of the pension problem on the recent stock market pullback . . .”. “During the 1970s, funding ratios generally hovered between 50 and 60 percent.” (Yet, public pension contracts in the United States were honored.)
January 2006
Colorado PERA Member Report: “As I said above, no changes are proposed for ‘legally protected’ benefits.” “The package addresses PERA’s funded status without impairing earned pension benefits for existing and retired members.”
http://www.copera.org/pdf/Newsletters/MemberReport/MR1-06.pdf
January 12, 2006
Governor Bill Owens 2006 State of the State:
“We need to modernize our pension system to reduce current and future unfunded liabilities. This will require a separate tier for newly-hired employees that is stable, sustainable, and less expensive to the taxpayer. This reform will significantly reduce the future burden on government while at the same time attracting quality workers to state government.
“We also need to take the politically tough step of examining benefit levels for our current employees. We can help make the system more sustainable by changing the age at which retirees receive full benefits and-if necessary-reducing benefits in the ‘out’ years for those furthest from retirement. These changes should not affect those closest to retirement, but could be phased in for those who have years to go.”
http://www.pewstates.org/projects/stateline/headlines/colorado-state-of-the-state-address-2006-85899394414
January 13, 2006
Rocky Mountain News: “(Colorado PERA Executive Director Meredith) Williams claims that any compromises in promised benefits to current employees could be deemed unconstitutional.”
http://m.rockymountainnews.com/news/2006/jan/13/brosenb-slay-the-pera-dinosaur/
February 2006
From PERA Legislative Update:
“Employees hired before January 1, 2007 remain in PERA Pioneer (and will receive) automatic increase of 3.5% per year after retirement.”
“PERA members hired January 1, 2007 or later, called PERA Centennial, no guaranteed annual increase after retirement.”
http://www.copera.org/pdf/Legislation/2006/LegUp2-06.pdf
February 10, 2006
Colorado PERA Board meeting summary on DocStoc: “A motion was made by Scott Noller and seconded by Carole Wright that ‘as it is in the best interest of the members and beneficiaries of PERA, and in compliance with the fiduciary obligation of the Board of Trustees, that any laws affecting PERA be legally adopted, that staff take appropriate action, including incurring reasonable expenses, to ensure that any laws affecting PERA be legally adopted.’”:
http://www.docstoc.com/docs/61834277/Colorado-Public-Employees-Retirement-Association
February 11, 2006
“It defines ‘actuarial necessity’ in state law, opening the door for benefit reductions for current PERA members who have not retired.”
http://m.rockymountainnews.com/news/2006/feb/11/governor-demands-pera-solution/
February 16, 2006
“Joint Budget Committee member Rep. Bernie Buescher (D-Grand Junction) told S&GR this week that he hopes in the next week to meet with representatives of CAPE, CEA, the Colorado Federation of Public Employees, the Colorado Association of School Executives, PERA and Gov. Bill Owens to work out a PERA solution.”
“Deputy Colorado Attorney General Bernie Buescher, ‘who spent 20 years as a pension attorney,’ has said that he believes Colorado PERA needs changes, but not drastic ones, pointing out that the ‘beauty’ of pension plans is that small changes compound interest over time. ‘When you’re talking about something as complex as retirement plans, the planning horizon is 30 to 50 years — even 20 years is too short.’”
“‘Some folks feel urgency’ to solve PERA’s problems, Buescher added. ‘I feel much more strongly that we need to do it right,’ he said. ‘We don’t have to do it this year, but the sooner we deal with it, the less painful the solution would be. It would be better to not do anything than to do something that is not productive.’” (Note that Buescher later served as Colorado Secretary of State and now works at the Colorado Attorney General’s office in the position formerly occupied by our new Colorado Supreme Court Justice, Monica Marquez.)
https://www.cu.edu/sg/messages/4829.html
February 24, 2006
“In an e-mailed statement, spokeswoman Katie Kaufmanis said PERA’s funded status at the end of 2004 ‘is the same as the funded status 20 years ago, and there was not a perceived crisis at that time. . . . PERA continues to enjoy positive cash flow and will be able to meet current and future retirement benefit payments for many decades in the future.’”
http://m.rockymountainnews.com/news/2006/feb/24/peras-red-ink-stains-colorado/
March 5, 2006
Colorado PERA’s “Five Minute Rule.” Denver Post article by Bob Ewegen (who retired from the Denver Post in 2008 after 36 years at the paper.) The title of the article is: “A 3 Percent Solution for PERA: Rescue Plan for Retirement Groups Finances Might be Simple”:
“In excluding any cuts for current retirees and slashing benefits for new hires, PERA and its critics agree on what might be called the ‘five minute rule.’ PERA members who are already retired – even if they left just five minutes ago – are considered ‘fully vested’ and thus legally immune from any changes that would reduce their current or future benefits.”
“Current or retired employees are guaranteed a 3.5 percent increase in benefits each year.” “PERA itself argues that the law bans any adverse change affecting even future earned benefits for existing employees.”
http://www.denverpost.com/opinion/ci_3566250
March 9, 2006
Silver and Gold Record: “Williams noted that most people don’t have enough money to pay off their mortgages, and that PERA’s assets have exceeded its total liabilities only twice in its 75-year history. ‘We have 74 percent of the mortgage, but some people are making hay out of that,’ he said. ‘They want to close down your pension fund.’” (Williams later supported the breach of Colorado PERA pension contracts when the Colorado PERA actuarial funded ratio was five points lower than this level.)
https://www.cu.edu/sg/messages/4871.html
April 2006
Colorado Association of School Executives (an organization that supported SB10-001) in an issue brief, “Politics and PERA, Separating Fact from Fiction”:
“What is PERA’s financial condition? Is PERA stable? Yes. PERA is quite stable. As of this writing, PERA’s market value is in excess of $35 billion. If there were flat investment returns in the future, PERA would have enough cash to pay benefits or over 40 years. By almost every standard, PERA is solvent.”
“How did PERA get into this predicament? Several factors have contributed to PERA’s current funded status. In 1999 and 2000 when PERA had more assets than liabilities, there was a major political movement to increase benefits, to lower the age of retirement, and to lower employer contribution rates for PERA.”
“Now, some of the same politicians who voted for increased benefits and lower contribution rates are the ones pointing fingers and talking about a ‘crisis.’”
“One result of these changes is that PERA’s employer contribution rate has declined by 25 percent since the late 1990s. Current contribution rates and estimated return on investments aren’t enough to pay off the debt over time.”
“In short, employer contributions were lowered during the boom years — now employers need to step up to fill some of the gap.”
“Different groups have proposed numerous ‘fixes’ that range from adjusting how Highest Average Salary is figured, to reconfiguring the benefit package, to privatizing the system.”
(My comment: Here CASE, an SB10-001 proponent, notes in its 2006 Issue Brief the existence of several “less drastic” alternatives to the breach of fully-vested PERA retiree pension contracts.)
“The negative publicity about PERA over the past year is largely the work of organized ideologically motivated activists and profit-minded special interest groups.”
“In reality, PERA has one of the lowest employer contribution rates in comparison with other public pension plans in Colorado and other states. The 2006 employer contribution to PERA is 10.65 percent. By comparison, public pension plans for neighboring states show an average employer contribution rate of 17.2 percent. Even with the scheduled gradual increase of the employer rate up to 13.15 percent by 2012, Colorado will still compare favorably with other public pension plans.”
“By Phil Fox, deputy executive director, and Jana Caldwell, director of communications, CASE.”
http://www.friendsofpera.com/facts/PERAIssuebrief.pdf
June 5, 2006
PERA CAFR: “PERA directs its efforts to keeping the funded ratio (the ratio of assets to accrued liabilities) for the divisional retirement funds at a minimum of 80 percent.” (Page 7)
http://www.leg.state.co.us/osa/coauditor1.nsf/All/900E3922BE6A3D9A872571A4006F3245/$FILE/PERA%20CAFR%20Dec.%202005%20heard%20July%202006.pdf
Fall 2006
“Shareholders Meeting Fall 2006” document: “Note that PERA was over 100% funded in only two years of our 75 year history.”
http://www.copera.org/pdf/Shareholder/ShareholderPresentation06.pdf
October 26, 2006
Silver and Gold Record: “One attendee asked if there was any similar controversy in the 1970s, when PERA’s unfunded liability went as low as 54.7 percent. Williams said former Gov. Richard Lamm, who co-chaired the PERA commission, made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level. Williams compared the unfunded liability to having a mortgage, and asked how many people have enough money on hand at any one time to pay off all or even half of their mortgages.” “He (Meredith Williams) added, however, that since PERA is not permitted to increase member contributions without a commensurate increase in benefits, the money is technically being paid by employers, from their salary-raise pools. Williams said this ‘employer contribution’ will not affect retirees . . .”
https://www.cu.edu/sg/messages/5245.html
2007
“Representative Bernie Buescher, a pension attorney from Grand Junction, began a month-long effort (in 2006) to educate the PERA Board and include them in discussions with others, including Senator Owen, in order to forge a compromise.”
http://cppa.utah.edu/_documents/westernstatesbudgets/wpsa-06/colorado-06.pdf
2008
Friends of PERA (an organization that supported SB10-001) in “PERA Quick Facts”:
“The employer contribution rate for the PERA pension plan is below the average rate contributed by public & private employers into retirement plans for their employees. Many employers contribute between 6% and 10% of pay in addition to 6.2% of pay for Social Security, for a total of 16.2% of pay.”
“In 1984, the contribution rate to PERA’s pension fund for the School and School Divisions was 12.5% and 12.2%, respectively. Over the years, the rate dropped to less than 10%. The rate in 2009 is 11.9%, still lower than it was 25 years ago.”
“Compare PERA’s rate with other non-PERA Colorado public plans: Denver = 13.7%, Adams & Pueblo counties = 13.7%, Douglas County = 14.2%, University of Colorado = 16.2%, City of Fort Collins = 13.7%, Jefferson County = 13.2%, Durango = 11.2%, Westminster = 10.3%, Lakewood = 11.7%.”
“Compare PERA’s rate with the average rate of the seven neighboring state pension plans: 11.9% vs. average of 18.3%, NM State = 22.8%, NM School = 17.8%, Utah RS = 21.9%, Wyoming = 17.5%, NE School = 13.5%, OK RS = 20.7%, KS PERS = 14.2%.”
“Compare PERA’s rate with the average of 32 public DB plans: 11.9% vs. 14.3%.”
“Average pension cost for all Private Employers according to the 2006 Chamber of Commerce Employee Benefits Study is 14.25%. PERA is 16 percent below this.”
“Rate cuts to PERA between 2000 and 2005 equaled some $325 million.”
“The State (taxpayers) is not the major provider of funds to the pension plan; only 17% of PERA’s revenue of $45 billion in the last 20 years came from the taxpayer; members contributed about 18% of the revenue. Investments brought in 65% of the revenue.”
“PERA’s funded level at the end of 2007 was an overall 75% of assets – about the same as it was in 1984.”
“Equating PERA’s amortization period (number of years when it will have the unfunded portion paid off) to an actuarial emergency or necessity is erroneous. PERA continues to have a positive cash flow without selling off assets.”
“PERA has been fully funded only two years in its 75-year history – in 1999 and 2000. When it was fully funded, Governor Owens immediately pursued cutting the employer contribution rate and unwisely pushed the Board of Trustees very strongly to reduce the cost to purchase service credit. This action resulted in a very large unfunded liability increase to the fund. When PERA tried to pursue legislative changes to remedy the situation, Governor Owens vetoed the legislation because it did not include a ‘defined contribution option’ for state employees.”
“PERA benefits are actually lower than private industry and other public plans that have Social Security plus a pension.”
“Laws passed in 1999 and 2000 to reduce the cost to purchase years of service and to provide for earlier retirement were initiated by Governor Owens’ office and legislators who wanted to encourage long-term state employees to retire. At the same time that the benefit rules were made better, the employer contribution rates were reduced and the rate employees paid remained the same. These changes were made by the Executive and Legislative branches, not by the PERA board.”
“There is a misconception that the ‘taxpayers’ are owners of the fund; the trust fund is owned by the beneficiaries of the fund . . .”
“PERA reacted promptly to the market downturn in 2001. In 2002, it developed a proposal that would have saved PERA millions of dollars in payments and brought in millions of dollars in additional revenue. This plan was passed unanimously by the General Assembly in 2003 but was vetoed by Governor Bill Owens (R). He vetoed this bill because of a political desire to include defined contribution plans as an alternative option to PERA, even though no other organization in the state offers a ‘choice’ in retirement plans.”
http://www.friendsofpera.com/facts/index.html
January 2008
U.S. Government Accountability Office, “State and Local Government Retiree Benefits: Current Funded Status of Pension and Health Benefits,” (GAO-08-223.) The GAO report notes on p. 15, “Many experts and officials to whom we spoke consider a funded ratio of 80 percent to be sufficient for public plans for a couple of reasons. First, it is unlikely that public entities will go bankrupt as can happen with private sector employers, and state and local governments can spread the costs of unfunded liabilities over up to 30 years under current GASB (my comment, “recommended”) standards. In addition, several commented that it can be politically unwise for a plan to be overfunded; that is, to have a funded ratio over 100 percent. The contributions made to funds with ‘excess’ assets can become a target for lawmakers with other priorities or for those wishing to increase retiree benefits.” (My comment, GASB does not have the power to compel state and localities to follow its recommendations. If an 80 percent AFR is a “sufficient” funding level, why does the Colorado PERA Board of Trustees seek to break Colorado PERA pension contracts until a 100 percent funded ratio is achieved?)
http://www.cbpp.org/cms/index.cfm?fa=view&id=3372
ANATOMY OF A COLORADO PERA PENSION CONTRACT BREACH. (Part 2 of 2.)
February 2008
The Auraria Campus Human Resources Department posted a Colorado PERA document on the AHEC website in 2008 (still in place) clearly stating that retirees will receive the contracted annual increase of 3.5 percent in retirement. This Colorado PERA publication predates PERA’s decision to attempt a pension contract breach. Since this document is on AHEC’s website, it is beyond PERA’s reach.
“Colorado PERA Retirement Process”: “The amount of increase you receive is dependent on when you were hired by a PERA employer: If you began PERA membership on or before June 30, 2005, you will receive an annual increase of 3.5 percent.”
http://www.ahec.edu/hr/peraretirement.pdf
April 17, 2008
Colorado has an opportunity for significant federal mineral lease revenue: “Co-sponsor Sen. Josh Penry (R-Grand Junction) said the bill will create an opportunity for the state to invest in strategic needs. He explained that at the time the original tax structure was set up, the state was receiving about $30 million to $40 million per year from federal mineral lease revenues. However, according to Penry, the state is now expected to see $300 million to $400 million per year, reaching a total of $2.7 billion over the next decade.” (Note that the State of Colorado also foregoes the collection of significant sales tax revenue.)
https://www.cu.edu/sg/messages/6125.html
August 1, 2008
Colorado PERA website, “Ask Meredith”: “Keep in mind that PERA is a long-term investor with a time horizon that is much longer than individuals have. PERA does not ‘time the market’ nor do we actively move assets to less risky investments when the market is falling. Because PERA is a long-term investor, we know that at times we’ll have losses, but those losses will be offset by gains over the long run in PERA’s diversified investment portfolio. The bottom line is that the PERA portfolio is well diversified and able to withstand the ups and downs of the market over time.
– Meredith”
https://www.copera.org/pera/about/askm.htm
October 10, 2008
Colorado PERA Executive Director Meredith Williams: “The value of your PERA benefit is based on highest average salary and years of service (a ‘defined’ formula) and does not fluctuate based on market performance.”
http://www.copera.org/pera/about/askm.htm
November 30, 2008
Colorado PERA General Counsel Greg Smith: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”
http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)
December 2008
Colorado PERA Executive Director Meredith Williams commenting on Colorado Attorney General Ken Salazar’s 2004 Formal Opinion on PERA benefits (PERA Retiree Update, page 1):
“The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”.
https://www.copera.org/pdf/5/5-40-08.pdf
December 4, 2008
Silver and Gold Record: “‘We’ve got a much larger segment of people making contributions and employers making contributions,’ and with its current assets PERA will be able to pay benefits for decades to come, he (Colorado PERA Executive Director Williams) said.” “Williams said that gives PERA time to examine its options.” “We generally can ride out market cycles,” he said. “We’re built to do that.”
https://www.cu.edu/sg/messages/6546.html
December 8, 2008
“Ask Meredith” column on Colorado PERA website: “That leaves the benefits being earned by members (active and inactive) as the only area to examine for savings. The Attorney General’s opinion contains the following language: ‘Once a PERA member fulfills all the statutory requirements for a pension benefit, retires and begins receiving a pension, the member’s fully vested pension right cannot be reduced by the General Assembly.’”
https://www.copera.org/pera/about/askm.htm
December 19, 2008
Colorado PERA Executive Director Meredith Williams assures PERA retirees that market volatility has no impact on their contracted pension benefits:
“Since PERA is a defined benefit plan, your benefit is not based on the fluctuations in the financial markets, but on your contributions, age, and years of service.”
https://www.copera.org/pera/about/askm.htm
2009
Sometime in 2009
Attorney Jean Dubofsky, at the request of Colorado PERA, provides PERA with a legal opinion arguing that the Colorado Legislature could legally take Colorado PERA retiree pension COLA benefits: “at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights;”
http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf
2009
Senator Josh Penry, in a videotaped discussion with Representative Mike May, (videocenter. denverpost.com) said ‘we can’t, can’t miss this window.’ And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . .
“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age. You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return. So that could change the specter of actuarial necessity. We gotta’ do it this year or else these other structural changes won’t be possible.”
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
January 2009
Colorado PERA Executive Director Meredith Williams: “The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”
https://www.copera.org/pdf/Topics/2009/Topics1-09.pdf
January 5, 2009
Colorado PERA officials discuss “what constitutes an actuarial emergency” with the Colorado Legislature’s Joint Budget Committee.
January 8, 2009
Silver and Gold Record: “The committee also met with representatives from the Public Employees’ Retirement Association on Monday. PERA Executive Director Meredith Williams pointed out that despite an estimated $11 billion market loss in 2008, the association has enough funds to pay benefits for decades, although perhaps not as many decades as it could have funded in the past.”
https://www.cu.edu/sg/messages/6594.htm
January 24, 2009
“Define an ‘actuarial necessity’ that automatically triggers a legislative response. PERA’s board has long argued that the state constitution may require any benefit cuts to be paired with equal reductions in contributions, unless the changes are ‘actuarially necessary.’”
http://m.rockymountainnews.com/news/2009/jan/24/lawmakers-must-act-now-on-pensions/
January 26, 2009
Former Colorado Treasurer and PERA Board member Mark Hillman: “PERA lawyers assert that benefits can be retroactively increased (as they have been), but that once increased, those benefits can never be reduced, even for someone who has worked just one day for a PERA employer.”
“. . . PERA’s party line is that the responsibility to make up for any shortfall rests with taxpayers, represented by state and local governments who contribute to PERA’s pension funds on behalf of their employees.”
http://www.markhillman.com/2009/01/26/get-taxpayers-off-the-pera-go-round/
February 4, 2009
Colorado PERA publication: “Employer contribution rates were lowered when PERA reached fully funded status, saving public employers in Colorado millions of dollars.”
http://www.copera.org/pera/about/newsarchives2009.htm#LAC
March 11, 2009
Colorado PERA officials place blame on the Colorado General Assembly for creating the latest PERA financial downturn: “Other notable factors (for the downturn in PERA’s fiscal position) include employers not contributing the actuarially determined contribution rates, the sale of purchased service credit at rates below actuarial costs, and the raising of benefits in the late 1990’s coupled with decreasing employer contributions.”
http://www.kentlambert.com/Files/PERA_Response_Pt_1.pdf
April 14, 2009
Colorado PERA Executive Director Meredith Williams testifies to the Senate Finance Committee hearing on SB09-282 (03:28 PM) stating that “the PERA Board is committed to presenting a proposal to the General Assembly that addresses retirement benefit issues for Colorado PERA.” Mr. Williams made this statement one week BEFORE the requirement for the PERA Board to provide recommendations to the Legislature regarding PERA reform was placed into SB09-282 (on April 21, 2009.) In court documents, Colorado PERA emphasizes that, in 2009, the PERA Board was simply responding to the General Assembly’s “legislative mandate” to make PERA pension reform recommendations. Response Brief submitted to the Denver District Court:
http://www.ednewscolorado.org/wp-content/uploads/2010/05/PERASuitResponse5-10-10.pdf
I suspect that (through PERA lobbyists) the PERA Board actually “asked itself” to make these recommendations, that this amendment was placed in SB09-282 at the end of the 2009 legislative session in order to make a preordained conclusion to attempt to take PERA COLA pension benefits appear to be the product of extensive deliberation on the part of the PERA Board to PERA’s benefit in anticipated litigation. It would be rather disingenuous of Colorado PERA to argue in court documents that it was responding to a “legislative mandate” to provide pension reform recommendations, when in fact Colorado PERA was responding to a Colorado PERA “mandate” to provide pension reform recommendations.
July 14, 2009
Speaker Frank McNulty: “I don’t think at this point we can expect employer contributions to be part of the solution . . .”
http://www.9news.com/rss/story.aspx?storyid=119465
August 11, 2009
Colorado PERA Board Trustee Casebolt assures PERA retirees present at Colorado PERA Denver meeting of the PERA “Listening Tour”: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”
Sue Ellen Quam: “I was a legislative liaison for many, many years. I sat in the Joint Budget Committee for many, many years, and I remember legislators saying ‘You know, you don’t get very good salary increases and your benefits really stink, but you’re gonna get a really good retirement and so just hang in there.” “So, I find it to be discouraging that the Legislature may be considering saying, ‘We got you on your salary, we got you on your benefits, and now we’re going to get you on your retirement.” “I’ve heard rumors that the 3.5 percent increase may be reduced or eliminated and that it’s OK with PERA members. It’s not OK with this PERA member.”
Colorado PERA’s General Counsel Greg Smith blames the Colorado General Assembly for PERA’s fiscal downturn: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”
http://www.copera.org/pera/about/listeningtour.htm
October 2009
Gabriel Roeder Smith paper: “Most public plans provide a COLA in order to protect retirees’ purchasing power from inflation. In many cases, the COLA is automatic and set at some fixed rate (e.g., 3% annually) or based on the Consumer Price Index (e.g., 80% of the annual CPI increase). In other cases, the COLAs are ad hoc and granted by a decision of the plan’s board of trustees. Because ad hoc COLAs are not part of the guaranteed benefit, they may be reduced or eliminated as circumstances warrant.”
http://www.vermonttreasurer.gov/sites/treasurer/files/pdf/retirement-all/GRS_Pesnio__Insight2009_10.pdf
October 22, 2009
“PERA is obviously gearing up for some heavy-duty lobbying, one observer noted. The agency has hired two lobbyists from the firm Colorado Communiqué, Collon Kennedy and Steve Adams, former president of the Colorado AFL-CIO. The pension system also has hired Mary Alice Mandarich, a well-connected Democratic lobbyist who formerly was chief of staff for Senate Democrats and who worked on campaigns for former Senate President Joan Fitz-Gerald, former Gov. Roy Romer and gubernatorial candidate Gail Schoettler.”
http://www.ednewscolorado.org/news/capitol-news/pera-woes-loom-large-for-education/comment-page-1
November 15, 2009
Denver Post Editorial Board: “First, let court rule on PERA. Before legislators take on reforms, they should first ask the state Supreme Court to determine how much leeway they have.”
“As Colorado lawmakers prepare to consider the financial rescue of the state employees’ retirement fund, they ought to first figure out just how much legal leeway they have to overhaul it.” “Legislators need to understand how much power a designation of ‘actuarially necessary’ gives them to modify benefits paid to members.” “We think lawmakers should ask the state Supreme Court for a ruling so they know exactly what they can do.” “Administrators of the Colorado Public Employees’ Retirement Association, or PERA, recently asserted that the fund’s foundering finances give the state the legal footing to cut future cost-of-living increases for people who already are retired. But what if that were challenged in court and found to be illegal?” “On the other hand, if annual hikes for retirees can be adjusted, why can’t a case be made to increase the retirement age for many of those who are still working and contributing to PERA — a reform that is missing from the PERA board’s plan?” “It’s in Colorado’s best interest to get out in front of the PERA problem, file an interrogatory with the state Supreme Court, and get a clear fix on what legislators can and cannot do. We’re confident that PERA solutions will be far more clear after that.”
http://www.denverpost.com/opinion/ci_13776995
December 16, 2009
Colorado PERA officials in written testimony to the Joint Budget Committee: “The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
December 17, 2009
Education News Colorado: “The most controversial part of the plan, at least based on the volume of e-mail flowing into legislators’ in-boxes, is a proposal to reduce most retirees’ annual cost-of-living increases from 3.5 percent to 2 percent. It’s estimated that the current COLA would provide a third of the pension benefits over the retirement of a worker who retired in 2008.”
http://www.ednewscolorado.org/news/capitol-news/pera-plan-work-longer-pay-more-receive-less
December 17, 2009
The Colorado General Assembly’s Joint Budget Committee (JBC) meets with representatives of Colorado PERA. At the meeting, Colorado PERA’s General Counsel Greg Smith informed the JBC that Colorado PERA had hired an outside law firm to provide a legal opinion relating to Colorado PERA contractual pension obligations:
Colorado PERA General Counsel Greg Smith – “We have obtained outside counsel’s opinion on this issue.”
Greg Smith, before the Joint Budget Committee: “The statutes are in fact binding, and they are constitutionally protected from reduction.”
Rep. Jack Pommer, Joint Budget Committee Chairman to JBC: “Are we not just saying we’re going to pick 30 years (as a PERA investment time horizon) because if we’re not balanced within 30 years that creates actuarial necessity which then let’s us change retiree benefits?”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
December 31, 2009
The Colorado PERA actuarial funded ratio (AFR) reaches 68.9 percent. This funding level is 9.1 percent below the 40-year average of the PERA actuarial funded ratio, 11.1 percent below an 80 percent AFR level considered “well-funded” by Fitch Ratings, 1.1 percent below a 70 percent AFR level considered “adequately-funded” by Fitch Ratings, 3.1 percent below the Wilshire Associates average U.S. public pension actuarial funded ratio that year. The General Assembly determines that Colorado PERA pension plan is in a funding “crisis,” and that PERA pension contracts must be broken. Should all U.S. public pension contracts be abrogated at that funding level?
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true
2010
January 5, 2010
SB10-001 co-prime sponsor Josh Penry: “Republicans and Democrats created this mess . . .”.
http://www.9news.com/rss/story.aspx?storyid=130197
January 10, 2010
Senator Josh Penry, co-prime sponsor, SB10-001 appearing on Your Show, Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on at 10:30 a.m.:
“What the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity.”
January 15, 2010
“PERA also is hoping the Legislature will ask the Colorado Supreme Court to review the matter through interrogatories before the end of the session.”
http://www.coloradostatesman.com/content/991527-state-retirees-ready-pounce-pera-fix
January 22, 2010
SB10-001 co-prime sponsor Senator Josh Penry and bill sponsor Senator Greg Brophy: “Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees.”
http://www.denverpost.com/search/ci_14242354
January 26, 2010
“With SB1, Shaffer and Penry have said the state can realize solvency in the PERA fund within 30 years. Previously, the Legislature had targeted a 60-year fix.”
“The difference between the past approach and SB1, Penry said, is that the new plan boldly tackles benefit reductions, which he said will constitute 90 percent of the PERA fund’s recovery and generate plenty of opposition along the way.”
http://www.chieftain.com/news/local/legislators-pera-changes-will-be-painful/article_b82cee28-328f-59ba-91c0-a480e5f719c8.html
January 27, 2010
Assistant Colorado Attorney General Steve Smith (retired) warns the Colorado Legislature’s Senate Finance Committee during testimony on Colorado PERA’s bill, SB10-001, against breaking state contracts: “Others, including a former assistant attorney general, said the 3.5 percent annual increase in benefits was a contractual right, and that changing it would be illegal.” “Many witnesses asked the senators to seek legal counsel before final passage of the bill rather than face a court battle afterward.”
https://www.cusys.edu/newsletter/2010/01-27/pera.html
January 29, 2010
Colorado PERA General Counsel Greg Smith to Senate Finance Committee: “There are few case laws that address the issue, Smith said, but one, regarding a fire and police pension plan, was litigated when the plan ran out of money and benefits were being paid for with current revenues.”
http://www.coloradostatesman.com/content/991568-pera-reform-bill-passes-first-test-capitol
January 29, 2010
2010 Senate floor debate on SB 10-001:
Rep. Lambert: “I have heard from my constituents, as many of you have, that this proposal will breach retiree’s contracts.”
Rep. Swalm: “We’re breaking new territory in this state by trying to reduce the COLA. We’re probably going to get a lawsuit out of that. If we cut the 3.5 percent COLA there will be a lawsuit.”
Rep. Gerou: in committee, said that it is a disservice to the state to rush a bill through when her committee knew that it will go to litigation, and said what we are doing to the retirees is wrong.
Rep. DelGrosso: said that it is “tough” for him to tell people that he is going to break their contract.
Senator Harvey: “We have made a commitment. We have a contract with current retirees. That is already in place. Reforms should be made for new hires. We do not have that commitment to new hires.”
Senator Spence: “The bill places an unfair burden on retirees.”
Senator Scheffel: “We are breaching our promises to existing retirees.”
Senator Lundberg: “This bill is a deal that was cut before this body met.”
February 1, 2010
Senate “Third Reading” debate on SB10-001 (watch on the Colorado Channel):
Senator Ted Harvey: “If we can’t fix that technical issue and compromise in telling the (PERA) members just what their rights are, then we’ve got a more serious problem in this body than simple technical amendments on Third Reading.”
Senator Renfroe: “Or, if you want it to go out of here with the PERA-approved document and nothing else then let’s just approve this one and vote mine down.”
http://www.coloradochannel.net/colorado-senate-2010-legislative-day-20
February 10, 2010
Joel Judd, Chairman, House Finance Committee, during the hearing on Senate Bill 10-001 Chairman Judd stated (near the end of the hearing) that SB 10-001 (the “COLA theft bill”) must be supported “because that’s where the money is.”
February 10, 2010
Jim Alexander’s paper provided to the House Finance Committee during testimony on SB10-001 (quoting the October 2002, PERA Retiree Report:
“In 2002, PERA Executive Director, Meredith Williams was asked, because of a downturn in the stock market, if retirement benefits were safe. He replied, ‘First, the ‘loss’ is due to a decline in the stock market. PERA still owns the same stocks that it did before the decline and this ‘loss’ is a result of the value of the stock decreasing. It is not ‘lost’ since we haven’t sold the stocks, and because PERA is a long-term investor, we can ride out the bad times the market experiences. When the market recovers, the value of these stocks will also increase, offsetting this ‘loss.’”
“Mr. Williams was quoted in the same report as saying ‘Most pension funds are considered sound at 80 percent funding levels.’”
“Meredith Williams ‘said at the Senate Finance Committee hearing in January that PERA needed to be funded at 100 percent. When the PERA representatives were asked by a member of the committee why in view of the fact that PERA had only been funded at 100 percent for about seven of the past thirty years (my comment, actually two of the last eighty-one years), it was necessary now. The answer was ‘it just makes things easier.’”
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
February 10, 2010
Assistant Colorado Attorney General Steve Smith (retired) warns the Colorado Legislature’s House Finance Committee during testimony on Colorado PERA’s bill, SB10-001, against breaking state contracts: “Former Assistant Attorney General Stephen Smith said he believed everything in SB 1 is legal except for the COLA change. ‘They’re setting themselves and you up for failure,’ he told the committee.”
http://www.coloradostatesman.com/content/991604-pera-reform-bill-gets-bipartisan-blessing
February 12, 2010
“Rep. Cheri Gerou, R-Evergreen, questioned why Williams and Smith still have their jobs, suggesting that if they worked in the private sector they might have been fired. ‘A lot of people would like to see you lose your jobs over this,’ she told them.”
“Gerou, in explaining her ‘no’ vote, said that the hours of testimony from retirees showed that the bill did not have ‘buy-in.’ ‘People who have already retired deserve better than this.’”
http://www.coloradostatesman.com/content/991604-pera-reform-bill-gets-bipartisan-blessing
February 23, 2010
Governor Bill Ritter signs SB10-001 into law, breaking Colorado PERA pension contracts.
http://statebillnews.com/2010/02/sb10-001-ritter-signs-bill-cutting-benefits-for-state-retirees/
February 26, 2010
Colorado PERA retirees sue Colorado PERA and the State of Colorado for breach of Colorado PERA pension contracts.
Education News Colorado: “Despite support for the bill by organized employee groups, there’s widespread anger about the cut among individual retirees, and the lawsuit doesn’t come as a surprise.” “The named plaintiffs are Gary Justus, a retired Denver Public Schools math teacher who had more than 29 years of service, and retired Department of Labor employee Kathleen Hancock, who worked for about 15 years.” “‘This lawsuit is about the state complying with its own constitution,’ Justus said in a statement. ‘The General Assembly is trying to correct its past mistakes on the backs of the retirees. We can’t go back and restart our careers.’”
“Some observers believe that past legislative actions, including benefit increases, contribution cuts and programs that allowed workers to buy extra years of eligibility, also weakened the pension system.”
“A PERA spokeswoman said Friday the agency hadn’t been served with any papers and doesn’t comment on litigation.” (As we have seen, Colorado PERA official have been regularly commenting on litigation over SB10-001 for three years.)
http://www.ednewscolorado.org/news/capitol-news/lawsuit-challenges-pera-retiree-cuts
March 17, 2010
Professor Amy Monahan, University of Minnesota School of Law, “Public Pension Plan Reform, the Legal Framework”: “This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
http://www.ncsl.org/documents/fiscal/AMonahan_Handout.pdf
March 19, 2010
Attorney Monica Marquez (soon to be a Colorado Supreme Court Justice) advises Colorado PERA on March 19, 2010:
https://www.copera.org/pdf/Board/Minutes/2010/Minutes3-19-10.pdf
May 10, 2010
Attorney Monica Marquez’s name appears on the PERA Defendant’s Motion to Dismiss submitted to the Denver District Court on May 10, 2010:
http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf
June 3, 2010
Colorado Supreme Court Chief Justice Mary Mullarkey announces retirement.
http://www.denverpost.com/ci_15221861
June 23, 2010
Nicholas Joseph Marcucci, Emeritus Board Member at the National Association of Public Pension Attorneys, “Constitutional Issues When Altering Public Pension Benefits”:
“In most states there is a fairly clear demarcation between the gratuity theory and the contract theory and a seminal case or two where the courts make the change. Police Pension and Relief Board of the City and County of Denver, et al. v. McPhail, 39 Colo. 330, 338 P.2d 694 (1959); and, Police Pension and Relief Board of City and County of Denver, et al., v. Bills, et al.”
“United States Trust Co. emphasizes that the impairment must be both reasonable and necessary. A State cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money on other public policy goals.”
“In many states, enforceable pension terms attach at the start of employment.” City Of Aurora v. Ackman, 738 P.2d 796 (Colo.App. 1987).
(To access this Word document, paste “Constitutional Issues When Altering Public Pension Benefits Marccuci” into Google.)
July 26, 2010
Colorado Secretary of State Bernie Buescher writes letter recommending Monica Marquez to serve on the Colorado Supreme Court.
http://www.lawweekonline.com/2010/08/letters-of-reference-for-monica-marquez-colo-supreme-court-finalist/
August 2, 2010
Ritter Administration Letter to GASB on contractual public pension obligations:
“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”
“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.”
“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits (such as COLAs), or an increase in required employee contributions both serve to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”
“The criteria suggested as the basis for differentiating these COLAs (automatic) versus ad-hoc COLAs is the statutes that exist as of the date of the employer’s financial statements.”
“The essential difference between an automatic COLA and an ad hoc COLA is the legal requirement; with this core difference there is no way for the two not to be substantively different. The legal difference in this instance is critical to the determination of whether the government is unable to avoid the surrender of resources to meet the obligation.”
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791
August 10, 2010
“The Legislature was cutting off funds and starving the pension system,” says Stephen Pincus, a Pittsburgh attorney . . .”. “They shouldn’t now be able to cry there’s no money in the pension system. They had a large hand in creating the crisis.”
http://www.pewstates.org/projects/stateline/headlines/states-test-whether-public-pension-benefits-given-can-be-taken-away-85899374772
August 16, 2010
“Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. ‘The belief is that if the employer [the state] prevails, it will have been worth the political risk,’ Klausner says. ‘And if they lose, they will be no worse off than before.’ Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the ‘bad guy’ if they overturn the law.”
http://www.governing.com/news/state/States-Test-Whether-Public-Pension-Benefits-Given-Can-Be-Taken-Away.html
August 22, 2010
Stephen Pincus: “And the key word is necessary – and we’re talking about on the verge of bankruptcy. And that’s what the case laws really hold that you have to honor your contracts. You can’t go around and say, well, we’re not going to be paying the contractor who built the bridge this month because we don’t have the funds. No, that’s an obligation that you have.”
http://www.npr.org/templates/story/story.php?storyId=12935726
August 30, 2010
Attorney Jean Dubofsky, author of the Colorado PERA “COLA-taking” legal opinion: “I worked on” the case, Justus v. State, with Colorado Supreme Court Justice Monica Marquez. The author of Colorado PERA “COLA-taking” legal opinion wrote a letter of recommendation for Monica Marquez to serve on Colorado Supreme Court: “In particular, I’ve worked on several cases where she provided superb briefing, argument and/or advice for the Attorney General’s office, including congressional redistricting, the challenges to voter-approved Amendments 41 and 54 to the Colorado Constitution, and the current challenge to the amendments to PERA (Justus v. State), the government’s pension system.”
“ . . . and Ms. Marquez would bring to the court sophistication about the numerous cases that involve, for example, TABOR, ballot titles, election issues, voter-initiated constitutional amendments, property tax, public pensions, labor law, and regulations issued by a wide variety of state agencies.”
“Sincerely, Jean E. Dubofsky.”
(Personally, I believe that Justice Marquez has such strength of character, and commitment to the rule of law, that she could hear the case, Justus v. State, objectively, in spite of her prior work on the case; however, I expect that she will recuse herself as she did in Lobato.)
http://www.scrib.com/doc/36638245/Letter-for-Monica-Marquez-by-Jean-Dubofsky
September 8, 2010
Governor Ritter appoints Monica Marquez to Colorado Supreme Court: “Marquez leads the State Services Section of the Attorney General’s Office, which represents nine of the 16 executive branch agencies in Colorado. She specializes in appellate litigation and has represented the state, in both state and federal appellate courts, in cases involving fiscal policy, education, healthcare, elections, redistricting and campaign finance.”
http://www.colorado.gov/cs/Satellite%3Fc%3DPage%26cid%3D1251580511104%26p%3D1251580511104%26pagename%3DGovRitter%252FGOVRLayout
September 28, 2010
Professor Jonathan Barry Forman, Alfred P. Murrah Professor of Law at the University of Oklahoma, “Funding of Public Pension Plans”: “Because governments tolerate an 80% funding level and use actuarial valuations instead of market valuations, public pensions are almost guaranteed to be underfunded.” “The second disadvantage to fully funded or overfunded public pension plans is that governors and legislatures call for contribution cuts and holidays. Politicians would rather spend money on projects that will bring them more immediate campaign contributions and votes.” “Of course, the best way to ensure that public pension plans are fully funded would be to require them to pay the actuarial required contributions (‘ARC’) in full each year.”
http://jay.law.ou.edu/faculty/jforman/Articles/2010Funding.pdf
October 18, 2010
Jean Dubofsky deposition submitted to Colorado PUC that she is the author of a legal opinion addressing the legality of reducing the PERA COLA benefit:
“My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”
(To access this document, paste “Colorado PUC E-filing system PERA legal opinion Jean Dubofsky” into Google.)
November 22, 2010
Colorado PERA General Counsel Greg Smith at 2010 PERA Shareholder meeting (10 minutes into this YouTube video): “We need to know the answer of whether this action was constitutional.” (Would it not have been simpler to send an interrogatory to the Colorado Supreme Court in 2009?)
2011
January 7, 2011
Stephen Pincus, a Pittsburgh attorney: “They’re just saying, ‘Let’s go after the public workers,’” Pincus says. “If there is a real general threat to the financial well-being of a state or local government, then everything should be on the table, not just one set of contracts.”
http://www.pewstates.org/projects/stateline/headlines/activists-seek-new-tactics-to-break-old-pension-deals-85899376866
January 18, 2011
Bernie Buescher (a former pension attorney) replaces Monica Marquez at Colorado Attorney General’s Office as Deputy Attorney General overseeing the Colorado Department of Law’s State Services Section.
“A native of Grand Junction, Buescher replaces Monica M. Marquez, whom Gov. Bill Ritter recently appointed to the Colorado Supreme Court.”
http://www.coloradoattorneygeneral.gov/press/news/2011/01/18/attorney_general_announces_bernie_buescher_new_deputy_attorney_general_state_s
February 2011
Colorado PERA General Counsel Greg Smith writes in Government Finance Review: “Adjusting public pension benefits in Colorado: a fiduciary process”: “Necessity is judged on two levels: 1) whether a less drastic modification could have been implemented; and 2) whether, even with modification, the state could have achieved its stated goals. To determine whether the changes were reasonable, the changes MUST BE THE MINIMUM CHANGES NECESSARY to solve the economic problems of the plan. (See United States Trust Co. v. New Jersey, 431 U.S. 1, 1977.)”
(The next year, [June 26, 2012] Colorado PERA’s independent actuary, Cavanaugh MacDonald Consulting, LLC, reports in the 2011 Colorado PERA CAFR: “It should be noted that the
changes made to the PERA structure as a result of SB10-001 have as a goal 100% funding of the accrued liability within 30 years for all divisions. The results of the December 31, 2011,
valuations combined with financial projections of all divisions, indicate that this goal, WHICH IS A MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB
STANDARDS, is still achievable with the exception of the Judicial Division.”
http://www.leg.state.co.us/OSA/coauditor1.nsf/All/641A0AB5B97D073C87257A3A0072FEA3/$FILE/2067-12%20CAFR_6-26-12.pdf.)
http://www.thefreelibrary.com/Adjusting+public+pension+benefits+in+Colorado%3a+a+fiduciary+process.-a0290520595
February 2011
Government Finance Review article by Leigh Snell, National Council on Teacher Retirement: “In fact, for the last 15 years, plan sponsors’ pension contributions have accounted for less than three percent of all state and local government spending.” NCTR article “Setting the Record Straight”:
http://www.gfoa.org/downloads/GFOA_GFRfeb11_SettingtheRecordStraight.pdf
February 2011
In the “Origins and Severity of the Public Pension Crisis,” Dean Baker states that the shortfalls facing state and local pension plans have been misrepresented. Further, his study notes that, “when expressed relative to the size of their economies, most states are facing shortfalls that appear easily manageable.” For example, unfunded liability as a percent of future state income for the Colorado PERA State Plan is approximately one-tenth of one percent of future state income, 0.09 % (See page 11 of the report.)
http://www.cepr.net/documents/publications/pensions-2011-02.pdf
February 14, 2011
Keith Brainard, Research Director, National Association of State Retirement Administrators testifies before the a subcommittee of the U.S. House of Representatives:
“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.” “Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.” “The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.” “While the impact of the financial crisis on state and local pensions will likely require spending to increase, the most recent studies find that the share of state and local budgets dedicated to pension contributions would likely need to rise to about five percent on average, and to about eight to 10 percent for those with the most seriously underfunded plans. (Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby, “The Impact of Public Pensions on State and Local Budgets,” Center for Retirement Research, October 2010).” “Assuming a rate of asset growth consistent with historic market norms, most funds will never run out of money. The Center on Retirement Research at Boston College said last October, “even after the worst market crash in decades, state and local plans do not face an immediate liquidity crisis . . .” (Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby, “Public Pension Funding in Practice,” NBER Working Paper 16442, October 2010).” “Although some states have accumulated significant unfunded liabilities, pension benefits are paid out over many years, not all at once. These are long-term funding issues, and most thorough analyses by those familiar with governments and public finance find patient and measured responses are required: In a 2008 report, the GAO said, “[U]nfunded liabilities are generally not paid off in a single year, so it can be misleading to review total unfunded liabilities without knowing the length of the period over which the government plans to pay them off.” (U.S. Government Accountability Office, “State and Local Government Pension Plans; Current Structure and Funding Status,” July 2008 GAO-08-983T).”
http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf
February 17, 2011
Fitch Ratings notes that a 70% actuarial funded ratio for public defined benefit pensions is considered an “adequate” actuarial funded ratio. “Fitch generally considers a funded ratio of 70% or above to be adequate and less than 60% to be weak.”
http://www.ncpers.org/Files/2011_enhancing_the_analysis_of_state_local_government_pension_obligations.pdf
February 17, 2011
“In 2009, Williams persuaded the legislature to roll back the annual COLA to 2 percent.’
http://www.cnbc.com/id/41642979/page/1
February 18, 2011
Colorado PERA in “States and Bankruptcy”: “We acknowledge that the State of Colorado and PERA’s other public employers are facing difficult budget decisions, but pension obligations are not bankrupting the state and other public employers in Colorado. Indeed, the National Association of State Retirement Administrators issued a recent study that showed that, on average, pension costs represent only about 3 percent of total state and local government expenditures. In Colorado, state and local government expenditures to fund retirement benefits totaled only 2.16 percent.” (Note that states cannot declare bankruptcy under federal law.)
http://www.copera.org/pera/about/issues.htm#42611
March 5, 2011
Eric Madiar: “Is Welching on Public Pension Promises an Option for Illinois?” “In sum, welching is not a legal option available to the State.” “Courts, though, “sit to determine questions on stormy as well as calm days,” and the Constitution was upheld during the Great Depression.”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1774163
March 31, 2011
Jennifer Staman, Legislative Attorney, Congressional Research Service in “State and Local Pension Plans and Fiscal Distress: A Legal Overview”: “. . . a State is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives. Similarly, a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well.” “Despite the variation in when a contractual right to a public plan pension benefit begins, as noted above, state courts generally find that the benefits of individuals who have already retired may not be diminished or impaired.”
http://www.nasra.org/resources/CRS%20state%20and%20local%20legal%20framework%201104.pdf
April 12, 2011
Colorado PERA in “Setting the Record Straight”: “But what’s not mentioned is that this liability is not due and cannot be made payable today, just like a mortgage. This is the aggregate amount owed by PERA to current retirees and to all existing workers who have begun work for a public employer in Colorado and may not begin receiving a benefit for three or more decades.”
“PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years.”
https://www.copera.org/pera/about/issues.htm
April 17, 2011
Senator Brandon Shaffer, co-prime sponsor, SB10-001, Denver Post: “I sponsored last year’s legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA’s current and future members and retirees.”
http://www.denverpost.com/opinion/ci_17858107
May 22, 2011
Jennifer Paquette, PERA Chief Investment Officer, in the Denver Post: “In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.”
http://www.denverpost.com/search/ci_18100068
May 29, 2011
Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain:
“Retired public servants who live on fixed incomes no longer get the same cost-of-living-increases upon which many had come to depend.”
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
“Most PERA beneficiaries don’t qualify for Social Security so their modest PERA benefit may be the only steady retirement payment they’ll ever receive. After careers in public service, this is a reasonable reward. They have earned it.”
http://www.chieftain.com/opinion/ideas/legislative-changes-have-put-pera-fund-on-a-solid-footing/article_3080a01c-88cd-11e0-ad01-001cc4c03286.html
June 2011
National Institute on Retirement Security on “automatic” and “ad hoc” public pension COLAs: “One key design feature of a COLA is whether it is automatic or ad hoc in nature. An automatic COLA means the retiree’s benefit increases automatically every year by a certain percentage. An ad hoc COLA is granted at the discretion of the plan sponsor, usually when the fund is in a well-funded position and investment gains have exceeded expectation.
http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf
June 24, 2011
Geoff Blue, Deputy Attorney General for Legal Policy and Government Affairs (now in private practice) argues in an interview on the program “The Devil’s Advocate” that since Colorado’s education establishment has failed at the polls lately, they are now seeking to “legislate through the courts.” “It would, and as a matter of fact Senator Rollie Heath has proposed such an initiative this year, to raise taxes specifically to fund education and higher education.” “Cleary there is a path to do it. They’ve been losing so they’re trying to legislate through the courts.”
September 13, 2011
Virginia Attorney General Kenneth T. Cuccinelli in “Judicial Compulsion and the Public Fisc.” “It is widely thought that a funded ratio of about 80 percent or better [is] sound for state and local government pensions.” “One factor militating in favor of challengers is that the state is entitled to less deference in the question of reasonableness and necessity, the third prong, when it exercises its sovereign power in a manner that benefits itself.” “Attempts to change the benefits of the retired, those qualified to retire, and voluntary participants in contributory programs probably would not be worth the effort.”
http://www.harvard-jlpp.com/wp-content/uploads/2012/03/CuccinelliFinal.pdf
October 26, 2011
Colorado PERA Executive Director Greg Smith, at the “Fall 2011 PERA Shareholder’s Meeting,” (thirty-six minutes into the video):”‘Only ten percent of the fix” of the [SB10-001] reforms in 2010 came from additional employer contributions.”
2012
Colorado PERA Board Member, Treasurer Walker Stapleton: “If the board votes to oppose legislative reform, then PERA, at the direction of the board, uses their almost $400,000 annual lobbying budget to ensure the legislation does not pass.”
http://www.colorado.gov/cs/Satellite/Treasury_v2/CBON/1251590160967
January 2012
SB10-001 co-prime sponsor Senator Brandon Shaffer: “They need to make it toxic for any politician to go up against PERA. As individuals, you need to sit down with PERA and tell them you’ve spoken to President Shaffer, and he says you have bad lobbyists.”
http://www.bouldervalleyea.org/images/AdvocateJanuary2012.pdf
February 4, 2012
“In 2010, the General Assembly temporarily suspended cost-of-living adjustments for PERA retirees, increased employee contributions to the plan short-term and limited the benefits guaranteed to new hires, among other tweaks.” “I personally think that we probably should go further,” Hickenlooper said.
http://www.chieftain.com/hickenlooper-talks-energy-water-pensions/article_25f92ef8-4ef1-11e1-a99f-001871e3ce6c.html
February 21, 2012
The Cato Institute publishes a paper addressing public pension plan funding in the United States, “Funding Status, Asset Management, and a Look Ahead: State and Local Pension Plans”: “Plans with actuarial asset values less than 60 percent of liabilities are considered poorly funded; plans with assets between 60 and 80 percent of plan liabilities are considered inadequately funded; and plans with assets above 80 percent of plan liabilities are considered adequately funded.”
http://www.cato.org/pubs/wtpapers/Gokhale-WP-State-and-Local-Pension-Plans.pdf
February 27, 2012
Representative DelGrosso: “I voted against SB 1, not because I didn’t think we needed to fix PERA, I agreed with that part of it, but I voted against Senate Bill 1 because it did adjust some of the COLAs, and it did adjust that for folks that were already retired and people that were about ready to retire,” said DelGrosso. “And to me, I felt like that was violating the contract that those people got into.”
http://www.coloradostatesman.com/content/993329-legislator-spikes-his-own-bill
March 6, 2012
Florida Circuit Court: “All indications are that the Florida Legislature chose to effectuate the challenged provisions of SB 2100 in order to make funds available for other purposes.” “The elimination of the future COLA adjustment alone will result in a 4 to 24% reduction in the plaintiffs total retirement income. These costs are substantial as a matter of law.” “If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.”
http://judicial.clerk.leon.fl.us/image_orders.asp?caseid=49809133&jiscaseid=&defseq=&chargeseq=&dktid=87117441&dktsource=CRTV
March 6, 2012
“The employees have a contractual right to their pensions and this court recognized that even if the governor and the Legislature choose not to. This is important. We are a society of laws. This court has said even the powerful have to follow the laws. This was a gamble that the governor and Legislature made last year. They gambled taxpayers’ money that they could balance the budget on the backs of the hard-working public employees of the state. They lost that bet today.”
http://www.firstcoastnews.com/news/article/245606/4/Momentous-ruling-on-Floridas-pension-contribution-law
March 7, 2012
Article: “(Florida) Legislature Overreaches, Public Pays the Bill.” “Yet Gov. Rick Scott and the Florida Legislature are at it again, embracing (public pension) legislation that ignores constitutional limits on their authority, forcing costly taxpayer-financed litigation and resorting to name-calling and threats to the judiciary when the courts rule against them. Tuesday’s ruling that cutting public employee salaries to help pay for pensions is unconstitutional is not the result of an activist judge as some Republicans complain. It reflects the failure of the executive and legislative branches to recognize their limits and the role of an independent judicial branch.” “Every time elected leaders make bad law, taxpayers pay the legal bills.”
http://www.tampabay.com/opinion/editorials/article1218839.ece
March 13, 2012
Denver attorney Cindy Birley (a champion of prospective public pension reform in Colorado) testifying before the Colorado Legislature’s Senate Finance Committee hearing on the bill SB12-149, on March 13, 2012: “Generally, you would not change people who have already retired . . .”. “There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.” “The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . . ‘definitely determinable’.” “So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.” “Because, it may not qualify as a defined benefit plan.” “We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.” “It still has to pass muster as a DB plan.”
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
March 28, 2012
Fitch Ratings (one of the three large rating agencies in the United States): “Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”
http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp
March 28, 2012
Article in the periodical “Bond Buyer” addresses attempts by politicians to exaggerate pension funding status: “Some state and local officials, eager to garner public support for cuts in pension benefits, increases in contributions or other reforms, have been exaggerating their pension problems, according to several lawyers.” “’We are seeing announcements of doom and gloom as a justification for cutting employee benefits,’ he said. ‘And at the same time, the people who say, It’s disastrous, go to bond raters and say, Everything is great. We are paying our debts.’”
http://www.bondbuyer.com/issues/121_61/issuers-accused-exaggerating-pension-fund-woes-1037961-1.html
April 6, 2012
“My Opinion: Colorado PERA’s Meredith Cuts and Runs.”
http://coloradopols.com/diary/17567/my-opinion-colorado-peras-meredith-cuts-and-runs
May 16, 2012
The Colorado General Assembly enacts the bill SB12-149, reforming certain Colorado public pension systems and honoring the accrued public pension benefits of public workers who are members of those pension systems, after having retroactively taken accrued benefits from Colorado PERA retirees in 2010.
June 26, 2012
(Governor Scott) Walker, Beloit Daily News: “One thing he did stress was that he would not attempt to touch the pensions of current retirees, which he noted would be illegal.”
http://www.beloitdailynews.com/news/walker-open-to-pension-reform/article_e53d0492-bfad-11e1-9faf-0019bb2963f4.html
August 8, 2012
Douglas Greenfield: “The theory behind that is that a pension that has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.” Greenfield participated in a panel discussion on hosted by the National Conference of State Legislatures. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”
http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx
Douglas Greenfield presented a paper outlining his arguments and analysis . . . “In Defense of State Judicial Decisions Protecting Public Employees’Pensions.”
“There is no sound public policy reason to conclude that these promises – based on the reasonable expectations of the contracting parties – should not be fully protected by the laws prohibiting or limiting the impairment of contracts.”
http://www.ncsl.org/documents/fiscal/DGreenfield_Presentation.pdf
October 11, 2012
Colorado Court of Appeals 2012 decision in Justus v. State:
“We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.”
http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf
December 23, 2012
Public pension legal scholars on contractual public pension obligations, in the periodical Truth-out: “The state is just trying to find any argument that allows them to get out of their obligations and that will stick in court.” “‘The entire public pension system is built on the understanding that pensions are legally protected promises,’ said Richard Kaplan, a professor at the University of Illinois College of Law. ‘That idea has been foundational for at least the last half-century.’” “Since the middle of the century, however, courts have generally acknowledged that states cannot promise pension benefits to their employees as an inducement to get them to work for the state and then renege on those promises. The large majority of states have protected pensions under the theory that the promise of a pension represents a form of contract . . .”. “The legal understanding has been, ‘That is your money, and the state can’t take it away.’” “The vast majority of states — 41 — apply a contract theory to their employees’ pension rights. All of these states have constitution provisions that — mirroring the contract clause of the federal Constitution — prohibit the passage of any law that impairs the obligation of contracts.” “‘It cuts against decades of precedent,’ Kaplan said, ‘not to mention basic, commonsense notions of what pensions are and what’s fair.’” “According to Secunda of Marquette University, a shift back towards a gratuity model would be ‘disastrous.’ ‘What the states are trying to do is change the rules in the middle of the game,’ he said.” “According to Richard Kaplan, a professor of law at the University of Illinois, proving that reneging on their pension obligations is necessary to achieve an important public purpose is a high bar to reach, because that argument implies that the state’s ability to raise taxes to keep its promises have been exhausted.”
http://truth-out.org/news/item/13498-pensions-a-promise-is-a-promise-unless-its-inconvenient
2013
February 15, 2013
“After being about 30 percent funded during the 1970s, CalSTRS funding slowly improved with an increase in state funding in 1990 and then large investment fund earnings during a high-tech boom later that decade.”
“As funding peaked at about 110 percent around 2000, the ‘surplus’ was not regarded as a cushion to offset future investment earnings shortfalls. As often happens with public pensions, the surplus was viewed as a windfall that should be spent.”
“Legislation began divvying up the windfall in 1998 when the surplus was still a projection. A cut began in the state contribution, 4.3 percent of pay, that would reduce the rate by half, a drop in pension funding of 2 percent of pay similar to the teacher diversion.”
http://calpensions.com/2013/02/15/how-much-calstrs-debt-due-to-mismanagement/
March 7, 2013
Colorado Supreme Court Justice Marquez recuses herself in Lobato case deliberations, since she had worked on the case at the Colorado Attorney General’s office: “The seventh, Justice Monica Marquez, recused herself because she had worked on the Lobato case while an attorney with the attorney general’s office.”
http://www.coloradostatesman.com/content/994052-lobato-lawsuit-could-have-major-ramifications-k-12-school-finance
March 8, 2013
Former Colorado Senator Hank Brown, co-chair of the Colorado Treasurer’s “Commission to Strengthen and Secure PERA” writes: “The Legislature took the difficult and unpopular step of reducing cost-of-living adjustments for all employees, including current retirees.” “Through a little ‘Colorado Courage,’ (my comment, aka, ‘breach of contract’) policy makers ensured that PERA is on track to be fully funded . . .”. Hank Brown holds this position in support of breaking “fully-vested” PERA retiree pension contracts in spite of the fact that the Commission he co-chaired found that: “For those Coloradans already collecting benefits from PERA, their retirement funds must be protected. The commission may not make any recommendations that materially affect current retirees.”
http://www.bizjournals.com/denver/print-edition/2013/03/08/congress-could-use-some-colorado.html?page=all
March 18, 2013
State financial crisis? Denver Business Journal: “. . . next year’s money — $924.3 million above the amount the state will spend this year, according to Legislative Council — is up for grabs.”
http://www.bizjournals.com/denver/news/2013/03/18/colorado-state-revenue-picture.html?page=all
April 2, 2013
Colorado Legislature pays off local government pension debt that is not the contractual obligations of the State of Colorado. (This $142 million appropriation brings the total to $700 million for this purpose.) “House Republican leaders are floating a proposal to repay a longstanding debt (My comment, this is not a state ‘debt,’ sloppy reporting) to the state’s Fire and Police Pension Association in full as a way to get some GOP lawmakers to vote in favor of the $20 billion state budget for next year, which will be up for debate in the House on Thursday.” “‘It’s (House Minority Leader) Waller’s effort to buy some Republican votes,’ one GOP lawmaker told FOX31 Denver Tuesday.” “Waller, who is almost certain to run for Attorney General (next) year, would like to be able to demonstrate that he leads a group of lawmakers who are pragmatic and responsible; and helping forge a bipartisan budget compromise would help him make that case.”
http://kdvr.com/2013/04/02/republicans-considering-pension-deal-hoping-for-bipartisan-budget-vote/
Support public pension contractual rights and the rule of law in the United States at saveperacola.com. “Friend” Save Pera Cola on Facebook!
Great piece of work Al!!
Unbelievable !
Hi here is the second half of this very long article (52 pages). Can you please post them in the correct order? and trim the end of the first half accordingly? Al
August 1, 2008
Colorado PERA website, “Ask Meredith”: “Keep in mind that PERA is a long-term investor with a time horizon that is much longer than individuals have. PERA does not ‘time the market’ nor do we actively move assets to less risky investments when the market is falling. Because PERA is a long-term investor, we know that at times we’ll have losses, but those losses will be offset by gains over the long run in PERA’s diversified investment portfolio. The bottom line is that the PERA portfolio is well diversified and able to withstand the ups and downs of the market over time.
– Meredith”
https://www.copera.org/pera/about/askm.htm
October 10, 2008
Colorado PERA Executive Director Meredith Williams: “The value of your PERA benefit is based on highest average salary and years of service (a ‘defined’ formula) and does not fluctuate based on market performance.”
http://www.copera.org/pera/about/askm.htm
November 30, 2008
Colorado PERA General Counsel Greg Smith: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”
http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)
December 2008
Colorado PERA Executive Director Meredith Williams commenting on Colorado Attorney General Ken Salazar’s 2004 Formal Opinion on PERA benefits (PERA Retiree Update, page 1):
“The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”.
https://www.copera.org/pdf/5/5-40-08.pdf
December 4, 2008
Silver and Gold Record: “‘We’ve got a much larger segment of people making contributions and employers making contributions,’ and with its current assets PERA will be able to pay benefits for decades to come, he (Colorado PERA Executive Director Williams) said.” “Williams said that gives PERA time to examine its options.” “We generally can ride out market cycles,” he said. “We’re built to do that.”
https://www.cu.edu/sg/messages/6546.html
December 8, 2008
“Ask Meredith” column on Colorado PERA website: “That leaves the benefits being earned by members (active and inactive) as the only area to examine for savings. The Attorney General’s opinion contains the following language: ‘Once a PERA member fulfills all the statutory requirements for a pension benefit, retires and begins receiving a pension, the member’s fully vested pension right cannot be reduced by the General Assembly.’”
https://www.copera.org/pera/about/askm.htm
December 19, 2008
Colorado PERA Executive Director Meredith Williams assures PERA retirees that market volatility has no impact on their contracted pension benefits:
“Since PERA is a defined benefit plan, your benefit is not based on the fluctuations in the financial markets, but on your contributions, age, and years of service.”
https://www.copera.org/pera/about/askm.htm
2009
Sometime in 2009
Attorney Jean Dubofsky, at the request of Colorado PERA, provides PERA with a legal opinion arguing that the Colorado Legislature could legally take Colorado PERA retiree pension COLA benefits: “at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights;”
http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf
2009
Senator Josh Penry, in a videotaped discussion with Representative Mike May, (videocenter. denverpost.com) said ‘we can’t, can’t miss this window.’ And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . .
“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age. You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return. So that could change the specter of actuarial necessity. We gotta’ do it this year or else these other structural changes won’t be possible.”
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
January 2009
Colorado PERA Executive Director Meredith Williams: “The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”
https://www.copera.org/pdf/Topics/2009/Topics1-09.pdf
January 5, 2009
Colorado PERA officials discuss “what constitutes an actuarial emergency” with the Colorado Legislature’s Joint Budget Committee.
January 8, 2009
Silver and Gold Record: “The committee also met with representatives from the Public Employees’ Retirement Association on Monday. PERA Executive Director Meredith Williams pointed out that despite an estimated $11 billion market loss in 2008, the association has enough funds to pay benefits for decades, although perhaps not as many decades as it could have funded in the past.”
https://www.cu.edu/sg/messages/6594.htm
January 24, 2009
“Define an ‘actuarial necessity’ that automatically triggers a legislative response. PERA’s board has long argued that the state constitution may require any benefit cuts to be paired with equal reductions in contributions, unless the changes are ‘actuarially necessary.’”
http://m.rockymountainnews.com/news/2009/jan/24/lawmakers-must-act-now-on-pensions/
January 26, 2009
Former Colorado Treasurer and PERA Board member Mark Hillman: “PERA lawyers assert that benefits can be retroactively increased (as they have been), but that once increased, those benefits can never be reduced, even for someone who has worked just one day for a PERA employer.”
“. . . PERA’s party line is that the responsibility to make up for any shortfall rests with taxpayers, represented by state and local governments who contribute to PERA’s pension funds on behalf of their employees.”
http://www.markhillman.com/2009/01/26/get-taxpayers-off-the-pera-go-round/
February 4, 2009
Colorado PERA publication: “Employer contribution rates were lowered when PERA reached fully funded status, saving public employers in Colorado millions of dollars.”
http://www.copera.org/pera/about/newsarchives2009.htm#LAC
March 11, 2009
Colorado PERA officials place blame on the Colorado General Assembly for creating the latest PERA financial downturn: “Other notable factors (for the downturn in PERA’s fiscal position) include employers not contributing the actuarially determined contribution rates, the sale of purchased service credit at rates below actuarial costs, and the raising of benefits in the late 1990’s coupled with decreasing employer contributions.”
http://www.kentlambert.com/Files/PERA_Response_Pt_1.pdf
April 14, 2009
Colorado PERA Executive Director Meredith Williams testifies to the Senate Finance Committee hearing on SB09-282 (03:28 PM) stating that “the PERA Board is committed to presenting a proposal to the General Assembly that addresses retirement benefit issues for Colorado PERA.” Mr. Williams made this statement one week BEFORE the requirement for the PERA Board to provide recommendations to the Legislature regarding PERA reform was placed into SB09-282 (on April 21, 2009.) In court documents, Colorado PERA emphasizes that, in 2009, the PERA Board was simply responding to the General Assembly’s “legislative mandate” to make PERA pension reform recommendations. Response Brief submitted to the Denver District Court:
http://www.ednewscolorado.org/wp-content/uploads/2010/05/PERASuitResponse5-10-10.pdf
I suspect that (through PERA lobbyists) the PERA Board actually “asked itself” to make these recommendations, that this amendment was placed in SB09-282 at the end of the 2009 legislative session in order to make a preordained conclusion to attempt to take PERA COLA pension benefits appear to be the product of extensive deliberation on the part of the PERA Board to PERA’s benefit in anticipated litigation. It would be rather disingenuous of Colorado PERA to argue in court documents that it was responding to a “legislative mandate” to provide pension reform recommendations, when in fact Colorado PERA was responding to a Colorado PERA “mandate” to provide pension reform recommendations.
July 14, 2009
Speaker Frank McNulty: “I don’t think at this point we can expect employer contributions to be part of the solution . . .”
http://www.9news.com/rss/story.aspx?storyid=119465
August 11, 2009
Colorado PERA Board Trustee Casebolt assures PERA retirees present at Colorado PERA Denver meeting of the PERA “Listening Tour”: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”
Sue Ellen Quam: “I was a legislative liaison for many, many years. I sat in the Joint Budget Committee for many, many years, and I remember legislators saying ‘You know, you don’t get very good salary increases and your benefits really stink, but you’re gonna get a really good retirement and so just hang in there.” “So, I find it to be discouraging that the Legislature may be considering saying, ‘We got you on your salary, we got you on your benefits, and now we’re going to get you on your retirement.” “I’ve heard rumors that the 3.5 percent increase may be reduced or eliminated and that it’s OK with PERA members. It’s not OK with this PERA member.”
Colorado PERA’s General Counsel Greg Smith blames the Colorado General Assembly for PERA’s fiscal downturn: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”
http://www.copera.org/pera/about/listeningtour.htm
October 2009
Gabriel Roeder Smith paper: “Most public plans provide a COLA in order to protect retirees’ purchasing power from inflation. In many cases, the COLA is automatic and set at some fixed rate (e.g., 3% annually) or based on the Consumer Price Index (e.g., 80% of the annual CPI increase). In other cases, the COLAs are ad hoc and granted by a decision of the plan’s board of trustees. Because ad hoc COLAs are not part of the guaranteed benefit, they may be reduced or eliminated as circumstances warrant.”
http://www.vermonttreasurer.gov/sites/treasurer/files/pdf/retirement-all/GRS_Pesnio__Insight2009_10.pdf
October 22, 2009
“PERA is obviously gearing up for some heavy-duty lobbying, one observer noted. The agency has hired two lobbyists from the firm Colorado Communiqué, Collon Kennedy and Steve Adams, former president of the Colorado AFL-CIO. The pension system also has hired Mary Alice Mandarich, a well-connected Democratic lobbyist who formerly was chief of staff for Senate Democrats and who worked on campaigns for former Senate President Joan Fitz-Gerald, former Gov. Roy Romer and gubernatorial candidate Gail Schoettler.”
http://www.ednewscolorado.org/news/capitol-news/pera-woes-loom-large-for-education/comment-page-1
November 15, 2009
Denver Post Editorial Board: “First, let court rule on PERA. Before legislators take on reforms, they should first ask the state Supreme Court to determine how much leeway they have.”
“As Colorado lawmakers prepare to consider the financial rescue of the state employees’ retirement fund, they ought to first figure out just how much legal leeway they have to overhaul it.” “Legislators need to understand how much power a designation of ‘actuarially necessary’ gives them to modify benefits paid to members.” “We think lawmakers should ask the state Supreme Court for a ruling so they know exactly what they can do.” “Administrators of the Colorado Public Employees’ Retirement Association, or PERA, recently asserted that the fund’s foundering finances give the state the legal footing to cut future cost-of-living increases for people who already are retired. But what if that were challenged in court and found to be illegal?” “On the other hand, if annual hikes for retirees can be adjusted, why can’t a case be made to increase the retirement age for many of those who are still working and contributing to PERA — a reform that is missing from the PERA board’s plan?” “It’s in Colorado’s best interest to get out in front of the PERA problem, file an interrogatory with the state Supreme Court, and get a clear fix on what legislators can and cannot do. We’re confident that PERA solutions will be far more clear after that.”
http://www.denverpost.com/opinion/ci_13776995
December 16, 2009
Colorado PERA officials in written testimony to the Joint Budget Committee: “The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
December 17, 2009
Education News Colorado: “The most controversial part of the plan, at least based on the volume of e-mail flowing into legislators’ in-boxes, is a proposal to reduce most retirees’ annual cost-of-living increases from 3.5 percent to 2 percent. It’s estimated that the current COLA would provide a third of the pension benefits over the retirement of a worker who retired in 2008.”
http://www.ednewscolorado.org/news/capitol-news/pera-plan-work-longer-pay-more-receive-less
December 17, 2009
The Colorado General Assembly’s Joint Budget Committee (JBC) meets with representatives of Colorado PERA. At the meeting, Colorado PERA’s General Counsel Greg Smith informed the JBC that Colorado PERA had hired an outside law firm to provide a legal opinion relating to Colorado PERA contractual pension obligations:
Colorado PERA General Counsel Greg Smith – “We have obtained outside counsel’s opinion on this issue.”
Greg Smith, before the Joint Budget Committee: “The statutes are in fact binding, and they are constitutionally protected from reduction.”
Rep. Jack Pommer, Joint Budget Committee Chairman to JBC: “Are we not just saying we’re going to pick 30 years (as a PERA investment time horizon) because if we’re not balanced within 30 years that creates actuarial necessity which then let’s us change retiree benefits?”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
December 31, 2009
The Colorado PERA actuarial funded ratio (AFR) reaches 68.9 percent. This funding level is 9.1 percent below the 40-year average of the PERA actuarial funded ratio, 11.1 percent below an 80 percent AFR level considered “well-funded” by Fitch Ratings, 1.1 percent below a 70 percent AFR level considered “adequately-funded” by Fitch Ratings, 3.1 percent below the Wilshire Associates average U.S. public pension actuarial funded ratio that year. The General Assembly determines that Colorado PERA pension plan is in a funding “crisis,” and that PERA pension contracts must be broken. Should all U.S. public pension contracts be abrogated at that funding level?
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true
2010
January 5, 2010
SB10-001 co-prime sponsor Josh Penry: “Republicans and Democrats created this mess . . .”.
http://www.9news.com/rss/story.aspx?storyid=130197
January 10, 2010
Senator Josh Penry, co-prime sponsor, SB10-001 appearing on Your Show, Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on at 10:30 a.m.:
“What the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity.”
January 15, 2010
“PERA also is hoping the Legislature will ask the Colorado Supreme Court to review the matter through interrogatories before the end of the session.”
http://www.coloradostatesman.com/content/991527-state-retirees-ready-pounce-pera-fix
January 22, 2010
SB10-001 co-prime sponsor Senator Josh Penry and bill sponsor Senator Greg Brophy: “Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees.”
http://www.denverpost.com/search/ci_14242354
January 26, 2010
“With SB1, Shaffer and Penry have said the state can realize solvency in the PERA fund within 30 years. Previously, the Legislature had targeted a 60-year fix.”
“The difference between the past approach and SB1, Penry said, is that the new plan boldly tackles benefit reductions, which he said will constitute 90 percent of the PERA fund’s recovery and generate plenty of opposition along the way.”
http://www.chieftain.com/news/local/legislators-pera-changes-will-be-painful/article_b82cee28-328f-59ba-91c0-a480e5f719c8.html
January 27, 2010
Assistant Colorado Attorney General Steve Smith (retired) warns the Colorado Legislature’s Senate Finance Committee during testimony on Colorado PERA’s bill, SB10-001, against breaking state contracts: “Others, including a former assistant attorney general, said the 3.5 percent annual increase in benefits was a contractual right, and that changing it would be illegal.” “Many witnesses asked the senators to seek legal counsel before final passage of the bill rather than face a court battle afterward.”
https://www.cusys.edu/newsletter/2010/01-27/pera.html
January 29, 2010
Colorado PERA General Counsel Greg Smith to Senate Finance Committee: “There are few case laws that address the issue, Smith said, but one, regarding a fire and police pension plan, was litigated when the plan ran out of money and benefits were being paid for with current revenues.”
http://www.coloradostatesman.com/content/991568-pera-reform-bill-passes-first-test-capitol
January 29, 2010
2010 Senate floor debate on SB 10-001:
Rep. Lambert: “I have heard from my constituents, as many of you have, that this proposal will breach retiree’s contracts.”
Rep. Swalm: “We’re breaking new territory in this state by trying to reduce the COLA. We’re probably going to get a lawsuit out of that. If we cut the 3.5 percent COLA there will be a lawsuit.”
Rep. Gerou: in committee, said that it is a disservice to the state to rush a bill through when her committee knew that it will go to litigation, and said what we are doing to the retirees is wrong.
Rep. DelGrosso: said that it is “tough” for him to tell people that he is going to break their contract.
Senator Harvey: “We have made a commitment. We have a contract with current retirees. That is already in place. Reforms should be made for new hires. We do not have that commitment to new hires.”
Senator Spence: “The bill places an unfair burden on retirees.”
Senator Scheffel: “We are breaching our promises to existing retirees.”
Senator Lundberg: “This bill is a deal that was cut before this body met.”
February 1, 2010
Senate “Third Reading” debate on SB10-001 (watch on the Colorado Channel):
Senator Ted Harvey: “If we can’t fix that technical issue and compromise in telling the (PERA) members just what their rights are, then we’ve got a more serious problem in this body than simple technical amendments on Third Reading.”
Senator Renfroe: “Or, if you want it to go out of here with the PERA-approved document and nothing else then let’s just approve this one and vote mine down.”
http://www.coloradochannel.net/colorado-senate-2010-legislative-day-20
February 10, 2010
Joel Judd, Chairman, House Finance Committee, during the hearing on Senate Bill 10-001 Chairman Judd stated (near the end of the hearing) that SB 10-001 (the “COLA theft bill”) must be supported “because that’s where the money is.”
February 10, 2010
Jim Alexander’s paper provided to the House Finance Committee during testimony on SB10-001 (quoting the October 2002, PERA Retiree Report:
“In 2002, PERA Executive Director, Meredith Williams was asked, because of a downturn in the stock market, if retirement benefits were safe. He replied, ‘First, the ‘loss’ is due to a decline in the stock market. PERA still owns the same stocks that it did before the decline and this ‘loss’ is a result of the value of the stock decreasing. It is not ‘lost’ since we haven’t sold the stocks, and because PERA is a long-term investor, we can ride out the bad times the market experiences. When the market recovers, the value of these stocks will also increase, offsetting this ‘loss.’”
“Mr. Williams was quoted in the same report as saying ‘Most pension funds are considered sound at 80 percent funding levels.’”
“Meredith Williams ‘said at the Senate Finance Committee hearing in January that PERA needed to be funded at 100 percent. When the PERA representatives were asked by a member of the committee why in view of the fact that PERA had only been funded at 100 percent for about seven of the past thirty years (my comment, actually two of the last eighty-one years), it was necessary now. The answer was ‘it just makes things easier.’”
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
February 10, 2010
Assistant Colorado Attorney General Steve Smith (retired) warns the Colorado Legislature’s House Finance Committee during testimony on Colorado PERA’s bill, SB10-001, against breaking state contracts: “Former Assistant Attorney General Stephen Smith said he believed everything in SB 1 is legal except for the COLA change. ‘They’re setting themselves and you up for failure,’ he told the committee.”
http://www.coloradostatesman.com/content/991604-pera-reform-bill-gets-bipartisan-blessing
February 12, 2010
“Rep. Cheri Gerou, R-Evergreen, questioned why Williams and Smith still have their jobs, suggesting that if they worked in the private sector they might have been fired. ‘A lot of people would like to see you lose your jobs over this,’ she told them.”
“Gerou, in explaining her ‘no’ vote, said that the hours of testimony from retirees showed that the bill did not have ‘buy-in.’ ‘People who have already retired deserve better than this.’”
http://www.coloradostatesman.com/content/991604-pera-reform-bill-gets-bipartisan-blessing
February 23, 2010
Governor Bill Ritter signs SB10-001 into law, breaking Colorado PERA pension contracts.
http://statebillnews.com/2010/02/sb10-001-ritter-signs-bill-cutting-benefits-for-state-retirees/
February 26, 2010
Colorado PERA retirees sue Colorado PERA and the State of Colorado for breach of Colorado PERA pension contracts.
Education News Colorado: “Despite support for the bill by organized employee groups, there’s widespread anger about the cut among individual retirees, and the lawsuit doesn’t come as a surprise.” “The named plaintiffs are Gary Justus, a retired Denver Public Schools math teacher who had more than 29 years of service, and retired Department of Labor employee Kathleen Hancock, who worked for about 15 years.” “‘This lawsuit is about the state complying with its own constitution,’ Justus said in a statement. ‘The General Assembly is trying to correct its past mistakes on the backs of the retirees. We can’t go back and restart our careers.’”
“Some observers believe that past legislative actions, including benefit increases, contribution cuts and programs that allowed workers to buy extra years of eligibility, also weakened the pension system.”
“A PERA spokeswoman said Friday the agency hadn’t been served with any papers and doesn’t comment on litigation.” (As we have seen, Colorado PERA official have been regularly commenting on litigation over SB10-001 for three years.)
http://www.ednewscolorado.org/news/capitol-news/lawsuit-challenges-pera-retiree-cuts
March 17, 2010
Professor Amy Monahan, University of Minnesota School of Law, “Public Pension Plan Reform, the Legal Framework”: “This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
http://www.ncsl.org/documents/fiscal/AMonahan_Handout.pdf
March 19, 2010
Attorney Monica Marquez (soon to be a Colorado Supreme Court Justice) advises Colorado PERA on March 19, 2010:
https://www.copera.org/pdf/Board/Minutes/2010/Minutes3-19-10.pdf
May 10, 2010
Attorney Monica Marquez’s name appears on the PERA Defendant’s Motion to Dismiss submitted to the Denver District Court on May 10, 2010:
http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf
June 3, 2010
Colorado Supreme Court Chief Justice Mary Mullarkey announces retirement.
http://www.denverpost.com/ci_15221861
June 23, 2010
Nicholas Joseph Marcucci, Emeritus Board Member at the National Association of Public Pension Attorneys, “Constitutional Issues When Altering Public Pension Benefits”:
“In most states there is a fairly clear demarcation between the gratuity theory and the contract theory and a seminal case or two where the courts make the change. Police Pension and Relief Board of the City and County of Denver, et al. v. McPhail, 39 Colo. 330, 338 P.2d 694 (1959); and, Police Pension and Relief Board of City and County of Denver, et al., v. Bills, et al.”
“United States Trust Co. emphasizes that the impairment must be both reasonable and necessary. A State cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money on other public policy goals.”
“In many states, enforceable pension terms attach at the start of employment.” City Of Aurora v. Ackman, 738 P.2d 796 (Colo.App. 1987).
(To access this Word document, paste “Constitutional Issues When Altering Public Pension Benefits Marccuci” into Google.)
July 26, 2010
Colorado Secretary of State Bernie Buescher writes letter recommending Monica Marquez to serve on the Colorado Supreme Court.
http://www.lawweekonline.com/2010/08/letters-of-reference-for-monica-marquez-colo-supreme-court-finalist/
August 2, 2010
Ritter Administration Letter to GASB on contractual public pension obligations:
“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”
“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.”
“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits (such as COLAs), or an increase in required employee contributions both serve to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”
“The criteria suggested as the basis for differentiating these COLAs (automatic) versus ad-hoc COLAs is the statutes that exist as of the date of the employer’s financial statements.”
“The essential difference between an automatic COLA and an ad hoc COLA is the legal requirement; with this core difference there is no way for the two not to be substantively different. The legal difference in this instance is critical to the determination of whether the government is unable to avoid the surrender of resources to meet the obligation.”
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791
August 10, 2010
“The Legislature was cutting off funds and starving the pension system,” says Stephen Pincus, a Pittsburgh attorney . . .”. “They shouldn’t now be able to cry there’s no money in the pension system. They had a large hand in creating the crisis.”
http://www.pewstates.org/projects/stateline/headlines/states-test-
whether-public-pension-benefits-given-can-be-taken-away-85899374772
August 16, 2010
“Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. ‘The belief is that if the employer [the state] prevails, it will have been worth the political risk,’ Klausner says. ‘And if they lose, they will be no worse off than before.’ Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the ‘bad guy’ if they overturn the law.”
http://www.governing.com/news/state/States-Test-Whether-Public-Pension-Benefits-Given-Can-Be-Taken-Away.html
August 22, 2010
Stephen Pincus: “And the key word is necessary – and we’re talking about on the verge of bankruptcy. And that’s what the case laws really hold that you have to honor your contracts. You can’t go around and say, well, we’re not going to be paying the contractor who built the bridge this month because we don’t have the funds. No, that’s an obligation that you have.”
http://www.npr.org/templates/story/story.php?storyId=12935726
August 30, 2010
Attorney Jean Dubofsky, author of the Colorado PERA “COLA-taking” legal opinion: “I worked on” the case, Justus v. State, with Colorado Supreme Court Justice Monica Marquez. The author of Colorado PERA “COLA-taking” legal opinion wrote a letter of recommendation for Monica Marquez to serve on Colorado Supreme Court: “In particular, I’ve worked on several cases where she provided superb briefing, argument and/or advice for the Attorney General’s office, including congressional redistricting, the challenges to voter-approved Amendments 41 and 54 to the Colorado Constitution, and the current challenge to the amendments to PERA (Justus v. State), the government’s pension system.”
“ . . . and Ms. Marquez would bring to the court sophistication about the numerous cases that involve, for example, TABOR, ballot titles, election issues, voter-initiated constitutional amendments, property tax, public pensions, labor law, and regulations issued by a wide variety of state agencies.”
“Sincerely, Jean E. Dubofsky.”
(Personally, I believe that Justice Marquez has such strength of character, and commitment to the rule of law, that she could hear the case, Justus v. State, objectively, in spite of her prior work on the case; however, I expect that she will recuse herself as she did in Lobato.)
http://www.scrib.com/doc/36638245/Letter-for-Monica-Marquez-by-Jean-Dubofsky
September 8, 2010
Governor Ritter appoints Monica Marquez to Colorado Supreme Court: “Marquez leads the State Services Section of the Attorney General’s Office, which represents nine of the 16 executive branch agencies in Colorado. She specializes in appellate litigation and has represented the state, in both state and federal appellate courts, in cases involving fiscal policy, education, healthcare, elections, redistricting and campaign finance.”
http://www.colorado.gov/cs/Satellite%3Fc%3DPage%26cid%3D1251580511104%26p%3D1251580511104%26pagename%3DGovRitter%252FGOVRLayout
September 28, 2010
Professor Jonathan Barry Forman, Alfred P. Murrah Professor of Law at the University of Oklahoma, “Funding of Public Pension Plans”: “Because governments tolerate an 80% funding level and use actuarial valuations instead of market valuations, public pensions are almost guaranteed to be underfunded.” “The second disadvantage to fully funded or overfunded public pension plans is that governors and legislatures call for contribution cuts and holidays. Politicians would rather spend money on projects that will bring them more immediate campaign contributions and votes.” “Of course, the best way to ensure that public pension plans are fully funded would be to require them to pay the actuarial required contributions (‘ARC’) in full each year.”
http://jay.law.ou.edu/faculty/jforman/Articles/2010Funding.pdf
October 18, 2010
Jean Dubofsky deposition submitted to Colorado PUC that she is the author of a legal opinion addressing the legality of reducing the PERA COLA benefit:
“My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”
(To access this document, paste “Colorado PUC E-filing system PERA legal opinion Jean Dubofsky” into Google.)
November 22, 2010
Colorado PERA General Counsel Greg Smith at 2010 PERA Shareholder meeting (10 minutes into this YouTube video): “We need to know the answer of whether this action was constitutional.” (Would it not have been simpler to send an interrogatory to the Colorado Supreme Court in 2009?)
2011
January 7, 2011
Stephen Pincus, a Pittsburgh attorney: “They’re just saying, ‘Let’s go after the public workers,’” Pincus says. “If there is a real general threat to the financial well-being of a state or local government, then everything should be on the table, not just one set of contracts.”
http://www.pewstates.org/projects/stateline/headlines/activists-seek-new-tactics-to-break-old-pension-deals-85899376866
January 18, 2011
Bernie Buescher (a former pension attorney) replaces Monica Marquez at Colorado Attorney General’s Office as Deputy Attorney General overseeing the Colorado Department of Law’s State Services Section.
“A native of Grand Junction, Buescher replaces Monica M. Marquez, whom Gov. Bill Ritter recently appointed to the Colorado Supreme Court.”
http://www.coloradoattorneygeneral.gov/press/news/2011/01/18/attorney_general_announces_bernie_buescher_new_deputy_attorney_general_state_s
February 2011
Colorado PERA General Counsel Greg Smith writes in Government Finance Review: “Adjusting public pension benefits in Colorado: a fiduciary process”: “Necessity is judged on two levels: 1) whether a less drastic modification could have been implemented; and 2) whether, even with modification, the state could have achieved its stated goals. To determine whether the changes were reasonable, the changes MUST BE THE MINIMUM CHANGES NECESSARY to solve the economic problems of the plan. (See United States Trust Co. v. New Jersey, 431 U.S. 1, 1977.)”
(The next year, [June 26, 2012] Colorado PERA’s independent actuary, Cavanaugh MacDonald Consulting, LLC, reports in the 2011 Colorado PERA CAFR: “It should be noted that the
changes made to the PERA structure as a result of SB10-001 have as a goal 100% funding of the accrued liability within 30 years for all divisions. The results of the December 31, 2011,
valuations combined with financial projections of all divisions, indicate that this goal, WHICH IS A MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB
STANDARDS, is still achievable with the exception of the Judicial Division.”
http://www.leg.state.co.us/OSA/coauditor1.nsf/All/641A0AB5B97D073C87257A3A0072FEA3/$FILE/2067-12%20CAFR_6-26-12.pdf.)
http://www.thefreelibrary.com/Adjusting+public+pension+benefits+in+Colorado%3a+a+fiduciary+process.-a0290520595
February 2011
Government Finance Review article by Leigh Snell, National Council on Teacher Retirement: “In fact, for the last 15 years, plan sponsors’ pension contributions have accounted for less than three percent of all state and local government spending.” NCTR article “Setting the Record Straight”:
http://www.gfoa.org/downloads/GFOA_GFRfeb11_SettingtheRecordStraight.pdf
February 2011
In the “Origins and Severity of the Public Pension Crisis,” Dean Baker states that the shortfalls facing state and local pension plans have been misrepresented. Further, his study notes that, “when expressed relative to the size of their economies, most states are facing shortfalls that appear easily manageable.” For example, unfunded liability as a percent of future state income for the Colorado PERA State Plan is approximately one-tenth of one percent of future state income, 0.09 % (See page 11 of the report.)
http://www.cepr.net/documents/publications/pensions-2011-02.pdf
February 14, 2011
Keith Brainard, Research Director, National Association of State Retirement Administrators testifies before the a subcommittee of the U.S. House of Representatives:
“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.” “Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.” “The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.” “While the impact of the financial crisis on state and local pensions will likely require spending to increase, the most recent studies find that the share of state and local budgets dedicated to pension contributions would likely need to rise to about five percent on average, and to about eight to 10 percent for those with the most seriously underfunded plans. (Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby, “The Impact of Public Pensions on State and Local Budgets,” Center for Retirement Research, October 2010).” “Assuming a rate of asset growth consistent with historic market norms, most funds will never run out of money. The Center on Retirement Research at Boston College said last October, “even after the worst market crash in decades, state and local plans do not face an immediate liquidity crisis . . .” (Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby, “Public Pension Funding in Practice,” NBER Working Paper 16442, October 2010).” “Although some states have accumulated significant unfunded liabilities, pension benefits are paid out over many years, not all at once. These are long-term funding issues, and most thorough analyses by those familiar with governments and public finance find patient and measured responses are required: In a 2008 report, the GAO said, “[U]nfunded liabilities are generally not paid off in a single year, so it can be misleading to review total unfunded liabilities without knowing the length of the period over which the government plans to pay them off.” (U.S. Government Accountability Office, “State and Local Government Pension Plans; Current Structure and Funding Status,” July 2008 GAO-08-983T).”
http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf
February 17, 2011
Fitch Ratings notes that a 70% actuarial funded ratio for public defined benefit pensions is considered an “adequate” actuarial funded ratio. “Fitch generally considers a funded ratio of 70% or above to be adequate and less than 60% to be weak.”
http://www.ncpers.org/Files/2011_enhancing_the_analysis_of_state_local_government_pension_obligations.pdf
February 17, 2011
“In 2009, Williams persuaded the legislature to roll back the annual COLA to 2 percent.’
http://www.cnbc.com/id/41642979/page/1
February 18, 2011
Colorado PERA in “States and Bankruptcy”: “We acknowledge that the State of Colorado and PERA’s other public employers are facing difficult budget decisions, but pension obligations are not bankrupting the state and other public employers in Colorado. Indeed, the National Association of State Retirement Administrators issued a recent study that showed that, on average, pension costs represent only about 3 percent of total state and local government expenditures. In Colorado, state and local government expenditures to fund retirement benefits totaled only 2.16 percent.” (Note that states cannot declare bankruptcy under federal law.)
http://www.copera.org/pera/about/issues.htm#42611
March 5, 2011
Eric Madiar: “Is Welching on Public Pension Promises an Option for Illinois?” “In sum, welching is not a legal option available to the State.” “Courts, though, “sit to determine questions on stormy as well as calm days,” and the Constitution was upheld during the Great Depression.”
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1774163
March 31, 2011
Jennifer Staman, Legislative Attorney, Congressional Research Service in “State and Local Pension Plans and Fiscal Distress: A Legal Overview”: “. . . a State is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives. Similarly, a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well.” “Despite the variation in when a contractual right to a public plan pension benefit begins, as noted above, state courts generally find that the benefits of individuals who have already retired may not be diminished or impaired.”
http://www.nasra.org/resources/CRS%20state%20and%20local%20legal%20framework%201104.pdf
April 12, 2011
Colorado PERA in “Setting the Record Straight”: “But what’s not mentioned is that this liability is not due and cannot be made payable today, just like a mortgage. This is the aggregate amount owed by PERA to current retirees and to all existing workers who have begun work for a public employer in Colorado and may not begin receiving a benefit for three or more decades.”
“PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years.”
https://www.copera.org/pera/about/issues.htm
April 17, 2011
Senator Brandon Shaffer, co-prime sponsor, SB10-001, Denver Post: “I sponsored last year’s legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA’s current and future members and retirees.”
http://www.denverpost.com/opinion/ci_17858107
May 22, 2011
Jennifer Paquette, PERA Chief Investment Officer, in the Denver Post: “In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.”
http://www.denverpost.com/search/ci_18100068
May 29, 2011
Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain: “Retired public servants who live on fixed incomes no longer get the same cost-of-living-increases upon which many had come to depend.”
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
“Most PERA beneficiaries don’t qualify for Social Security so their modest PERA benefit may be the only steady retirement payment they’ll ever receive. After careers in public service, this is a reasonable reward. They have earned it.”
http://www.chieftain.com/opinion/ideas/legislative-changes-have-put-pera-fund-on-a-solid-footing/article_3080a01c-88cd-11e0-ad01-001cc4c03286.html
June 2011
National Institute on Retirement Security on “automatic” and “ad hoc” public pension COLAs: “One key design feature of a COLA is whether it is automatic or ad hoc in nature. An automatic COLA means the retiree’s benefit increases automatically every year by a certain percentage. An ad hoc COLA is granted at the discretion of the plan sponsor, usually when the fund is in a well-funded position and investment gains have exceeded expectation.
http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf
June 24, 2011
Geoff Blue, Deputy Attorney General for Legal Policy and Government Affairs (now in private practice) argues in an interview on the program “The Devil’s Advocate” that since Colorado’s education establishment has failed at the polls lately, they are now seeking to “legislate through the courts.” “It would, and as a matter of fact Senator Rollie Heath has proposed such an initiative this year, to raise taxes specifically to fund education and higher education.” “Cleary there is a path to do it. They’ve been losing so they’re trying to legislate through the courts.”
September 13, 2011
Virginia Attorney General Kenneth T. Cuccinelli in “Judicial Compulsion and the Public Fisc.” “It is widely thought that a funded ratio of about 80 percent or better [is] sound for state and local government pensions.” “One factor militating in favor of challengers is that the state is entitled to less deference in the question of reasonableness and necessity, the third prong, when it exercises its sovereign power in a manner that benefits itself.” “Attempts to change the benefits of the retired, those qualified to retire, and voluntary participants in contributory programs probably would not be worth the effort.”
http://www.harvard-jlpp.com/wp-content/uploads/2012/03/CuccinelliFinal.pdf
October 26, 2011
Colorado PERA Executive Director Greg Smith, at the “Fall 2011 PERA Shareholder’s Meeting,” (thirty-six minutes into the video):”‘Only ten percent of the fix” of the [SB10-001] reforms in 2010 came from additional employer contributions.”
2012
Colorado PERA Board Member, Treasurer Walker Stapleton: “If the board votes to oppose legislative reform, then PERA, at the direction of the board, uses their almost $400,000 annual lobbying budget to ensure the legislation does not pass.”
http://www.colorado.gov/cs/Satellite/Treasury_v2/CBON/1251590160967
January 2012
SB10-001 co-prime sponsor Senator Brandon Shaffer: “They need to make it toxic for any politician to go up against PERA. As individuals, you need to sit down with PERA and tell them you’ve spoken to President Shaffer, and he says you have bad lobbyists.”
http://www.bouldervalleyea.org/images/AdvocateJanuary2012.pdf
February 4, 2012
“In 2010, the General Assembly temporarily suspended cost-of-living adjustments for PERA retirees, increased employee contributions to the plan short-term and limited the benefits guaranteed to new hires, among other tweaks.” “I personally think that we probably should go further,” Hickenlooper said.
http://www.chieftain.com/hickenlooper-talks-energy-water-pensions/article_25f92ef8-4ef1-11e1-a99f-001871e3ce6c.html
February 21, 2012
The Cato Institute publishes a paper addressing public pension plan funding in the United States, “Funding Status, Asset Management, and a Look Ahead: State and Local Pension Plans”: “Plans with actuarial asset values less than 60 percent of liabilities are considered poorly funded; plans with assets between 60 and 80 percent of plan liabilities are considered inadequately funded; and plans with assets above 80 percent of plan liabilities are considered adequately funded.”
http://www.cato.org/pubs/wtpapers/Gokhale-WP-State-and-Local-Pension-Plans.pdf
February 27, 2012
Representative DelGrosso: “I voted against SB 1, not because I didn’t think we needed to fix PERA, I agreed with that part of it, but I voted against Senate Bill 1 because it did adjust some of the COLAs, and it did adjust that for folks that were already retired and people that were about ready to retire,” said DelGrosso. “And to me, I felt like that was violating the contract that those people got into.”
http://www.coloradostatesman.com/content/993329-legislator-spikes-his-own-bill
March 6, 2012
Florida Circuit Court: “All indications are that the Florida Legislature chose to effectuate the challenged provisions of SB 2100 in order to make funds available for other purposes.” “The elimination of the future COLA adjustment alone will result in a 4 to 24% reduction in the plaintiffs total retirement income. These costs are substantial as a matter of law.” “If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.”
http://judicial.clerk.leon.fl.us/image_orders.asp?caseid=49809133&jiscaseid=&defseq=&chargeseq=&dktid=87117441&dktsource=CRTV
March 6, 2012
“The employees have a contractual right to their pensions and this court recognized that even if the governor and the Legislature choose not to. This is important. We are a society of laws. This court has said even the powerful have to follow the laws. This was a gamble that the governor and Legislature made last year. They gambled taxpayers’ money that they could balance the budget on the backs of the hard-working public employees of the state. They lost that bet today.”
http://www.firstcoastnews.com/news/article/245606/4/Momentous-ruling-on-Floridas-pension-contribution-law
March 7, 2012
Article: “(Florida) Legislature Overreaches, Public Pays the Bill.” “Yet Gov. Rick Scott and the Florida Legislature are at it again, embracing (public pension) legislation that ignores constitutional limits on their authority, forcing costly taxpayer-financed litigation and resorting to name-calling and threats to the judiciary when the courts rule against them. Tuesday’s ruling that cutting public employee salaries to help pay for pensions is unconstitutional is not the result of an activist judge as some Republicans complain. It reflects the failure of the executive and legislative branches to recognize their limits and the role of an independent judicial branch.” “Every time elected leaders make bad law, taxpayers pay the legal bills.”
http://www.tampabay.com/opinion/editorials/article1218839.ece
March 13, 2012
Denver attorney Cindy Birley (a champion of prospective public pension reform in Colorado) testifying before the Colorado Legislature’s Senate Finance Committee hearing on the bill SB12-149, on March 13, 2012: “Generally, you would not change people who have already retired . . .”. “There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.” “The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . . ‘definitely determinable’.” “So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.” “Because, it may not qualify as a defined benefit plan.” “We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.” “It still has to pass muster as a DB plan.”
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
March 28, 2012
Fitch Ratings (one of the three large rating agencies in the United States): “Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”
http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp
March 28, 2012
Article in the periodical “Bond Buyer” addresses attempts by politicians to exaggerate pension funding status: “Some state and local officials, eager to garner public support for cuts in pension benefits, increases in contributions or other reforms, have been exaggerating their pension problems, according to several lawyers.” “’We are seeing announcements of doom and gloom as a justification for cutting employee benefits,’ he said. ‘And at the same time, the people who say, It’s disastrous, go to bond raters and say, Everything is great. We are paying our debts.’”
http://www.bondbuyer.com/issues/121_61/issuers-accused-exaggerating-pension-fund-woes-1037961-1.html
April 6, 2012
“My Opinion: Colorado PERA’s Meredith Cuts and Runs.”
http://coloradopols.com/diary/17567/my-opinion-colorado-peras-meredith-cuts-and-runs
May 16, 2012
The Colorado General Assembly enacts the bill SB12-149, reforming certain Colorado public pension systems and honoring the accrued public pension benefits of public workers who are members of those pension systems, after having retroactively taken accrued benefits from Colorado PERA retirees in 2010.
June 26, 2012
(Governor Scott) Walker, Beloit Daily News: “One thing he did stress was that he would not attempt to touch the pensions of current retirees, which he noted would be illegal.”
http://www.beloitdailynews.com/news/walker-open-to-pension-reform/article_e53d0492-bfad-11e1-9faf-0019bb2963f4.html
August 8, 2012
Douglas Greenfield: “The theory behind that is that a pension that has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.” Greenfield participated in a panel discussion on hosted by the National Conference of State Legislatures. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”
http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx
Douglas Greenfield presented a paper outlining his arguments and analysis . . . “In Defense of State Judicial Decisions Protecting Public Employees’Pensions.”
“There is no sound public policy reason to conclude that these promises – based on the reasonable expectations of the contracting parties – should not be fully protected by the laws prohibiting or limiting the impairment of contracts.”
http://www.ncsl.org/documents/fiscal/DGreenfield_Presentation.pdf
October 11, 2012
Colorado Court of Appeals 2012 decision in Justus v. State:
“We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.”
http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf
December 23, 2012
Public pension legal scholars on contractual public pension obligations, in the periodical Truth-out: “The state is just trying to find any argument that allows them to get out of their obligations and that will stick in court.” “‘The entire public pension system is built on the understanding that pensions are legally protected promises,’ said Richard Kaplan, a professor at the University of Illinois College of Law. ‘That idea has been foundational for at least the last half-century.’” “Since the middle of the century, however, courts have generally acknowledged that states cannot promise pension benefits to their employees as an inducement to get them to work for the state and then renege on those promises. The large majority of states have protected pensions under the theory that the promise of a pension represents a form of contract . . .”. “The legal understanding has been, ‘That is your money, and the state can’t take it away.’” “The vast majority of states — 41 — apply a contract theory to their employees’ pension rights. All of these states have constitution provisions that — mirroring the contract clause of the federal Constitution — prohibit the passage of any law that impairs the obligation of contracts.” “‘It cuts against decades of precedent,’ Kaplan said, ‘not to mention basic, commonsense notions of what pensions are and what’s fair.’” “According to Secunda of Marquette University, a shift back towards a gratuity model would be ‘disastrous.’ ‘What the states are trying to do is change the rules in the middle of the game,’ he said.” “According to Richard Kaplan, a professor of law at the University of Illinois, proving that reneging on their pension obligations is necessary to achieve an important public purpose is a high bar to reach, because that argument implies that the state’s ability to raise taxes to keep its promises have been exhausted.”
http://truth-out.org/news/item/13498-pensions-a-promise-is-a-promise-unless-its-inconvenient
2013
February 15, 2013
“After being about 30 percent funded during the 1970s, CalSTRS funding slowly improved with an increase in state funding in 1990 and then large investment fund earnings during a high-tech boom later that decade.”
“As funding peaked at about 110 percent around 2000, the ‘surplus’ was not regarded as a cushion to offset future investment earnings shortfalls. As often happens with public pensions, the surplus was viewed as a windfall that should be spent.”
“Legislation began divvying up the windfall in 1998 when the surplus was still a projection. A cut began in the state contribution, 4.3 percent of pay, that would reduce the rate by half, a drop in pension funding of 2 percent of pay similar to the teacher diversion.”
http://calpensions.com/2013/02/15/how-much-calstrs-debt-due-to-mismanagement/
March 7, 2013
Colorado Supreme Court Justice Marquez recuses herself in Lobato case deliberations, since she had worked on the case at the Colorado Attorney General’s office: “The seventh, Justice Monica Marquez, recused herself because she had worked on the Lobato case while an attorney with the attorney general’s office.”
http://www.coloradostatesman.com/content/994052-lobato-lawsuit-could-have-major-ramifications-k-12-school-finance
March 8, 2013
Former Colorado Senator Hank Brown, co-chair of the Colorado Treasurer’s “Commission to Strengthen and Secure PERA” writes: “The Legislature took the difficult and unpopular step of reducing cost-of-living adjustments for all employees, including current retirees.” “Through a little ‘Colorado Courage,’ (my comment, aka, ‘breach of contract’) policy makers ensured that PERA is on track to be fully funded . . .”. Hank Brown holds this position in support of breaking “fully-vested” PERA retiree pension contracts in spite of the fact that the Commission he co-chaired found that: “For those Coloradans already collecting benefits from PERA, their retirement funds must be protected. The commission may not make any recommendations that materially affect current retirees.”
http://www.bizjournals.com/denver/print-edition/2013/03/08/congress-could-use-some-colorado.html?page=all
March 18, 2013
State financial crisis? Denver Business Journal: “. . . next year’s money — $924.3 million above the amount the state will spend this year, according to Legislative Council — is up for grabs.”
http://www.bizjournals.com/denver/news/2013/03/18/colorado-state-revenue-picture.html?page=all
April 2, 2013
Colorado Legislature pays off local government pension debt that is not the contractual obligations of the State of Colorado. (This $142 million appropriation brings the total to $700 million for this purpose.) “House Republican leaders are floating a proposal to repay a longstanding debt (My comment, this is not a state ‘debt,’ sloppy reporting) to the state’s Fire and Police Pension Association in full as a way to get some GOP lawmakers to vote in favor of the $20 billion state budget for next year, which will be up for debate in the House on Thursday.” “‘It’s (House Minority Leader) Waller’s effort to buy some Republican votes,’ one GOP lawmaker told FOX31 Denver Tuesday.” “Waller, who is almost certain to run for Attorney General (next) year, would like to be able to demonstrate that he leads a group of lawmakers who are pragmatic and responsible; and helping forge a bipartisan budget compromise would help him make that case.”
http://kdvr.com/2013/04/02/republicans-considering-pension-deal-hoping-for-bipartisan-budget-vote/
Support public pension contractual rights and the rule of law in the United States at saveperacola.com. “Friend” Save Pera Cola on Facebook!
FORBES COLUMNIST: HOW DOES “SCREWING WORKERS” OUT OF A PENSION COLA BENEFIT ENHANCE THEIR “RETIREMENT SECURITY?”
SENATOR BRANDON SHAFFER, SPONSOR OF THE COLORADO PERA “COLO-THEFT” BILL: PERA HAS “BAD LOBBYISTS.” COME AGAIN SHAFFER?
Rather than enacting legislation to reform public pensions prospectively and legally, (like state legislatures across the country), a handful of state legislatures (including the Colorado General Assembly and the Rhode Island Legislature) are attempting to retroactively take accrued, earned benefits from public pensioners. Colorado state legislators (setting a moral example for their children) are trying to break state contracts to maintain Colorado’s status as a state “tax haven.” (So far, Colorado legislators have opted against an attempt to break the state’s corporate contracts.)
Edward Siedle, a contributor at Forbes addresses state legislative “COLA-theft” in his most recent column. Siedle:
“The Rhode Island Retirement Security Act of 2011, enacted November 18, 2011 (which is being challenged as unconstitutional), suspends the COLA for all state employees, teachers, state police and judges until the plans’ funding level exceeds an 80 percent funding level.”
(My comment: The Colorado Legislature’s SB10-001 sets a more ambitious COLA-theft goal than does the Rhode Island legislation . . . Colorado’s bill takes pension COLA benefits until a “100 percent” pension funded level is achieved. Perhaps, the Colorado Legislature should finish the job it started, and simply pass a bill stating that ALL of the state’s public and corporate contracts will be scrapped until Colorado taxpayers contribute nothing for state services.)
Siedle:
“Why is it that laws screwing workers always have the words ‘retirement security’ in their titles?”
(My comment: Colorado PERA, proponent of Colorado’s 2010 public pension contract breach, tells us: “In Colorado, Senate Bill 1 [the bill that broke Colorado PERA pension COLA contracts] passed with the support of the Colorado Coalition for RETIREMENT SECURITY . . .”.
http://www.copera.org/pera/about/ask.htm
In a recent editorial, former Colorado Senator Hank Brown tells Colorado PERA pensioners that Colorado PERA’s 2010 breach of their COLA contracts will help provide them with “RETIREMENT SECURITY.” Hank Brown:
“Through a little ‘Colorado Courage,’ [a euphemism for breach of contracts] policy makers ensured that PERA is on track to be fully funded and provide RETIREMENT SECURITY . . .”.
It follows that Hank Brown could enhance his own RETIREMENT SECURITY by relinquishing part of his own “2.6 million” federal pension. The Duke Chronicle on Senator Hank Brown’s personal “$2.6 million” federal pension benefit:
“Members of Congress rant and rave about government spending, but when it comes to their golden retirement pensions — somehow that doesn’t count.” “On the Senate side, the Midas awards go to next year retirees: Sens. Sam Nunn, D-Ga., Bill Bradley, D-N.J., and Hank Brown, R-Colo., who will each collect estimated lifetime benefits in excess of $2.6 million.”
http://www.dukechronicle.com/articles/1996/01/11/congressional-pensions-out-touch-reality
I do not understand how taking money by force, seizing accrued, earned pension benefits, breaking the state’s public pension contracts while the state’s corporate contracts are unscathed . . . how this enhances a Colorado PERA pensioner’s “retirement security.”
As we have seen, Rhode Island’s “COLA-theft” legislation was championed by current Rhode Island Treasurer Gina Raimondo, who hopes to ride this “COLA-theft” horse to the Rhode Island Governor’s office. (Breaking public pension contracts is rather popular among voters at present.)
Siedle:
“Retired, largely elderly state workers had to have their benefits shaved by 3% annually to ‘save’ the pension, they were told. With an average pension benefit of $33,000, the Treasurer (Gina Raimondo) apparently figured these retirees could learn to live a bit more frugally in their golden years.”
“The measly 3% COLAs promised to working stiffs are chump-change compared to the over 4% fees she’s (Rhode Island Treasurer Gina Raimondo) paying hedge fund desperados.”
“It seems the Treasurer believes it’s a lot easier for retired state workers to adjust their cost of living than it is for hedge fund high rollers. Or maybe workers are simply less deserving of the monies that have been set-aside for, and by, them.”
Our own Governor John Hickenlooper (R-Colorado) is also doing his part to nudge a few public pension dollars toward the captains of industry:
“Gov. John Hickenlooper said in a statement that Colorado business owners have long said they need easier access to capital to grow. ‘The creation of the Colorado Mile High Fund will improve the access to capital and we are pleased that Colorado PERA’s partnership will benefit and help grow companies here in Colorado,’ Hickenlooper said.”
http://csbj.com/2012/10/18/pera-establishes-capital-fund-for-colorado-businesses/
According to Hick, Colorado business owners need “easier access to capital.” The current, historically-low interest rates on Colorado bank loans just aren’t cutting the mustard. So, Hick recently decreed that Colorado PERA pensioners will assume risk with their Colorado PERA trust funds that smart bankers apparently won’t touch. I think this Hickenlooper corporate welfare decree ($50 million in corporate loans backed by pensioners) proves his “Colorado Courage?”
“The Colorado Mile High Fund [the Fund] is a $50 million co-investment program designed to invest in a diversified, high-quality portfolio of companies with a nexus to Colorado.”
“The Fund is sponsored by the Colorado Public Employees’ Retirement Association (Colorado PERA) and is managed by the Credit Suisse Customized Fund Investment Group.”
http://coloradomilehighfund.com/
Back to Siedle:
“I can tell you where that COLA savings is going—into the already-stuffed pockets of Wall Street’s most highly-compensated gamblers—almost dollar-for-dollar. By my estimate, $2.1 billion in fees (out of the $2.3 billion in COLA savings) will be paid by the pension to hedge, private equity and venture capital tycoons. That’s some ‘reform.’ No wonder Wall Street is so eager to support this shameless public pension money grab.”
“This should come as no surprise because Wall Street solutions to retirement problems, even in the corporate and 401(k) marketplace, have always involved greater fees to Wall Street.”
“If $87.4 million in fees were paid every year for the next 20 years, that would amount to $1.75 billion or with compounding to $3.8 billion, which equates to $2.1 billion in 2013 dollars. In summary, the savings related to suspension of the 3% COLA ($2.3 billion) miraculously appear to be just enough to pay Wall Street’s elevated fees of 2% and 20% of profits ($2.1 billion). Imagine that!”
“Rhode Island pensioners have been told that they have to sacrifice to ‘save’” the state pension. If that is true and the pension can’t afford to pay retirees 3%, then how can it afford to pay Wall Street 2% and 20%– over 4%? Rhode Islanders, in my opinion, you don’t have to be a Rhodes scholar to see you’ve been hood-winked.”
Full article at Forbes:
http://www.forbes.com/sites/edwardsiedle/2013/04/16/rhode-island-pensioners-3-colas-will-help-pay-wall-street-high-rollers-4-fees/2/
BRANDON SHAFFER ON THOSE “BAD COLORADO PERA LOBBYISTS.”
In my mind, the 27 members of Colorado PERA’s SB10-001 lobbying troop were quite effective during the 2010 legislative session. They succeeded in ramming SB10-001 through the legislative process. To me, it looks like they got the job done for Colorado PERA.
Colorado PERA spends $400,000 out of PERA member’ trust funds each year for lobbying, and they get their money’s worth! It’s no simple matter to persuade an elected official who has sworn to uphold the U.S. Constitution to ignore the constitution’s Contract Clause. The 27 SB10-001 lobbyists succeeded in dramatically (and temporarily) diminishing the contractual obligations of Colorado PERA-affiliated employers.
So, I find it odd that the prime sponsor of the “COLA-theft” bill, former Senator Brandon Shaffer considers some PERA lobbyists to be “bad lobbyists.”
The wisdom of SB10-001 co-prime sponsor Brandon Shaffer:
“PERA is very good at crunching numbers, but they’re terrible at getting their message out. They need to make it toxic for any politician to go up against PERA. As individuals, you need to sit down with PERA and tell them you’ve spoken to President Shaffer, and he says you have bad lobbyists.”
http://www.bouldervalleyea.org/images/AdvocateJanuary2012.pdf
(My comment: Some of the lobbyists supporting Colorado PERA’s “COLA-theft” bill, SB 10-001, represented the Colorado Education Association.)
“His wife (Senator Brandon Shaffer) is a teacher, active in the CEA . . .”
http://www.davidthielen.info/politics/2010/05/senate-president-brandon-shaffer-interview.html
According to the website of the Colorado Secretary of State, six lobbyists (of the 27 SB10-001 lobbyists) were paid by Colorado PERA to ram the COLA-theft bill (SB10-001) through the legislative process:
1. Michael Beasley – Colorado PERA – supporting
5280 Strategies (Beasley) – Colorado PERA – supporting
2. Beth C. Minahan – Colorado PERA – supporting
3. Collon Kennedy – Colorado PERA – supporting
4. Steve Adams – Colorado PERA – supporting
Colorado Communique, Inc. (Minahan, Kennedy, Adams) – Colorado PERA – supporting
5. Mary Alice Mandarich – Colorado PERA – supporting
6. Roberta Robinette – Colorado PERA – supporting
When SB10-001 co-prime sponsor Senator Brandon Shaffer refers to “PERA’s bad lobbyists” who, exactly, is he referring to? Does he consider any of these six lobbyists to be “bad lobbyists”? Come clean Shaffer!
Rather than strengthening Colorado PERA’s influence at the Colorado General Assembly as Senator Shaffer suggests (“making it toxic for any politician to go up against PERA”) I argue that the Colorado General Assembly should begin making its own public pension policy.
I suggest that the Colorado General Assembly create an ongoing oversight commission for all Colorado public pensions. I suggest that the Colorado Legislature study public pension administration, and prospective pension reform options (i.e., follow the example of other states.) I suggest that Colorado PERA’s influence over the legislative process be curtailed rather than magnified.
In 2010, Colorado PERA’s leaders marched uninformed Colorado legislators right off the contract breach cliff. In light of this, why should Colorado PERA’s legislative influence be increased?
“LESS DRASTIC” PENSION REFORM OPTIONS THAT PACK MORE PENSION LIABILITY REDUCTION “PUNCH” THAN DOES THE BREACH OF “FULLY-VESTED” COLA CONTRACTS.
According to Colorado PERA officials, breaking “fully-vested” pension COLA contracts was the only choice in 2010:
“The only solution that works involves impacting the COLA,” he (Colorado PERA General Counsel Greg Smith) said.
http://www.coloradostatesman.com/content/991604-pera-reform-bill-gets-bipartisan-blessing
But, it turns out that certain modifications to “partially-vested” public pension contractual rights pack more pension reform “punch” than does the breach of pension COLA contracts. Such alternatives to taking “fully-vested” public pension benefits offer a “less drastic” impairment of public pension contracts.
This fact was reported during a 2011 public pension funding presentation at Harvard. According to the presenters, two public pension reform options impacting “partially-vested” pension contractual rights: (1) the use of average pay over the course of a career to calculate base pension benefits and (2) raising retirement age to 65 offer a greater reduction of public pension liabilities than does the elimination of pension COLA benefits. Both of these pension reform options impact only “partially-vested” public pension contractual rights.
It follows that incremental changes in these “partially-vested” parameters, for example, calculating a PERA pension base benefit using a 10 or 15 year salary average, or raising the PERA retirement age to 60 for active pension members would generate a greater pension liability reduction than a 1.5 percent taking of “fully-vested” COLA benefits. The point is that public pension reform options are available, that offer significant cost savings, that do not impact “fully-vested” public pension contractual rights. Why were the “less drastic” pension reform options of raising the PERA retirement age, or averaging pay over the course of a public sector career not considered in 2010?
Further, the rate at which future pension benefits accrue may be set prospectively by a legislative body at a level generating a greater reduction in pension system liabilities than does the breach of “fully-vested” public pension COLA contracts. Such options were not on the table in 2010 because these pension reform options were not supported by the 27 lobbyists pushing SB10-001 through the legislative process.
October 13, 2011 Thomas J. Healey & Carl Hess presentation at Harvard:
“Underfunded State Pensions: The Size of the Problem, the Obstacles to Reforms, and Potential Paths Forward.”
“Change to practice of averaging pay over the course of a career:
• Lowers the cost by 7.4% of payroll
• Overall cost reduction of 33%
Raise retirement age to 65:
• Lowers the cost by 5.7% of payroll
• Overall cost reduction of 25%
Cost savings from elimination of public pension COLAs:
• Lowers the cost by 5.3% of payroll
• Overall cost reduction of 24%”
http://www.hks.harvard.edu/m-rcbg/Events/Underfunded_State_Pensions_29%20October.pdf
Colorado PERA active and retired members, many legal, prospective “less drastic” pension reform options were ignored by the Colorado Legislature in 2010. Support the rule of law and public pension contractual rights in Colorado. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
6,000 COLORADO POLICE AND FIREFIGHTERS TO CONSIDER TAXING THEMSELVES TO PAY FOR A PENSION COLA BENEFIT.
(IN DECADES TO COME, WHEN THE COLA IS ALL PAID OFF . . . WILL THE STATE LEGISLATURE JUST TAKE IT?)
In 2014, more than 6,000 police officers and firefighters in Colorado will have a chance to vote on the question of raising their pension contributions (by a gradual increase of an additional four percent) to pay for a new pension benefit . . . an enhanced annual cost-of-living increase after they retire.
These Colorado police officers and firefighters are members of a pension system called the Fire and Police Pension Association of Colorado (FPPA.) In Colorado, we have a number of public pension systems . . . including Colorado PERA, the FPPA, the Denver Employees’ Retirement Plan and many county-run pension systems. These public pension systems are governed by Colorado statutes, which set forth a variety of standards for the contractual pension rights of the members of these pension systems. Under the 2012 bill, SB12-149, accrued public pension benefits of certain Colorado county-run pension plans are honored, while the 2010 bill, SB10-001, seizes accrued public pension benefits. Current Colorado law also provides disparate treatment of Colorado pension systems in regard to “amortization of plan liabilities” (the amount of time pension plans have to pay off their debt.) Colorado law allows some pension plans to amortize plan liabilities over a 40-year period, while other plans (like Colorado PERA) are permitted only a 30-year “maximum amortization period.”
Colorado’s police officers and firefighters should take heed. Pensioners in the Colorado PERA pension system paid for their DEFINED, pension COLA benefit (out of every paycheck) for decades, only to see the Colorado Legislature renege on this contract. Why would a Colorado police officer or firefighter trust that the Colorado Legislature, or a local government, would not simply pass legislation in the future to take their money as well? As we have seen, Colorado politicians are primarily concerned about maintaining Colorado’s status as a “tax haven.” They are not above breaking contracts to win votes from constituents who want governmental services, but don’t want to pay for those governmental services.
I ask, in a state that casually breaks public pension COLA contracts, and that has recently demonstrated a willingness to seize accrued public pension COLA benefits, why would any public employee vote to tax themselves for a public pension COLA benefit?
Police officers and firefighters would be better off placing this money in their own savings accounts and managing their own “retirement inflation protection,” instead of putting the money in the hands of a governmental plan sponsor that may use it to reduce future taxpayer obligations.
Colorado PERA pension benefits are governed by Colorado state law, the Colorado Revised Statutes. Colorado fire and police pension benefits are also governed by the Colorado Revised Statutes. In 2010, the Colorado General Assembly enacted a bill that amended the Colorado Revised Statutes to break Colorado PERA contracts and seize accrued PERA pension COLA benefits. What is to prevent the Colorado Legislature, or a local government, from simply enacting legislation in decades to come to shore up local government pension plans through the elimination of the proposed, new FPPA COLA? Nothing. The reality is that a majority of the members of the Colorado Legislature do not respect public pension contracts. They will take accrued, earned, contracted pension benefits to the extent permitted by courts. Moral constraints on such takings of property are not a factor. Remember that taking accrued, earned, contracted pension COLA benefits was the first choice of Colorado legislators in 2010.
If accrued pension COLA benefits may be freely seized in Colorado state legislation, or in municipal ordinance, if pension contracts are freely abrogated under the Colorado Constitution, why would a Colorado police officer or firefighter vote to increase their monthly contributions to pay for a new COLA benefit? If police officer or firefighter pension contributions can simply be redirected under Colorado law to fund other municipal programs, why would they support this contribution increase?
What legal protections for police officers and firefighters does the FPPA propose that would prevent FPPA-affiliated employers (local governments) from passing ordinances to unilaterally take the new COLA benefit in the future? None. What is to prevent an FPPA-affiliated local government from following the example of the Colorado General Assembly? Underfund the pension to lower its funded ratio, claim that the low funded ratio represents a “fiscal crisis” justifying seizure of accrued pension benefits, break pension contracts to lower taxpayer obligations, repeat . . .
The assets of public pension plans are trust funds that belong to the beneficiaries of the pension plan. In spite of this fact, for decades, Colorado legislators have tried to get their hands on public pension trust funds. In the minds of many Colorado legislators, access to these pension trust funds allows them to keep state taxation low in the state with the nation’s lowest state tax revenue per capita. Colorado legislators have tried to get at public pension assets through the “front door” and through the “back door.”
At the turn of the century, former Governor Bill Owens sought and signed legislation creating “early retirement incentives” for Colorado PERA members. His goal was to persuade the older, more “expensive” public workers to retire under Colorado PERA, in order to shift Colorado public sector labor costs from Colorado governments to the Colorado PERA pension system. Governor Bill Owens pension scheme was a “back door” raid on Colorado PERA public pension assets. Having prompted these retirements, the Colorado Legislature now seeks to renege on the deal.
In 2010, Colorado legislators passed a bill that brazenly seized accrued, earned, contracted Colorado PERA pension benefits (SB10-001) to minimize future taxpayer contributions to the pension system. This bill, SB10-001, represents the legislators’ desired “front-door” raid on the Colorado PERA pension trust funds. Even Governor Hickenlooper is getting into the public pension raid game with his recent decree that Colorado PERA pension trust funds will be used to provide corporate welfare ($50 million in loans) to businesses that the private sector apparently won’t touch.
“AD HOC” PENSION COLAS VS. “AUTOMATIC” PENSION COLAS.
The FPPA currently provides a small “ad hoc” pension COLA benefit, that is, a COLA benefit that is discretionary. The Colorado PERA pension system provides an “automatic” COLA benefit under Colorado law, that is a COLA benefit that is contracted, guaranteed, mandatory on the part of the pension plan sponsor.
FPPA:
“Benefit adjustments are not guaranteed and are determined annually by the FPPA Board of Directors based on the most recent actuarial study. The amount of the benefit adjustment can be 0% to 3%, or the greater of the Consumer Price Index (CPI) per year.”
http://www.fppaco.org/pdfs/pubs_handouts/SWDBP_3.5.13.pdf
The Colorado PERA pension system has “automatic” pension COLA benefits (i.e., pension COLA benefits that are a contractual obligation of PERA-affiliated employers):
“PERA Benefits at a Glance,” 2004:
“Receive an annual AUTOMATIC increase of 3.5 percent in your monthly retirement benefit to help keep up with the cost of living.”
PERA Legislative Update, February 2006:
“Employees hired before January 1, 2007 remain in PERA Pioneer (and will receive) AUTOMATIC increase of 3.5% per year after retirement.”
“PERA members hired January 1, 2007 or later, called PERA Centennial, no guaranteed annual increase after retirement.”
http://www.copera.org/pdf/Legislation/2006/LegUp2-06.pdf
Buck Consultants (independent actuary) 2001 actuarial report to the Legislative Audit Committee of the Colorado General Assembly: the Colorado PERA 3.5 percent COLA is “AUTOMATIC,” a “fixed” COLA, that is “compounded annually for each year of retirement,” part of PERA’s “guaranteed benefits at retirement.”
Colorado PERA publication “History of Colorado PERA Legislation”:
“HB 00-1458. Established 3.5% compounded annual AUTOMATIC COLA effective March 2001.”
NEXT YEAR’S FIRE AND POLICE PENSION COLA ELECTION.
Here are a few excerpts from FPPA materials for next year’s police and fire COLA election . . . the “FPPA Fire and Police Pension COLA Election White Paper”:
“A benefit adjustment for retirees, often commonly known as a ‘COLA’ or cost of living adjustment, is not guaranteed in the SWDB (FPPA Statewide Defined Benefit) Plan. The board of directors of FPPA determines on an annual basis what, if any, benefit adjustment to provide to current retirees.”
“In addition, an election requires a mandate from the active members of the plan, since 65% of the members must vote in favor of a proposition and a non-vote is treated as a negative vote.”
“Effect of inflation upon purchasing power.”
“The base benefit provided in the SWDB Plan does not have any form of automatic adjustment for inflation. Without some type of inflation protection, an annuity will not provide equivalent purchasing power over time.”
“It cannot be over-emphasized, however, that the SWDB Plan does not provide guaranteed benefit adjustments.”
“In the event that the Plan were ever to become actuarially unsound, the board of directors has the authority to: Reduce or eliminate plan amendments voted in by the membership.”
“Retirement income needs to keep pace with inflation as much as possible, so that over time the retiree can continue to maintain his or her standard of living.”
“Benefit adjustments provide protection against inflation and are the most cost-effective way to achieve that protection.”
“Working together, members of the SWDB Plan can proactively act to preserve and improve retirement security for themselves.”
http://www.fppaco.org/pdfs/election-2012-pdfs/white-paper.v03.pdf
(My comment: Colorado PERA retirees “worked together,” and made mandatory contributions to the Colorado PERA pension system for a “DEFINED” pension COLA benefit upon retirement. Colorado PERA retirees “acted proactively” to ensure their “retirement security.” For decades Colorado PERA retirees made these mandatory contributions. In 2010, Governor Ritter, with the stroke of a pen, seized these PERA contributions, and breached the retirees’ PERA contracts.)
From the FPPA “Election Handout”:
“Why vote ‘yes’ on increasing the member contribution rate? The short answer is that added funding: Increases the likelihood that you will get a greater benefit adjustment (commonly called
a COLA) when you retire . . .”.
http://www.fppaco.org/pdfs/election-2012-pdfs/handout.V4.3.19.13.pdf
(My comment: “Likelihood,” an excellent word choice here.)
COLORADO’S ARBITRARY PARAMETERS FOR MEETING PUBLIC PENSION LIABILITIES.
As noted earlier, a public pension plan’s “maximum amortization period” is the number of years allowed by the legislative body overseeing the plan during which any pension liabilities must be paid off. Although public pension benefits will come due over the next 70 years, Colorado law requires that these liabilities be paid off in about half that time frame.
Under Colorado law, the Colorado PERA pension system is currently permitted a period of 30 years to pay off its unfunded pension liabilities. Seven years ago, Colorado law allowed the Colorado PERA pension system 40 years to pay off unfunded pension liabilities (the time period was reduced in SB06-235.) Sixteen years ago, Colorado law allowed the Colorado PERA pension system 60 years to pay off its unfunded pension liabilities (the time period was reduced in HB97-1114.) Colorado law currently allows the FPPA pension system to pay off unfunded pension liabilities over a 40-year period, except for FPPA “Old Hire” pension plans that get 37 years. You can see that this factor, incorporated into written, statutory public pension contracts in Colorado, is set in law in an arbitrary fashion.
Colorado PERA, in its publication “Setting the Record Straight”:
“The bottom line is that SB 1 prefunds these liabilities over the next 30 years while the payment of benefits will occur over the next 70 years.”
“PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years.”
https://www.copera.org/pera/about/issues.htm
In 2006, the Colorado Legislature lowered Colorado PERA’s maximum amortization period to 30 years, in 2010 the Colorado Legislature claimed that this 30-year maximum amortization period was such a burden that the State of Colorado was forced to break its PERA pension contracts.
Recall the words of Representative Jack Pommer, JBC Chairman in 2009. At the December 17, 2009 meeting of the Joint Budget Committee, Representative Pommer asked: “Are we not just saying we’re going to pick 30 years because if we’re not balanced within 30 years that creates actuarial necessity which then let’s us change retiree benefits?” Representative Pommer asked if the Legislature could legally alter the statutory parameters of the PERA pension to manufacture a “crisis” in order to justify its breach of pension contracts.
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
Colorado law governing the FPPA:
“31-31-102. Definitions. (1) “Actuarially sound” means a police officers’ or firefighters’ pension fund . . . receiving or scheduled to receive employer and member contributions . . . actuarially determined to be necessary . . . to pay the annual contribution necessary to amortize any unfunded accrued liability over a period not to exceed FORTY years.”
“31-31-408. Modification of state plan by the board. (1) . . . the board may modify the pension benefits and the age and service requirements for pension benefits . . . with respect to the members of the statewide defined benefit plan if: (f) The modification does not adversely affect the pension benefits of retired members.”
http://www.fppaco.org/pdfs/Title%20%2031-30%20thru%2031%20w-%20amendments%20(2012).pdf
Colorado Legislature: We’ll break Colorado PERA pension contracts in order to pay off the unfunded liability in 30 years, but we’ll give local government Old Hire fire and police pension plans 37 years. (The arbitrary 30-year time frame is included in the title of the bill that broke Colorado PERA pension contracts, SB10-001.)
“31-30.5-304. (4) (a) For municipalities, fire protection districts, and county improvement districts (with Old Hire fire and police pension plans) . . . contributions for each calendar year . . . shall be at a rate . . . required to amortize the unfunded accrued liabilities of such state-assisted fund over a period of not more than thirty-seven years . . .”.
“31-30.5-305. No change in employer obligation. It is the intention of the general assembly that the minimum funding standards established by this part 3 shall not enlarge nor diminish the obligation of municipalities and fire protection districts to their employees for pension benefits provided pursuant to this article.”
Colorado Legislature: However, the funding standards that we put in SB10-001, WE DO INTEND to use to break pension contracts and diminish our own state PERA pension obligations.
From the FPPA Rules:
“909. Vesting. Upon attaining the eligibility requirements for a benefit, a Member shall be fully vested in the benefits such Member has accrued.” “This rule is not to be construed as a reduction or limitation of rights heretofore existing, nor as an indication that vested benefits would be forfeitable before the stated age is attained.”
http://www.fppaco.org/pdfs/rnr/120927%20%20Codified%20Final%20FPPA%20Rules%20Regulations.pdf
Colorado law governing Colorado PERA:
“24-51-211, C.R.S. Amortization of liabilities. (1) . . . A maximum amortization period of thirty years shall be deemed actuarially sound . . . the employer or member contribution rates for the plan may be adjusted by the general assembly when indicated by actuarial experience.”
(My comment: No mention here in Colorado statutes about the Colorado General Assembly breaking its pension contract when “indicated by actuarial experience.”)
Instead of simply reamortizing Colorado PERA’s unfunded pension liabilities in 2010, a majority of Colorado legislators preferred to break PERA contracts.
THE COLORADO LEGISLATURE INTENDS TO PAY AN ADDITIONAL $142 MILLION IN NEXT YEAR’S BUDGET FOR LOCAL GOVERNMENT PENSIONS THAT ARE NOT ITS RESPONSIBILITY . . . WHILE IGNORING ITS OWN CONTRACTUAL PERA PENSION OBLIGATIONS.
The Colorado General Assembly claims that financial hardship necessitates its breach of Colorado PERA pension contracts, while simultaneously the Colorado General Assembly tops off a collective $700 million appropriation for local government public pensions that are not its responsibility. At least the local government lobbyists are happy.
On September 19, 2012, FPPA CEO Dan Slack provided testimony to the Colorado General Assembly’s Police Officers and Firefighters Pension Reform Commission (29 minutes into the hearing) regarding the obligation of the State of Colorado to pay for local government “Old Hire Police Officers Pension Plans.” Dan Slack: “So the State has made certain commitments, but has been very careful not to make binding obligations upon itself as the state to provide some assistance with funding for these plans.”
Link:
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
“31-31-101. Legislative declaration.” “The general assembly further declares that state moneys provided to municipalities, fire protection districts, and county improvement districts DO NOT CONSTITUTE A CONTINUING OBLIGATION OF THE STATE to participate in the ongoing normal costs of pension plan benefits . . . but are provided in recognition that the local governments are currently burdened with financial obligations relating to pensions in excess of their present financial capacities.”
This “Legislative Declaration” states that the Colorado General Assembly has provided state resources “in recognition that local governments are currently burdened with financial obligations relating to pensions . . .”. Accordingly, the policy preference of the Colorado General Assembly is that discretionary grants of state resources should be made to Colorado local governments when they are “burdened by financial pension obligations,” but when the State of Colorado is also “burdened by financial pension obligations” the State of Colorado will break its public pension contracts.
More Colorado law:
“31-30.5-304, C.R.S. (3) The general assembly finds and determines that it has contributed substantial sums to the (FPPA Old Hire fire and police pension) program established by this part 3 and that the state has a responsibility to evaluate the advisability of its contribution in light of its own fiscal situation.”
http://www.fppaco.org/pdfs/Title%20%2031-30%20thru%2031%20w-%20amendments%20(2012).pdf
In spite of this statutory language, and the fact that the State of Colorado is currently in breach of its own pension contracts, the Colorado Legislature intends to pump this additional $142 million into local government pension obligations in the next fiscal year.
How much more evidence is needed to demonstrate that no fiscal emergency exists in Colorado that would justify any breach of state contracts?
Colorado PERA active and retired members, it is clear that the Colorado Legislature has placed into statute public pension contract provisions that are arbitrary, providing unequal protection under the law. Fight for your contractual public pension rights! Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
LAW PROFESSOR: PENSION PROMISES MUST STAND IMMUTABLE FOR WORK ALREADY PERFORMED.
LEGISLATURES SHOULD “RECOGNIZE EXPLICITLY THE PAST AND FUTURE SERVICE DISTINCTION.”
“FOR EVERY DAY ONE WORKS, ONE IS ENTITLED TO KNOW WHAT ONE IS EARNING THAT DAY, INCLUDING WHAT PENSION BENEFIT ONE IS EARNING.”
A few days ago, a “guest column” addressing contractual public pension rights was published in the periodical, Oregon Live. The author of the “guest column” is Professor Henry Drummonds of the Lewis and Clark Law School. Professor Drummonds is a public pension legal scholar who agrees with Professor Amy Monahan (University of Minnesota School of Law) that public pensions should be reformed prospectively, in conformance with state and federal constitutions. The law professors argue that the rate of future accrual of public pension benefits should be modified as a means of bolstering public pension funded ratios.
http://www.oregonlive.com/opinion/index.ssf/2013/04/the_tragedy_of_the_oregon_publ.html
Professor Monahan’s legal arguments:
“This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
Link to Monahan law article:
http://www.law.umn.edu/facultyprofiles/monahana.html
This legal argument, for prospective reform of public pensions, was also made in testimony to the Colorado Legislature’s Senate and House Finance committees regarding SB12-149. (The Colorado General Assembly has adopted prospective pension reform for some Colorado public pension systems, those administered by certain county governments, while it has also enacted retroactive pension reforms that seize accrued pension benefits from Colorado PERA members.)
Here are a few quotations from attorneys representing the Adams County Retirement Plan (Vickie Johnson and Cindy Birley of Davis, Graham and Stubbs) in testimony on SB12-149 before legislative committees in 2012:
“As I said, in Subsection 3, we make clear in the proposed legislation that vested benefits already accrued, including the vested benefits of retirees, are not going to be touched.”
“So, if a board was going to go and make changes, it would be to future benefit accruals, not stuff that has already been earned.”
“For example, if you’re going to be paid a 2.5 percent multiplier, we could say ‘you’ve earned it to this day,’ and here’s your benefits to this day, we may reduce your benefit multiplier going forward.”
“For future service . . . we would like to be able to lower that benefit formula, multiplier . . .”.
“These are fully-vested rights once the person is eligible to retire.”
“You’ve got fully-vested rights for everything that you’ve accrued, but your future accruals could be at a lower formula rate.”
“So, let’s just say that you’ve worked for 25 years. And, you’ve earned your benefits at this multiplier. Those would not be taken away. If you elect to stay on for five more years, then that accrual may be reduced.”
“Under the current law . . . once you start working as an employee for a governmental pension plan and you contribute to your pension benefits it’s understood that you have obtained a contract right.”
“And, as long as you continue to work it’s understood under the law that your benefits cannot be changed.”
If legal, prospective pension reform is appropriate for an administrative division of Colorado state government (county government), why is legal, prospective pension reform not appropriate for the State of Colorado itself? Language from SB12-149:
“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”
Here are a few excerpts from Professor Drummond’s guest column at Oregon Live:
“As explained below, pension promises must stand immutable for work already performed, but changeable prospectively for future work.”
“First, as one relevant point of comparison, private sector pensions operate with just such a rule under the federal Employee Retirement Income Security Act (ERISA). Under ERISA, employers cannot renege on promises made regarding work already done, but can change the promises of what is earned for future work.”
“Second, looking at public employees, pension promises are a form of deferred compensation and one aspect of TOTAL compensation, which includes salaries, fringe benefits, vacation and holiday pay, etc. Every other aspect of this total compensation package — most dramatically, salaries — CAN be changed prospectively, for future work.”
“Instead it is much more reasonable to construe pension promises — like every other term of total compensation — as immutable for service already performed, but subject to democratic processes for work to be performed in the future. This would not only protect needed public services and younger public employees, but would also rest upon the reasonable expectation of the affected public employees; for every day one works one is entitled to know what one is earning that day, including what pension benefit one is earning.”
“The (Oregon Supreme) Court struck down the portion of the 2003 law (in Strunk) that again attempted to eliminate the 8 percent guaranteed return as to both past and future work, and another portion of the 2003 law that reduced cost-of-living adjustments for already retired public employees.”
“In sum, a firm basis exists in the holdings of the Oregon Supreme Court for the past service/future service presumption presented in this essay.”
“It is time for both the Legislature and the Oregon Supreme Court to recognize explicitly the past and future service distinction.”
“Henry Drummonds is a professor at Lewis and Clark Law School.”
“More recently, Professor Drummonds served as an advisor to the Oregon Attorney General, to Oregon Governor John Kitzhaber, and Oregon Governor Ted Kulongoski on labor relations, tenure law, and pension matters.”
“Academic Credentials: B.A. 1969 University of Oregon, J.D. cum laude 1972 Harvard Law School, Editor, Harvard Law Review, Member, Phi Beta Kappa.”
http://law.lclark.edu/faculty/henry_drummonds/
Recently, the Oregon Legislature requested an opinion (from their in-house legislative attorneys, the Oregon Legislative Counsel) on a proposal to take back accrued public pension COLA benefits. Here is the February 4, 2013 response of Oregon’s legislative attorneys:
“Based on recent Oregon Supreme Court precedent, we conclude that an attempt to limit the COLA in this way would be found to be a violation of the contract rights of the members.”
“The Oregon Supreme Court has found several times that the 1953 law establishing PERA created a contract between public employers and public employees.”
“The court stated several times in Strunk that there is a contract right to the COLA. For example, the court found that:
‘We note that the status of the law is particularly clear with regard to retired members, and there can be little question that the COLA is a fully accrued benefit for a member who has retired.’”
Here is a link to the complete February 4, 2013 opinion of the Oregon Legislative Counsel:
http://media.oregonlive.com/politics_impact/other/LC%20Opinion.pdf
Colorado legislators were not aware of such prospective, legal public pension reform options (as the Monahan proposal) in 2009/2010 because they allowed self-interested outside groups to run the PERA pension reform show. In any event, legislators did not want to know the truth. Instead of appointing a commission (or an interim committee) to examine all legal, prospective public pension reform options, the Colorado General Assembly abdicated its pension policy-making authority to the 27-member SB10-001 lobbying troop (we have identified earlier). The Colorado General Assembly did not conduct due diligence prior to breaking Colorado PERA contracts.
During the 2009 “Listening Tour,” Colorado PERA distributed a list of its own predetermined pension reform options that was quite short on prospective solutions. The preference from the outset was to break PERA contracts. One person present at the Denver meeting of the “Listening Tour” pointed out that, of the many pension reform ideas on the list, only 2 or 3 impacted those who actually owe the debt, PERA-affiliated employers.
Also, in 2009, the General Assembly ignored an on-point Colorado Attorney General Opinion precluding their proposed PERA contract breach. Further, the General Assembly ignored advice to send an interrogatory to the Colorado Supreme Court to clarify the constitutionality of the developing SB10-001 proposal. They did not want to hear the truth.
Colorado PERA claims that the General Assembly requested that the PERA Board make recommendations regarding pension reform in 2009, while I suspect that PERA lobbyists actually put this request into Colorado statutes at the end of 2009 in an attempt to add legitimacy to a preordained outcome. (Perhaps I am wrong, but this suspicion could be easily confirmed by deposing the SB10-001 bill drafter, or by examining “member files” at the Colorado State Archives for the 2009 bill, which would identify the person who requested that the “PERA Board pension reform recommendation” amendment be drafted. I suspect that the amendment request came from a PERA lobbyist, or was made by a legislator on behalf of a PERA lobbyist.)
In legal briefs, Colorado PERA goes so far as to emphasize this “legislative mandate” from the Colorado General Assembly. In a Response Brief submitted to the Denver District Court PERA attorneys write:
“By LEGISLATIVE MANDATE the PERA Board extensively studied the underfunding and consulted with its members . . . before proposing a solution to the General Assembly.”
Link:
http://www.ednewscolorado.org/wp-content/uploads/2010/05/PERASuitResponse5-10-10.pdf
I ask: Did Colorado PERA plant this request language into SB 09-282 at the end of the 2009 legislative session in order to lend a patina of legitimacy to what was in fact a premeditated attempt to breach pension COLA contractual obligations?
Recall Senator Lundberg’s statement on the Senate floor during the SB 10-001 debate: “This bill is a deal that was cut before this body met.”
Was Colorado PERA’s ostensible, impartial examination of pension reform options in 2009 in reality an elaborate ruse constructed by PERA lobbyists to add legitimacy to a process with a predetermined conclusion? To falsely portray a preordained conclusion to breach pension COLA contracts as the result of an extensive, deliberative process?
Colorado PERA active and retired members. Continue the fight for public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
THE NATION’S PUBLIC PENSION COLA-THEFT CHAMPION RECEIVES HER COMEUPPANCE.
FORBES COLUMNIST LAMBASTES RHODE ISLAND TREASURER GINA RAIMONDO.
RAIMONDO ON COLORADO PERA MANAGEMENT FEES.
In the United States, we have a handful of prominent self-serving politicians who support the breach of public pension contracts. As we have seen, such politicians serving in the Colorado General Assembly are attempting a “forced downward mobility” for a vulnerable subclass of Colorado residents . . . Colorado PERA pensioners.
Some U.S. politicians seek to advance their own political careers by breaking public pension contracts, some want to see further state tax cuts, some want to free up money for state discretionary expenditures. In Colorado, politicians broke public pension (Colorado PERA) contracts to further reduce state taxation . . . in a state with (nearly) the lowest per capita state tax collections in the nation. Colorado politicians also have many personal priorities for public program expenditures that supersede meeting the state’s contractual obligations.
Rhode Island’s Treasurer, Gina Raimondo, is apparently directing Rhode Island public pension trust funds to hedge fund cronies, and also hoping to ride her pension contract breach pony all the way to the Governor’s mansion.
Edward Siedle, a contributor at Forbes writes:
“According to Institutional Investor, Rhode Island Treasurer, Gina Raimondo is at work solving the nation’s retirement dilemma, showing how tough public pension reforms can pay fiscal and political dividends. Don’t believe a word of it.”
“A look behind the curtain reveals her changes to the investment portfolio of the $7 billion Employee Retirement System of the State of Rhode Island will inevitably dramatically increase both risk and fees paid to alternative investment managers, such as hedge funds and private equity firms.”
“There’s no prudent, disciplined investment program at work here—just a blatant Wall Street gorging, while simultaneously pruning state workers’ pension benefits. It’s no surprise that some of Wall Street’s wildest gamblers have backed her so-called pension reform efforts in the state legislature. Former Enron energy trader emerges as a leading advocate for prudent management of state worker pensions? That’s more than a little ironic.”
” . . . when alternative investment managers take control of a state pension and recklessly dump pension assets into high-cost, high-risk alternative investments, while they slash workers’ benefits, that’s no reform. Call it what it is: a money grab.”
http://www.forbes.com/sites/edwardsiedle/2013/04/04/rhode-island-public-pension-reform-looks-more-like-wall-street-feeding-frenzy/
(My comment: Wall Street Journal: “Hedge Funds Kiss Their Alpha Goodbye”:
http://blogs.wsj.com/marketbeat/2011/11/21/hedge-funds-kiss-their-alpha-goodbye/)
Siedle:
“Financial alchemy, whether promoted by Democrats or Republicans, ends up costing the taxpayers dearly.”
(My comment: This Siedle remark calls to mind our own Governor Hickenlooper’s recent raid on the Colorado PERA trust funds for corporate welfare:
“COLORADO PERA’S LATEST FIASCO.”
“News flash for our ‘businessman’ Governor: By definition, placing an artificial, political restriction on investment options for a portion of the PERA Trust Funds denies PERA members and retirees the benefit of the most productive use of those funds.”
“Does the Governor understand that the Colorado PERA trust funds belong to the beneficiaries of the PERA trust? Does the Governor understand that the PERA Trust Funds are not public property to be used to meet public policy goals? [Politicians have been trying to gain access to this 'pile of money' for decades.]”
“If Colorado businesses are desperate for capital why do these businesses not take advantage of available historically low market interest rates? Is it simply the case that these businesses are considered too great a risk by private lenders? This risk must be assumed by the beneficiaries of a public pension fund? Public pensions should be forced to invest in businesses that the private sector won’t touch?”
“How is it the responsibility of Colorado PERA members and retirees to redress this shortfall of funding for Colorado entrepreneurs by accepting a less favorable risk/reward ratio for a portion of their PERA Trust Fund property?”
“How did the PERA Board go about determining the geographical investment boundaries that offer the greatest risk/reward potential for the investment our PERA trust funds? What analysis was conducted? What advantages did Colorado’s borders offer over limiting investment of the funds to venture capital or private equity opportunities in Massachusetts? California? Australia?”
http://thecontributor.com/colorado-peras-latest-fiasco
“The Colorado Mile High Fund [the Fund] is a $50 million co-investment program designed to invest in a diversified, high-quality portfolio of companies with a nexus to Colorado.”
“The Fund is sponsored by the Colorado Public Employees’ Retirement Association (Colorado PERA) and is managed by the Credit Suisse Customized Fund Investment Group.”
http://coloradomilehighfund.com/)
RHODE ISLAND TREASURER RAIMONDO ON COLORADO PERA FEES.
Raimondo’s comments to a local Rhode Island reporter:
(WPRI reporter Nesi): “On fees, Colorado’s pension fund says its expenses total less than 0.4% of assets per year. Do you know what the figure is for Rhode Island?”
Raimondo: “No – you’ve got to be very careful with apples to apples in this, so I don’t know what Colorado means when they say that.”
http://blogs.wpri.com/2013/04/05/qa-raimondo-fires-back-after-attack-by-forbes-contributor/
Seidle’s reaction:
“On fees, Colorado’s pension fund says its expenses total less than 0.4% of assets per year. Do you know what the figure is for Rhode Island?”
“‘No,’ says Raimondo.”
“Ouch.”
http://www.forbes.com/sites/edwardsiedle/2013/04/06/rhode-islands-scary-state-treasurer/
Recall that, some months ago, we heard another Forbes journalist call the breach of public pension contracts “theft.” William Baldwin of Forbes Magazine was interviewed in regard to public pension contracts on Fox:
In the interview, Mr. Baldwin recommended the prospective pension reform advocated by Professor Amy Monahan of the University of Minnesota School of Law in her paper “Public Pension Plan Reform: The Legal Framework,” i.e., a reduction of the rate of future accrual of public pension benefits for current public employees.
Link to Monahan paper:
http://www.ncsl.org/documents/fiscal/AMonahan_Handout.pdf
Professor Monahan’s PROSPECTIVE, “constitutional” public pension reform has been adopted by the Colorado General Assembly (in SB12-149) for certain county-operated public pension plans in Colorado, while RETROACTIVE pension reforms were enacted by the Colorado General Assembly for the Colorado PERA pension system (SB10-001). This is, of course, a statutory double standard on Colorado public pension contracts.
The Colorado Legislature has placed into Colorado law a policy providing that the contracts and accrued public pension benefits of certain county government retirees in Colorado will be honored, while up to one-third of the contracted pension benefits of Colorado PERA retirees will be seized by the State of Colorado.
Pension reforms adopted by the Colorado General Assembly in SB12-149 represent a “less drastic” alternative to the Legislature’s breach of the fully-vested pension contracts of current Colorado PERA retirees. Such PERA retirees have met all statutory conditions for the receipt of their PERA public pension benefits. They have fully performed under their PERA public pension contracts.
Here are a few quotations from Mr. Baldwin’s interview:
“It is not fair, and it may even be unconstitutional to take away a pension that has already been earned. That’s just theft.”
“It’s not as sharp a change (401Ks, reduction of future pension accrual rates) as taking away something that has already been earned . . . which I don’t think you can do . . . I don’t think that’s fair.” “It’s all politics.”
http://blogs.forbes.com/people/baldwin/
More Seidle comments on Raimondo’s pension raid:
“Rhode Island’s Scary State Treasurer”
Seidle:
“For the record, I was not provided any opportunity to comment on (local Rhode Island reporter) Nesi’s article. I’ve learned to expect as much whenever I criticize highly-politicized public pension investment shenanigans. Local media is usually, shall we say, heavily influenced by local politicians.”
(My comment: Local media heavily influenced by local politicians? When the Colorado Court of Appeals reversed the Denver District Court’s ruling in the case Justus v. State last year, the Denver Post inexplicably labeled the reversal [upholding public pension COLA contractual rights in Colorado] a “win” for Colorado PERA, the organization trying to break those same contracts. When, last year in SB12-149, the Colorado Legislature contradicted its 2010 legislation, SB10-001, which denied the contractual nature of Colorado PERA COLA benefits, we heard not a peep from the Denver Post or any other Colorado media outlet. SB12-149 impacted the retirement benefits of thousands of Colorado county government retirees, yet not a word from the Colorado media. Heavily influenced by local politicians? To be fair, the Colorado media gives adequate attention to some substantive state legislation. They did a great job covering designation of the official Colorado amphibian:
http://blogs.denverpost.com/thespot/2012/02/06/amphibian-bill-up-today-in-house-ag/57717/
http://www.gazette.com/articles/inches-134074-salamander-amphibian.html
http://www.chieftain.com/news/region/lawmakers-consider-state-amphibian/article_abf64222-5151-11e1-9a50-001871e3ce6c.html
http://www.9news.com/news/sidetracks/247456/337/Colorado-considers-a-salamander-as-state-amphibian-
http://www.koaa.com/news/colorado-gets-official-state-amphibian-friday/
http://kdvr.com/2012/02/06/bill-to-name-tiger-salamander-state-amphibian-advances/)
Back to Seidle:
“The Ocean State’s Treasurer scares me. I am alarmed by her poor command of pension fundamentals. A phrase I once heard a Catholic priest use when I was in law school at Boston College comes to mind: Her reputation far exceeds her capabilities. This is the woman who is credited with leading the charge for public pension reform nationally?”
“The high-risk alternative investments you have steered the pension into charge exponentially greater fees—fees of about 2% plus 20% of profits or more. Do the math and you’ll agree, the fees the pension will pay have skyrocketed. Mushroomed. Ballooned. Soared.”
“That’s good for your Wall Street pals, no-so-good for workers participating in the pension. It’s a little difficult to reconcile your opinion that the state’s pension system can’t afford to pay workers the benefits they were promised but, on the other hand, it can afford to pay Wall Street’s wildest gamblers one hundred times greater fees than it has in the past.”
http://www.forbes.com/sites/edwardsiedle/2013/04/06/rhode-islands-scary-state-treasurer/
Public comments on Rhode Island’s COLA-theft Champion Raimondo:
Retiree Binyamin Efreom: “My husband is one of the retired state employees affected by Raimondo’s pension steal. Now that he is 70 years old, we are supposed to be able to switch from an income that has a small built-in inflation correction to a fixed income. It’s too late to do that. We have no idea now how much money we have to live on but we are portrayed as the ‘evil’ unionists. The entire burden for making the pension system stable by Gina’s definition is on us — nothing is on the state. Engage RI enlisted a shell of figureheads financed by a Texas Enron billionaire to spend a million dollars on local advertising diverting attention away from the fact that her legislation bullies and targets the elderly — who do they think the retired people are. Also, despite her cries of state poverty, the state has been running significant surpluses, none of which have been earmarked for the pension fund. Thank you again for providing one lone voice in the wilderness.”
(My comment: At least under Colorado’s 2010 pension reform bill, SB10-001, the entire burden of the reform is not on Colorado PERA retirees . . . just 90 percent. Senator Brandon Shaffer, co-prime sponsor, SB10-001, Denver Post, 4-17-11:
“I sponsored last year’s legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA’s current and future members and retirees.”
http://www.denverpost.com/opinion/ci_17858107
This is how it works at the Colorado Legislature: Those who legally owe the debt pay 10 percent, those who do not owe the debt pay 90 percent.
Note that the Colorado General Assembly has also recently received word of a one-billion surplus for the coming fiscal year. Does this news motivate the Colorado’s Legislature to conserve funds to meet its contractual obligations? No. In next year’s state budget, Colorado state legislators transfer $142 million to pay for pensions that ARE NOT the state’s responsibility . . . NOT their contractual obligation. These are pension obligations of local governments. We find more in next year’s state budget . . . although the State of Colorado already has the lowest per capita state tax burden in the nation, we see the Senate President planning to further cut Colorado state taxes by up to one-quarter billion over the next three years. All this, while Colorado argues that a “financial crisis” prevents the state from meeting its contractual PERA obligations.)
Retiree John Oberle: “Thank you for your research into the workings of Treasurer Raimondo’s office. Since my wife and I are both pensioners in the retirement system managed by Ms. Raimondo we are impacted twofold by her action to freeze our COLAs. There is something very unnerving about the way the Treasurer manipulated the members of the media, i.e., the Providence Journal and Ted Nesi. She seems expert at appealing to people’s basest instincts, i.e., jealousy toward teachers and government workers who have fixed pensions while most private industry employees have been forced into 401k’s, IRA’s and Social Security.”
“In our case, we were given a piece of paper at retirement by the state retirement system that clearly asked us to choose one of three options offered to retirees. We selected our option and the retirement system official signed it and we signed it. It stated that the third January after our retirement and every January thereafter we would receive a 3 percent COLA compounded annually. We did not make up the form. The retirement system and State legislature did. Now six years later this past January we did not receive the promised COLA’s. We clearly had a contract signed by both parties yet thanks to Ms. Raimondo’s dire predictions the general assembly of the state of RI changed the rules and has withheld the COLA’s. Now we see evidence of outside parties with political agendas were working behind the scenes supporting Treasurer Raimondo’s agenda. Treasurer Raimondo has snookered most Rhode Islanders into placing blame for the pension systems poor financial performance on retired workers although she hypocritically spent two years saying the retirees did nothing wrong, but for the survival of the system drastic actions were needed. Furthermore, she has spent much of her time as Treasurer building up a war chest for an upcoming run for Governor. Thanks again. Hopefully, shedding light on some of the behind the scenes wheeling and dealing taking place here in RI will result in a fairer, more competent functioning of the Treasurer’s office.”
Seidle:
“As a testifying expert in multiple Madoff cases, I can assure you that hedge funds INCREASE risk. In fact, every hedge fund offering statement I’ve reviewed in the past 30 years says in bold print, ‘These are speculative, high-risk investments.’ Beware of anyone who, like Bernie, tells you otherwise.”
Retiree Paul Zecchino: “Thank you for staying on this. Retirees’ lives have been reduced by the cavalier actions of this individual and the curious cabal of cronyistic individuals who apparently direct her steps.”
“Search ‘Raimondo’ in the search box here at Forbes at upper right, and you’ll find a most prophetic article by a Mr. Danker with a comment by WH Rosen which clearly state that withholding COLA’s is in effect a closet tax-hike, and is a most unwise move.”
“A little googling will turn all this up and quickly produce troubling suggestions that there’s much more to this than merely looting retirees and teachers, the demonizing them is clearly to shift guilt from the pension manager and EngageRI, but also perhaps to remake the education system in the image of these characters.”
“When someone withholds COLA’s that’s curious. When the ones who withhold then viciously demonize and blame the retirees they just reduced for all the world’s ills, that begins to stink of a Constructed Fraud.”
Colorado PERA active and retired members. Support the rule of law in Colorado. Help Colorado politicians understand that the Contract Clause takes precedence over pet discretionary public programs. Let them know that Colorado public contracts will not be discarded on a whim. Contribute at saveperacola.com. “Friend” Save Pera Cola on Facebook!
THE EVIDENCE MOUNTS: POLITICS RATHER THAN FINANCIAL NECESSITY MOTIVATED THE BREACH OF COLORADO PERA PENSION CONTRACTS.
Last week, the Colorado Legislature volunteered further evidence that it faces no financial need to break Colorado PERA pension contracts.
Incredibly, the Colorado General Assembly, while it is in breach of its own (PERA) public pension contracts, has included a transfer of an additional $142 million in this year’s state budget (the Long Bill) to make discretionary payments for pension obligations of local governments. This transfer will bring total state transfers to make pension payments that ARE NOT contractual obligations of the State of Colorado to approximately $700 million.
I repeat, these local government pension obligations (Old Hire Fire and Police pensions) ARE NOT contractual obligations of the State of Colorado.
I emphasize, the State of Colorado is currently in breach of its own Colorado PERA pension contracts. From the Colorado Court of Appeals 2012 decision in the case Justus v. State:
“We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.” In the cases McPhail and Bills, the Colorado Supreme Court “found a contractual right based on members’ provision of services and contributions to the retirement fund.”
Does this recent Colorado Court of Appeals decision motivate the Colorado Legislature to conserve available resources to meet its contractual pension obligations? The reality of the situation does not even register with Colorado lawmakers.
From KDVR:
“House Republican leaders are floating a proposal to repay a longstanding debt (My comment, this is not a state “debt,” sloppy reporting) to the state’s Fire and Police Pension Association in full as a way to get some GOP lawmakers to vote in favor of the $20 billion state budget for next year, which will be up for debate in the House on Thursday.”
“‘It’s (House Minority Leader) Waller’s effort to buy some Republican votes,’ one GOP lawmaker told FOX31 Denver Tuesday.
Waller, who is almost certain to run for Attorney General (next) year, would like to be able to demonstrate that he leads a group of lawmakers who are pragmatic and responsible; and helping forge a bipartisan budget compromise would help him make that case.”
http://kdvr.com/2013/04/02/republicans-considering-pension-deal-hoping-for-bipartisan-budget-vote/
I have no objection to discretionary expenditures on the part of the Colorado General Assembly. However, I do object to arguments by attorneys representing the State of Colorado that the state cannot meet its own contractual pension obligations while it is giving away revenues to pay off local government pension obligations. I do object to attempts to break state pension contracts, while the Legislature is making discretionary expenditures to pay off public pension debts of local governments. Having made such appropriations, the Colorado General Assembly cannot legitimately argue that financial need has forced the Legislature to break Colorado PERA pension contracts.
Have attorneys representing Colorado PERA in the lawsuit Justus v. State contacted legislative leadership recently? I suggest that they pose these questions to legislative leadership:
“How do you expect us to establish a financial need to break Colorado PERA contracts, when you have an extra billion dollars in revenue for the coming fiscal year, and instead of directing a dime of it toward meeting your own contractual PERA pension obligations, you allocate $142 million of the new revenue to pay for local government pensions that ARE NOT your contractual obligation?”
“Let’s get this straight . . . you’re asking the courts to allow you to break your own pension contracts, while you have simultaneously pumped $700 million into pensions that ARE NOT your responsibility?”
“You’re asking the courts to allow you to retrospectively take accrued Colorado PERA pension benefits, when, last session, you enacted public pension reform for county governments that respects accrued public pension benefits (SB12-149)?”
“We are your attorneys . . . do you have the slightest concern about our ability to effectively argue on your behalf in court?”
Political considerations now trump even the need to build a case for SB10-001.
Is the leadership of the Colorado Legislature completely oblivious? Or, have they simply given up efforts to make legal arguments for breaking Colorado PERA pension contracts?
This 2013/14 Long Bill local government pension appropriation should be welcomed by the plaintiffs in the case Justus v. State. If the Colorado Supreme Court sends the case to trial, plaintiffs should add the 2013/14 Long Bill to the list of documents to be introduced into evidence.
At the Colorado Legislature, politics and political careers take precedence over the U.S. and Colorado constitutions. There are no rational actors in sight, other than perhaps local government lobbyists.
Are local government lobbyists driving the $142 million local government pension appropriation in this year’s Long Bill? Perhaps these lobbyists, recognizing the rotten legal foundation on which SB10-001 rests, have urged the Colorado General Assembly to pay off their local government debts before SB10-001 is struck down in court. (The local government lobbyists are, of course, acquainted with attorney Cindy Birley and her legal rationale for SB12-149.)
The Colorado Legislature simply has a political preference to break Colorado PERA contracts. It is also the preference of many of their constituents to break PERA contracts. It is the political preference of the 27 lobbyists who ran the SB10-001 show to break PERA contracts. Like the Colorado legislators who initiated the decline in Colorado PERA’s funded ratio a decade ago, many current legislators realize that, due to term limits, they won’t be present to address the aftermath of their SB10-001 PERA contract breach fiasco.
For the time being, Colorado PERA members can only sit back and marvel at this surreal spectacle.
LOCAL GOVERNMENT PENSIONS ARE NOT THE CONTRACTUAL OBLIGATION OF THE STATE OF COLORADO.
In 2005, Colorado voters adopted Referendum C. The language of this state-wide ballot measure makes it clear that local government pensions ARE NOT contractual obligations of the State of Colorado:
“TO FUND RETIREMENT PLANS FOR FIREFIGHTERS AND POLICE OFFICERS, SO LONG AS THE GENERAL ASSEMBLY DETERMINES THAT SUCH FUNDING IS NECESSARY . . .”.
The discretionary nature of state grants to fund Colorado local government pensions is also stated clearly in the “Legislative Declaration” preceding (Section 31-31-101, C.R.S. ) set forth in Colorado law.
Here is the “Legislative Declaration”:
“31-31-101. Legislative declaration.”
“The general assembly further declares that state moneys provided to municipalities, fire protection districts, and county improvement districts DO NOT CONSTITUTE A CONTINUING OBLIGATION OF THE STATE to participate in the ongoing normal costs of pension plan benefits, except for state funding of death and disability benefits as specified in this article, but are provided in recognition that the local governments are currently burdened with financial obligations relating to pensions in excess of their present financial capacities.”
This “Legislative Declaration” states that the Colorado General Assembly has provided state resources “in recognition that local governments are currently burdened with financial obligations relating to pensions . . .”. Accordingly, the policy preference of the Colorado General Assembly is that discretionary grants of state resources should be made to Colorado local governments when they are “burdened by financial pension obligations,” but when the State of Colorado is also “burdened by financial pension obligations” the State of Colorado will break its public pension contracts.
For an accounting of the Colorado General Assembly’s historical discretionary grants to meet local government public pension obligations see pages 6 and 28 of the 2012-2013 Colorado Department of Treasury Budget Briefing document at this link:
http://www.state.co.us/gov_dir/leg_dir/jbc/2011-12/trebrf.pdf
Here is an excerpt:
“State Contributions for Local Fire and Police Pension Plans”
“Since 1980, the State has contributed almost $540 million to the FPPA to eliminate the unfunded liability of the ‘old-hire’ pension plans.”
From page 29 of the JBC document:
“To put this figure in perspective, the total state General Fund operating budget in the FY 1978-79 Long Bill was just over $1.0 billion. Thus the $500 million shortfall in local plans represented nearly half of the annual state General Fund budget. If the magnitude of this shortfall were adjusted for inflation, it would exceed $1.8 billion.”
From page 31:
“During the ensuing years, the State’s contribution to the old hire plans equaled about 41 percent of the total combined contributions of the state, local governments and employees.”
(Note that the Colorado General Assembly has made discretionary grants to fund more than 40 percent of the total contributions made to these local government pension plans . . . and yet the Colorado General Assembly claims it has been “burdened” by the necessity to provide for PERA-employer pension contributions at a fraction of this level of commitment.)
In the coming years, judges may legitimately ask “Why should the state of Colorado be permitted to break its contractual PERA pension obligations when, for many years, it has opted to fund public pension obligations that are not its own?”
For your information, I am providing a link to a memorandum prepared by the Colorado Municipal League that discusses these historical, discretionary state grants to meet Colorado local government pension obligations:
http://www.cml.org/uploadedFiles/CML_Site_Map/_Global/pdf_files/pension_memo.pdf
Colorado PERA active and retired members, has the need for Judicial Branch oversight of the Colorado General Assembly ever been so clear?
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THE PUBLIC PENSION RANT HEARD FROM FROG JUMP TO PUNKIN CENTER.
A few days ago former (appointed) Colorado Treasurer and farmer Mark Hillman raised a ruckus in the Denver Post about those darn Colorado PERA public pensions. Hillman, rest assured, Colorado PERA retirees don’t take kindly to loose talk about breachin’ their contracts!
As we have seen, the Colorado PERA public pension system was underfunded and mismanaged by former Colorado Governor Bill Owens, yet Hillman (appointed by Bill Owens) apparently believes that Colorado PERA retirees should bear the financial burden of this mismanagement. In his “guest commentary,” Hillman actually tries to use guilt as a mechanism to persuade Colorado PERA pensioners to relinquish their contractual public pension rights. He fails to recognize that spending to meet the government’s contractual obligations and spending for discretionary public purposes are different animals altogether. It’s one thing to cut a discretionary public program, quite another to break state contracts.
Hillman, get this straight in your head . . . there is a world of difference between a governmental appropriation to meet a contractual obligation, and a discretionary governmental expenditure . . . for example, a farm subsidy.
For Mark Hillman’s edification, let’s explore the distinction between mandatory and discretionary public sector expenditures. Later in this article, we’ll have a look at Colorado PERA’s contractual pension obligations, but first let’s peer into the nature of discretionary public expenditures. The U.S. Farm Subsidy program (“agriwelfare”) serves this purpose well.
According to Hillman, the threat of government confiscation of property allows the federal government to give farm subsidies:
Mark Hillman, September 2, 2007 Pueblo Chieftain:
“Transfer payments – like welfare, Social Security and farm subsidies – couldn’t occur if government didn’t have the power to confiscate our property or assets if we refused to pay taxes, even for causes we would not support voluntarily.”
Hillman praises Santorum’s efforts to “reform” farm subsidies:
“He’s (Santorum) been a courageous leader in reforming entitlements, including welfare and farm subsidies.”
http://www.markhillman.com/2012/02/10/santorums-surprise/
So, it appears that the Hillman hackles can be easily stood up over this matter of farm subsidies. Yet, one website reports that farm subsidies received by a Mark Hillman of Burlington, Colorado approach one-half million dollars. From the EWG website:
“EWG Farm Subsidy Database – Subsidy Total 1995-2011”
“135 Mark Hillman Burlington, CO 80807 $463,616.75”
http://farm.ewg.org/addrsearch.php?c=1&city=burlington&stab=CO&page=4
For perspective on this matter of farm subsidies, let’s turn to sober journalist Dave Barry:
“The purpose of the Farm Security act is to provide farmers with ‘price stability.’ What do we mean by ‘price stability?’ We mean: your money. You have already been very generous about this: Last year alone, you gave more than $20 billion worth of price stability to farmers. Since 1996, you’ve given more than a million dollars apiece to more than 1,000 lucky recipients, many of which are actually big agribusinesses.” “Perhaps you are asking yourself: ‘Wait a minute! Isn’t this kind of like, I don’t know . . . welfare?”
“No, it is not. Welfare is when the government gives money to people who produce nothing. Whereas the farm-money recipients produce something that is critical to our nation: votes. Powerful congresspersons from both parties, as well as President Bush, believe that if they dump enough of your money on farm states, the farm states will re-elect them, thus enabling them to continue the vital work of dumping your money on the farm states. So as we see, it’s not welfare at all! It’s bribery.”
http://news.google.com/newspapers?nid=861&dat=20020623&id=ODNSAAAAIBAJ&sjid=HjYNAAAAIBAJ&pg=7027,5523128
From the EWG:
“The program has been maintained beyond its intended lifetime and now is a federal entitlement program for farmers that costs the government about $5 billion per year.”
“The Tea Party swept into the 112th Congress with promises of cutting government spending. But according to a report out today, at least five lawmakers with Tea Party connections have been longtime recipients of federal agricultural subsidies. ‘There’s nothing too surprising about hypocrisy in Washington,’ Ken Cook, president of Environmental Working Group, told ABC News. ‘This particular group, you not only have to look at the hypocrisy but you need to watch your wallet.’”
“The biggest recipient was Rep. Stephen Fincher, a Republican from Frog Jump, Tenn. While the self-described Tea Party patriot lists his occupation as ‘farmer’ and ‘gospel singer’ in the Congressional Directory, he doesn’t mention that his family has received more than $3 million in farm subsidies from 1995 to 2009, according to the Environmental Working Group.”
http://farm.ewg.org/subsidyprimer.php
Hillman:
“TEA parties ignite conservative resurgence.”
http://www.markhillman.com/2010/10/03/tea-parties-ignite-conservative-resurgence/
It appears that the agriwelfare flows freely across Kit Carson County, I reckon it flows all the way to yonder Punkin Center:
“USDA subsidies for farms in Kit Carson County, Colorado totaled $557,637,000 from 1995 through 2011.”
http://farm.ewg.org/regionsummary.php?fips=08063
“Recipients of Subtotal, Farming Subsidies from farms in Kit Carson County, Colorado totaled $8,511,000 in 2011.”
http://farm.ewg.org/top_recips.php?fips=08063&progcode=totalfarm&page=1&yr=2011
Former Treasurer Hillman has a number of opinions about “discretionary” public expenditures, like those supporting life on the Farm Dole. But, let’s see what Hillman has to say about mandatory expenditures to meet public sector contractual obligations, for instance, Colorado PERA contractual obligations. Below I provide a few excerpts from Hillman’s March 29, 2013 “guest commentary” in the Denver Post. Hillman writes:
“Do PERA pensioners really believe that keeping every last cent of their benefits is worth taking nearly $10,000 away from their grandchildren’s classrooms?”
(My comment: Here Hillman uses a “guilt appeal” as a mechanism seeking to eliminate public sector pension debt. To be thorough, Hillman should also direct this “guilt appeal” toward the elimination of Colorado’s debt to corporations. Here is my proposal: Hillman . . . attend the next board meeting of the Colorado Association of Commerce and Industry and make a case for “shared corporate sacrifice” for our public schools. Ask that Colorado corporations forgive all receivables due from Colorado state and local governments for the next decade or so. Further, ask that investors in debt issued by Colorado governments take a one-third haircut on the face value of their bonds and that funds made available be transferred to Colorado schools. [Such a bondholder haircut would approximate the Colorado General Assembly’s proposed taking from Colorado PERA retirees.] I am confident that your corporate “guilt appeal” will be welcomed by the CACI Board with enthusiasm.
By the way Hillman, Colorado PERA retirees are not concerned about the “last cent” they are owed under their PERA contracts. Colorado PERA retirees are primarily concerned about state seizure of a third of their contracted PERA retirement benefits. I ask, does Mark Hillman honestly believe that the State of Colorado should fund its public schools through the breach of state contracts? Do Colorado taxpayers, who have nearly the lowest per capita state tax burden in the nation, believe that maintaining a paltry level of support for public education in Colorado is worth shortchanging their grandchildren’s classrooms? Do Colorado’s corporate masters believe that keeping nearly “every last cent” of their corporate earnings is worth shortchanging a grandchild’s classroom? Well, of course these grandchildren are in private schools.)
Hillman:
“As Colorado lawmakers consider an overhaul of the way the state funds K-12 education, more people are noticing that schools are increasingly forced to pay for the past rather than invest in the future.”
(My comment: Yes Hillman, Colorado PERA-affiliated employers are contractually obligated to pay deferred compensation to Colorado PERA retirees for work completed over the course of their careers. You know this . . . you have served on the PERA Board. But Hillman, you present a false choice. Here we have the Washington Post condemning such tactics:
“It’s time to retire the false choice. As a rhetorical device, particularly as a political rhetorical device, the false choice has outlived its usefulness, if it ever had any. The phrase has become a trite substitute for serious thinking. It serves too often to obscure rather than to explain.”
http://articles.washingtonpost.com/2011-03-31/opinions/35208590_1_financial-reform-false-choice-false-choice
Colorado taxpayers are free to “invest in the future” of Colorado education at their pleasure. The fact that Colorado governments must meet debt obligations [incurred in the past] does not preclude Colorado taxpayers from lifting Colorado education from the bottom of the public education support barrel in the future.)
Hillman:
“No other line item is large enough to produce the savings necessary to pay for the tremendous cost of the PERA bailout.”
(My comment: Hillman, paying your debts is not a “bailout.” Meeting your contractual obligations is not a “bailout.” For example, if a farmer receives a federal agriwelfare check and uses that check to meet his farm mortgage payment, the farmer is not “bailing out” his mortgage company.)
Hillman:
“Our public schools must take money out of the classroom in order to pay for investment losses and unaffordable promises that have created a $25 billion shortfall in the Public Employees Retirement Association (PERA).”
(My comment: Where to begin? Shortfall? Hillman, contracted Colorado PERA benefits will be paid over the next 70 years, these PERA benefits are not due tomorrow. The term “shortfall” implies that the money is needed immediately. It is a misnomer.
Allow me to further illustrate my point with another example. If a farmer has a $25,000 balance on his farm mortgage that is due over the next thirty years, the farmer does not fret about his “shortfall.” The farmer knows that future revenues (agriwelfare checks?) will permit him to meet obligations as they come due. The farmer does not holler about his “crisis” to the neighbors. If he did so, his fellow agriculturists would rightly deem him barking mad.
Further Hillman, why concern yourself with this relatively insignificant “shortfall”? A much more massive and terrifying “shortfall” threatens. At this moment, Colorado taxpayers are confronted by a “shortfall” of many hundreds of billions of dollars needed to support Colorado public programs in the coming decades . . . highway construction, police protection, prisons and education. Colorado taxpayers have not banked the tax dollars needed to support these Colorado public programs over the next 70 years. Thus, by your definition, they are confronted by an unbearable burden. A mere two (to four?) percent of all future Colorado state and local government revenue will be needed to meet Colorado public pension contractual obligations, a commitment perhaps lower than expenditures that would be required to make Social Security contributions for such workers. The Colorado PERA “shortfall” you that worries you is comparatively, peanuts.)
Hillman:
“To continue to promise benefits that are unaffordable and unsustainable is simply unconscionable.”
(My comment: Hillman, if you believe that Colorado PERA benefits are unaffordable and unsustainable why not support prospective, legal public pension reform, like that available to many Colorado counties under SB12-149? Such prospective pension reform protects your cherished property rights and diminishes future taxpayer obligations.
Unlike “agriwelfare” handouts, Colorado PERA benefits are actually earned . . . they are contracted deferred compensation, earned in the present, payable in the future. Colorado PERA retirees do not ask for any sort of “handout” from their former employers. Colorado PERA retirees merely ask that Colorado governments meet their contractual obligations.
I am heartened that, in the past, Hillman has acknowledged the Colorado PERA Board’s long-held position that accrued, contracted public pension benefits, under Colorado law, are inviolate:
Former State Treasurer, and Colorado PERA Board Member Mark Hillman:
“More significantly, PERA abandoned its long-held legal argument that benefits once promised to its members can never be scaled back, no matter how unaffordable they become. PERA proposes an immediate reduction of cost-of-living adjustments from the current 3.5 percent per year to no more than 2 percent.”
http://www.markhillman.com/2010/01/26/workers-cant-ignore-cost-of-pera-fix/
Hillman:
“Parents must wonder: What can possibly justify penalizing two full generations of students for a mess created long before their lives began?”
(My comment: Mark Hillman expresses concern here for a lack of adequate financial resources for Colorado public schools in the future.
OK, now that we have absorbed that fact we can move on.
Hillman, many Coloradans share your concern. From the Denver Post:
“Colorado ranks among the stingiest states in the nation in how much it spends to educate its children, according to a government report released Monday.”
http://www.denverpost.com/ci_12926871
If Hillman is actually concerned about the underfunding of public education, why has he not actively supported campaigns to remedy the situation? If Hillman is actually concerned about the underfunding of public education, why not tackle those ridiculous farm subsidies? Hillman, the cost of the U.S. agriwelfare mess is simply tacked onto the national debt, displacing public education resources and “penalizing” future generations of students. These students are accordingly “penalized” although the agriwelfare mess was created “long before their lives began.” Does the protection of U.S. agriwelfare justify “penalizing” these future generations?)
Hillman:
“If we truly value our future, then we really should ask if it’s wise to shortchange schools for the next 35 years in order to pay for past mistakes.”
(My comment: Give Hillman credit here for again acknowledging the historical mismanagement of the Colorado PERA pension. As you know, I also blame Colorado PERA Board and legislative mismanagement for the decline in PERA’s funded ratio in the last decade. Hillman joins me in criticizing Colorado PERA’s administration. From Friends of PERA:
“Many (Colorado PERA Board) Trustees have daily work experience in areas such as finance and benefits administration. During 2006, when the change (to PERA Board composition) was being advocated since the Trustees supposedly ‘lacked experience and educational credentials’, the only individual on the 16-member Board who did not have a college degree was the temporary governor-appointed State Treasurer Mark Hillman.”
http://www.friendsofpera.com/facts/index.html)
Now, Hillman is also an ardent supporter of private property rights. The Colorado Court of Appeals recently cited Lynch on the matter of public pension property rights: “contract rights can constitute property interests protected by the Takings Clause . . . In light of our conclusion that the court erred in that regard, we also reverse the summary judgment on the Takings Clause claim.”
Strangely, Hillman believes that when the Colorado Legislature regulates public smoking, that regulation interferes with private property rights. Yet, when the Colorado Legislature seizes up to one-third of the value of a contracted public pension benefit, that’s just hunky-dory.
Mark Hillman on the importance of honoring property rights:
“But you don’t need to be a farmer or rancher to understand the importance of private property rights.”
(My comment: Exactly Hillman, Colorado PERA retirees understand the importance of property rights.)
Hillman:
“Colorado’s popular new statewide smoking ban is another example of blatant disregard for property rights.”
Hillman:
“Once you’ve made a piece of property your own, for someone to take it from you by force is nothing less than theft . . .”.
(My comment: Spot on Hillman.)
Hillman:
“Who would do such a thing? Too often, the answer is our government.”
“Yet the legislature put the will of the majority ahead of the rights of property owners.”
(Hillman, I nominate you as Chairman of Save Pera Cola!)
http://www.markhillman.com/2007/08/29/property-rights-or-privileges/
“In elected office, Mark has been a leader in the fight to protect the rights of private property owners against government takings . . .”
http://www.leadershipprogram.org/board-of-directors/the-honorable-mark-hillman
“During his service in the Colorado Senate, Mark focused on protecting the rights of private property owners against government takings . . . “
http://www.markhillman.com/bio/
Link to the complete Hillman “guest commentary” in the Denver Post:
http://www.denverpost.com/opinion/ci_22893614/pera-bailout-shortchanges-students-teachers
Recently, our former Colorado Senator Hank Brown (a man who collected a $400,000 salary running a charitable organization . . . a man with a $2.8 million federal pension) told us that breaking public pension contracts (perhaps a “non-Hank Brown” public pension) is “Colorado Courage.” Let’s see a “Colorado courageous” Hank Brown transfer of one-third of Hank Brown’s public pension benefits to Colorado public schools.
Heck, let’s redirect the entirety of Colorado’s farm dole to the support of public education!
Colorado PERA active and retired members, many prominent Coloradans are unfamiliar with the concept of “hypocrisy.” I blame chronic, inadequate financial support for public education in our state. But, obviously, the breach of state contracts as a means of funding Colorado public schools is an unconstitutional, immoral proposal advocated by self-serving demagogues.
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GIVEN THE 2010 BREACH OF COLORADO PERA PENSION CONTRACTS, DO PERA PENSION BENEFITS REMAIN “DEFINITELY DETERMINABLE”?
By now, you have certainly heard that the State of Colorado is trying to break its contracts. A majority of Colorado legislators actually voted for a bill (in 2010) that claws back accrued, contracted benefits from pensioners in their home state.
This is odd, since the Colorado Legislature has also recently enacted a pension reform measure that honors the accrued public pension benefits of certain other public pensioners in the state. We recently learned that, last year, the Colorado Legislature adopted legal, prospective pension reforms, in the bill SB12-149, for a number of Colorado’s county governments (administrative arms of the state). These county government pension reforms honor pension benefits that have been accrued to date, and make changes only on a prospective basis, while the pension reforms adopted for the Colorado PERA pension system seize pension benefits that have been accrued over decades. In spite of the fact the Colorado Legislature has adopted pension reforms that honor the accrued benefits of certain county government retirees, the Legislature persists in its attempt to claw back accrued benefits from PERA state government and other retirees. How is it possible that such a glaring disparity of treatment of the contractual rights of similarly situated parties under Colorado law escaped mention during the hearings on this legislation (SB12-149)?
We also recently learned that the State of Colorado has an extra billion dollars to spend in the next year . . . and yet the State of Colorado persists in its efforts to break its contracts, due a financial “crisis.”
We have learned that the failure of the Colorado Legislature to pay its pension bills for the last decade (as recommended by Colorado PERA’s actuaries), and the Legislature’s and Governor Bill Owens’ mismanagement of the pension system, are largely responsible for the decline in Colorado PERA’s funded ratio in the last ten years.
More truth has come to light. In 2009, the Colorado PERA Board of Directors desired a legal opinion that they could use to justify their contemplated breach of Colorado PERA retiree pension contracts. They sought some means of circumventing legal roadblocks in the form of a 2004 Colorado Attorney General opinion on the subject and adverse Colorado case law. In addition, the Board faced the substantial hurdle presented by their own General Counsel’s testimony that the accrued pension benefits targeted by the Board were indeed contractual obligations of the State of Colorado.
So, where did the Colorado PERA Board look for this desired legal opinion in 2009? They did not seek an opinion from a law firm that had specialized for decades in employee benefits law. Instead, they sought an opinion from an admirable Colorado attorney, who happens to be a “current full-time activist,” and a public education advocate . . . having founded a think tank that provides public education advocacy. The author of the 2009 “COLA-taking” opinion (on which Colorado PERA based its 2009/2010 legal, lobbying and public relations campaigns to break PERA pension contracts) is an impressive Colorado resident . . . indeed, a woman who has served on the Colorado Judicial Performance Commission.
Now, to the meat of this article. According to Colorado PERA officials, the PERA pension plan is a “qualified plan” under federal IRS regulations:
“Colorado PERA is a qualified retirement plan that can substitute for Social Security, as required by law.”
https://www.copera.org/PDF/8/8-324.pdf
“PERA is a qualified retirement plan under the Internal Revenue Code Section 401(a). As a defined benefit plan, PERA benefits are guaranteed based on a benefit formula that is set by law.”
https://www.copera.org/pdf/5/5-115.pdf
“In 1951, public employers could join Social Security; the Colorado Legislature decided to continue the PERA program instead of joining Social Security.”
http://class.ccaurora.edu/fiscal/PERA_Choice.pdf
Yet, under IRS regulations, a public pension plan must have something called “definitely determinable benefits” in order to pass muster as an IRS “qualified plan.”
Denver attorney Cindy Birley (a woman I consider to be a champion of prospective public pension reform in Colorado) addressed this requirement for qualification of public pension plans at the Legislature’s Senate Finance Committee hearing on the bill SB12-149, on March 13, 2012:
Cindy Birley:
“Generally, you would not change people who have already retired . . .”.
“There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.”
“The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . . ‘definitely determinable’.”
“So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.”
“Because, it may not qualify as a defined benefit plan.’
“We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.”
“It still has to pass muster as a DB plan.”
Since the Colorado General Assembly has clawed back “definitely determinable” Colorado PERA pension COLA benefits from PERA retirees in 2010, and retrospectively altered this pension COLA benefit, how can this “automatic” PERA COLA benefit still be characterized as a “definitely determinable” public pension benefit?
IRS attorneys write that a qualified “governmental plan” must have “definitely determinable benefits”:
“Definitely Determinable Benefits/Written Plan Document Section 401(a)(25) provides that the actuarial assumptions used to calculate participants’ benefits must be specified in the plan.”
“A pension plan within the meaning of section 401(a) is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement. (§1.401-1(b)(1)(i)).”
Reading this, I wondered how an IRS qualified governmental plan can be considered to have “definitely determinable benefits” if the plan sponsors are free to vary an “automatic,” contracted COLA as they please. For example, if a pension plan sponsor reduces its “automatic,” contracted COLA from 3.5 percent to 2 percent or lower, diminishing the value of an annuitant’s lifetime “guaranteed” pension benefit by say, one-third, how could such variable benefits be considered “definitely determinable”? Are qualified governmental plans, like Colorado PERA, required to report whether or not their COLAs are “automatic” or “ad hoc,” i.e., discretionary? How can the IRS know what the “definitely determinable” lifetime retirement benefit is without knowing the nature of a public pension plan’s COLA benefit? As we have seen, Colorado PERA has consistently described the PERA COLA benefit as “automatic.”
IRS attorneys also note that qualified plans “must operate in accordance with plan terms,” and “must meet “Pre-ERISA Vesting Requirements in Section 411(e)(2).”
“Pre-ERISA Vesting Requirements in Section 411(e)(2)
“A governmental plan shall be treated as meeting the requirements of section 411 if the plan meets the vesting requirements resulting from the application of sections 401(a)(4) and 401(a)(7) as in effect on September 1, 1974. “Including “Vesting on Normal Retirement Age.”
http://www.irs.gov/pub/irs-tege/govt_414d.pdf
In 2009, Cindy Birley and Rebecca Hudson of the Denver law firm Davis Graham & Stubbs wrote an article: “New Trends in Public Sector Plans.”
Cindy Birley writes:
“A ‘qualified’ plan under Code Sec. 401(a) is afforded special tax treatment provided numerous requirements under Code Sec. 401(a) are met. The primary advantages of being a qualified plan are: 1) employer contributions are not taxable to the participants as they are made, 2) trust earnings are not taxable, and 3) favorable tax treatment is available to participants when they receive distributions (i.e., rollover treatment).
“A defined benefit plan . . . is a retirement plan that provides (my emphasis) ‘DEFINITELY DETERMINABLE’ benefits. For instance, a defined benefit plan might entitle a participant to a monthly pension for life equal to a percentage of the participant’s monthly compensation.”
“Cindy S. Birley is an attorney practicing at the Denver law firm Davis Graham & Stubbs LLP. Ms. Birley has 17 years of experience in the employee benefits/executive compensation field. Ms. Birley has extensive experience with public sector plans. She is also a member of the National Association of Public Pension Attorneys.”
http://www.dgslaw.com/images/materials/606317.pdf
In a May 30, 2008, “Public Employment and Pension Law Update,” for the Colorado Municipal League, Cindy Birley notes that the IRS is increasing scrutiny of public plans:
“Increased Scrutiny of Governmental Plans, questionnaire to be sent to 200 government plan representatives. Failure to reply could open a compliance check.”
How has Colorado PERA described its pension COLA benefit in responses to such IRS questionnaires?
http://www.dgslaw.com/publications?&id=652
Although the Colorado General Assembly has not paid its full pension bill for the last decade, at least one member of the Colorado PERA Board of Trustees, as a fiduciary, seems to feel some responsibility to encourage Colorado legislators to do so.
Colorado PERA Board Trustee Maryann Motza (elected to the PERA Board in 2005) is the author of an article published in Vol. 22, No. 1 of the journal, “Government Finance Review,” that addresses training of new public pension board members.
From Trustee Motza’s article “Recommended Practice: a Tutor for New Pension Board Members”:
“Assure that actuarially required contributions are collected by the pension plan on a timely basis, so as to achieve the plan’s stated funding policy.”
PERA Board Trustee Motza writes that Colorado PERA follows recommended practices of the Government Finance Officers Association (GFOA):
“It is comforting to know that PERA adheres to GFOA’s recommended practices, which set the standard on how the funding of public pension plans can best be achieved and maintained.”
But, I see no endorsement from the GFOA for the retrospective taking of accrued public pension benefits. From GFOA Best Practices (regarding the creation of new benefit tiers):
“Identify and address legal constraints. Consult with legal counsel to identify any federal and state legal impediments. In some states, there may be a legal foundation for changing current employees’ pension benefits prospectively.”
http://www.gfoa.org/index.php?option=com_content&task=view&id=1887
The GFOA also recommends that public pension trustees consult the writings of Professor Amy Monahan at the University of Minnesota School of Law, “Public Pension Plan Reform: The Legal Framework.” “
See ‘Public Pension Plan Reform: The Legal Framework’ by Amy B. Monahan, Education and Finance Policy, Fall 2010.”
It happens that the aforementioned public pension attorney, Cindy Birley, has recommended (and advocated in testimony to the Colorado Legislature) prospective public pension reform for administrative arms of Colorado state government (county governments) that conforms perfectly to Professor Monahan’s legal theories.
Back to the GFOA:
“If state law allows public employers to change plan benefits prospectively for current employees, this right should be clearly stated in the plan documents that are distributed to employees. If there is no explicit or implied contract that entitles an employee to accrual of benefits indefinitely under the current benefit structure for future service, this should be clearly stated in the plan documents as well. Consult with legal counsel to ensure that such descriptions do not violate the requirement that benefits be ‘definitely determinable’ under Internal Revenue Code 401(a). Generally, a plan does not provide definitely determinable benefits if a member’s ability to receive the benefit is conditioned on the employer’s discretion, absent plan changes.”
“Defined benefit plans . . . Investment risk born by the plan sponsor.”
“Guaranteed lifetime annuity to members at retirement unless they choose an alternate payment method.”
“Guaranteed or ad-hoc cost-of-living adjustments provided to annuitants.”
http://www.gfoa.org/index.php?option=com_content&task=view&id=1608
In light of all this, how has Colorado PERA remained a “qualified plan” under IRS regulations?
Colorado PERA active and retired members, help put an end to the Colorado Legislature’s ill-advised attempt to escape its contractual obligations. Contribute at saveperacola.com and “Friend” Save Pera Cola on Facebook!
THE STATE WITH AN EXTRA BILLION DOLLARS. . . SADLY, FORCED TO BREAK ITS CONTRACTS.
The Colorado Legislature and the state’s public pension administrator, Colorado PERA, claim that a financial emergency necessitates the breach of Colorado’s public pension contracts. But, how can legislators make this claim when they have an extra one billion dollars to spend? Do they simply prefer to spend this billion on discretionary governmental programs instead of meeting the state’s contractual obligations? Perhaps they wish to augment the $538 million they have already allocated toward local government pensions that are not the contractual obligation of the State of Colorado? Perhaps they wish to make another $100 million grant of discretionary property tax relief? The objective of a politician is to win votes. How many votes can be won by simply meeting the state’s contractual obligations?
The Colorado Legislature claims that the state’s pension system, Colorado PERA, must be funded at a 100 percent level TODAY, although the PERA pension system’s obligations will come due over the next 70 years. Legislators claim that PERA must be funded at a 100 percent level although the PERA pension system has been funded at a 100 percent level just twice in its 82 year history.
Claiming that the Colorado PERA pension system is “broke,” because the Colorado Legislature cannot pay 100 percent of contracted pension benefits right now is like saying every Colorado homeowner is broke because they can’t pay off the entire amount of their 30-year mortgage right now. It is nonsensical.
From the Denver Business Journal:
“ . . . next year’s money — $924.3 million above the amount the state will spend this year, according to Legislative Council — is up for grabs.”
http://www.bizjournals.com/denver/news/2013/03/18/colorado-state-revenue-picture.html?page=all
From EdNewsColorado:
“State economic forecasts released on Monday show revenues higher than predicted in the December estimates, creating a significant windfall for one of the state funds that supports K-12 education.”
“Revenues are rising because of state economic growth that is outpacing the nation’s economic recovery.”
“‘We know that there’s new money available’ but don’t know what the potential demands are, Sobanet said. ‘We’re at the very beginning stages’ of totaling everything up.”
http://www.ednewscolorado.org/news/state-revenue-picture-brightens-again
From the most recent Colorado Economic Forecast:
“The recovery in Colorado’s economy is among the most vibrant in the nation.”
“In FY 2012-13, the General Fund is expected to end the year with a surplus of $848.0 million.”
“The General Assembly will have $924.3 million more to spend in the General Fund during FY 2013-14 than the amount budgeted for FY 2012-13.”
http://www.colorado.gov/cs/Satellite/CGA-LegislativeCouncil/CLC/1251640260333
From the January 29, 2010 Senate Finance hearing on the bill that broke Colorado PERA retiree pension contracts (SB10-001):
“Retiree Carol Pace said the (PERA) COLA is a contractual obligation and ‘if you break this contract you will break others.’ She asked that the committee fully explore the legal ramifications, and to send interrogatories on the bill’s constitutionality to the Supreme Court ‘before you put us in a position of taking you to court.’”
http://www.coloradostatesman.com/content/991568-pera-reform-bill-passes-first-test-capitol
Colorado PERA Executive Director Greg Smith at this hearing:
“There are few case laws that address the issue, Smith said, but one, regarding a fire and police pension plan, was litigated when the plan ran out of money and benefits were being paid for with current revenues.”
http://www.coloradostatesman.com/content/991568-pera-reform-bill-passes-first-test-capitol
From the September 24, 2010 Denver Post:
Senate Bill10-001 not only reduces current, contractually agreed upon benefits, it allows the legislators, rather than fiscal professionals to determine where the trigger point is to declare funding shortfalls and emergencies. By precedent, the only other pension fund in the U.S. that was declared by the courts to be actuarially emergent was flat broke. Colorado PERA has a large reserve that has tempted legislators and governors for years, but before the last legislative session, they couldn’t figure out how to get at it. In 2003, Governor Bill Owens went after it, but he was thwarted by an Attorney General’s opinion that the state could not walk away from its contracts. So that administration took a different tack by offering early retirement buy-outs and reduced rates to purchase service credit. Governor Owens dipped into Colorado PERA funds through the back door, moving state employees at the top ends of the pay grades from state paychecks to Colorado PERA paychecks. In other words, Governor Owens reduced state costs by shifting them to Colorado PERA and at the same time he reduced the state’s PERA contribution percentage, beginning the slide from 105% funded to current levels. Granted the slide was accelerated by the economic downturn, but it began when the state figured out how to supplement the General Fund by raiding PERA trust funds. Senate Bill 10-001, if upheld by the courts, will open the front door to Colorado PERA resources.
http://www.denverpost.com/legislature/ci_16159422
Breach of Colorado PERA pensioner contracts . . . Reasonable? Necessary?
Colorado PERA active and retired members, Colorado state legislators who now regret their support for SB10-001, newly installed Colorado legislators who are unfamiliar with public pension administration . . . help prevent Colorado PERA’s proposed breach of public pension contracts. Fight for the rule of law in Colorado, and contribute at saveperacola.com! Also, “Friend” Save Pera Cola on Facebook!
COLORADO’S STATUTORY DOUBLE STANDARD ON PUBLIC PENSION CONTRACTS.
LAST YEAR, THE STATE OF COLORADO ADOPTED LEGAL, PROSPECTIVE PENSION REFORM (FOR COUNTY GOVERNMENTS). WE HONOR THE PENSION CONTRACTS OF THESE COUNTY PENSIONERS, WHY ARE WE ATTEMPTING A RETROSPECTIVE TAKING OF ACCRUED COLORADO PERA RETIREE BENEFITS?
As you know, the State of Colorado is trying to break its contracts . . . escape its legal public pension obligations. In 2010, the Colorado Legislature passed a bill that proposes to take back accrued, earned, contracted, deferred compensation from public pensioners in the state. The bill taking these pension benefits, SB10-001, proposes to shift the debt of Colorado state and local governments onto the backs of Colorado PERA retirees.
But, you may not know that a double standard exists in Colorado law on this matter of public pension contractual rights. Under Colorado statutes, the public pension plans of certain Colorado county governments are to be reformed prospectively. Respect for the vested, accrued benefits of pensioners in these counties has been codified in Colorado law. While such legal pension reform is embraced in one article of the Colorado Revised Statutes for county governments, another section of the law (that governing the state’s pension plan, Colorado PERA) includes provisions that mandate state seizure of accrued, fully-vested pension benefits from Colorado PERA retirees.
Under current Colorado law, if you worked for one of these county governments and retired after 30 years, your accrued pension rights are protected. Under Colorado law, if you worked for the State of Colorado, and retired after 30 years, the statutory double standard mandates that up to one-third of your retirement benefit will be seized by the state.
The existence of this double standard in Colorado law is particularly egregious given that some of the county governments for which prospective, legal pension reform is permitted have pension systems that are in far worse financial shape than was Colorado PERA at the time of the adoption of SB10-001. In 2010, the Colorado Legislature determined that it was “actuarially necessary” to bolster the Colorado PERA pension plan by taking accrued pension benefits. Two years later, the Colorado Legislature determined that it was NOT “actuarially necessary” to reform public pension plans that had lower funded ratios than Colorado PERA (county plans) by taking accrued pension benefits.
It should also be noted that public pensioners in these counties participate in Social Security. Colorado PERA pensioners are not eligible to participate in Social Security. They rely much more heavily on their contracted PERA benefits, while their counterparts in Colorado county governments have this “extra leg of the retirement stool.” Yet, the accrued benefits of Colorado PERA pensioners are seized, while county pensioner accrued benefits are honored.
If legal, prospective pension reform is appropriate for an administrative division of Colorado state government (county government), why is legal, prospective pension reform not appropriate for the State of Colorado itself? If the Colorado General Assembly had not abdicated its public pension policy making authority to 27 union and corporate lobbyists in 2010, it might have considered legal, prospective public pension reform options similar to those advocated by the proponents of SB12-149, the bill by which prospective pension reform for the county governments was permitted. The proponents of SB12-149 include Cindy Birley, a public pension attorney with many decades of experience. The 2012 decision of the Colorado Court of Appeals affirming the contractual nature of Colorado PERA COLA benefits reveals that the proponents of SB12-149 were correct to pursue prospective reform of their pension systems. The proponents of SB12-149 rely on the DeWitt case to permit changes simply to future pension accrual rates. Colorado PERA is relying on DeWitt for its ill-advised and reckless attempt to claw back fully-vested PERA retiree benefits.
“Cindy Birley has over 25 years of experience in the employee benefits and executive compensation field. Ms. Birley is recognized in the 2009-2013 editions of The Best Lawyers in America in Employee Benefits Law. She is a member of the American, Colorado, and Denver Bar Associations. She is also a member of the National Association of Public Pension Attorneys, Denver Chapter of the Western Pension & Benefits Conference, and Colorado Municipal League.”
http://www.dgslaw.com/attorneys/cindy-birley
If the General Assembly had not abdicated its public pension policy making responsibility in 2010, it might have, rationally, sent an interrogatory to the Colorado Supreme Court regarding the constitutionality of the pension reform proposal, SB10-001. The Legislature was encouraged to take this step.
In the past, we’ve looked at a prospective pension reform proposal offered by Professor Amy Monahan of the University of Minnesota School of Law. Professor Monahan proposes that public pension reforms be adopted by state governments that alter the rate of FUTURE accrual of pension benefits, thus avoiding retrospective takings of such accrued benefits. This proposal is made in Monahan’s paper “Public Pension Reform: The Legal Framework.”
In her paper, Professor Monahan writes:
“What if, ten years into X’s tenure with the state, the state announces that effective immediately, pension benefits will only accrue at the rate of 1% of salary per year? I have argued that such prospective changes should be permitted absent an explicit agreement protecting against such changes.”
Professor Monahan concludes:
“This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
Link to Monahan law article:
http://www.law.umn.edu/facultyprofiles/monahana.html
I consider Professor Monahan’s public pension reform proposal to be a “less drastic” public pension reform than Colorado PERA’s breach of the fully-vested public pension contracts of current retirees in 2010.
In 2012, when the Colorado General Assembly adopted SB12-149, the Legislature demonstrated that it is capable of adopting legal, prospective public pension reforms. Here is a description of SB12-149 from the Colorado Municipal League:
“Permits the board of a defined benefit plan or system created by a local government to (for a specified period of time) modify the benefits and the age and service requirements for any such plan or system when the board determines the modification is required to ensure the sustainability of the plan or system. Specifies that any modifications to the benefits and age and service requirements shall not adversely affect vested benefits already accrued by members of such defined benefit plans or systems.”
http://www.cml.org/uploadedFiles/CML_Site_Map/_Global/Legislative/laws_2012.pdf
Senator Pat Steadman was the prime sponsor of SB12-149 in the Senate. Why did Senator Steadman agree to carry SB12-149? It’s odd that Senator Steadman supports SB12-149, a bill proposing a prospective, legal public pension reform, while also supporting SB10-001 in 2010, a bill that operates retrospectively, taking accrued PERA retiree benefits . . . it just doesn’t add up.
From, “PERA Changes: Shape up or Shakedown?”
“Senator Pat Steadman (D-Denver) (on SB10-001) said, “I wasn’t the first to jump into this wagon, but I think this bill is great progress.”
http://www.coloradocapitolwatch.com/blog/2010/01/27/pera-changes–shake-up-or-shake-down/
Senator Steadman was present at the Denver meeting of the Colorado PERA Listening Tour on August 11, 2009 where he heard Colorado PERA Executive Director Greg Smith state:
“In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” “And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.”
The balance of this article provides summaries of legislative committee hearings on the bill, SB12-149 and quotations from these hearings pertinent to the breach of Colorado PERA retiree contracts. During the legislative hearings on SB12-149, members of the Colorado General Assembly commented extensively on the concept of “actuarial necessity,” the DeWitt test in Colorado case law, prospective public pension reform, and the involvement of Colorado PERA and Colorado’s public sector unions in the development of SB12-149.
First, some excerpts from the Senate Finance meeting summary for SB12-149, March 13, 2012:
“02:20 PM — Senate Bill 12-149
Senator Steadman, prime sponsor, presented Senate Bill 12-149 concerning allowing local government pension plan boards to make modifications to defined benefit plans. Senator Steadman stated that the bill impacts defined benefit plans in five counties in Colorado: Adams County, Arapahoe County, El Paso County, Pueblo County, and Weld County. He explained that the bill seeks to get rid of the unfunded liabilities in the defined benefit pension plans in these counties and allows the pension boards to shore up the long term solvency of the plans. He concluded his opening remarks by stating the bill is about retirement security and enabling local governments to make decisions for themselves as to how to secure their pension funds.”
“02:30 PM
Committee discussion ensued about differences between the statutory requirements of the Public Employees’ Retirement Association of Colorado (PERA) and local defined benefits plans.”
“02:33 PM — Ms. Vicki Johnson, an attorney representing the Adams County Retirement Plan, spoke in support of the bill. Ms. Johnson explained the difference between defined benefit plans and defined contribution plans, and stated that this bill does not impact counties with PERA, defined contribution plans, or home-rule cities.”
“03:16 PM — Mr. Michael McIntosh, member of the Adams County Retirement Plan Board of Directors, spoke in support of the board. He discussed why the Adams County plan is currently under-funded.”
“03:23 PM — Mr. Erik Hansen, Adams County Commissioner, spoke in support of the bill. He talked about the need to avoid reducing benefits for current retirees.”
“03:26 PM — Mr. Frank Weddig, former state senator and former Arapahoe County Commissioner, spoke in support of the bill.”
“03:29 PM — Mr. John MacPherson, a member of the Colorado Coalition for Retirement Security, spoke in opposition to the bill. He stated that there is no need for the bill because it gives boards legal immunity for actions they are already legally able to take. He stated that the bill does not give these counties any additional tools to manage their retirement plans.”
“03:33 PM — Ms. Cindy Birley, an attorney representing the Adams County Retirement Plan, spoke in support of the bill. She summarized the testimony that was given by previous witnesses and discussed some case law that was used in developing the language of the bill.”
“03:43 PM
Ms. Birley continued her testimony. Senator King asked Ms. Birley about the unfunded liabilities of the other counties that would be impacted by this bill. She answered by reiterating that none of these other counties oppose the legislation.”
“03:54 PM
Senator Guzman asked Ms. Birley if this legislation would impose any new requirements or restrictions on the other counties affected by the bill. Ms. Birley answered that making changes to a county plan by its board is voluntary and not required. Senator Johnston asked Ms. Birley to confirm the three classes of rights that exist in the defined benefits plans.”
“04:05 PM
Committee discussion ensued regarding case law that is applicable to the bill.”
“04:16 PM
Senator Johnston spoke about his concerns with the bill and brought up the possibility of including a repeal date of one year. Public testimony was closed.”
“04:23 PM
Senator Steadman gave closing remarks and stated that this bill is about retirement security and dealing with future liabilities in a responsible way.”
Link to meeting summary:
http://www.leg.state.co.us/clics/clics2012a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/8eaf024bd08e6f24872579c0006fb917?OpenDocument
Below, I provide quotations from the Senate Finance Hearing on SB12-149 on March 13, 2012 that are relevant to the taking of the Colorado PERA pension COLA benefit by the Colorado General Assembly in 2010.
Beginning 36 minutes into the meeting:
Senator Steadman noted that the bill affects five county defined benefit pension plans in Colorado. Steadman:
“The impetus for this bill is; however, very similar to what we saw two years ago when we were looking at SB10-001.”
“The bottom there of page 3 actually talks about not impairing vested rights, and so really that’s just reciting some existing boundaries that exist.”
(My comment: Here is the language in the bill that Senator Steadman refers to:
“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”)
Senator Johnston, Chairman Senate Finance Committee:
“You (Adams County) are probably the most underfunded pension plan in the state, certainly the most underfunded that I’ve seen.”
Vickie Johnson, Davis Graham and Stubbs, attorney for the Adams County Retirement Plan, noted that her associate Cindy Birley, “is the tax and benefits counsel for more than 25 pension plans around the country and in Colorado.”
Vickie Johnson:
“Boards of pension plans have very limited options to improve the funded status of the plan.” “They could cut benefits, but for incoming employees . . . employees that haven’t been hired yet.”
“Now, we’ve made clear that any modifications to benefits and age and service requirements shall not affect vested benefits already accrued. So, it won’t affect benefits that are already earned or benefits of retired members.”
“When an employee begins working for a government entity that offers a pension, and the employee contributes to that benefit, the benefit offered to the employee is considered to be a contract right governed by the United States Constitution.”
“The legislation that we’ve drafted, we use the Dewitt case, and this is the case that PERA is using right now to argue that the court should uphold their cuts to the COLA.”
“There’s case law that says that . . . a board can make a change to limited vested rights . . . when it’s due to actuarially necessity.”
“PERA has been arguing that this Dewitt case, which comes after those cases, has wiped out that limited vested concept and the concept of actuarial necessity.”
“So, we had worked to maybe actually try to define what sustainability would be . . . like when a plan fell below 60 percent funded . . . but, there was a lot of concern that we shouldn’t define that.”
“As I said, in Subsection 3, we make clear in the proposed legislation that vested benefits already accrued, including the vested benefits of retirees, are not going to be touched.”
“So, if a board was going to go and make changes, it would be to future benefit accruals, not stuff that has already been earned.”
Vicki Johnson embraces the Monahan proposal:
“For example, if you’re going to be paid a 2.5 percent multiplier, we could say ‘you’ve earned it to this day,’ and here’s your benefits to this day, we may reduce your benefit multiplier going forward.”
Pamela Mathisen, Adams County Retirement Plan Administrator:
“The proposed legislation prohibits reducing benefits already accrued, and we do not intend to reduce those benefits.”
Leslie Thompson, actuary, Gabriel, Roeder, Smith:
“This reform looks at just amending the accruals in future years for current employees . . . nothing that has already been earned. This is a standard tool in the private sector tool kit, and I know we’re not private sector, but private sector has always been allowed to amend future accruals, never touch what has already earned, that’s completely protected.”
Michael McIntosh, member of the Adams County Retirement Plan Board of Directors:
“We’re not talking about doing anything with the benefits that they’ve already accrued, we’re not going to touch those, it would just be things moving forward.”
“Anything going forward affecting my benefits, that’s different from what it is today, I need to obviously be able to plan for that.”
(My comment: Colorado PERA retirees with fully-vested pension benefits feel the same way.)
Cindy Birley, Davis Graham and Stubbs, (a 10-year member of the National Association of Public Pension Attorneys):
“Based on current case law, we do not believe that we are able to reduce benefits for people who are eligible to retire, without having this legislation.” “So, for example at Adams County there are approximately 300 people that we could not reduce their future accruals.”
(My comment: SB12-149 allows Adams County to change the rate of future accrual of pension benefits for employees who are currently eligible to retire, assuming that they continue to work.)
Cindy Birley:
“For future service . . . we would like to be able to lower that benefit formula, multiplier . . .”.
“We’re unable to do that under some of the current case law, one of which is the ‘Police versus Bills’ case . . . “.
“These are fully-vested rights once the person is eligible to retire.”
“A partially-vested right you could eliminate due to actuarial necessity under some of the historical case law.”
“You’ve got fully-vested rights for everything that you’ve accrued, but your future accruals could be at a lower formula rate.”
Committee Chairman Senator Johnston:
“What you’re telling me is that you believe that this bill actually substantively changes the ability for us to eliminate fully-vested rights for someone who is eligible for retirement, but has chosen to keep working.”
Cindy Birley:
“Correct, on a prospective basis.”
“We did have . . . in initial drafts of the bill, we had a numerical test (a percent funded ratio threshold) . . .”.
“We met in Senator Steadman’s office . . ., at a reception that Senator Steadman had for stakeholders on January 9th, and we met with representatives from PERA, Colorado WINS, AFSCME, as well people from Arapahoe and Adams.”
“The various union groups and PERA were adamantly opposed to putting in an actuarial necessity test.”
(My comment: Well of course, the proposed test for “actuarial necessity” was lower than Colorado PERA’s funded ratio [69% AFR] at the time of the breach of Colorado PERA retiree pension contracts.)
Cindy Birley:
“We were asked to remove that, they urged us to remove it, and so at their request we took out an actuarial necessity test.”
“We were essentially told that if are unable to make that concession it would not pass through legislation, because there were enough Senators and Representatives who would vote ‘no’.”
Senator Steadman:
“If you study the DeWitt Case, you’ll find . . . is that when modifications are made in order to ensure sustainability of the plan, one of the things they’re going to look at is sort of who has been responsible for putting us into the ditch that we’re in now.”
“ . . . and if the plan was sort of deliberately driven into the ditch, that’s not an excuse for them coming in and undermining the benefits that your own . . . malfeasance and how you’ve, you know breach, perhaps, of fiduciary duty in managing the plan, isn’t going to save you at that point.”
(My comment: The fact that the Colorado General Assembly drove Colorado PERA into the pension “ditch” over the last decade is well-established . . . billions of dollars of underfunding, mismanagement, cutting needed state revenues, discretionary grants for state property tax relief in lieu of contractual pension payments, failure to propose measures to provide sufficient revenue to meet contractual obligations, funding local pension obligations that are not the state’s contractual duty, etc.)
Senator Steadman:
“I became increasingly convinced that any kind of numeric formula in statute was probably a bad idea.”
Senator King:
“Because, the formula was 60 percent.”
Senator Steadman:
“That was the one that was on the table at the time.”
(My comment: At this January 9, 2012 meeting, did Colorado PERA, or AFSCME, or Colorado WINS officials agree that a 60 percent standard was an appropriate threshold? Remember, there is no threshold at which fully-vested retiree benefits can be taken by the state.)
Cindy Birley, said that actuaries in the 1990s told pension boards:
“You can afford to give a cost-of-living adjustment this year and here’s how much it’s going to cost in assets, and the boards would say ‘sure’.”
Senator Steadman:
“Just for the committee’s benefit, this Legislature did the exact same thing with PERA in that exact same time period, and PERA was like at 104 percent or 105 percent funded.”
Senator Johnston:
“We have three categories of rights here . . . “
“We have partially vested rights, which under the AG’s opinion of 04, they are still deferring to Bills and (McPail) that, that is an actuarial necessity standard . . .”
“So the legal standard for partially-vested is still actuarial necessity. Is that correct?”
Cindy Birley:
“DeWitt blends and just chats about vested rights and so the question is, is whether there is a partially-vested and a fully-vested rights category.”
“I believe it was an amicus brief that was filed in connection with the PERA case . . . page 5, May 13, 2011.” “It was a brief, it’s not a court order.”
Senator Johnston:
“The other two categories are vested rights not retired, and then vested rights already retired.”
“What you want us to do is reinforce the ‘defer to the legislative action’ part of DeWitt, rather than the three-part contractual test.”
(My comment: Remember that 30 to 40 years ago public pensions in the United States were “mostly pay as you go,” they had funded ratios of zero, yet contracts were upheld. Indeed, pension contracts were upheld during the Great Depression.)
Senator Johnston:
“But, PERA is going to have win an actuarial necessity case at 64 percent . . .”.
(My comment: Colorado PERA’s “actuarial funded ratio” at the time of the PERA contract breach in perspective:
- (54.5% to 105.2%) – 40-year range of the Colorado PERA actuarial funding ratio (AFR), (source, Colorado PERA.)
- 78% – average PERA AFR over the 40-year period.
- 68.9% – PERA AFR at time of the taking of the contracted 3.5 % COLA benefit.
- 9.1% – difference between the PERA AFR at time of COLA taking and the 40-year average PERA AFR.
- 11.1% – difference between PERA AFR at the time of the COLA taking and an 80% AFR level considered “well-funded” by Fitch Ratings.
- 72% – average AFR at the end of 2009 for 57 state retirement systems reporting to Wilshire Associates.
- 3.1% – difference between the Colorado PERA AFR and Wilshire Associates average AFR for 57 state retirement systems at time of PERA COLA taking.)
Cindy Birley:
“The PERA order is just on DeWitt.”
Senator Johnston:
“So, if you don’t have us, you would have to use actuarial necessity instead of Dewitt which is a higher standard.”
Cindy Birley:
“But, we couldn’t make changes for people that are eligible to retire like Pam . . .”
“The three-part test only applies when you have a state statute.”
“Vicki is mentioning that the cases that had actuarial necessity also had state statutes.”
Senator Johnston:
“Has there never been a pension fund whose plan was modified without a preexisting state statute to support it?”
Cindy Birley:
“I think that pension funds have been modified, without preexisting state statutes, but they have not gone so far as to modify the benefits for people who have . . .and I’m not sure there is case law on it, that I’m aware of, in Colorado.”
“Generally, you would not change people who have already retired . . .”.
“There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.”
“The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . . ‘definitely determinable’.”
“So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.”
“Because, it may not qualify as a defined benefit plan.’
“We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.”
“It still has to pass muster as a DB plan.”
Now, we move over to the Colorado House and the House Finance meeting where SB12-149 was considered on April, 18, 2012. Here are excerpts from the summary of that meeting:
“01:48 PM — Ms. Vicki Johnson, an attorney representing the Adams County Retirement Plan, spoke in support of the bill and distributed a handout on the Adams County Retirement Plan. Ms. Johnson explained the difference between defined benefit plans and defined contribution plans, and stated that this bill does not impact counties with PERA, defined contribution plans, or home-rule cities.” “She concluded by stating that the bill will not affect benefits that are already accrued and vested or those benefits of retired members.”
“02:30 PM — Mr. Joseph Pacyga, representing the Adams County Retirement Plan, spoke in support of the bill and responded to committee questions about local government pension plans.”
“02:38 PM — Ms. Cindy Birley, an attorney representing the Adams County Retirement Plan, spoke in support of the bill. Ms. Birley responded to committee questions about local government benefits under the pension plan systems.”
“02:45 PM — Ms. Diane Hunt, representing Gabriel, Roeder & Smith, spoke in support of the bill and discussed the need for reform.”
“02:51 PM — Sheriff Doug Darr, representing Adams County and Adams County Employees, spoke in support of the bill.”
“02:52 PM — Mr. Frank Weddig, former state legislator and former Arapahoe County Commissioner, spoke in support of the bill.”
Link to meeting summary:
http://www.leg.state.co.us/clics/clics2012a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/b695bc1290e34d25872579e4006ba1bd?OpenDocument
Here are some quotations from the Legislature’s House Finance Committee hearing of SB12-149 on April 19, 2012, (note that Representative Priola was the prime House sponsor for SB12-149):
Representative Priola:
“The purpose of this bill is very similar to why we passed Senate Bill 1 for PERA.”
“Paragraph 3. . . makes clear that the bill does not impair vested rights, meaning that vested benefits already accrued cannot be taken away, including the benefits of retirees or individuals eligible to retire.”
Representative Kagan:
“Under your bill, local boards . . . would be able to simply adopt a modification.”
“Would they get more authority under this bill than the PERA board has?”
“Will there be any check at all, if this bill should pass, on the action of the boards?”
Vicki Johnson, Davis, Graham and Stubbs:
“I specialize in defending pension plans when they get sued.”
House Finance Committee Chairman DelGrosso:
“Are you expecting lawsuits because of this?”
Vicki Johnson:
“It’s a possibility, yes.”
“So, let’s just say that you’ve worked for 25 years. And, you’ve earned your benefits at this multiplier. Those would not be taken away. If you elect to stay on for five more years, then that accrual may be reduced.”
“If you’re a retiree, we’re not going to touch you.”
“Under the current law . . . once you start working as an employee for a governmental pension plan and you contribute to your pension benefits it’s understood that you have obtained a contract right.”
“And, as long as you continue to work it’s understood under the law that your benefits cannot be changed. “So, what the boards do is they go out and they change the benefits of new employees, new hires because that’s what they can change.”
Representative Kagan:
“Can the Legislature affect the contractual rights of an employee?”
Vicki Johnson:
The DeWitt case says that . . . “if a Legislature passes a law that impairs a contract right, the law will be upheld if it is reasonable and appropriately serves a significant and legitimate public purpose when considered against the severity of the contractual (impairment).”
(My comment: Reasonable? In 1977, the U.S. Supreme Court [in U.S. Trust Co, 431 U.S.] clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE’S SELF-INTEREST IS AT STAKE. As the court bluntly stated:
“A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote
the public good rather than the private welfare of its creditors.”)
Vicki Johnson:
“Part of the reason why you came there is because of this promise of a pension in the future, and so if you worked to earn it, the courts have been very protective of that area. We understand that and we think that that’s right.”
Vicki Johnson:
“There’s this case law out there that says you cannot cut benefits of current employees.”
“The case law would trump that as it currently stands.”
Cindy Birley:
“The case law says that if you take an action . . . that impairs a contract pursuant to that change in law that will be sustained and upheld under the Dewitt case, if it was a reasonable and foreseeable change.”
“We’re asking for a change in the law that we can point to if we are sued to say it’s a reasonable and foreseeable change that we would have modified the plan to . . . reduce a benefit formula, for example, on a prospective basis.”
Diane Hunt, Gabriel Roeder and Smith:
“My final comment is that this proposal only affects future accruals, and this is a tool that is used in private sector defined benefit plans.”
Below, I provide (from Adams County board minutes) the reaction of Cindy Birley to the Colorado Court of Appeals decision in 2012 reversing the decision of the Denver District Court and remanding the case to the lower court:
“PERA – Colorado Court of Appeals Update:
Ms. Birley indicated that the Colorado Court of Appeals reversed the motion for summary judgment for Colorado PERA indicating that the COLA is a contractual right. She stated that the Court of Appeals sent it back down to the lower court to run the three prong test of DeWitt. Ms. Birley indicated that this sounds like the legislation that Adams County Retirement Plan just got enacted for Senate Bill 12-149. She stated that this action shows that Davis Graham & Stubbs was right with the language that was put in the legislation.”
“Article – PERA – Vicki Johnson:
Ms. Birley indicated that the Board packet contained an article with Vicki Johnson, Davis Graham & Stubbs being quoted on the PERA case.”
http://www.acretirement.org/minutes/201211_board_meeting_minutes.pdf
From the Adams County Retirement Plan website:
“Prior to passage of Colo. SB 12-149 in 2012, the laws governing the Plan were unclear about the Board’s ability to reduce benefits for current employees.”
“SB 12-149 permits the Retirement Plan Board to reduce future benefit accruals of current employees to ensure the sustainability of the Plan Vested benefits already earned cannot be reduced.”
http://www.acretirement.org/legislative_update.htm
“Any modification would be to future benefit accruals, refund provisions, or both and will not reduce vested benefits already accrued for any member, whether active or retired, or any beneficiary.”
http://www.acretirement.org/legislative_update/notice_possibility_of_future_reduction_in_benefits.pdf
“The Board will not reduce vested benefits already accrued for any member whether active or retired. SB 12-149 specifically prohibits any such reduction.”
http://www.acretirement.org/legislative_update/201204MemorandumRE-ProposedLegislation.pdf
Colorado PERA active and retired members, support the rule of law and contractual public pension rights in Colorado! Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!
LOBATO’S LESSONS FOR THE COLORADO PERA CASE, JUSTUS v. STATE.
http://www.courts.state.co.us/lobatovstate/
The Colorado Supreme Court recently heard oral arguments in the Lobato public education funding case:
“The Colorado Supreme Court last week heard oral arguments on a lawsuit that could dramatically change the system of K-12 school finance in Colorado.” “The Supreme Court’s March 7 hearing included a first: a live video broadcast of the proceedings.”
http://www.coloradostatesman.com/content/994052-lobato-lawsuit-could-have-major-ramifications-k-12-school-finance
As I watched the Lobato oral arguments two important “takeaways” for the Colorado PERA retiree pension lawsuit (Justus v. State) came to mind. First, the failure of Colorado politicians to raise sufficient revenue to meet the state’s obligations does not excuse the state’s breach of public pension contracts in 2010. Second, if the Colorado Supreme Court finds for the plaintiffs in the case Justus v. State, this decision need not impose an undue hardship on Colorado governments given that legal, prospective PERA pension reforms may be implemented over as many as seven decades.
TAKEAWAY #1: FAILURE TO RAISE REVENUE FOR DISCRETIONARY STATE EXPENDITURES DOES NOT EXCUSE COLORADO’S BREACH OF CONTRACT.
According to the Denver Post, in Lobato oral arguments Colorado Assistant Attorney General Jonathan Fero (representing the state of Colorado) argues in regard to the state: “They have limited funds. They cannot become indebted. They cannot raise revenue on their own power.”
Justice Hobbs responded: “‘I’m concerned that the argument ‘we can’t do it,’ becomes an excuse for ‘we won’t do it,’ Hobbs said, his voice rising.” (29 minutes into the 69 minute oral arguments.)
http://www.coloradostatesman.com/content/994052-lobato-lawsuit-could-have-major-ramifications-k-12-school-finance
Justice Hobbs continued: “It’s generally public knowledge we have a balanced budget requirement, that there is TABOR . . .” “I’m very concerned that what the state’s arguing here is that we simply don’t have any duty and we should give up.”
http://www.courts.state.co.us/lobatovstate/
As we know, Colorado’s constitutional TABOR amendment, does not prohibit the Colorado General Assembly from regularly referring measures to Colorado voters to raise revenues sufficient to meet Colorado’s contractual obligations, and sufficient to fund the state’s discretionary public policy programs. The 1992 Colorado TABOR constitutional amendment permits the Colorado General Assembly and Colorado local governments to seek voter approval for new revenues.
In 2010, the Colorado General Assembly looked first to break Colorado public pension contracts. The Colorado General Assembly has never placed a measure on the statewide ballot asking voters for funding to meet the state’s contractual pension obligations. It’s just easier to break contracts. Colorado politicians should have some backbone and forthrightly inform the state’s voters that they actually have to pay for state services that are to be consumed . . . and they have to pay contractual deferred compensation for services that have been consumed in the past.
Instead, Colorado politicians propose the breach of state pension contracts while simultaneously making $100 million annual discretionary grants of property tax relief (popular with constituents) and giving away $538 million for local government pension obligations (Old Hire Fire and Police pensions) that are not the state’s obligation (popular with local government lobbyists.)
Although Colorado has (nearly) the lowest state tax revenue per capita in the nation, Colorado politicians do not want to propose tax hikes . . . here’s Hickenlooper on taxes:
“‘It’s hard to say whether you have not enough taxes or too much taxes until you get to a point where you are running everything efficiently and you are utilizing the resources you have wisely,’ Hickenlooper said. ‘The enterprise isn’t running efficient yet.’”
“John Straayer, a political scientist at Colorado State University who says state fiscal problems will not be solved without more revenue, questioned Hickenlooper’s reasoning.”
“‘Obviously, you have to run any organization as efficiently as possible,’ Straayer said. ‘But when do you know that, and do you do nothing until you know? That could go on forever.’”
http://www.denverpost.com/news/ci_22277571/hickenlooper-faces-hot-potatoes-second-half-term
“A 50-state study from the University of Tennessee estimated that Colorado’s state and local tax revenue losses from untaxed e-commerce sales totaled $172.7 million in 2012.”
http://www.denverpost.com/opinion/ci_22593397/yes-colorado-missing-out-sales-tax-revenue
The thought of actually raising new revenue to meet contractual pension obligations is a non-starter in our state.
Speaker Frank McNulty (R-Highlands Ranch): “I don’t think at this point we can expect employer contributions to be part of the (PERA) solution . . .”.
http://www.9news.com/rss/story.aspx?storyid=119465
“Employer contribution rates were lowered when PERA reached fully funded status, saving public employers in Colorado millions of dollars.”
http://www.copera.org/pera/about/newsarchives2009.htm#LAC
SB10-001 Proponent Friends of PERA:
“Rate cuts to PERA between 2000 and 2005 equaled some $325 million.”
“There is a misconception that the ‘taxpayers’ are owners of the (PERA) fund; the trust fund is owned by the beneficiaries of the fund . . .”
http://www.friendsofpera.com/facts/index.html
“The fact is that 80 percent of the dollars in the PERA trust fund come from the investment market and from member contributions — not taxpayers,” PERA spokeswoman Katie Kaufmanis said.
http://watchdog.org/63044/co-lawmakers-battle-secret-pension-issue-on-behalf-of-taxpayers/
Governor Bill Owens 2006 State of the State: “These changes should not affect those closest to retirement, but could be phased in for those who have years to go.”
http://www.pewstates.org/projects/stateline/headlines/colorado-state-of-the-state-address-2006-85899394414
“Interestingly, positions attributed to the Governor (Owens) . . . emphasized (PERA) solvency and the unacceptability of taxpayer funding to achieve it.”
http://cppa.utah.edu/_documents/westernstatesbudgets/wpsa-06/colorado-06.pdf
Meredith Williams, PERA Executive Director, May 29, 2011, Pueblo Chieftain:
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
https://www.copera.org/pera/about/issues.htm
Gino L. DiVito, Tabet DiVito & Rothstein LLC, Chicago, ILL:
“ . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”
SB10-001 co-prime sponsor Senator Josh Penry:
“‘Republicans and Democrats created this (PERA) mess . . .’.
http://www.9news.com/rss/story.aspx?storyid=130197
In the minds of many Colorado legislators (and voters) public pension contracts are considered to possess an inferior status relative to Colorado’s corporate contracts. The idea of breaking the state’s corporate contracts would be unthinkable at the Legislature. Such a proposal would be universally condemned by Colorado’s media. But, as we recently heard, the breach of Colorado’s public pension obligations is “Colorado Courage.”
In 2010, Colorado’s education establishment looked first to break Colorado PERA retiree pension contracts. The education establishment put a tax-hike measure (Proposition 103) on the ballot in 2011, AFTER the education establishment had already supported the breach of Colorado PERA retiree pension contracts in 2010. The proponents of the 2010 Colorado PERA bill that broke pension contracts (largely the Colorado education establishment) cannot claim that they tried to raise revenue PRIOR to breaking PERA contracts. In 2010, pensioners were considered a great new education funding source.
In 2011, Senator Rollie Heath campaigned for a ballot measure seeking funding for public education in Colorado, but unfortunately the measure was defeated at the polls. Senator Heath shares Justice Hobb’s concern . . . that the General Assembly not “give up”:
“It’s a conversation,” Heath said, “that we need to keep going.” “ . . . Heath said he hopes Coloradans will ‘come together to say, we need to make some changes’ and work on what he termed ‘the big fix’ to unwind the knot of the Taxpayers Bill of Rights, or TABOR, the Gallagher Amendment and Amendment 23, three constitutional provisions he described as a fiscal stranglehold on the state.”
The Colorado Education Association (CEA), as a proponent of SB10-001, appears to remain optimistic that Colorado voters will eventually provide sufficient public education funding:
“‘CEA was similarly encouraged by more than 140,000 voters across the state who signed petitions to put Proposition 103 on the election ballot, and thousands more who joined the grassroots coalition led by state Senator Rollie Heath,’ CEA President Beverly Ingle added. ‘The momentum created by this energy and awareness to find new ways to increase public education funding will be Proposition 103’s lasting legacy.’”
http://coloradostatesman.com/content/993126-tax-hike-proves-be-losing-proposition
Geoff Blue, former Colorado Deputy Attorney General, argues that since Colorado’s education establishment has failed at the polls lately, they are now seeking to “legislate through the courts.”
Geoff Blue, Deputy Attorney General for Legal Policy and Government Affairs (now in private practice) made these comments in a 2011 interview (on Jon Caldara’s show The Devil’s Advocate, June 24, 2011) regarding the Lobato case:
Jon Caldara:
“Where is the teachers union on this?”
Geoff Blue:
“I don’t know if they are the plaintiffs, but I’m sure they’re very happy about this case.”
Jon Caldara:
“If the school districts want more money through law we have that ability to get them more money. We can raise our taxes. The state legislature can put on tax increases. The local districts can put up mill levy increases. All they need to do is ask us, that’s what the state constitution says. Wouldn’t that be easier than this?”
Geoff Blue:
“It would, and as a matter of fact Senator Rollie Heath has proposed such an initiative this year, to raise taxes specifically to fund education and higher education.”
“Cleary there is a path to do it. They’ve been losing so they’re trying to legislate through the courts.”
“Geoff Blue joined the Attorney General’s Office in early 2008 as a senior policy adviser to the Attorney General and the office’s liaison to the governor, General Assembly and local governments.”
http://www.coloradoattorneygeneral.gov/sites/default/files/uploads/AnnualReport.pdf
TAKEAWAY #2, A COLORADO SUPREME COURT DECISION STRIKING DOWN SB10-001 NEED NOT IMPOSE UNDUE HARDSHIP, SINCE PUBLIC PENSIONS ARE REFORMED OVER MANY DECADES.
In Lobato oral arguments, Terry Miller of the law firm Davis, Graham and Stubbs suggested that the Colorado General Assembly address its funding problems incrementally . . . over many years. This is precisely the manner in which the Colorado PERA trust funds should be strengthened.
From the Lobato oral arguments:
“(Justice) Bender asked if that wouldn’t require a lot of time.”
“It doesn’t have to happen in one year, as long as they’re making reasonable progress toward a constitutional fix,” (Terry) Miller said.
http://www.denverpost.com/breakingnews/ci_22738785/colorados-high-court-hears-school-funding-lawsuit-arguments
The actuarial funded ratio (AFR) of the Colorado PERA trust funds declined from a high of 105% to reach about 70% in 2010. The PERA AFR has been as low as the 50s, back in the 1970s. In 2010, the Colorado Legislature decided to use the recent market volatility as an excuse to eliminate a large part of the pension debt of Colorado PERA-affiliated employers through breach of contract. But, dips in the Colorado PERA AFR need not be fixed overnight by breaking contracts. The most recent decline in Colorado PERA’s AFR can be addressed over as many as seven decades.
Colorado PERA:
“PERA is a long-term investor with an investment horizon that spans not just 10 years, but 50 or 70 years.”
https://www.copera.org/pera/about/issues.htm#41211
Colorado PERA Board Trustee and Court of Appeals Judge Casebolt: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”
http://www.copera.org/pera/about/listeningtour.htm
Deputy Colorado Attorney General Bernie Buescher, “who spent 20 years as a pension attorney,” has “said that he believes Colorado PERA needs changes, but not drastic ones, pointing out that the ‘beauty’ of pension plans is that small changes compound interest over time. ‘When you’re talking about something as complex as retirement plans, the planning horizon is 30 to 50 years — even 20 years is too short.’”
https://www.cu.edu/sg/messages/4829.html
http://m.rockymountainnews.com/news/2006/feb/11/governor-demands-pera-solution/
Bernie Buescher currently serves as Colorado’s “Deputy Attorney General overseeing the Colorado Department of Law’s State Services Section.” “A native of Grand Junction, Buescher replaces Monica M. Marquez, whom Gov. Bill Ritter recently appointed to the Colorado Supreme Court.”
http://www.coloradoattorneygeneral.gov/press/news/2011/01/18/attorney_general_announces_bernie_buescher_new_deputy_attorney_general_state_s
Meredith Williams, Colorado PERA Executive Director, Pueblo Chieftain, August 13, 2005:
“The liabilities of the system, frankly, will be paid out over multiple decades, and we’re talking 70 or 80 years. We’re kind of designed for the long haul and we know we’re going to experience ups and downs in the marketplace. Unfortunately, we’re just coming off the worst three years of market performance in history.”
http://www.chieftain.com/metro/slow-stock-market-retiree-boom-hurts-pension-system/article_da58863b-1799-50b4-8ff3-0548d16be68c.html
Meredith Wiliams, CAFR Summary to Members, 2002, December, 5/21 (REV 6/03):
“While the investment markets will always have ups and downs, PERA is a long-term investor and we can ride out the bad times the market experiences.”
http://www.copera.org/pdf/5/5-21-02.pdf
Meredith Williams, Silver and Gold Record, December 4, 2008:
“‘The beauty of a defined benefit plan is that it rolls in a lot of people from different employers and age groups,’ Williams said. ‘We’ve got a much larger segment of people making contributions and employers making contributions,’ and with its current assets PERA will be able to pay benefits for decades to come, he said.” “Williams said that gives PERA time to examine its options.” “We generally can ride out market cycles,” he said. “We’re built to do that.”
https://www.cu.edu/sg/messages/6546.html
Meredith Williams in a 2008 “Shareholder Presentation”:
“Because PERA is a long-term investor, we know that at times
we’ll have losses, but those losses will be offset by gains over the long run in PERA’s diversified investment portfolio. The bottom line is that the PERA portfolio is well diversified and able to withstand the ups and downs of the market over time.”
https://www.copera.org/pdf/Shareholder/ShareholderPresentation08.pdf
Colorado PERA: “Setting the Record Straight”:
“But what’s not mentioned is that this liability is not due and cannot be made payable today, just like a mortgage. This is the aggregate amount owed by PERA to current retirees and to all existing workers who have begun work for a public employer in Colorado and may not begin receiving a benefit for three or more decades.”
http://www.friendsofpera.com/Setting%20the%20Record%20Straight.pdf
Keith Brainard of the National Association of State Retirement Administrators (NASRA):
“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.”
“Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.”
http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf
SB10-001 Proponent, Colorado Association of School Executives (CASE) in a 2006 CASE (PERA) Issue Brief:
“What is PERA’s financial condition? Is PERA stable? Yes. PERA is quite stable. As of this writing, PERA’s market value is in excess of $35 billion. If there were flat investment returns in the future, PERA would have enough cash to pay benefits or over 40 years. By almost every standard, PERA is solvent.” “Now, some of the same politicians who voted for increased benefits and lower contribution rates are the ones pointing fingers and talking about a ‘crisis.’”
http://www.friendsofpera.com/facts/PERAIssuebrief.pdf
SB10-001 Proponent Friends of PERA:
“Equating PERA’s amortization period (number of years when it will have the unfunded portion paid off) to an actuarial emergency or necessity is erroneous. PERA continues to have a positive cash flow without selling off assets.”
http://www.friendsofpera.com/facts/index.html
Colorado PERA active and retired members, support public pension rights and the rule of law! Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!
SEC ISSUES CEASE AND DESIST ORDER ADDRESSING ILLINOIS PUBLIC PENSION UNDERFUNDING. WHY DOESN’T ILLINOIS AVOID THIS CRITICISM BY SIMPLY BREAKING PENSION CONTRACTS LIKE COLORADO?
Last week the SEC issued a cease and desist order condemning inadequate disclosure of chronic state public pension underfunding in Illinois:
“The Securities and Exchange Commission deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the Securities Act of 1933 against the State of Illinois.”
“On the basis of this Order and the State’s Offer, the Commission finds that:
“1. In connection with multiple bond offerings raising over $2.2 billion from approximately 2005 through early 2009, the State of Illinois misled bond investors about the adequacy of its statutory plan to fund its pension obligations [pension actuarially required contributions, ARC] and the risks created by the State’s underfunding of its pension systems.”
“2. The State omitted to disclose in preliminary and final official statements material information regarding the structural underfunding of its pension systems and the resulting risks to the State’s financial condition.”
“This methodology structurally underfunded the State’s pension obligations and backloaded the majority of pension contributions far into the future. The resulting systematic underfunding imposed significant stress on the pension systems and on the State’s ability to meet its competing obligations.”
“3. During this same time period, the State also misled investors about the effect of changes to the Statutory Funding Plan, including substantially reduced pension contributions in 2006 and 2007 (‘Pension Holidays’).”
Colorado’s public pension administration arm, Colorado PERA, hires actuaries who prepare an annual financial report for the pension system (CAFR.) These actuaries are required to inform the State of Colorado and other PERA-affiliated employers of the annual underfunding of the state’s (PERA) pension system. They provide this information in the annual Colorado PERA CAFR. Over the last decade, the members of the Colorado General Assembly have preferred to make discretionary state expenditures in lieu of meeting the contractual pension obligations of the State of Colorado.
Provided below are statistics relating to the failure of the Colorado General Assembly to pay its public pension “actuarially required contributions” (ARCs), from the Center for Retirement Research at Boston College Public Plans Database:
2001 Colorado School – 100% ARC Paid
2002 Colorado School – 100% ARC Paid
2003 Colorado School – 69% ARC Paid
2004 Colorado School – 51% ARC Paid
2005 Colorado School – 48% ARC Paid
2006 Colorado School – 62% ARC Paid
2007 Colorado School – 60% ARC Paid
2008 Colorado School – 68% ARC Paid
2009 Colorado School – 65% ARC Paid
2010 Colorado School – 70% ARC Paid
2011 Colorado School – 89% ARC Paid
2001 Colorado State – 100% ARC Paid
2002 Colorado State – 100% ARC Paid
2003 Colorado State – 69% ARC Paid
2004 Colorado State – 51% ARC Paid
2005 Colorado State – 48% ARC Paid
2006 Colorado State – 58% ARC Paid
2007 Colorado State – 56% ARC Paid
2008 Colorado State – 63% ARC Paid
2009 Colorado State – 61% ARC Paid
2010 Colorado State – 62% ARC Paid
2011 Colorado State – 85% ARC Paid
2001 Colorado Municipal – 100% ARC Paid
2002 Colorado Municipal – 100% ARC Paid
2003 Colorado Municipal – 69% ARC Paid
2004 Colorado Municipal – 62% ARC Paid
2005 Colorado Municipal – 64% ARC Paid
2006 Colorado Municipal – 85% ARC Paid
2007 Colorado Municipal – 84% ARC Paid
2008 Colorado Municipal – 98% ARC Paid
2009 Colorado Municipal – 96% ARC Paid
2010 Colorado Municipal – 101% ARC Paid
2011 Colorado Municipal – 139% ARC Paid
(According to the 2011 PERA CAFR, the dramatic increase in the percentage contributed for the Colorado PERA Local Government Division is a “result of the changes contained in SB10-001,” [2011 PERA CAFR Financial Section, page 82.] Apparently, when the State of Colorado breaks its public pension contracts it really facilitates the payment of the full ARC in some PERA divisions.)
Many state legislatures have kept up with their contractual public pension obligations, and accordingly, their public pension systems have been much less impacted by the 2008-09 market volatility:
“An April 2010 issue brief authored by the Center for Retirement Research at Boston College found that for the public pension community as a group, receiving the full ARC would require additional pension contributions of two percent of payroll, an amount that varies by plan.”
Link:
http://www.publicfundsurvey.org/www/publicfundsurvey/SummaryofFindingsFY10public.pdf
But, Colorado legislators are indifferent to Colorado’s contractual pension obligations:
“July 14, 2009 – However, Rep. Frank McNulty (R-Highlands Ranch) said he did not want to ask for higher contributions from governments, which are supported by taxpayers.
‘I don’t think at this point we can expect employer contributions to be part of the solution . . .’”
http://www.9news.com/rss/story.aspx?storyid=119465
(In 2009, Rep. McNulty stated that those who legally owe the Colorado PERA pension debt, Colorado PERA-affiliated employers, should not “be part of the solution.” Indeed, the bill adopted by the Legislature to break Colorado PERA retiree contracts, SB10-001, asked that those who legally owe the debt contribute a mere “ten percent” of the “fix” proposed in the bill.)
Back to the SEC Cease and Desist Order:
“This underfunding also compromised the creditworthiness of the State and increased the State’s financing costs.”
“Concern about the State’s pension financing was a significant factor prompting downgrades of the State’s credit rating from 2010 to 2012.”
(My comment: Recently, the credit rating firm Standard and Poors (S&P) downgraded the State of Illinois due to pension underfunding:
“Standard & Poor’s rating service said Friday that the rating on the state’s general obligation bonds was downgraded to A- from A.” “The agency says the outlook is negative, an indication it could take the unusual step of further downgrading the state if conditions don’t improve.”
Link to Breitbart.com:
http://www.breitbart.com/Big-Government/2013/01/26/S-P-lowers-Illinois-credit-rating–blames-pensions
S&P warned the Illinois Legislature about the adoption of unconstitutional pension reform:
“Today, Standard & Poor’s warned lawmakers that unconstitutional pension cuts would invite ‘legal challenges’ and cause ‘several years’ of budget uncertainty.
Link:
http://www.weareoneillinois.org/news/coalition-comments-on-sp-downgrade-points-to-summit-as-critical-step-forward
Colorado has adopted the type of unconstitutional public pension reform (SB10-001) that S&P warns against – breaching public pension contracts – yet S&P has actually upgraded Colorado’s credit rating from AA- to AA. That is, while the State of Colorado suffers through its recently claimed “actuarial emergency,” it has somehow managed to achieve an improved credit rating. Let’s add this situation to our list of life’s great mysteries.
Colorado’s S&P rating in 2012: AA
Colorado’s S&P rating in 2009 and 2010 at time of contract breach: AA
Colorado’s S&P rating during 2002 to 2006: AA-
Link:
http://www.pewstates.org/projects/stateline/headlines/infographic-sp-state-credit-ratings-20012012-85899404785)
Back to the SEC Cease and Desist Order:
“The State’s current funding deficit was created in significant part by the State’s historical failure to fund its pension systems in a manner to avoid the growth of the unfunded liability.”
“Rather than controlling the State’s growing pension burden, the Statutory Funding Plan’s contribution schedule increased the unfunded liability, underfunded the State’s pension obligations, and deferred pension funding. This resulting underfunding of the pension systems [“Structural Underfunding”] enabled the State to shift the burden associated with its pension costs to the future and, as a result, created significant financial stress and risks for the State.”
“For the majority of the years under the Statutory Funding Plan, the State’s annual required contributions were insufficient to prevent the growth of its unfunded liability.”
“The State’s pension contributions were calculated in accordance with State law, not in accordance with the ARC, and therefore the Statutory Funding Plan deferred funding of the State’s pension obligations and compounded its pension burden.”
“By failing to amortize the UAAL completely, the State was able to lower its contributions. However, by assuring that some portion of the UAAL would remain outstanding, it also increased the economic cost of the pensions and delayed the cash outlays necessary to fulfill its pension obligations.”
“The State’s insufficient contributions under the Statutory Funding Plan were the primary driver of this increase, outweighing other causal factors, such as market performance and changes in benefits.”
From the Silver and Gold Record:
“PERA Executive Director Meredith Williams told the committee that PERA is ‘rock solid, even in the face of volatility and financial insecurity.’ At least one committee member saw no reason to adopt the more drastic changes. Sen. Norma Anderson (R-Lakewood), who said she has been following PERA for many years, told S&GR after the hearing, ‘The plan is solid, one of the best in the nation. Why change it?’”
(My comment: Note that former Senator Norma Anderson testified in favor of SB 10-001, the bill that breached Colorado PERA retiree pension contracts.)
https://www.cu.edu/sg/messages/551.html
Back to the SEC Cease and Desist Order:
“The State did not disclose in its official statements its failure to contribute to the full amount of the ARC and the consequences of not funding the full amount of the ARC.”
“ . . . the CAFR disclosures did not describe the risks and implications of the Statutory Funding Plan and deviations from that plan.”
“In its official statements, the State cited a number of factors that, in the past, contributed to the increase in unfunded pension liability, such as statutory benefit enhancements and market performance, but did not disclose that the State’s insufficient contributions were the primary driver of the increase.”
(My comment: Have Colorado’s bond official statements and Colorado PERA financial documents adequately disclosed Colorado’s underfunding of the PERA pension? Colorado PERA’s CAFRs do set forth the failure of the Colorado Legislature to pay annual ARCs during the last decade.)
SEC Cease and Desist Order:
“On June 1, 2005, the State legislatively enacted Pension Holidays, lowering the contribution in 2006 and 2007 by 56 and 45 percent, respectively.”
“Reasonable investors would have viewed such information as significantly altering the total mix of information available regarding the State’s financial condition and the State’s future financial prospects. Such information allows investors to weigh and price the risk associated with the State’s debt obligations.”
“GOMB’s procedures were inadequate for ensuring that material information concerning State Pension Funds or the State’s financing of State Pension Funds was disclosed and accurate in bond offering documents.”
“The result was a process in which no one person fully accepted responsibility for identifying and analyzing potential pension disclosures.”
“In late 2009, the State made a series of personnel changes in the GOMB, including in its most senior positions. These new officers worked to formalize the disclosure and underwriting process.”
(My comment: I want to pause here and caution Colorado PERA active and retired members against prematurely laying blame for the SB10-001 taking of fully-vested PERA COLA benefits at the doorstep of Colorado PERA Executive Director Greg Smith. It would be wrong to blame him for SB10-001 and find out later that he may very well have attempted to dissuade the Colorado PERA Board of Trustees from promoting the breach of PERA retiree contracts.
Here’s why I think we should be cautious in this respect: Greg Smith has provided written testimony to the Colorado Legislature’s Joint Budget Committee that the PERA COLA is a contractual obligation. He has described his own legal research in the press finding that “actuarial emergencies” occur only when a public pension system is broke, and cannot pay current benefits. He has also pointed out that the Legislature has failed to meet the required ARC payments. We don’t know what Greg Smith’s initial reaction was to the proposal to seize PERA retiree COLA benefits, so, at this point, I don’t think we can fairly criticize him.
But, some have criticized Greg Smith. A member of the Colorado General Assembly asked why Colorado PERA’s Greg Smith and Meredith Williams remain employees of the PERA pension system:
“Rep. Cheri Gerou, R-Evergreen, questioned why Williams and Smith still have their jobs, suggesting that if they worked in the private sector they might have been fired. ‘A lot of people would like to see you lose your jobs over this,’ she told them.”
http://coloradostatesman.com/content/991604-pera-reform-bill-gets-bipartisan-blessing
Colorado Senate President John Morse (a co-sponsor of the COLA-taking bill, SB10-001) is not among those who criticize Colorado PERA Executive Director Greg Smith:
From the January 16, 2013 Colorado Senate Journal, the Colorado Senate honors Greg Smith for his appointment to the position of Colorado PERA Executive Director:
“TRIBUTES: Honoring: Greg Smith, for his recent appointment with PERA — By President John P. Morse.”
Link:
http://www.leg.state.co.us/CLICS/CLICS2013A/csljournals.nsf/(jousen)/6F8152ABB6CFAA3D87257AF50052F652/$FILE/jour_008.pdf
A few more excerpts from the SEC Cease and Desist Order:
“Issuers of municipal securities are responsible for the accuracy of their disclosure documents.”
“The Commission has repeatedly emphasized that disclosure in municipal debt offerings may be rendered materially misleading due to the omission of other material facts.”
“The antifraud provisions of Section 17(a) of the Securities Act prohibit fraudulent or deceptive practices in the offer or sale of securities by the issuers of municipal securities.”
“A fact is material if there is a substantial likelihood that a reasonable investor would have viewed the information as ‘having significantly altered the ‘total mix’ of information available.’”
“As a result of the negligent conduct described above, the State violated Sections 17(a)(2) and 17(a)(3) of the Securities Act.”
“ . . . the State misled bond investors by omitting to disclose information about the adequacy of its statutory plan to fund its pension obligations . . .”
“Accordingly, it is hereby ORDERED that, pursuant to Section 8A of the Securities Act, the State of Illinois shall cease and desist from committing or causing any violations and any future violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act.”
“By the Commission. Elizabeth M. Murphy Secretary”
Link to the complete SEC Cease and Desist Order:
http://www.sec.gov/litigation/admin/2013/33-9389.pdf
Colorado PERA active and retired members, support the rule of law in Colorado. Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!
KENTUCKY GOVERNOR BESHEAR: REFORM STATE TAX CODE TO MEET PUBLIC PENSION CONTRACTUAL OBLIGATIONS.
In 2010, the Colorado General Assembly looked first to break Colorado PERA retiree contracts.
A June 26, 2005, Rocky Mountain News editorial encouraged the Colorado General Assembly to seek new revenue to meet its contractual obligations, but this advice was ignored:
“The New Mexico legislature, for example, passed a measure requiring increases in employer and employee contributions. In Oklahoma, voters earmarked a portion of the state’s lottery proceeds to pay down $6 billion in pension liabilities. Other states, including New Jersey, Illinois, Kansas and Maine, have sold bonds to pay off the unfunded pension liabilities. Not that any of these actions are necessarily the right solution for PERA – but clearly something must be done about the looming shortfall.”
A November 15, 2009 Denver Post editorial encouraged the Colorado General Assembly to send an interrogatory to the Colorado Supreme Court seeking guidance on the constitutionality of proposed Colorado PERA pension reforms. The Legislature also ignored this advice:
“First, let court rule on PERA: Before legislators take on reforms, they should first ask the state Supreme Court to determine how much leeway they have.”
“Legislators need to understand how much power a designation of ‘actuarially necessary’ gives them to modify benefits paid to members.”
“We think lawmakers should ask the state Supreme Court for a ruling so they know exactly what they can do.”
“Administrators of the Colorado Public Employees’ Retirement Association, or PERA, recently asserted that the fund’s foundering finances give the state the legal footing to cut future cost-of-living increases for people who already are retired. But what if that were challenged in court and found to be illegal?”
“On the other hand, if annual hikes for retirees can be adjusted, why can’t a case be made to increase the retirement age for many of those who are still working and contributing to PERA — a reform that is missing from the PERA board’s plan?”
(My comment: Here the Denver Post editorial board identifies a pension reform that is “less drastic” than the breach of fully-vested Colorado PERA pension contracts.)
“It’s in Colorado’s best interest to get out in front of the PERA problem, file an interrogatory with the state Supreme Court, and get a clear fix on what legislators can and cannot do.”
http://www.denverpost.com/opinion/ci_13776995
In 2009, Colorado PERA campaigned for breach of pension contracts on a statewide “Listening Tour.” Nine members of the Colorado Legislature attended the Denver meeting of this PERA “Listening Tour.” But, what was the point of conducting a “Listening Tour,” when the proponents of breaking Colorado PERA retiree contracts had no intention of “hearing”?
A few days ago, the Kentucky Center for Economic Policy released an analysis of their state’s chronic underfunding of state public pension obligations.
http://www.kypolicy.us/content/not-paying-pension-bills-adds
A few excerpts:
“Not Paying Pension Bills Adds Up:”
“A major contributor to Kentucky’s pension funding problem is the legislature’s failure to make the full required contribution to the retirement system in recent years.”
(My comment: As we know, the Colorado General Assembly has failed to make approximately $5 billion in annual required contributions identified by its own actuaries in the last decade. In 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s General Counsel Greg Smith blamed the Colorado General Assembly for PERA’s fiscal downturn: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”
Link:
http://www.copera.org/pera/about/listeningtour.htm)
Kentucky Center:
“Shortfalls in payments started as early as 1993, but began in earnest in 2004. As the first figure below shows, the state has shortchanged the pension system by at least $100 million a year since 2007 (total $1.8 billion.)”
“Since the contributions were not in the system to earn investment returns, the full impact of underfunding is even worse. Taking those lost returns into account brings the total shortfall for the pension fund alone up to an estimated $2.4 billion by the end of 2014.”
(My question: What is extent of the General Assembly’s underfunding of its Colorado PERA pension contractual obligations when corresponding lost investment returns are also taken into consideration?)
Kentucky Center:
“How big a number is $2.4 billion? At the end of 2012, the Kentucky Employees Retirement System pension fund had $3.8 billion in assets. So without the shortfalls the system would have around 63 percent more assets.”
(My question: What percentage of Colorado PERA’s trust fund assets have been lost due to the Colorado General Assembly’s combined PERA underfunding and lost investment returns in the last decade?)
Kentucky Center:
“Some of the benefit changes were made to encourage experienced employees to retire in order to save money in the already-lean budget—but the changes just shifted new costs over to the retirement system.”
(My comment: The Kentucky Legislature has followed the Colorado General Assembly’s PERA playbook:
“PERA bill expected to be retirement incentive,” by Marianne Goodland, April 6, 2000.
“An early retirement bill working its way through the General Assembly may be a true win-win situation: a good early retirement incentive for classified employees, increased health insurance contributions from employers and substantial savings for state government.”
https://www.cu.edu/sg/messages/2229.html)
“Befort also noted that several years ago, the Legislature and Gov. Bill Owens decided to encourage higher-paid employees to retire early. Payroll expenses went down for the state, but PERA’s costs increased, he explained.”
https://www.cu.edu/sg/messages/4405.html
December 31, 2000 Colorado PERA CAFR:
“The Governor’s office initiated HB 00-1458 to make early retirement more feasible and to achieve cost reductions, and the PERA Board of Trustees supported the bill. PERA’s Board supported HB 1458 after it received assurance that this legislation would not affect the actuarial soundness of the PERA plan.”
From the PERA document “2000 PERA legislation,” updated May 4, 2000:
“The bill was initiated by the Owen’s administration and includes some features to make it more attractive for some long-term employees to leave state service and retire.”
Kentucky Center:
“Poor investment returns resulting from two recessions in the 2000s also worsened the problem, but Kentucky’s pension system wouldn’t be a subject of such scrutiny if it were for investment results alone. Kentucky’s losses were on par with other states, but most of those states will return to adequate funding levels in the next few years because they did not underfund promised benefits.”
Link:
http://www.kypolicy.us/content/not-paying-pension-bills-adds
(My comment: Public pension systems have significantly recovered in states that have kept up with their contractual obligations. The fact that the Colorado General Assembly is now trying to push a debt that is the obligation of all Coloradans onto the backs of PERA pensioners is beyond the pale.)
The members of the Colorado PERA Board of Trustees are fiduciaries. It is their fiduciary responsibility to ensure that the Colorado PERA trust funds are sound. Colorado PERA officials have met with committees of the Colorado Legislature at least three times per year for decades. Why have these PERA officials not been in the faces of legislators during those meetings? Why have they not emphatically pointed out to the legislators that contractual public pension obligations take precedence over discretionary expenditures?
Why has the Colorado PERA Board of Trustees never adopted a resolution calling for the Colorado General Assembly to pay its public pension bills? Is it just easier to break contracts? At a minimum, public pension fiduciaries should ask governmental plan sponsors to meet their contractual obligations. Kentucky’s public pension board has adopted such a resolution calling for full-funding of the state’s pension ARC:
“NOW THEREFORE, The Board of Trustees of the Kentucky Retirement Systems, by a vote of its members taken in public session at its regular quarterly meeting held February 21,
2013, hereby resolves that the Commonwealth of Kentucky should begin funding the KERS and SPRS plans at 100% of the actuarially recommended contribution rate (ARC) in the next biennial budget and thereafter.
Approved this 21st day of February 2013:
Link:
https://kyret.ky.gov/uploads/committees/02_21_2013_Trustee_Resolution.pdf
Kentucky Governor Steve Beshear’s 2013 State of the State:
“I agree that we need to reduce our unfunded (pension) liability – and the longer we put this off, the bigger the problem will be. The question – again – is: ‘Where will the money come from?’”
“Well, the answer is obvious: We must modernize our out-dated tax code. Kentucky has commissioned 12 studies of its tax system since 1982. I created another one last year to update the work. And every study has reached the same conclusion: Kentucky’s tax code works against us, not for us. We need a tax structure that’s fair to all of our citizens and easy to understand; that helps recruit business, not drive it away; and that – because it’s aligned with a 21st century economy – is able to bring in the revenue we need to fund critical services.”
http://www.governing.com/news/state/kentucky-beshear-2013-state-of-the-commonwealth.html
Public pension reforms that are “less drastic” than Colorado’s breach of fully-vested pension contracts have been proposed at the Kentucky Legislature:
“Stumbo, D-Prestonsburg, said Thursday that options under consideration include revenue from Internet keno, instant racing and lottery sales taxes but not casino gambling, which he predicted would not have a chance of passing the Senate this year.”
http://www.courier-journal.com/article/20130221/NEWS0101/302210088/Senate-Majority-Leader-Damon-Thayer-argues-pension-reform-regular-session?nclick_check=1
Colorado PERA active members and retirees, many in Colorado’s legal, media and political communities have conspired to break your pension contracts. Don’t let it happen, contribute at saveperacola.com. Friend Save Pera Cola on Facebook!
JEAN DUBOFSKY: ONE OF A “DWINDLING BREED OF UNABASHED LIBERALS.”
The Denver Post has referred to Jean Dubofsky as one of a “dwindling breed of unabashed liberals.”
https://bulk.resource.org/gpo.gov/hearings/108s/90303pt2.txt
I have to admit, I have a soft spot for these dwindling “unabashed liberals.”
But, former Colorado Supreme Court Justice Jean Dubofsky is also an evaluator of Colorado judges, an appellate strategist, an education advocate (indeed the founder of a think tank that provides public education advocacy), a campaign contributor, a “well-known liberal figure,” a “current full-time activist,” a “crafty legal mind” and a “powerhouse” lawyer. This woman who considers herself “shy,” has drawn the attention of millions.
We recently learned that Boulder’s Jean Dubofsky is the author of a legal opinion that the Colorado PERA Board of Trustees uses to rationalize the board’s attempted breach of Colorado PERA pension contracts. Over the course of her long legal career, Jean Dubofsky has fought for the rights of women and minorities. Why is Jean Dubofsky wrapping up her legal career with an attempt to take earned, accrued, contracted benefits from pensioners? I am utterly bewildered. Did Colorado’s public sector unions ask her to write this legal opinion? I think she is on the wrong side of the PERA contract breach debate.
In 2009, Colorado PERA officials requested a legal opinion from Jean Dubofsky. The legal opinion she provided to Colorado PERA attempts a legal justification for the breach of Colorado PERA pension COLA statutory contracts. Colorado PERA Executive Director Greg Smith, before the Legislature’s Joint Budget Committee on December 17, 2009:
“We have obtained outside counsel’s opinion on this issue.”
Jean Dubofsky’s resume:
“ . . . at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights . . .”
Jean Dubofsky in a Colorado PUC deposition:
“My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”
Did the Colorado PERA Board order this “outside” legal opinion from Jean Dubofsky because the board disagreed with the legal opinion of PERA’s in-house counsel on this question of the constitutionality of clawing back PERA COLA benefits? Colorado PERA’s Executive Director, Greg Smith, has informed the Legislature’s Joint Budget Committee, in writing, that PERA COLA benefits are contractual, and he has maintained (in the press, and [possibly] before the JBC) that “actuarial emergencies” occur only when a pension plan is unable to pay current benefits. If you find yourself blocked by the opinions of your “in-house” attorney, perhaps it’s best to consult an “outside” attorney. Is this how it went down?
On February 21, 2004, Rocky Mountain News journalist David Milstead reported Greg Smith’s description of his legal research as follows:
“PERA general counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that’s not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.”
Greg Smith elaborates:
“In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” “And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.”
Link:
http://www.copera.org/pera/about/listeningtour.htm
Dubofsky’s law practice in 2008:
“Currently, Dubofsky is a sole practitioner in Boulder, representing litigants in tort, workers’ compensation, commercial, criminal, civil rights and family law cases.”
http://www.bizjournals.com/denver/stories/2008/05/12/smallb5.html
Dubofsky is the author of hundreds of legal opinions:
“ . . . successfully challenging the constitutionality of the workers’ compensation laws that reduced benefits.”
“While on the bench she wrote several hundred opinions for the court, including a landmark water law opinion that protected the public interest.”
“She continues a primarily appellate law practice to protect the civil liberties of Coloradans.”
http://www.cogreatwomen.org/dubofsky.htm
Dubofsky on appellate strategy:
“Dubofsky concentrated ‘on the composition of the court and how to pull down as many votes as possible instead of working on hitting a home run,’ says Rick Hills, then an associate in Dubofsky’s practice in Boulder, Colo., and now an assistant professor at the University of Michigan Law School.”
http://alumni.stanford.edu/get/page/magazine/article/?article_id=43530
Dubofsky: Make your legal argument “appealing” to a court, “in the sense that they’re not going out on a limb in order to rule your way”:
“I’ve also always liked cases involving governmental issues—public interest kinds of cases—and they almost always have some public policy involved that’s usually timely; and if you’re creative enough, you’re going to figure out some interesting ways to develop the law.”
“I’ve always found that contract interpretation and statutory interpretation cases are the hardest to predict, because when you’re talking about whether something can be clearly interpreted, it usually means there’s more than one way of interpreting it. Those are pretty unpredictable.”
“. . . because I’m a sole practitioner, I’ve been able to sit down and figure out, ‘OK, if I were judging this case, what would I want to hear and what would it take for the court to rule in my favor?’”
“This may not be true of the U.S. Supreme Court right now, but certainly when I was on the Colorado Supreme Court people looked for ways to accommodate. An opinion written by one person may very well include ideas from others. So the cases resolved in a fashion that, if you thought about it, usually made sense.”
“In practicing appellate law, my theory has been to figure out what is the more likely way a court is going to rule in your favor. There are lots of rules of the road. Like: You usually don’t raise sufficiency of evidence on appeal; you don’t say that the trial court was wrong in terms of interpreting what witnesses said or their credibility; and you don’t usually try to go against a trial court’s finding of fact. That just doesn’t work. But you do have to find some legal issues that are significant enough for the court; and you’ve got [to have] a good theory going for you. So you go back and look at some of the treatises, and figure out where the rule you’re talking about came from and why. Then you can start putting together an argument that you can make appealing to a court.”
“I also oversaw a lot of the legal work that was done (at the Colorado Attorney General’s Office), kept track of the cases that were controversial; and if the governor or secretary of state had a legal question, I was the person from the attorney general’s office who would go over and talk with them and work through it.”
“Q: You previously mentioned to me you would be retiring soon. Is this well-known in Colorado legal circles?
A: I’ve never done any kind of a formal announcement. A lot of people who see me know that I’m not taking on new cases—that I am either consulting or serving as an expert. I’ve done some reports for state agencies and things of that nature.”
http://www.superlawyers.com/colorado/article/Lone-Ranger/dce615f4-d7b2-4f82-853b-da8463e03a69.html
“You can make it appealing in the sense that they’re not going out on a limb in order to rule your way.”
http://blog.superlawyers.com/2012/04/judging-her-judicial-career-what-jean-dubofsky-learned-on-the-colorado-supreme-court.shtml
Dubofsky’s political activity:
“Boulder County District Attorney Stan Garnett officially announced his candidacy for the Democratic nomination for Colorado Attorney General Thursday and will challenge Suthers, the Republican incumbent.”
“Garnett’s announcement came with two endorsements: Boulder County Sheriff Joe Pelle and former Colorado Supreme Court Justice Jean Dubofsky.”
http://www.coloradostatesman.com/content/991745-dems-excited-about-garnetts-ag-candidacy
“And Garnett has his ducks in a row, with endorsements from incumbent prosecutor Mary Lacy and former state Supreme Court justice Jean Dubofsky.”
http://coloradoindependent.com/2330/boco-buzz-ch-ch-ch-changes-continue
Dubofsky on Romney: “. . . can’t be trusted to stand up for working families.”
http://coloradopols.com.lb.soapblox.net/main/50
(My comment: Hey Jean, we PERA members are “working families,” [at least we were prior to retirement]. Stand up for us!)
Dubofsky, public education advocate:
“Dear Governor Hickenlooper, Attorney General Suthers, and Members of the State Board of Education: As Colorado taxpayers and public education supporters, we ask you to stop wasting our tax dollars defending an indefensible school funding system. We ask that you take into consideration those whom you represent: the children, parents, businesses and citizens of Colorado who all depend on a quality public education system.”
“Please do not appeal the Lobato decision. Enforce it. Our children have already waited far too long for a school funding system that makes it possible for every child to succeed.”
“Jean Dubofsky,” (and hundreds of other Great education Colorado supporters.)
http://www.greateducation.org/wp-content/uploads/2011/12/dontappealletter010812.pdf
Dubofsky’s past role in evaluating the performance of Colorado judges (was she involved in the evaluation of any sitting Colorado judges?):
“Jean Dubofsky is a member of the state Judicial Performance Review Commission in Colorado. She was a justice on the Colorado Supreme Court from 1979 until 1987.”
http://ir.lawnet.fordham.edu
“She has also served on the state’s Commission on Judicial Performance; the Colorado Music Festival Board; the Commission on the Status of Women; the Judicial Performance Commission; Supreme Court Board of Continuing Legal and Judicial Education; and the Colorado ACLU Board of Directors.”
http://www.zoominfo.com/p/Jean-Dubofsky/27068562
Jean Dubofsky, in her efforts to protect the integrity of Colorado courts, and defend Colorado Supreme Court justices, tangled with the group Clear the Bench Colorado:
“The group I am a part of, Courts: No Place for Politics (www.courtsnoplaceforpolitics.org), has launched a long-term effort to educate the public about the value and integrity of Colorado’s system of judicial selection and retention.”
http://www.denverpost.com/opinion/ci_16401231
“ . . . Matt Arnold appeared on the Your Show television program (moderated by Adam Schrager), debating former Colorado Supreme Court justice (and current full-time activist) Jean Dubofsky, representing the “Colorado Judiciary Project” (a legal-establishment special-interest group formed by Democrat state party attorney and Mark Grueskin.”
http://www.clearthebenchcolorado.org/tag/devils-advocate/
Dubofsky, target of conservative criticism:
“Next, Jean Dubofsky, a former Supreme Court justice with a crafty legal mind and a penchant for legislating from the bench, proffered a clever legal strategy.”
“Dubofsky is no neutral observer. She’s a board member of the Colorado ACLU and two liberal think tanks that despise TABOR.”
http://m.rockymountainnews.com/news/2009/feb/25/hillman-dems-eye-another-end-run-on-voters/
Dubofsky harshly (unfairly?) criticized in Denver Post (comments) and in blogs. (Clear the Bench Colorado has directed criticism at her . . . I’m not going to reproduce all of their criticism here.)
“The integrity of the courts in persistently serving the interests of her clients and friends is Justice Dubofsky’s real concern.”
http://www.denverpost.com/opinion/ci_16401231
“Justice Dubofsky’s concern is less with preservation of the alleged integrity of our courts, which is demonstrably open to question, and more with continued control of appointments by special interests served by an inner circle of connected attorneys, including Justice Dubofsky. These attorneys ensure that no one who threatens those special interests will ever be appointed to the bench in Colorado.”
“Justice Dubofsky knows this, but she would rather fool you into thinking all will be well so long as she and her friends in the inner circle run the judiciary free from interference from the masses.”
http://brennanlawjustice.blogspot.com/search?q=Dubofsky#!/2010/10/of-judicial-retentiveness-which-is.html
“Former Colorado Supreme Court Justice Jean Dubofsky and Democratic Party lawyer (and one-time CEA lawyer) Mark Grueskin are forming a nonprofit group to educate voters about the judicial performance evaluation . . .”
http://www.clearthebenchcolorado.org/2010/05/10/former-colorado-supreme-court-justice-and-current-full-time-activist-jean-dubofsky-democrat-party-lawyer-mark-grueskin-roll-out-the-big-bucks-to-counter-clear-the-bench-colorado/
“Mark Grueskin, best known in education circles as a lawyer for the Colorado Education Association . . .”
http://www.ednewscolorado.org/news/capitol-news/gaming-bill-debated-delayed
Dubofsky’s involvement with Amendment 54:
“Speaking to reporters after the ruling, Mark Grueskin, who represented the unions in the suit, exhibited visible relief.”
“In arguing against the amendment (54), Grueskin was accompanied by Doug Friednash and former state Supreme Court Justice Jean Dubofsky.”
http://coloradoindependent.com/31997/unions-breathe-sigh-of-relief-as-judge-issues-amendment-54-injunction
As one might expect, Dubofsky and former Colorado PERA Board Chairman Casebolt are acquainted:
“Before the distinguished panel of Justice Allison Eid, former Justice Jean Dubofsky, and Judge James Casebolt, Director of the Moot Court Programs . . .”
http://lawweb.colorado.edu/news/showArticle.jsp?id=319
Dubofsky’s involvement in Colorado redistricting:
“She was also the lawyer that Colorado Democrats relied upon when they challenged a Republican-drawn redistricting map.”
Dubofsky said she was surprised to be selected (for a CU Football investigation).
“I thought I was too liberal,” she said.
http://m.rockymountainnews.com/news/2004/Feb/17/a-look-at-the-panel/
“Another well-known liberal figure, former supreme court Justice Jean Dubofsky . . .”
http://www.ednewscolorado.org/news/capitol-news/gaming-bill-debated-delayed
Dubofsky’s involvement with state spending limits:
“Morse, however, with the backing of a powerhouse legal team that includes former state Supreme Court justice Jean Dubofsky, reiterated that Arveschoug-Bird is not a spending limit and that a recent Supreme Court ruling provides precedent to that effect.”
http://coloradoindependent.com/22653/morses-6-percent-solution-budget-bill-clears-first-hurdle
Colorado PERA active members and retirees, four years have passed since Jean Dubofsky wrote her “COLA-taking” opinion for our Colorado PERA Board of Trustees. Perhaps she has had a change of heart in the interim? I challenge Jean Dubofsky to read all of the comments that have been posted to the site saveperacola.com, and upon completing this task, to determine if her legal opinion of 2009 remains supportable.
Colorado PERA active members and retirees, I challenge you to support the rule of law in Colorado, to contribute at saveperacola.com, and to Friend Save Pea Cola on Facebook!
HANK BROWN, FORMER U.S. SENATOR, SUPPORTS COLORADO’S BREACH OF PUBLIC PENSION CONTRACTS.
Hank, come on now. I am speechless (although, thankfully I can still type.) You support the breach of Colorado PERA retiree pension contracts? The Colorado Court of Appeals recently confirmed the contractual status of these PERA pension benefits. Given the fact that you are collecting a significant government pension yourself (one that has remained inviolate) I am surprised to see you out front on this issue. Did someone put you up to this?
Hank Brown is undeniably a talented man. He is a former U.S. Senator from Colorado, a former CU President, and a former President and CEO of the Daniel’s Fund. He has also provided honorable military service to our country. Let’s pause for a moment and acknowledge his achievements. (OK, moment’s up.)
Inexplicably, Hank Brown’s name appears on a recent article supporting the Colorado General Assembly’s 2010 breach of Colorado pensioner contracts. Hank, did you really write this article? (He might have, but I suspect that the proponents of the 2010 PERA contract breach put him up to it. Admittedly, this is pure speculation on my part . . . Hank, please correct me if I am wrong.) I suspect that the proponents of the 2010 PERA contract breach brought the idea to him, and he responded along the lines of “Sure, write something up for me and I’ll take a look at it.”
Now, Hank Brown has been well-compensated for his labor and talent. I as far as I know, Hank Brown has given away much of his life’s earnings to charity. (I really would not be surprised.) If this were true, I believe that it would significantly diminish the hypocrisy I observe in his support for the 2010 Colorado PERA “pension reforms.” It pains me (seriously!) to even use the word “hypocrisy” in the same sentence with the name of a man of such stature.
Hank Brown deserves every penny of the compensation he is due for services he has provided to his employers. But, even those blessed with less prodigious talents deserve to be paid the consideration due under their contracts. Even the “little guys” (retired Colorado snow plow drivers, prison guards, teachers, all middle class Colorado PERA retirees who are our friends and our neighbors) deserve to be paid what they are owed for work they performed in the past. The contracts of Colorado PERA retirees should be honored just as the contracts to which Hank Brown is a party are honored.
The Duke Chronicle on Hank Brown’s “$2.6 million” federal pension:
“Members of Congress rant and rave about government spending, but when it comes to their golden retirement pensions — somehow that doesn’t count.”
“On the Senate side, the Midas awards go to next year retirees: Sens. Sam Nunn, D-Ga., Bill Bradley, D-N.J., and Hank Brown, R-Colo., who will each collect estimated lifetime benefits in excess of $2.6 million.”
Link:
http://www.dukechronicle.com/articles/1996/01/11/congressional-pensions-out-touch-reality
Philanthropy News Digest (December 2, 2003) on Hank Brown’s “$400,000” salary at the Daniels Fund:
“Daniels Fund Cuts Spending, Staff”
“The Denver-based Daniels Fund, which was founded by the late Bill Daniels, a cable TV pioneer, has announced that it will shut its out-of-state offices and lay off about a third of its sixty-two-person staff in an effort to reduce operating costs, the Rocky Mountain News reports.”
“The board felt that our top priority should be helping the poor,” said CEO Hank Brown.
“Brown offered to take a reduction in his $400,000 salary before the layoffs were announced, but fund chairman John Saeman refused the offer, saying it was inappropriate.”
Link:
http://foundationcenter.org/pnd/news/story.jhtml?id=52000010
From the book: “Taking Philanthropy Seriously: Beyond Noble Intentions to Responsible Giving,” by William V. B. Damon:
“The fund was also accused of paying Brown an excessive salary and moving into a lavish new office building in Denver, just as it was supposedly trying to economize elsewhere (Goze 2004).”
Link:
http://books.google.com/books?id=4GmFOE1pWSgC&pg=PA57&lpg=PA57&dq=hank+brown+Daniels+fund+salary&source=bl&ots=rMUIJcxV7p&sig=Wtf74a33OUYIvxm6Cnm-9hvGtEs&hl=en&sa=X&ei=cGk_UbayJOjcyQG9i4Bw&ved=0CD4Q6AEwAjgK#v=onepage&q=hank%20brown%20Daniels%20fund%20salary&f=false
Excerpts from Hank Brown’s March 11, 2013 article on the 2010 PERA pension “reform”:
“Take the example of the tough choices made to shore up PERA, Colorado’s state pension system. After the economic downturn of 2008, there were serious concerns about PERA’s long term sustainability. In fact, PERA’s own projections indicated the fund would be exhausted by 2030.”
(My comment: The “choices” that the Colorado General Assembly made in enacting SB10-001 were not “tough choices.” The Colorado General Assembly took the easy way out. It was much simpler to attempt a breach of Colorado PERA retiree pension contracts [to fix a problem created by the Legislature’s chronic underfunding and mismanagement of the pension] than it was to ask voters for new revenue to meet the state’s contractual obligations. Hank, you write that PERA’s projections indicated that the fund would be exhausted by 2030. Well, of course the PERA pension fund will eventually be exhausted if the State of Colorado continues to underfund the pension . . . to skip annual required contributions recommended by PERA’s actuaries. I “project” that if I “underfund” my contractual mortgage obligations I will eventually encounter “foreclosure.”)
Back to Hank Brown’s PERA article:
“A bipartisan majority of the Colorado General Assembly had the courage to make a series of hard decisions and demanded tough sacrifices from public employees. Increased contributions from public employers were mandated. When permissible, increased contributions come from money otherwise available for employee wage increases. The legislature imposed a two-percent cap on cost-of-living adjustments and toughened age and service requirements. Republicans and Democrats alike recognized that decreasing future benefits alone would not adequately provide a long term solution. The legislature took the difficult and unpopular step of reducing cost-of-living adjustments for all employees, including current retirees.”
(My comment: Hank, perhaps you are unaware that this “bipartisan majority” [a three-vote majority in the House] was “encouraged” by 27 lobbyists. The “bipartisan majority” did NOT demand “tough sacrifices” from Colorado PERA-affiliated EMPLOYERS. As the legislative sponsors of SB10-001 and Colorado PERA administrators have acknowledged, PERA-affiliated employers [that is, those who legally owe the PERA pension debt] contributed a mere 10 percent of the SB10-001 “fix.” Reasonable?
Further, SB10-001’s age and service requirement changes did not apply to current employees. Such a PERA pension reform to “partially-vested” PERA contractual obligations would have constituted a “less drastic” change to PERA pension contracts than SB10-001’s breach of “fully-vested” statutory pension contracts.
Hank, FYI . . . your fellow Republicans during the 2010 SB10-001 Senate floor debate:
Senator Harvey, “We have made a commitment. We have a contract with current retirees. That is already in place.” “Reforms should be made for new hires.” “We do not have that commitment to new hires.”
Senator Spence, “The bill places an unfair burden on retirees.”
Senator Scheffel, “We are breaching our promises to existing retirees.”
Senator Lundberg, “This bill is a deal that was cut before this body met.”)
Back to Hank Brown’s PERA article:
“Through a little ‘Colorado Courage,’ policy makers ensured that PERA is on track to be fully funded and provide retirement security not just for today’s retirees, but for those beginning their careers in public service and those yet to be hired.”
(My comment: Is “Colorado Courage” a euphemism for “breach of contract”? I don’t believe that repudiation of one’s contractual obligations is “courageous.” Is there something about living out west that exempts us from the strictures of the U.S. Constitution? Where does that come from? Also, how does breaking the contracts of Colorado PERA retirees ensure their “retirement security”? I feel like having my pension benefits illegally seized by the state reduces my retirement security.)
“Hank Brown is senior counsel at Brownstein Hyatt Farber Schreck, LLP.”
Link to full article:
http://www.jdsupra.com/legalnews/congress-could-use-some-colorado-courag-87597/
Colorado PERA active and retired members, please forgive Hank Brown this (not so youthful) indiscretion. (I like the guy.) While you are forgiving him, please support Colorado public pension contractual rights and the rule of law in our exceptional state. Contribute at saveperacola.com. Finally, Friend Save Pera Cola on Facebook!
THE AUTHOR OF COLORADO PERA’S SB10-001 (COLA-TAKING) LEGAL OPINION IS AN EDUCATION ADVOCATE . . . A FORMER COLORADO SUPREME COURT JUSTICE.
In 2010, the Colorado General Assembly enacted legislation that attempts a retrospective taking of accrued public pension cost-of-living (COLA) benefits. The bill that proposes to claw back these contracted pension benefits from retirees was supported by Colorado’s pension administration arm, Colorado PERA. That bill, SB10-001, was also supported by Colorado’s public education establishment and teachers’ unions. In my opinion, the consensus of Colorado’s education establishment in 2010 was that a successful breach of Colorado PERA statutory COLA contracts would free up more money for public schools in the state and also limit the increases in Colorado PERA member contributions that were required to meet Colorado PERA unfunded pension liabilities.
Raising education funding is a worthy objective, but it should be accomplished through state and local government ballot issues, rather than through the breach of state pension contracts. The desired breach of Colorado PERA pensioner contracts was self-serving on the part of Colorado’s education establishment. Colorado PERA retirees were, in essence, considered a new source of funding for public school administrators and educators. If Colorado PERA retiree contracts could be broken, needed efforts to persuade Colorado voters to approve new education resources would be accordingly diminished.
Now, advocacy of public education is commendable. I am also an advocate of Colorado public education. Personally, I am willing to double (or triple!) the amount of support I provide through taxes to public education in Colorado. However, I will not support Colorado public education at all costs. I will not support the breach of Colorado’s contractual obligations, or violation of provisions of Colorado’s constitution, in order to garner new resources for education in our state.
In 2009, Colorado PERA officials told us that the Colorado PERA Board of Trustees had ordered a legal opinion that sought legal justification for the breach of Colorado PERA pension COLA statutory contracts.
On December 17, 2009, the Colorado General Assembly’s Joint Budget Committee (JBC) met with representatives of Colorado PERA. At that meeting, Colorado PERA’s General Counsel Greg Smith informed the JBC that Colorado PERA had hired an outside law firm to provide a legal opinion relating to Colorado PERA contractual pension obligations:
3:51 PM – Greg Smith – “We have obtained outside counsel’s opinion on this issue.”
This December 17 meeting is one of a number of instances in which Greg Smith has made reference to Colorado PERA’s “outside” legal opinion addressing Colorado PERA employer contractual public pension obligations. This “outside” legal opinion was the foundation of Colorado PERA’s SB10-001 legal, lobbying and political campaigns. It appears that the author of this “outside” Colorado PERA legal opinion is none other than former Colorado Supreme Court Justice and public education advocate Jean Dubofsky.
Former Colorado Supreme Court Justice Dubofsky notes on her resume that, at the request of Colorado PERA, she provided a legal opinion to PERA in 2009 arguing that the Colorado Legislature could legally take Colorado PERA retiree pension COLA benefits:
“at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights; and
Link to Jean Dubofsky’s resume:
http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf
Jean Dubofsky also notes in a deposition submitted to the Colorado PUC that she is the author of a legal opinion addressing the legality of reducing the PERA COLA benefit:
“My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”
(To access this document, paste “Colorado PUC E-filing system PERA legal opinion Jean Dubofsky” into Google.)
Why would the Colorado PERA Board of Trustees rely on a legal opinion relating to the contractual nature of public pension benefits from a law firm that does not specialize in public pension law? Yes, Jean Dubofsky is a talented attorney, but she has not spent a lifetime in employee benefits law.
For many years, Jean Dubofsky has been involved with advocacy for Colorado public education. Indeed, Jean Dubofsky is a founding member of an organization that provides Colorado public education advocacy:
“Former Colorado Supreme Court Justice Jean Dubofsky, a founding member and current chair of the Board of Directors of the Bell Policy Center . . .”
Link:
http://bellpolicy.org/taxonomy/term/1742
The Bell Policy Center advocates on behalf of public education in Colorado:
“To make Colorado a land of opportunity for all in the 21st Century, we have to start with education. Our top priority must be preparing our kids to be good citizens and to compete and prosper in a global economy.”
Link:
http://bellpolicy.org/node/12
Jean Dubofsky:
“There are a couple of public policy groups in Denver – one called the Bell Policy Center, of which I was one of the founding members. It was designed to develop policies that were more progressive for state legislators and local government in the state. They’re still doing it.”
“They do an annual report, and then they work on a lot of legislation and draft a lot of legislation.”
“The other group is the Center on Law and Policy, and it was an outgrowth of the legal services work that I had done before the legislature – taking clients to the legislature and trying to get bills passed.”
http://bellpolicy.org/content/jean-dubofsky-public-policy-groups-matter
“Bell also tracks state legislation affecting K-12 and higher education. For more information, visit our Education issues page.”
https://bellpolicy.org/content/about
“We concentrate on issues affecting educational opportunity, economic opportunity, and health status.”
“Every child should have the opportunity to attend a quality public school.”
https://bellpolicy.org/content/frequently-asked-questions
“Colorado now spends less (on K-12 education) than the national average per pupil.”
“What more should Colorado do?” “Ballot questions: The passage of Referendum C in 2005 is expected to bring approximately $1 billion more into the public schools by 2010 and to raise overall school funding by at least $250 million a year after that.”
http://www.bellpolicy.org/PUBS/annual/2005/G3Literacy.pdf
“The Daily Sentinel reports on the Bell’s outreach tour in 2005 in support of Referenda C and D.”
http://bellpolicy.org/taxonomy/term/215?page=6
“To remedy that situation, the Denver-based Bell center has begun a statewide effort to convince voters to support Referendums C and D on this November’s ballot.”
“Referendum C asks voters to lift temporarily the TABOR revenue limits on the state budget — as is allowed under TABOR — and use that additional money for health care, public education and higher education and transportation projects.”
“Bell is engaged in an admirable undertaking to educate people about the critical impacts that will occur if Referendums C and D aren’t passed.”
http://bellpolicy.org/sites/default/files/PUBS/coverage/2005/05SentinelRefCedit.pdf
“Both efforts reflect our interest in and concern about education – especially Colorado’s poor record getting low income and minority kids to graduate from high school or enter and complete college.”
http://www.thebell.org/PUBS/comment/2005/12Agenda2006.pdf
Of the 27 lobbyists who supported SB10-001 in 2010, 15 lobbyists represented the educational establishment, and six of the lobbyists were paid directly by Colorado PERA.
Link to the Colorado Secretary of State’s Directory of Lobbyists by Bill for SB10-001:
http://www.sos.state.co.us/lobby/SubjectSearchResults.do?&cmd=passgo&pi1=1
“. . . the well-staffed higher education lobby is sure to be involved in this issue as well.” “All that lobbying power will be focused on 100 legislators . . .”
Link:
http://statebillnews.com/2009/10/pera-woes-loom-large-for-education/
Jean Dubofsky also has a long history of representing the interests of Colorado PERA. Thirty-eight years ago Dubofsky represented Colorado PERA as Deputy Colorado Attorney General in the case Taylor v. PERA. The case was decided by the Colorado Supreme Court on November 17, 1975. In their decision, the Colorado Supreme Court recognized Colorado PERA pension benefits as “vested rights,” and held that any ambiguities in Colorado public pension statutes are to be construed favorably toward the employee member of the pension system. Here are a few excerpts from Taylor v. PERA:
“Prior Colorado cases were cited with approval, defining a retrospective act as one ‘. . . which takes away or impairs vested rights acquired under existing laws, or creates a new obligation . . . .’”
“There is no question that the retirement benefits payable to petitioner are a ‘vested right of which [she] cannot be deprived,’” (citing McPhail and Bills).
“We disagree with the view that these cases were based on the outdated rationale that government employee pensions are a gift, subject to whatever changes the lawmaker decides to make, rather than a right which becomes vested at the time of retirement.”
“Moreover, the fact that petitioner had certain pension rights at the time of retirement, in no way precludes post-retirement pension changes which increase rather than decrease benefits received thereunder.”
“In McPhail, supra, we stated that ‘. . . changes may be made in the pension system looking to strengthening and bettering it . . .’ as long as the vested rights of pensioners are not abridged or weakened.”
“As was noted in Endsley v. Public Employees’ Retirement Association, 33 Colo.App. 416, 520 P.2d 1063 (1974), ambiguities appearing in statutes regulating pension and retirement funds are construed favorably toward the employee.”
Here are a few links to the case, Taylor v. PERA:
http://scholar.google.com/scholar_case?case=11856628789716288634&q=Jean+Dubofsky+Colorado+PERA&hl=en&as_sdt=2,6
http://www.leagle.com/xmlResult.aspx?xmldoc=1975925542P2d383_1915.xml&docbase=CSLWAR1-1950-1985
I also noticed that the defendants in the case Justus v. State copied a Motion to Dismiss the case to Dubofsky’s law firm in Boulder on June 23, 2010:
Link:
http://saveperacola.files.wordpress.com/2011/04/2010-06-23-state-defs-reply-in-support-of-motion-to-dismiss1.pdf
In addition to her connections to the Bell Policy Center, Dubofsky is a former President, and current board member of the Colorado Center for Law and Policy:
http://www.cogreatwomen.org/dubofsky.htm
http://www.cclponline.org/who_we_are/page/board-of-directors
I recognize that former Colorado Supreme Court Justice Dubofsky has provided admirable service to the State of Colorado. However, in my opinion Colorado governments and public policy advocacy groups should direct their efforts to raising the funds necessary to adequately fund public services in our state, including public education. The repudiation of Colorado’s contractual pension obligations is not supportable.
Colorado PERA active and retired members, defend your contractual public pension rights and the rule of law in Colorado. Contribute at saveperacola.com, and Friend Save Pera Cola on Facebook!
LOBBYING FOR THE 2010 COLORADO PERA DEBT SHIFT . . . AN EASY TARGET, AN EASY FIX.
The State of Colorado and many Colorado local governments require that their workers participate in a public pension system, Colorado PERA. Every month, these workers (as a condition of employment) pay into the Colorado PERA pension. In exchange for the worker’s labor and contributions to the pension over the course of their careers, the employers assume a contractual obligation to pay the workers a defined financial benefit in retirement. This contractual obligation is Colorado’s public pension debt.
The public pension debt is a legal obligation of the pension system, Colorado PERA and PERA’s affiliated state and local government employers, but the PERA-affiliated employers have decided that they do not want to pay their debts. So, in 2010, PERA employers conspired to try and escape their debts with a contrivance. First, they claim that one aspect of the pension debt they owe is not actually their contractual obligation . . . annual PERA retiree cost-of-living adjustments (COLA). However, establishing this claim is complicated by the fact that Colorado PERA officials, and Colorado courts have maintained for decades (before PERA hit upon this contrivance) that the COLA benefit is indeed their contractual public pension obligation. How could it be otherwise? If the PERA COLA benefits were not a contractual obligation they would necessarily be a “gift” for the private benefit of a few, and thus illegal under Colorado’s Constitution.
The COLA benefit is part of a Colorado PERA member’s earned, accrued, deferred compensation under the Colorado PERA pension system. In my opinion, when we hear Colorado PERA officials make the (convenient) argument that the COLA benefit is not contractual, we are hearing self-serving fiction. Colorado PERA officials and the sponsors of SB10-001 have acknowledged many times that, under the provisions of their bill SB10-001, the organizations that legally owe the debt (the PERA employers) contribute only ten percent of the cost of the solution the bill proposes. Funny how it worked out that way!
Second, Colorado PERA and its affiliated employers claim that, even if the COLA benefit IS their contractual obligation, they were forced to repudiate it in 2010 since Colorado PERA’s volatile pension assets were diminished in the most recent U.S. stock market decline (that is, prior to the market’s doubling.) The legal term for the argument Colorado PERA officials are trying to make is “actuarial necessity.” The argument they make is that the breach of the Colorado PERA pensioner’s COLA contracts was “actuarially necessary.” However, Colorado PERA and its affiliated governmental employers had many other legal, “less drastic,” prospective pension reform options available. It was just “easier” for them to push the debt off onto Colorado PERA retirees.
“When the PERA representatives (including Executive Director Meredith Williams) were asked by a member of the (Senate Finance) committee why in view of the fact that PERA had only been funded at 100 percent for about seven of the past thirty years (my comment, actually two of the last forty years), it was necessary now. The answer was ‘it just makes things easier.’”
Here’s the link:
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf
In my opinion, Colorado PERA officials believed that PERA retirees would not aggressively defend their contractual pension rights. After all, many of the retirees are elderly, preoccupied, uninformed, sick, in hospital . . . unrepresented at the Colorado Capitol. In short, an easy target . . . an easy fix.
The proponents of the bill, SB10-001, advance the “actuarial necessity” argument in spite of the fact that the Colorado General Assembly is primarily responsible for the decline in the PERA pension assets (trust funds.) The Colorado General Assembly has enacted public policies that brought about the decline in the PERA trust funds. In the last decade, the Colorado General Assembly has failed to make its required contributions to the pension (according to Colorado PERA officials and Colorado PERA’s own actuaries). The Colorado General Assembly also enacted policies that drove up the PERA pension debt. Now, we see the author of the most recent downturn in the value of Colorado PERA’s assets attempting to compensate for past pension mismanagement with a debt shift. I’m confident that, prior to seeking public office, Colorado legislators who supported SB10-001, believed they would be “different.” They would not be the stereotypical “politician” . . . cutting ethical corners for “the easy fix.” But, how has it turned out?
So, the proponents of the bill, SB10-001 pursue an easy means by which they can escape their debts, i.e., “actuarial necessity,” but how can they make the case for “actuarial necessity” when Colorado PERA’s Executive Director maintains that there is no legal basis for applying “actuarial necessity” to the facts of the recent downturn in Colorado PERA’s assets?
Press reports document that the legal research of Colorado PERA’s Executive Director (formerly General Counsel), Greg Smith has found that “actuarial necessity” occurs only when public pension plans are so broke that they cannot pay current retiree benefits. On February 21, 2004, Rocky Mountain News journalist David Milstead reported Greg Smith’s description of his legal research as follows:
“PERA general counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that’s not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.”
Greg Smith elaborates:
“In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” “And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.”
Link:
http://www.copera.org/pera/about/listeningtour.htm
Further, Colorado PERA officials have assured us on many occasions that they DO have plenty of cash on hand to pay PERA retiree benefits for decades to come. Here is just one example (from the August 11, 2009 Colorado PERA Denver “Listening Tour”):
Colorado PERA Board Trustee Casebolt assured PERA retirees present at the meeting that: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”
Prior to moving forward with the SB10-001 debt shift scheme, did Greg Smith inform all of the members of the SB10-001 lobbying troop that he was the author of legal research that found “actuarial necessity” applicable only when public pension plans are completely out of money and unable to pay current retiree benefits? In my opinion, this was pretty important information for the SB10-001 lobbyists to have.
Last September, I posted a list of lobbyists who supported the bill, SB10-001. I took that list of SB10-001 lobbyists from a secondary source rather than directly from the website of the Colorado Secretary of State (SOS). That list included the names of 17 statehouse lobbyists who supported the enactment of SB10-001. Well, I should have just gone to the official source of the information, the SOS website. Yesterday, I checked the lobbying records on the SOS website and learned that there were actually 27 lobbyists reporting that they supported SB10-001 . . . the number of SB10-001 lobbyists is blossoming like a 2013 Colorado PERA portfolio!
This number of lobbyists, 27, constitutes one SB10-001 lobbyist for every four members of the Colorado General Assembly. That is pretty thorough coverage. In 2009, Colorado PERA and its affiliates knew that it would take an overwhelming lobbying force, a lobbying juggernaut, to overcome opposition to breaking state contracts. Even with 27 lobbyists, they just barely managed to pull it off. A switch of just three votes in the Colorado House and SB10-001 would have died on the vine. This narrow “victory” demonstrates the reluctance of many Colorado legislators to break state contracts, in particular the reluctance of legislators who stated in legislative debate, “We should not break state contracts.”
Of the 27 SB10-001 lobbyists, it appears that six of the lobbyists were paid directly by Colorado PERA. Fifteen lobbyists represented the educational establishment. Two represented Boulder County. Two represented Colorado Concern (a business organization), and two represented the Special District Association of Colorado.
Of the 27 SB10-001 lobbyists, it looks like 25 represent Colorado PERA or Colorado PERA-affiliated employers. Remember, Colorado PERA-affiliated employers are the organizations that actually owe the Colorado PERA pension debt. Note that Colorado PERA retirees have fully-vested public pension contractual rights. Under their statutory public pension contracts the Colorado PERA pension debt is the obligation of Colorado state and local governments. This debt is not the legal obligation of Colorado PERA retirees.
A 2009 article in the publication “State Bill Colorado,” addressed the initial recruitment of the PERA lobbying troop:
“PERA is ‘obviously gearing up for some heavy-duty lobbying, one observer noted. The agency has hired two lobbyists from the firm Colorado Communique, Collon Kennedy and Steve Adams, former president of the Colorado AFL-CIO. The pension system also has hired Mary Alice Mandarich, a well-connected Democratic lobbyist who formerly was chief of staff for Senate Democrats and who worked on campaigns for former Senate President Joan Fitz-Gerald, former Gov. Roy Romer and gubernatorial candidate Gail Schoettler. Coalition members have their own lobbyists, and the well-staffed higher education lobby is sure to be involved in this issue as well.” “All that lobbying power will be focused on 100 legislators . . .”
Link:
http://statebillnews.com/2009/10/pera-woes-loom-large-for-education/
A Colorado PERA Board member has disclosed that the Colorado PERA Board of Directors allocates up to $400,000 of the PERA member’s trust fund assets each year for the purposes of lobbying. Is $400,000 for lobbying a good investment on the part of the PERA Board? Perhaps some members of the Colorado General Assembly are swayed by such aggressive lobbying. Representative Jack Pommer, Chairman of the Colorado Legislature’s Joint Budget Committee, and co-sponsor of SB10-001 told us, in a moment of candor, “we react to the people who lobby the hardest.” He made this statement on April 30, 2010, (during the same legislative session at which he supported the breach of Colorado PERA pensioner contracts.) Rep. Pommer’s statement is available at this link:
http://www.cochamber.com/legislative/pdf/CACI%20Capitol%20Report_April%2030.htm#Pommer
In my opinion, if Colorado PERA is going to use their member’s trust fund assets to pay for lobbyists, those assets should be used to protect the rights of the PERA members and retirees, and not to break their pension contracts.
For the record, I place most of the blame for this SB10-001 “pension reform” legal fiasco on Colorado PERA officials and the boards of directors of PERA-affiliated employers. The 27 lobbyists received their marching orders from the boards of directors . . . lobbyists, try to use this latest market downturn as an excuse to cut our debt!
In my opinion, the Colorado PERA-affiliated employers didn’t see much downside risk. If Colorado courts sanction the breach of Colorado PERA retiree contracts, their future pension obligations will be slashed. If Colorado courts strike down the bill, SB10-001, their legal pension obligations will be unaltered, and the Colorado courts will be “the bad guys.” What’s to lose?
The 27 SB10-001 Lobbyists:
1. Michael Beasley – Colorado PERA – supporting
5280 Strategies (Beasley) – Colorado PERA – supporting
2. Beth C. Minahan – Colorado PERA – supporting
3. Collon Kennedy – Colorado PERA – supporting
4. Steve Adams – Colorado PERA – supporting
Colorado Communique, Inc. (Minahan, Kennedy, Adams) – Colorado PERA – supporting
5. Mary Alice Mandarich – Colorado PERA – supporting
6. Roberta Robinette – Colorado PERA – supporting
7. Aponte and Busam – Pikes Peak Education Alliance – supporting
8. Edward Bowditch – Jefferson County School District – supporting
9. Bruce Caughey – Colorado Association of School Executives – supporting
10. Antoinette Salazar – Colorado Association of School Executives – supporting
11. Jane Urschel – Colorado Association of School Boards – supporting
12. Julie George – Colorado Association of School Boards – supporting
13. Dan Daly – Colorado Education Association – supporting
14. Soloman Malick – American Federation of Teachers Colorado – supporting
15. Amy Redfern – Pikes Peak Education Alliance – supporting
16. Anthony Salazar – Colorado Education Association – supporting
17. Julie Whitacre – Colorado Education Association – supporting
18. Karen Wick – Colorado Education Association –supporting
19. Paula Stephenson – Colorado Rural Schools Caucus – supporting
20. Megan Davis – Boulder County – supporting
21. Mark Ruzzin – Boulder County – (former Boulder Mayor) supporting
22. Tanya Kelly-Bowry – Boulder Valley School District – supporting
TKB Consulting, LLC (Bowry) – Boulder Valley School District – supporting
23. Terry Campbell – Association of Colorado State Patrol Professionals – supporting
24. Evan Goulding – Special District Association of Colorado
25. Ann Terry – Special District Association of Colorado ((http://www.sdaco.org/, “SDA has nearly 1,300 special district members and over 150 associate members.”) – supporting
26. Peter Kirchhof – Colorado Concern – supporting
27. Janice Sinden – Colorado Concern – supporting – (http://www.coloradoconcern.com/, Colorado Concern is a business organization. Denver Mayor Hancock has selected Janice Sinden to be his Chief of Staff.)
Link to the Colorado Secretary of State’s Directory of Lobbyists by Bill for SB10-001:
http://www.sos.state.co.us/lobby/SubjectSearchResults.do?&cmd=passgo&pi1=1
Other organizations that supported SB 10-001 are not represented in the list of lobbyists above. Colorado PERA Executive Director (at the time) Meredith Williams recorded the names of these organizations on Colorado PERA’s website:
“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”
http://www.copera.org/pera/about/ask.htm
Attention active and retired Colorado PERA members! Check in over at saveperacola.com. They could use your help in defending your PERA pension contracts. Their efforts are preventing your PERA pension contract from becoming worthless. If the State of Colorado succeeds in breaking your pension contract once, you can bet your bottom dollar that they will do it again . . . and again. (Also, note that your bottom dollar is all that will remain in your wallet.) Yes, we are in the Wild West, but this does not mean we relinquish our rights under the U.S. Constitution! Contribute to the legal defense of our public pension contracts! And, “Friend” Save Pera Cola on Facebook!
Public pension fund conference in Hawaii draws boycotts
http://news.yahoo.com/public-pension-fund-conference-hawaii-draws-boycotts-172725694–sector.html
Excerpt from above article:
“Budget cuts and austerity may be on the agenda when public pension fund officials hold their annual conference in May, but delegates will be able to take some comfort from their surroundings on the palm-fringed beaches of Waikiki.”
I wonder how many Colorado PERA executives and trustees will be attending this conference held in a luxury resort?
PENNSYLVANIA GOVERNOR CORBETT: “NO CUTS TO ANY RETIREE BENEFITS. THEY EARNED THEIR RETIREMENT. THEY EARNED THEIR GUARANTEED SECURITY.”
In Pennsylvania, we see respect for state contracts. In Colorado, we see a duplicitous, deceptive, immoral, and illegal attempt to push state debts onto elderly pensioners. This attempt has diminished the State of Colorado.
I’m sure that you have all heard by now, the State of Colorado is trying to break its contracts . . . escape its legal public pension obligations. In 2010, the Colorado Legislature passed a bill that proposes to take back accrued, earned, contracted, deferred compensation from public pensioners in the state. The bill, SB10-001, proposes to shift the debt of Colorado state and local governments onto the backs of Colorado retirees. In 2010, a group of union and corporate lobbyists colluded to persuade Colorado legislators to make the attempt to escape contractual public pension obligations. It’s one thing to change a discretionary benefit. Breaking contractual obligations is another thing entirely.
I also find it strange that the PRIMARY option considered by the Colorado General Assembly in 2010 to shore up the Colorado PERA pension was to take money from pensioners. Colorado PERA officials have admitted that this breach of Colorado PERA pension contracts accounts for 90 percent of the cost savings in their bill, SB10-001.
It’s odd that the Colorado General Assembly would look first to breaking retiree pension contracts, particularly when one learns that Colorado state and local governments dedicate a smaller percentage of their budgets to support public pension obligations than is the case in most states. Even though Colorado has put forth the minimum effort to support its public pensions historically, representatives of the State of Colorado claim that they want to be the first in the nation to break those public pension contracts. This is not good faith and fair dealing on the part of the State of Colorado.
Jennifer Paquette, Colorado PERA’s Chief Investment Officer, wrote in the Denver Post on May 22, 2011:
“In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.”
Link:
http://www.denverpost.com/headlines/ci_18100068
In 2010, a majority of the Colorado Legislature and Governor Ritter decided to try and hoodwink Colorado courts into believing that the 69 percent Colorado PERA actuarial funded ratio that year was some sort of “crisis” that necessitated the breach of contracts by Colorado governments. Why would they attempt this deception? Even Colorado’s former Governor Richard Lamm has observed that a Colorado PERA unfunded liability as low as 54.7 percent is not a “crisis.”
From the Silver and Gold Record’s coverage of Colorado Treasurer Mike Coffman’s 2005 PERA commission hearings:
“One attendee asked if there was any similar controversy in the 1970s, when PERA’s unfunded liability went as low as 54.7 percent. (Colorado PERA Executive Director) Williams said former Gov. Richard Lamm, who co-chaired the PERA commission, made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level. Williams compared the unfunded liability to having a mortgage, and asked how many people have enough money on hand at any one time to pay off all or even half of their mortgages.”
Link:
https://www.cu.edu/sg/messages/5245.html
Arguing that the Colorado PERA pension system is in a “crisis” because Colorado PERA cannot pay off 100 percent of contracted benefits immediately is like saying every homeowner in the United States is broke because they can’t pay off the entire amount of their 30 year mortgage right now. It is an absurd argument.
Pennsylvania’s Governor considers such attempts to break state contracts immoral, and a waste of millions of taxpayer dollars on fruitless lawsuits. He proposes that the State of Pennsylvania honor its current public pension debts to retirees, (as well as accrued pension benefits of current employees.) The Governor proposes that the rate at which current employees accrue public pension benefits going forward be reduced. This is essentially a proposal made by Professor Amy Monahan of the University of Minnesota School of Law. While the Pennsylvania Governor’s proposal is controversial, it is also admirable in that it does not attempt to deny the state’s existing public pension debt. It is clearly “less drastic” than Colorado’s attempt to break fully-vested public sector retiree pension contracts.
Here are a few excerpts from Pennsylvania Governor Tom Corbett’s recent 2013 State of the State address:
“Resolving our pension crisis will be the single most important thing we do for decades to come. I will not allow any cuts to any benefits of our retirees.”
“Let me repeat that: no cuts to any retiree benefits. They earned their retirement. They earned their guaranteed security.”
“Nor will I allow any pension dollars already earned by any current employee to be diminished in any way.”
Link:
http://www.governing.com/news/state/pennsylvania-corbett-2013-speech.html
Nor, will U.S. courts allow state and local governments to abandon their contractual obligations . . . particularly if other “less drastic” alternatives to contract breach are available to those state and local governments. Dozens of “less drastic” alternatives to public pension contract breach have been documented at saveperacola.com. The U.S. Supreme Court has found that: “If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . (U.S. Trust.)”
Here are a few excerpts from a PennLive.com editorial suggesting yet another “less drastic” alternative to public pension contract breach:
“As discussed in last week’s PennLive editorial, Pennsylvania faces unfunded public sector pension obligations of $41 billion. And proposals are proliferating to reform pension parameters in ways which are likely to face protracted legal challenges.”
“Apparently, we will be tied in binding budgetary and legal knots for many years to come. Could it be otherwise? Might someone undo the knot, as in the Gordian legend?”
“Perhaps Pennsylvania should start acting as the energy-rich state that it has become. Thanks to the thousands of Marcellus shale wells, and the expected growth of such activities, the state could obtain resource royalty revenue, if a bold policy pivot can be accomplished.”
“Other energy-rich states realize sizeable revenue streams from royalty fees on oil and natural gas; our closest competitor, West Virginia, imposes a 6.1% effective royalty rate. Other states such as Texas, Oklahoma, North Dakota, and Alaska, all receive significant royalty revenue. Pennsylvania is truly exceptional in its forgoing of such revenue.”
(My comment: How do royalty fees on oil and natural gas in Colorado compare to West Virginia’s 6.1 percent fee level? My guess is that another “less drastic” alternative to Colorado’s pension contract breach will be found here.)
“Last year, Pennsylvania opted for an impact fee structure on natural gas which brings in significantly less tax revenue, than a volume based royalty.”
Link to the PennLive.com article:
http://www.pennlive.com/opinion/index.ssf/2013/03/op-ed_leveraging_marcellus_shale_to_pay_for_pension_reform.html
Here’s a thought. Instead of our elaborate charades in Colorado, why don’t we just pay our public pension debt? A Boston College Center for Retirement Research paper notes that even when we consider the most recent downturn in U.S. equity markets, state and local governments could meet their contractual public pension obligations with a reasonable increase in pension contributions:
“While the impact of the financial crisis on state and local pensions will likely require spending to increase, the most recent studies find that the share of state and local budgets dedicated to pension contributions would likely need to rise to about five percent on average, and to about eight to 10 percent for those with the most seriously underfunded plans. (Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby, “The Impact of Public Pensions on State and Local Budgets,” Center for Retirement Research, October 2010).”
If you are also sick of the charades, contribute to saveperacola.com. (Their website explains the process.) Support the sanctity of contracts in the United States. We are not a Banana Republic! Also, Save Pera Cola has a Facebook page, “Friend” Save Pera Cola!
COLORADO PERA: GIVE IT UP ALREADY, THE COLA IS A CONTRACT!
Three years ago, the Colorado Legislature and its pension administrator Colorado PERA hit upon the idea of reducing state debt by taking back accrued public pension “COLA” (cost-of-living) benefits from retirees in the pension. They retroactively seized these accrued pension benefits in a bill, SB10-001.
The members of the Colorado PERA pension whose COLA benefits were taken (PERA retirees) claim that the State of Colorado broke their pension contracts, and they’re fighting the taking of their COLA benefits in court. But, the people who actually owe the money due under the contracts (the State of Colorado, Colorado PERA and its affiliates) can’t make up their minds on the subject of the PERA contract breach. They claim that the pension COLA benefits ARE their contractual obligation, AND they claim that the pension COLA benefits ARE NOT their contractual obligation.
Such extreme cognitive dissonance must certainly result in great discomfort. I imagine that it is very disconcerting to Colorado PERA’s SB10-001 Legal Defense Colossus . . . composed of a group of capable in-house Colorado PERA attorneys, the external high-powered law firm paid to help take the COLA benefit, AND the gifted lawyers of the Colorado Attorney General’s Office. The Colorado PERA SB10-001 legal defense team is truly colossal!
However, it is unfortunate for the Colorado PERA SB10-001 Legal Defense Colossus that their client (Colorado PERA) has so resoundingly contradicted the Colossus’ theory of the law case . . . and in writing submitted to the Colorado General Assembly no less! This must be quite uncomfortable.
But, does this seem fair to you? In one corner we have the Colorado PERA SB10-001 legal defense team with access to boundless Colorado taxpayer litigation dollars AND, incredibly, Colorado PERA retiree trust funds! In the opposite corner we have some elderly, not-particularly-wealthy, retired public workers who humbly ask for what they are owed. (I know . . . life’s not fair.)
Fortunately, Colorado courts have staved off Goliath’s earlier attempts to seize accrued public pension benefits. For half a century, Colorado courts have held that public pension benefits ARE contractual obligations of Colorado public pension plan sponsors. This makes sense . . . otherwise, Colorado’s public pension benefits would be illegal “gifts” under Colorado’s Constitution.
PROPONENTS OF BREAKING COLORADO PERA CONTRACTS BEFORE THE BREACH, “THE PERA COLA IS A CONTRACTUAL OBLIGATION.”
Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
Link:
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
Greg Smith, Colorado PERA General Counsel, (at the time) in the Denver Post, November, 30, 2008: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”
Link:
http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly
Senator Josh Penry, co-prime sponsor, SB10-001 appearing on Your Show, Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on January 10, 2010 at 10:30 a.m.:
“What the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity.”
Legal Brief of Colorado PERA General Counsel (at the time) Greg Smith, as described by a Rocky Mountain News reporter on August 17, 2005:
“His briefing paper said ‘there has never been a finding in Colorado that the state has reserved its power to make changes’ in PERA’s benefit structure.”
PROPONENTS OF BREAKING COLORADO PERA CONTRACTS AFTER THE BREACH, “THE PERA COLA IS NOT A CONTRACTUAL OBLIGATION.”
Adam Franklin, Senior Staff Attorney, Colorado PERA, April 5, 2011 (as documented by the organization Friends of PERA):
“PERA believes that the COLA formula is not contractual.”
Link:
http://www.friendsofpera.com/0405meeting.pdf
Attorney General John Suthers in testimony to the Colorado Legislature’s Joint Budget Committee on December 4, 2012:
“We’re appealing because we believe there was no contractual right (to the PERA COLA.)”
In my opinion, what our esteemed Attorney General really meant to say is (no offense intended John): “We’re appealing because we WISH there was no contractual right to the PERA COLA.”
Colorado courts have correctly determined that Colorado public pension benefits (including public pension COLA benefits) ARE contractual obligations. They arrive at this conclusion rationally, based on a contract analysis. This is the legitimate test for the contractual nature of public pension benefits. But, even the legislative history of the Colorado PERA COLA benefit makes it clear that the COLA benefit is a contractual obligation.
In 2000, the Colorado General Assembly enacted legislation to set the Colorado PERA COLA benefit at a flat 3.5 percent rate. Colorado PERA describes this change in their publication “History of Colorado PERA Legislation” as follows:
“2000, HB 00-1458: Established 3.5% compounded annual automatic COLA effective March 2001.”
Link:
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true
Now, it would be rather difficult for Colorado PERA administrators to deny that the “legislative history” of the PERA COLA benefit establishes the PERA COLA benefit as contractual. Particularly, after we learn that these Colorado PERA administrators describe the PERA COLA benefit as “automatic” in their own publication setting forth the “History” of “Colorado PERA Legislation.”
Colorado PERA administrators use the word “automatic” in their publication to describe the PERA COLA since “automatic” pension COLA benefits may not legally be diminished by public pension plan sponsors. Pension COLA benefits that may be legally diminished by public pension plan sponsors are known as “ad hoc” COLA benefits. Colorado PERA’s administrators are well aware of this fact. (I suspect that they would prefer that PERA retirees defending their pension contracts were not well aware of the fact.)
As we have seen, in 2004, in another bill, the General Assembly “grandfathered” in past PERA members at the 3.5 percent COLA level enacted earlier in 2000. Going forward, into 2005 and beyond, new PERA members were granted a COLA of the lesser of 3 percent or inflation. If the Colorado PERA COLA of 3.5 percent enacted in the bill, HB 00-1458, was not an “automatic,” “guaranteed,” “fixed,” “contracted” COLA benefit, then why would the Legislature have bothered with “grandfathering” in 2004? Answer: They would not have bothered. They would have simply reduced the PERA COLA across the board as state legislatures do if their state has an “ad hoc” COLA benefit. This change made to the Colorado PERA statutory contract in 2004 was legal, because it was “PROSPECTIVE,” it did not impair existing contracts.
Public pension benefits may be legally reduced for future members of pension plans without impairing contracts. Public pension benefits may also be legally improved for current members of pension plans without impinging on their contractual rights. On the other hand, changes to public pension statutory contracts that diminish contracted benefits (e.g., the COLA provisions of SB10-001) are indeed unconstitutional . . . such changes take earned, accrued, deferred compensation.
Even earlier, back in 1993, the Colorado PERA COLA benefit was IMPROVED to “the lesser of 3.5 percent or inflation.” This 1993 bill, HB93-1324, also struck the “ad hoc” language from Colorado law whereby the General Assembly reserved the right to approve COLAs before they were paid. HB 93-1324 struck the following language from the PERA statutes “COLA increases shall be made only on approval of the General Assembly.” Consequently, the discretion of the Colorado General Assembly to diminish the PERA COLA benefit for vested PERA members was eliminated.
On March 24, 1993 (1:32 PM – 2:28 PM) the House Finance Committee of the Colorado General Assembly heard House Bill 93-1324, i.e., the bill that made the 1993 improvement in the PERA COLA. The testimony given at this meeting and the responses of the members of the House Finance Committee make it clear that the PERA COLA benefit they are putting into Colorado law is a contractual obligation of Colorado PERA and its affiliated public employers.
If you listen to the recording of this meeting, you will hear a member of the House Finance Committee refer to the Colorado PERA COLA provision under consideration as a pension benefit that is “guaranteed,” “now and in the future.” This House Finance Committee member made certain that all of her colleagues were on the same page . . . the new, automatic PERA COLA benefit was “guaranteed” into the future for Colorado PERA retirees.
You will hear the Chairman of the House Finance Committee, Representative Martin, tell the committee that the proposed PERA COLA benefit had been “unanimously approved by the PERA Board.” Rep. Martin added: “I think this is a reasonable approach.”
You will hear Rob Gray, PERA’s Director of Government Relations, tell the committee: “The PERA Board does support this bill.” “We felt like it is something that is good pension policy . . . that it makes sense . . . THAT IT IS MAKING PERMANENT CHANGES, and also that it does help employers which is one of the goals of the bill.”
In 1993, the Colorado PERA Board of Trustees and the Colorado General Assembly were concerned that the existing “ad hoc” PERA COLA provisions could lead to the payment of higher pension COLA rates to retirees in the future, if inflation accelerated. Ironically, at the time, they believed that the proposed PERA COLA, at a predetermined, fixed level, was a good deal for Colorado PERA-affiliated employers, even though the PERA COLA would become “automatic.” Note that even when this “automatic” PERA pension COLA was put into Colorado law in 1993, the primary concern was limiting Colorado PERA employer contributions.
Rob Gray continued: “The (CPI up to) 3.5 percent increase is a reasonable level.” “It will probably come close to what the long-term inflation rate is.” (SB10-001’s illegal 2 percent COLA provision seeks to inflate away Colorado PERA-affiliated employer pension debt. The official Colorado PERA inflation assumption is 3.75 percent.)
Significantly, the Colorado PERA representative, Rob Gray, pointed out an advantage of the proposed “automatic” PERA COLA. According to Rob Gray, the advantage of the proposed COLA: “is that it adds predictability for current and future retirees, people looking at leaving might look at this and say now I know how my future increases are going to be determined . . .”.
Here, Rob Gray clearly allays the concerns of PERA members about making the retirement decision. He offers assurances to Colorado PERA members choosing to retire under the statutory Colorado PERA contract that they need not be concerned that the annual increases in their pension benefits will ever be diminished. With the bill, COLA benefits were now safe . . . “predictable.” Many PERA members have changed the course of their lives by choosing to retire in reliance upon this “automatic,” contracted Colorado PERA COLA benefit.
At the bill hearing, Rob Gray noted that: “when a change in benefits is added, like this bill, it extends out the period for paying off that unfunded liability.” Thus, Rob Gray characterized the Colorado PERA COLA benefit as a Colorado PERA liability.
Rob Gray’s comments continue: “We like all three parts of the bill . . . we urge you to support all three.” “We think the cost-of-living changes make a lot of sense.”
Rob Gray: “The Cost-of-Living Stabilization Fund change ended up pushing the amortization period too, simply because you’re funding it on an actuarial basis and you’re recognizing that it’s an ongoing thing.” Why would Rob Gray bother characterizing the proposed PERA COLA as “an ongoing thing” if it was actually discretionary, i.e., “ad hoc”? He would not.
Rob Gray: “You’re right that you do have compounding there for the first time.” “I think the retirees support this change, because they see it as a more actuarial way of funding it.” “It will be easier for them to understand, because they won’t have two methods of increase . . . it will just be the single increase.”
The legislative history of the Colorado PERA COLA benefit makes it clear that the PERA COLA is a contractual obligation of Colorado PERA and PERA-affiliated employers. During the March 24, 1993 presentation and discussion of HB93-1324 we hear the Colorado PERA COLA benefit under consideration described as a public pension benefit that is “guaranteed,” “now and in the future,” “an ongoing thing.” We hear the proposed Colorado PERA COLA benefit described as “predictable,” “permanent,” and a Colorado PERA “liability.” Further, we hear a representative of Colorado PERA inform the House Finance Committee that members of the Colorado PERA pension plan who are considering retirement will be able to look at the proposed PERA COLA benefit and “know how . . . future increases are going to be determined.”
Despite Colorado PERA’s wishes, an “automatic,” contracted public pension COLA benefit cannot legally, retrospectively metamorphose into an “ad hoc” pension COLA. The legislative intent is clear. It is obvious that the members of the House Finance Committee and the Colorado PERA representative were describing a contractual obligation of Colorado PERA and its affiliated employers. Retroactively changing the PERA COLA benefit to the detriment of a Colorado PERA retiree is unconstitutional.
Our Colorado Attorney General has told us: “We’re appealing because we believe there was no contractual right.” But, our Attorney General must know that when a public employee has earned his retirement benefit and retired, at that time, pension benefits become “a vested right of which the person entitled thereto cannot be deprived; it has ripened into a full contractual obligation.”
In my opinion, the most honorable path for our Attorney General to take is to have the thing out at once. He should acknowledge that the Colorado PERA COLA benefit is manifestly a contractual obligation.
Please help Save Pera Cola do battle with the Colorado PERA SB10-001 Legal Defense Colossus. (It’s no small undertaking.) The website, saveperacola.com, explains how to make a contribution. And, Friend Save Pera Cola on Facebook!
Hear hear! Thank you Al Moncrief for continually explaining this unfair and immoral action in such clear articulate terms. Out of curiosity, I calculated what my monthly benefit *should* be as of March 1, 2013, and the State of Colorado is currently shorting me $483 a month. This is a substantial amount for me and my spouse, as this is our primary income on which we depend for essential living expenses. I am sure countless others are facing this same dilemma….watching our resources dwindle. I hope *all* PERA members recognize how critical this fight is….that our earned PERA pensions remain intact to allow us to grow old with dignity.
ILLINOIS TO CONSIDER LEGAL PUBLIC PENSION REFORM!
An Illinois newspaper, the Journal Star, is reporting that a constitutional, prospective pension reform proposal is now on the table. It’s good to see states that have much more pressing pension problems than Colorado provide examples of legal pension reform. Many such “less drastic” alternatives exist to Colorado’s calculated breach of Colorado PERA pension COLA contracts in 2010.
The Journal Star describes the Illinois pension reform proposal as follows:
“The income tax increase would be made permanent and then solely dedicated to pension payments under a pension reform plan floated Wednesday by Rep. Lou Lang.”
“Under the plan, employees would pay 3 percentage points more of their salaries toward their pensions and the minimum retirement age to receive full pension benefits (for new employees) would be 67 for all five pension systems.”
(My comment: Attention Colorado legislators! One of your counterparts in Illinois is providing an excellent example. He does not propose that Illinois abandon its contractual obligations. Conservatives, I know the idea of an income tax hike in Colorado is anathema. But, let’s face it, we have to pay our debts. So, let’s look for other revenue sources that are more palatable.
Illinois’ Representative Lang is proposing that the State of Illinois allocate new revenue to meet the state’s pension obligations. In 2010 [or earlier] there was nothing preventing the Colorado Legislature from submitting a measure to Colorado voters to dedicate new funding sources toward meeting Colorado’s debt. This action is permitted under TABOR. The voters can be asked for permission for new revenues. Such a referred pension funding measure would have demonstrated good faith on the part of the Colorado General Assembly in 2010 [or earlier]. Yes, asking the state’s voters to dedicate new revenues to meet Colorado PERA contractual obligations would have required creativity, effort and political capital. It was much simpler to just break PERA contracts in 2010. But, finding new revenue to meet state and local debt obligations has the significant advantage of constitutionality. It is a “real” solution, as opposed to a “litigation timeout.”
While we’re on the subject of TABOR it should be universally recognized that the defendants in the case Justus v. State [the Colorado public pension COLA lawsuit] cannot legitimately argue that the existence of the TABOR Amendment in the Colorado Constitution somehow justifies Colorado’s breach of contract. TABOR’s revenue and spending limitations were put in place in 1992. Since 1992, the Colorado Legislature has irresponsibly enacted further cuts to its available revenue and has adopted legislation that significantly increased Colorado PERA’s unfunded liabilities. It is not possible to argue with a straight face that TABOR does not allow the State of Colorado to meet its contractual pension obligations, when the state has cut its revenue stream beyond TABOR’s requirements, and has racked up long-term PERA pension debt (unfunded liabilities) for short-term taxpayer savings.
In 2001, the Colorado Legislature and Governor Bill Owens enacted legislation to incentivize the early retirement of public sector workers. The goal (which was achieved) was to encourage the expensive (higher paid) older public sector workers in Colorado to retire, thus saving the State of Colorado and Colorado local governments significant short-term labor costs.
From the Silver and Gold Record:
“Befort also noted that several years ago, the Legislature and Gov. Bill Owens decided to encourage higher-paid employees to retire early. Payroll expenses went down for the state, but PERA’s costs increased, he explained.”
https://www.cu.edu/sg/messages/4405.html
From the Colorado Statesman:
“PERA’s troubles date back to 1999-2000, when the pension plan peaked at 104.7 percent on its ratio of assets to obligations (liabilities). The Legislature was feeling flush, and passed bills reducing the employer contribution.”
Link:
http://www.coloradostatesman.com/content/991527-state-retirees-ready-pounce-pera-fix
The group “Friends of PERA” tells us on their website:
“Rate cuts to PERA (affiliated employers) between 2000 and 2005 equaled some $325 million.”
Finally, have you all noticed that even our cherished TABOR amendment recognizes public pension obligations as state “debt”?
Here’s some background information on TABOR:
http://www.colorado.gov/cs/Satellite/CGA-LegislativeCouncil/CLC/1200536135614)
Off soapbox . . . back to the Journal Star article:
“But Lang’s plan does not call for any reduction in pension benefits, something he said makes his plan constitutional. Other pension reform plans floated so far call for a change in cost of living adjustments to retiree benefits, something Lang said makes them unconstitutional.”
(My comment: Heads up Colorado legislators! A retrospective taking of accrued public pension COLA benefits is unconstitutional. Who knew?)
The Journal Star article:
“Gov. Pat Quinn has thrown his support behind [an alternative pension reform bill] Senate Bill 1, sponsored by Senate President John Cullerton, D-Chicago. It combines two major reform proposals into one bill. If the courts strike down one of the proposals, the other would take effect.”
“Lang said he thinks both components of the bill are unconstitutional because they diminish pension benefits.”
(My comment: Is it not uncanny irony that the unconstitutional pension reform proposal in Illinois is Senate Bill 1, sponsored by the Senate President? I think this proves the existence of a parallel universe.
Recall that earlier we examined the unconstitutional nature of the Cullerton proposal. An Illinois Appellate Court has already held that: “the [government] cannot whipsaw citizens into ‘voluntarily’ choosing one of two means by which they will be divested of an existing property interest.” (Boonstra v. City of Chicago, 214 Ill. App. 3d 379, 387, 574 N.E.2d 689, 695 [1st Dist. 1991].
See this link:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1774163)
Here’s a link to the complete article on Illinois pension reform in The Journal Star:
http://www.pjstar.com/news/x1037514608/Reform-measure-would-make-rate-increase-permanent-raise-full-benefit-retirement-age
Below, I present the Illinois Federation of Teachers’ guiding principles for pension reform in their state:
“Guaranteed Funding. You’ve always paid toward your retirement. The state has not. Decades of skipped and shorted payments have created a $90 billion debt and a serious crisis. This bill secures an ironclad promise that lawmakers must make the annual pension and debt payment every year. And, SB2404 establishes the right for the state retirement systems – or individuals – to bring court action if they don’t.”
(My comment: As we know, the State of Colorado has also skipped billions in annual required pension contributions in the last ten years. Note that although Illinois pensions have the lowest public pension funded ratios in the nation, and this public sector union [IFT] perceives a “crisis,” the union is not calling for the breach of pension contracts. They are pursuing solutions that are admittedly more difficult than a simple contract breach, but will withstand court muster.
The Colorado General Assembly could have explored such “less drastic” reform options if it had not relinquished its policy-making authority in this area to lobbyists and pension administrators in 2009/2010. Those in attendance at the Colorado PERA “listening tours” pointed out that Colorado PERA’s list of pension reform options [that were distributed to attendees] almost exclusively asked for sacrifices from Colorado PERA employees, rather than Colorado PERA employers.
The Colorado Legislature should consider creation of a statutory commission, composed of legislators, to monitor all of the state’s public pension systems, review and propose legislation addressing those systems, and elevate the level of knowledge of the members regarding public pension administration.)
“Creating a Pension Stabilization Fund. Beyond paying the annual costs, the state must also pay down the massive debt. In past years, Springfield leaders used creative borrowing schemes to make payments, which only created more debt through bonds that had to be paid off first by law. SB2404 would create a constitutionally protected fund to directly pay down the debt with resources already in the Illinois budget.”
“Shared Sacrifice. While public workers are not to blame for Illinois’ pension problem, we are willing to be part of the solution. With an ironclad funding guarantee to ensure employer underfunding can never happen again and the dedicated revenue source described above, active members would contribute an additional 2 percent of salary, phased in over the next two years. This will generate more than $3 billion over the next decade.”
(My comment: Note that this public sector union [IFT] does not employ the concept of “shared sacrifice” as a euphemism for breach of contract. Implicit in the concept of “shared sacrifice” is the intent that such “sacrifice” actually be legal.)
Link:
http://www.ift-aft.org/news/dailynews/13-02-19/Progress_on_Pensions.aspx
Meanwhile, Kentucky legislators are considering their own “less drastic” alternatives to the breach of public pension contracts.
From Kentucky’s Courier Journal:
“Leaders of the House Democratic majority are proposing a new sales tax on lottery tickets, with the revenue earmarked for stabilizing the state’s financially strapped retirement system.”
“A 6 percent sales tax on lottery tickets could generate about $49 million each year, and new lottery games could be implemented over several years to eventually create $60 million to $90 million annually for pensions, said Rep. Brent Yonts, D-Greenville, chairman of the House State Government Committee.”
“House Speaker Greg Stumbo, D-Prestonsburg, said the Democratic caucus will discuss the proposal Monday and then talk with House Republicans to determine if it has enough votes to clear the House floor.”
“SB 2 would also require the state to fully fund Kentucky Retirement Systems by fiscal 2015, costing $120 million for the state general fund in the first year.”
“House Democrats have reviewed more than a dozen other funding options — including higher cigarette taxes, Instant Racing and casino gambling — but Stumbo confirmed Friday that those proposals are no longer under consideration.”
(My comment: A dozen? Surely, some of these funding options could be pursued in Colorado. Instead, the Colorado Legislature decided to force Colorado courts into the role of “the bad guy.” Where was the statesmanship in 2010?!)
The Courier Journal:
“Yonts said the sales tax was viewed as the most “palatable” since lottery games are voluntary, and would generate $15 million in additional net revenue for the lottery system. Once complete, the sales tax and expansion would likely provide enough new revenue to cover the state’s full general fund contribution to Kentucky Retirement Systems, Yonts said.”
Link to complete Courier Journal article:
http://www.courier-journal.com/article/20130222/NEWS0101/302220067/Kentucky-pension-bill-include-6-lottery-sales-tax?nclick_check=1
From the group, Kentucky Government Retirees:
“A number of proposals have been floated in recent weeks, but House Democrats seem to have settled on expanding Kentucky Lottery games and Instant Racing as funding sources for public pension contributions.”
“House Speaker Greg Stumbo, D-Prestonsburg, said the House will propose paying full pension contributions by offering Keno and online wagering through the Kentucky Lottery and expanding Instant Racing statewide should the courts uphold the game’s legality.”
“Those measures are expected to generate $1 billion over 10 years in a trust fund.”
“Studies commissioned by the horse racing industry show Instant Racing would generate about $25 million in new revenue if the game, which allows players to bet on previously run horse races, is established across Kentucky, he said.”
“Expanding Kentucky Lottery games to include Keno and an online lottery would bring the annual total to more than $100 million after three to five years, Stumbo said, adding the Kentucky Lottery has the authority to expand its offering of lottery-type games.”
Link:
http://www.facebook.com/permalink.php?story_fbid=451773918228190&id=152951648110420
The Lane Report on Kentucky public pensions:
“A state employee’s pension is a legal contract with the state: They pay into the system to get specific benefits when they retire – a defined-benefits model. The state – and its taxpayers – is obligated to pay at the rate the contract promised.”
“Commitments made by governors and legislators are legal obligations to state residents collectively, including the liabilities. Taxpayers owe the money needed to shore up the system. For over a decade, the legislature has not put the money into KERS that it was supposed to, spending tax revenue on other projects and obligations. The debt owed by law to KERS grew.”
Link:
http://www.lanereport.com/19048/2013/02/pension-reform-bill-revised/
Support public pension contractual rights and the rule of law in the United States. All members of Colorado PERA (active or retired) should help Save Pera Cola defend public pension rights. The website, saveperacola.com, explains how to make a contribution. Also, “Friend” Save Pera Cola on Facebook!
MONTANA ESCHEWS “WELCHER STATE” MONIKER.
MONTANA GOVERNOR STEVE BULLOCK: WE WILL CRAFT A PLAN THAT “DOESN’T GO BACK ON THE PROMISES” WE’VE MADE TO MONTANA PUBLIC EMPLOYEES.
GOVERNOR, UNIONS, LOCAL GOVERNMENTS AGREE: USE COAL SEVERANCE TAX REVENUES TO PAY THE STATE’S PENSION DEBT.
BILL SPONSOR: “WE HAVE A CONTRACTUAL OBLIGATION TO EMPLOYEES AND RETIREES WHO ARE CURRENTLLY IN THE TRS SYSTEM.”
Governor Hickenlooper is looking to rebrand the State of Colorado. I submit for his consideration: “Colorado: The Welcher State.”
Link:
http://www.denverpost.com/breakingnews/ci_22474473/hickenlooper-unveils-effort-rebrand-colorado
Admittedly, this suggestion is made tongue-in-cheek, but as a Coloradan I wonder how our politicians arrived at the conclusion in 2010 that the state’s contracts with elderly Colorado pensioners should be broken . . . that the state should “welch” on its contractual obligations. Why should Colorado break its contracts with pensioners, while the state’s contracts with corporations remain unscathed? Are some contracts more important than other contracts? How do we decide which ones to honor? Which ones to discard? Mitt Romney reminded us recently that corporations are “people” too. Apparently, Colorado politicians believe that corporations are VIPs . . . superior to the caste “old Colorado retired public servant.”
In 2010, a majority of the members of the Colorado Legislature voted to break Colorado’s contracts with its pensioners in the bill SB10-001. If their attempt to break the state’s contracts holds up in court, my arguments for rebranding with “Colorado: The Welcher State” will be bolstered.
The State of Colorado has a pension-administration arm called Colorado PERA. Members of the PERA pension are parties to a contract with Colorado PERA and Colorado governments. These governments made an offer to PERA members of fixed retirement benefits in exchange for decades of work and contributions to the pension system. Colorado state and local governments entered into this contract with pensioners freely. The pensioners held up their end of the bargain by paying into the pension and working for their public employers for 30 years. The pension debt is clearly the legal responsibility of Colorado state and local governments.
Nevertheless, in 2010, a majority of Colorado state legislators decided to try and shift this debt from Colorado state and local governments onto the backs of retirees. Legislators racked up the state’s pension debt by failing to pay their pension bills for ten years. Then, the “solution” occurred to them . . . shift the state’s accumulated debt onto pensioners. Although the debt is the responsibility of Colorado state and local governments, only a small fraction of the “fix” in SB10-001 comes from Colorado state and local governments. The provisions of SB10-001 require that those who legally owe the debt contribute a mere ten percent of the “fix,” while those who do not owe the debt (PERA members and retirees) contribute 90 percent of the “fix.” Do any Coloradans actually believe that this solution sought in SB10-001 is reasonable? Immense quantities of contorted, twisted logic are needed to reach the conclusion that the SB10-001 debt shift is somehow “reasonable.” Indeed, in 2010 a 17-member statehouse lobbying troop was required to persuade a majority of Colorado legislators that the provisions of SB10-001 were “reasonable.” The legislators could never have arrived at such a conclusion of their own accord.
Colorado PERA’s Executive Director Greg Smith, at the “Fall 2011 Colorado PERA Shareholder’s Meeting” told us that: “‘Only ten percent of the fix” of the (SB10-001) reforms in 2010 came from additional employer contributions.
Link:
http://www.copera.org/pera/about/shareholder.htm.
Although the state’s public pension debt is owed by Colorado state and local governments, Colorado’s Speaker of the House told us on July 14, 2009 that he didn’t believe that they should be asked to actually pay their debts:
“I don’t think at this point we can expect employer contributions to be part of the solution . . .”.
Link:
http://www.9news.com/rss/story.aspx?storyid=119465
I’m aware that “state debt” is not a subject that Coloradans want to hear about. Like the majority of Colorado legislators who voted to break PERA retiree contracts in 2010, most Coloradans wish the problem “would just go away.” I’m also aware that most people have no concern about such matters unless they are personally affected. So, let’s pause for a moment and thank God for our Judiciary. Without the Judiciary, our politicians would casually discard the constitutional rights of vulnerable minorities. (Many members of this minority are particularly vulnerable. A number of PERA retirees were unable to leave nursing homes or hospital beds to fight corporate and union lobbyists at the Colorado Capitol!)
The articles I have written on this subject provide numerous examples of state legislation that addresses public pension debt without resorting to breach of state contracts. Dozens of alternatives to state breach of pension contracts have been adopted in legislation across the country. These alternatives were ignored by Colorado legislators in favor of “the easy fix.” Our neighbor to the north, Montana, is currently considering legal, prospective pension reform options. They are showing Colorado how it’s done . . . legally.
In his State of the State address three weeks ago, Montana Governor Steve Bullock stated his intent to honor Montana’s public pension contracts. (Montana will make no attempt to “welch” on public pension debt.)
Governor Steve Bullock (36 minutes into his State of the State address):
“We must also meet our responsibility to fix a long-term problem created by our predecessors. I’ve outlined a detailed plan that will shore up our public retirement systems and do so without raising taxes. I look forward to working with this body to ensure that we craft a plan that honors our commitment to Montana’s public servants. A plan that doesn’t go back on the promises we’ve made to our snow plow drivers, prison guards, teachers and other middle class workers who are our friends and our neighbors.”
Link to Governor Bullock’s State of the State speech:
http://watch.montanapbs.org/video/2331212142?starttime=1200000
The Billings Gazette is now reporting that a consensus has emerged in Montana to shore up the state’s public pension funds. The Montana Governor, public sector unions and local governments have decided to skip the 3-5 year “pension reform litigation timeout” that the Colorado Legislature has embraced and address the Montana’s public pension system immediately. This decision in Montana will prevent millions of taxpayer dollars from being wasted on a court battle to answer a question that has already been answered. Public pension benefits are contractual obligations of their governmental pension plan sponsors. Would we have it any other way? Should we permit public employers to take earned, accrued pension benefits from their employees? Should governments have carte blanche to take people’s property?
From the Billings Gazette:
“Gov. Steve Bullock’s bill to repair the financially troubled Montana Public Employee Retirement System drew widespread support Thursday, except from groups upset with budget cuts to programs to help pay for the fix.”
“The Joint Select Committee on Pensions heard, but didn’t vote on, House Bill 454, by Rep. Bill McChesney, D-Miles City.”
“‘It’s a reasonable, well thought out, responsible fix,’ McChesney told the committee.”
“Here is how the bill would work:
— State and local government employers would pay an additional 1 percent of their employees’ salaries into the pension fund, amounting to about $12 million more annually.
— Public employees would pay an additional 1 percent of their salaries into the fund, generating $10.5 million more annually.
— Additional state funding would come from the spendable portion of the coal severance tax, which would be about $17 million a year and increasing annually.
— Other state funding of up to $21 million a year from the interest income from the coal severance tax permanent trust fund would go into the fund until fiscal 2019 and then increase to $24 million a year.
— The bill provides a trigger that would allow the additional 1 percent from employers and 1 percent from employees to end once the system is fully funded. The added contributions stop when the amortization period would no longer be more than 25 years. The actuary estimates this would occur in 2033.”
“Roxanne Minnehan, executive director of the Montana Employee Retirement Administration, endorsed the bill on behalf of the Public Employees’ Retirement Board.”
“‘This is the only proposal significantly addressing the funding in the Public Employees’ Retirement System,’ she said.”
“Minnehan said the bill offers the ‘least impairing impact’ to current pension fund members, while preserving the defined benefit pension plan.”
“Also endorsing the bill were representatives of the Montana Association of Counties, Montana League of Cities and Towns, MEA-MFT, Montana County Attorneys Association, American Federation of State County and Municipal Employees, Montana Sheriffs and Police Officers Association, Montana Association of Clerks of District Court, Montana Magistrates’ Association and the Association of Retired Public Employees.”
(My comment: Montana public sector unions are supporting constitutional measures to shore up public pensions. Colorado public sector unions supported the breach of the pension contracts of their retired union “brothers and sisters” in 2010.)
Link to article at the Billings Gazette:
http://billingsgazette.com/news/state-and-regional/montana/governor-s-pension-fix-draws-praise-criticism/article_eae3436d-1d98-5805-8c7c-e6e6eb268497.html
From yesterday’s Bozeman Daily Chronicle:
“I am sponsoring HB 377, a plan that proposes minor changes to existing employees plans while requiring somewhat more of a contribution from future employees. The adjustments are as follows. Existing employees would see their contribution go from 7.15 percent to 8.15 percent. This would be adjusted down once the total pension is 90 percent funded. New employees would also contribute 8.15 percent of their salary, with an adjustment up or down of .5 percent depending on success of the fund investments. State taxpayer contribution rates would remain unchanged.”
“The major proposed change to TRS in HB 377 would be that new employees would have to contribute longer in order to qualify for a full pension. Teachers would have to have 30 years of service and be at least 55 to receive a full pension instead of the current 25 years. Personally, I think that this is a reasonable change and a reasonable expectation. What would remain unchanged is that employees would still qualify for a partial pension if they have at least five years of service and are at least 60 years old.”
“We have a contractual obligation to employees and retirees who are currently in the TRS system.”
“A plan such as HB 377 is a reasonable approach to fulfill Montana’s contractual and constitutional obligations. The longer we wait to address this problem the more it will cost us in the future. Let’s get this done during this legislative session.”
“Tom Woods, who represents House District 64 in the Montana Legislature, is an adjunct instructor at MSU.”
Link to the complete article in the Bozeman Daily Chronicle:
http://www.bozemandailychronicle.com/opinions/article_6d5c013a-7f6f-11e2-91eb-001a4bcf887a.html
The battle to prevent Colorado from becoming “The Welcher State” is being waged by the organization Save Pera Cola. If you are a person who supports the rule of law, and believes that the U.S. Constitution should not be discarded when convenient, consider contributing to Save Pera Cola. (Their website, saveperacola.com, explains how to do this.) Also, if you have a Facebook account, “Friend” Save Pera Cola on Facebook.
DRUNK ON THE COLORADO PERA CONTRACT BREACH KOOL-AID.
PROPONENTS OF COLORADO’S PENSION CONTRACT BREACH: YOU SHOULD HAVE SAVED MORE MONEY TO PROTECT AGAINST INFLATION . . . ANTICIPATED THAT COLORADO WOULD BREAK YOUR CONTRACT.
In 2010, the Colorado General Assembly adopted legislation to break the state’s contracts with elderly pensioners in the state. The bill breaking the state’s contracts, SB10-001, retrospectively seized accrued Colorado PERA pension benefits that Colorado PERA retirees had paid for, and worked for . . . for decades.
SB10-001 was supported by a group of public sector unions, school administrators, and corporate interests in Colorado. (Public records name the registered lobbyists supporting SB10-001).
It’s easy to see why Colorado corporate interests would support SB10-001. If the Colorado PERA pension contract is broken, this lowers the future tax burden of Colorado corporations. (But, isn’t it sick that Colorado businesses would support taking money from old people through the breach of contracts in order to pad their future corporate earnings?)
Money motivated corporate support for the breach of Colorado PERA pension contracts. Money was also the motivation for union support for the breach of Colorado PERA pension contracts.
Colorado public sector unions supported the breach of the contracts of their retired union “brothers and sisters” in order to limit increases in pension contributions by their dues-paying (non-retired) members. However, I believe that the support of these public sector unions for the breach of the PERA pension contracts of their retired members was myopic. If the State of Colorado and Colorado PERA are permitted to abandon their contractual pension obligations once, IT IS A CERTAINTY, that the State of Colorado and Colorado PERA will break PERA pension contracts repeatedly. There is no question that this will happen. Colorado state legislators have already demonstrated that they prefer to make discretionary expenditures of public funds that buy them votes, in lieu of meeting Colorado’s contractual public pension obligations, i.e., paying the Colorado PERA annual required contributions.
Is that the outcome Colorado’s public sector unions desire? Endless breach of Colorado PERA pension contracts, to the point that the relationship between public employees and the governmental sponsors of their pension plan IS NO LONGER CONTRACTUAL? Do Colorado’s public sector unions want their union members to work for their entire careers, paying into a pension fund, contributing their labor in exchange for contracted pension benefits, only to have that contract discarded by public sector employers at retirement? This is inevitably the end result of their support for SB10-001.
Many of the interests that supported the breach of pension contracts in Colorado (in SB10-001) are represented by a group called the Colorado Coalition for Retirement Security (CCRS). Three weeks ago, (January 30, 2013) CCRS conducted a “town hall” meeting by telephone. The event was titled the “January 2013 Tele-Town Hall.”
Julie Whitacre, a lobbyist for the Colorado Education Association, was present at the “Tele-Town Hall.” Ms. Whitacre stated at the outset: “We support Senate Bill 1 from 2010.”
John MacPherson, former Communications Director for the Denver Public Schools Retirement System, representing CCRS, was also present.
This morning, I listened to the recording of this CCRS “Tele-Town Hall” meeting and put my reactions on paper. I listened . . . and I could not believe what I was hearing.
It’s clear to me now that those who supported the breach of Colorado PERA pension contracts are unaware of the delusions under which they labor. They seem to have forgotten that we all live under the rule of law in the United States. They have forgotten that governments in the United States may act only within the strictures of the U.S. Constitution. Contrary to Colorado public pension case law, they assume no contractual relationship between public employees and their Colorado governmental pension plan sponsors.
From the comments made during the “Tele-Town Hall,” it appears that the proponents of SB10-001 have not read relevant Colorado public pension case law or the 2004 Colorado Attorney General opinion on this subject.
From the “PERA Retiree Update,” December 2008, page 1:
“The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.” (Meredith Williams, Colorado PERA Executive Director, discussing Attorney General Ken Salazar’s 2004 Formal Opinion on Colorado PERA contractual pension obligations.)
The proponents of SB10-001 seem to think that the payment of Colorado PERA COLA benefits is discretionary on the part of PERA-affiliated employers. They speak of “shared sacrifice,” without realizing that this concept is irrelevant in the context of contractual relationships.
These people are drunk on the Colorado PERA Contract Breach Kool-Aid.
Below, I provide transcribed comments from the Colorado Coalition for Retirement Security “January 2013 Tele-Town Hall,” and my reactions to those comments.
Midway through the “Tele-Town Hall,” CCRS took questions. At thirty-three minutes into the discussion, a caller “Paul” asks a question over the telephone. Paul notes that he is old enough to remember the high inflation of the 1970s, and that he expects that current Federal Reserve Board quantitative easing will eventually cause high inflation again. He notes that: “There is nothing in Senate Bill 1, I think it is, that protects pensioners in the event of inflation that is extremely high, which can cause the pension to essentially disappear.”
Paul asks: “Are there any thoughts about that?”
John MacPherson, representing CCRS, took the question and responded:
“I certainly share those concerns that we all have to look at what the effects of inflation are going to be on our pension distribution as we go through time.”
John MacPherson noted that Colorado PERA: “is one of the few public pension plans in the nation that actually has a GUARANTEED cost-of-living adjustment. Most public pension plans do not have that COLA . . .”.
(My comment: The CCRS representative admits that the Colorado PERA pension COLA benefit is “guaranteed,” i.e., it is an “automatic” COLA. Yet, how can the CCRS representative describe the PERA COLA benefit as “guaranteed” and simultaneously support a retrospective state taking of the benefit? When the State of Colorado ignores its contractual obligations to pay the PERA COLA benefit, does that not somehow preclude its characterization as “guaranteed”?
Perhaps CCRS members should have paid greater attention to Colorado PERA’s General Counsel when he noted in an August 17, 2005 Rocky Mountain News article (and in his legal brief at the time) that courts have never found that the Colorado Legislature “has reserved its power” to make retrospective changes in Colorado PERA pension benefits. From the August 17, 2005 Rocky Mountain News:
“Smith said in his opinion that ‘other (non-Colorado) courts have set a high burden to meet the necessity threshold.’”
“His briefing paper said ‘there has never been a finding in Colorado that the state has reserved its power to make changes’ in PERA’s benefit structure.”)
John MacPherson continued with his comments at the “Tele-Town Hall”:
“Is it something that could erode our purchasing power? Absolutely. But, as we plan for retirement we have to plan both for our defined benefit distribution, our defined benefit pension in our retirement years, as well as some supplemental savings that will address things such as the inflation factor as we go forward.”
(My comment: So, here is the message from a representative of CCRS, now that you as a Colorado PERA retiree have completed your own obligations under the PERA pension contract, now that you have made pension contributions and worked for thirty years, you were foolish to rely on your contract with Colorado PERA. You should not have expected your PERA-affiliated employer or the State of Colorado to hold up their end of the bargain. When planning for your retirement over the last few decades you should have saved more, you should have anticipated that your employer would break your pension contract. The audacity of this comment is breathtaking.)
John MacPherson continues with his response to Paul’s question:
“So, Paul is absolutely right that inflation could have a detrimental effect on our pension . . .”.
“But, we also should also look at fact that should inflation go up above where its been the last few years . . . should it get up into the high single digits or even into double digits, most likely the investment returns are going to go up with that, and that means the full funding of PERA would come that much sooner, therefore it would mean the relaxation of the limitation on the 2 percent cost of living adjustment would come that much sooner . . . ”
(My comment: First, let’s not forget that Colorado PERA’s official long-term inflation assumption is 3.75 percent. The Colorado PERA Board of Trustees believes that inflation for the foreseeable future will average 3.75 percent. So, by supporting SB10-001 and the retrospective reduction of the PERA COLA benefit to a 2 percent level, the Colorado PERA Board of Trustees has adopted a de facto policy to erase the contractual obligations of its PERA-affiliated employers through inflation.
Another point that escapes John MacPherson (or does it?) is that in an environment of hyper-inflation borrowing costs in the United States would spike, the economy would slow, equity prices would fall, the Colorado PERA trust funds would take a loss, and under the provisions of SB10-001, the COLA would not be relaxed. PERA retiree COLA benefits would be inflated away.
Why does John MacPherson believe that the higher bond yields accompanying high inflation would bring Colorado PERA to full funding? A spike in interest rates would hammer the bonds that Colorado PERA currently owns, decimating the value of PERA’s fixed income portfolio holdings. It would take years to offset these losses through the higher coupon rates of new bonds added to the portfolio. A significant interest rate spike would also bring down stock prices and accordingly the value of PERA’s equity portfolio.)
John MacPherson continues:
“This is actually a distribution of your deferred compensation from the time that you were working as an active employee. You are now enjoying the benefits of having set money aside during your working years to finance your retirement years, and that’s the way you should think of this.”
(My comment: John MacPherson nails it here. That is indeed the way Colorado PERA retirees “should think of this.” That is indeed the way that Colorado PERA retirees have thought of it throughout their careers. John MacPherson is describing the “consideration” associated with the Colorado PERA contract, and the “deferred compensation” that is due Colorado PERA retirees under the contract. Before accepting employment with their Colorado PERA-affiliated employers, and throughout their careers, Colorado PERA members have had the expectation that their PERA public pension contracts would be honored by their governmental employer.)
At Forty-one minutes into the “Tele-Town Hall” CCRS receives a question from a person named “Steve.” “Steve” begins: “I want to ask about this concept of ‘shared sacrifice.’”
“I don’t see it as an even shared sacrifice . . . I see it as mostly a sacrifice by state employees.”
“Where is my view of this wrong . . . if it is wrong?”
(My comment: Of course, “Steve” perceives the situation correctly:
From “Colorado PERA on the Issues”:
“In all, about 90 percent of the changes enacted by Senate Bill 1 will fall on the shoulders of current and future PERA members and retirees – not other taxpayers.”
Link:
http://www.copera.org/pera/about/issues.htm
Senator Shaffer, in the Denver Post, April 17, 2011:
“I sponsored last year’s legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA’s current and future members and retirees.”
Link:
http://www.denverpost.com/opinion/ci_17858107
Meredith Williams, PERA Executive Director, in the Pueblo Chieftain, May 29, 2011:
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
SB 10-001 co-prime sponsor Senator Josh Penry and sponsor Senator Greg Brophy in the Denver Post, January 22, 2010:
“Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees . . .”
Link:
http://www.denverpost.com/search/ci_14242354
Colorado PERA Executive Director Greg Smith, at the “Fall 2011 PERA Shareholder’s Meeting,” (thirty-six minutes into the video):
“‘Only ten percent of the fix” of the [SB10-001] reforms in 2010 came from additional employer contributions.
Link:
http://www.copera.org/pera/about/shareholder.htm.)
John MacPherson asked Steve: “Steve I would just ask you, what would you be looking for as evidence of shared sacrifice?”
Steve responded: “Well, to give you a personal example, I looked at the Excel spreadsheet that ‘Save Pera Cola’ put out, where you could plug in your monthly pension benefit and see how much you will lose over the course of time. And I projected out 30 years . . . I figured I’m going to live 30 years after my retirement, and the amount that I lost was pretty significant . . . six figures.”
“I just don’t see that there is a shared sacrifice, that the citizens of Colorado overall are sacrificing anything as a result of the economic downturn in Colorado.”
(My comment: Again, Steve knows what is happening to his pension contract. In an August 2, 2010 letter, the Ritter Administration [Office of the Colorado State Controller] to the federal pension regulator, the Governmental Accounting Standards Board [GASB] the Ritter administration reports that SB10-001 will cost each Colorado PERA retiree an average of $165,000: “In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.” This amount is “substantial” for nearly every resident of the planet. You can read the entirety of the letter on GASB’s website here:
http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791.)
John MacPherson responded to “Steve”:
“What you did is, is you went on the Save Pera Cola website, and that is the group that filed the lawsuit that I spoke about regarding Senate Bill 1, and, in part they are absolutely right that as PERA retirees, we believed that when we retired we would see an annual increase of 3.5 percent on a compounded basis.”
(My comment: The CCRS representative admits that Colorado PERA retirees have legitimate expectations to receive their contracted Colorado PERA pension benefits.)
John MacPherson continues:
“We as retirees accepted that, rather than a 3.5 percent COLA every year, we would accept essentially a guarantee of a 2 percent COLA every year.” “Now that was the immediate effect of Senate Bill 1.”
(My comment: To the CCRS representative I pose this question: “In the coming years, when the Colorado Legislature continues to ignore its Colorado PERA annual required contributions and decides to again break the PERA pension contract will you accept essentially “a guarantee” of a one percent COLA every year?” John MacPherson’s understanding of “guarantee” differs markedly from my understanding of the term.)
At the “Tele-Town Hall” meeting, Julie Whitacre (the CEA lobbyist) described the Colorado Coalition for Retirement Security (CCRS) noting that:
“Our coalition members include AFSCME Colorado, the American Federation of Teachers, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, the Colorado Education Association, the Colorado School and Public Employees’ Retirement Association, Colorado WINS, and Friends of PERA.”
(These groups are voting members of the CCRS, see this link:
http://www.securepera.org/wp-content/uploads/2013/01/CCRS-Bylaws-1_1_2013.pdf)
Here’s a link to an audio recording of the January 30, 2013 Colorado Coalition for Retirement Security “Tele-Town Hall”:
http://www.securepera.org/
So, PERA retirees, you know what to do. Help Save Pera Cola put an end to this madness. The rule of law must prevail in Colorado. In Colorado we must pay our debts. We are a wealthy state with the lowest state taxes in the nation. We are not “welchers.” Contribute to Save Pera Cola at their website, saveperacola.com. Friend Save Pera Cola on Facebook.
“MUST” VERSUS “SHALL”: COLORADO LAW IS ABOUT TO CHANGE.
Recently we looked at the manner in which the Colorado Legislature uses “authority verbs” like the words “shall” and “must” when writing Colorado laws.
This topic is of interest to Colorado PERA retirees since Colorado law (prior to the breach of Colorado PERA retiree pension contracts in the bill SB10-001) provided that Colorado PERA retiree’s SHALL receive a contracted, accrued 3.5% PERA COLA benefit: “. . . the cumulative increase applied to benefits paid SHALL be recalculated annually as of March 1 and SHALL be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective . . .”, (Colorado Law – Section 24-51-1002 (1), Colorado Revised Statutes.)
In 2010, a majority of the members of the Colorado General Assembly and Governor Ritter decided to enact an unconstitutional, retrospective change to statutes governing Colorado PERA benefits to make the pension debt owed by Colorado state and local governments simply go away. They ignored the fact that the Colorado Constitution forbids “any law retrospective in its operation.”
Also, prior to the public pension contract breach in SB10-001, Colorado law provided that members of Colorado PERA who purchase PERA service credit SHALL receive Colorado PERA pension benefits in effect at the time of the purchase: “Service credit purchased by members . . . SHALL be subject to the benefit provisions in effect for the existing member contribution account,” (Colorado Law – Section 24-51-502 (3), Colorado Revised Statutes.)
In the near future, Governor Hickenlooper will sign into law a bill (HB13-1029) that defines these “authority verbs” in Colorado law. Of course, in the context of the Colorado PERA statutes, the Colorado General Assembly has used the word “shall” to indicate Colorado PERA’s contractual obligation to pay accrued public pension benefits.
Lynn Bartels of the Denver Post covered the Legislature’s “authority verb” bill (HB13-1029) in the Denver Post’s political blog, The Spot, (here are a few excerpts from her article):
“Must ‘must’ be used in Colorado’s statutes when ‘a person or thing is required to meet a condition for a consequence to apply’? Shall ‘shall’ mean that ‘a person has a duty’?”
“Apparently so, according to the House Judiciary Committee, which voted 11-0 to approve HB13-1029, a bill by Rep. Claire Levy (D-Boulder) entitled, ‘Concerning the Use of Authority Verbs in the Colorado Revised Statutes.’”
“Rep. Levy told the new chairman, Rep. Daniel Kagan (D-Cherry Creek Village), that the bill would give guidance to the courts about the legislature’s intent in any legislation approved after this bill is passed. No prior legislation would be affected by the bill.”
Link:
http://blogs.denverpost.com/thespot/2013/01/17/colorado-legislators-decide/88950/
For your information, here’s a description of HB13-1029 from the bill’s legislative “fiscal note”:
“Summary of Legislation
The bill, recommended by the Committee on Legal Services (OLLS) during the 2012 interim, codifies use of the terms ‘must’ and ‘shall’ in the drafting of new statutory language. The bill defines ‘must’ to mean that a person or thing is required to meet a condition for a consequence to apply (it does not mean that a person has a duty). ‘Shall’ is defined to mean that a person has a duty.”
Link:
http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/8DF19AF46171630287257AEE0054B879?Open&file=HB1029_00.pdf
HB13-1029 was reported out of the Colorado Legislature’s House Judiciary Committee on January 17, 2013. Here’s a brief summary of the House Judiciary Committee hearing on that date:
“01:37 PM — House Bill 13-1029
Representatives Levy and Gardner, co-prime sponsors, presented House Bill 13-1029 concerning the use of authority verbs in the Colorado Revised Statutes. The bill, recommended by the Committee on Legal Services during the 2012 interim, codifies the use of the terms ‘must’ and ‘shall’ in the drafting of new statutory language. The bill defines ‘must’ to mean that a person or thing is required to meet a condition for a consequence to apply (it does not mean that a person has a duty). ‘Shall’ is defined to mean that a person has a duty. They responded to questions from the committee about the effective date of the bill.
01:45 PM — Jeff Ruebel, representing the Colorado Defense Lawyers’ Association, testified in support of the bill. Mr. Ruebel spoke about the importance of wordsmithing statutes to communicate legislative intent. He responded to questions from the committee about situations when intent might be unclear without the definitions contained in the bill.”
Link:
http://www.leg.state.co.us/CLICS/CLICS2013A/csl.nsf/Committee?OpenFrameSet
And, a few quotations from the January 17, 2013 bill hearing:
Representative Levy described HB13-1029 at the hearing:
“We’ve also included some direction to the court on when to apply this new codified definition.”
“It’s going to apply prospectively.”
“The courts should not construe prior language according to these definitions, unless that’s what’s warranted from the context of the bill.”
Representative Gardner on HB13-1029:
“‘Must’ is a condition for a consequence to apply . . . . ‘shall’ is a duty.”
The Colorado Defense Lawyer’s Association supported the bill:
“We are of the belief that this statute will . . . provide invaluable assistance to lawyers and judges.”
Here’s the summary from the Senate Judiciary Committee hearing on HB13-1029 on February 13, 2013:
“01:34 PM — House Bill 13-1029
Senator Roberts and Senator Schwartz, co-sponsors, presented House Bill 13-1029. The bill, recommended by the Committee on Legal Services during the 2012 interim, codifies use of the terms ‘must’ and ‘shall’ in the drafting of new statutory language. The bill defines ‘must’ to mean that a person or thing is required to meet a condition for a consequence to apply (it does not mean that a person has a duty). ‘Shall’ is defined to mean that a person has a duty.
01:35 PM
Senator Lundberg sought clarification concerning the effects of the bill. Senator Roberts and Senator Schwartz responded to his question.
01:38 PM — Mr. Tom Morris, representing the Office of Legislative Legal Services, walked the committee through the bill. He spoke about the applicability clauses on page 3 of the bill.”
Link:
http://www.leg.state.co.us/CLICS/CLICS2013A/csl.nsf/Committee?OpenFrameSet
And, a quotation from the Senate Judiciary Committee hearing on HB13-1029:
Senator Roberts:
“If you use the word ‘shall,’ it’s imposition of a duty.”
In my opinion, the Colorado General Assembly’s Legislative Drafting Manual has historically made it clear that the word “shall” in Colorado law “indicates a command.” The context of the Colorado PERA statutes has made it clear that the state’s pension administrator “shall” pay the accrued, contracted Colorado PERA pension COLA benefit. Legislative history makes it clear that Colorado PERA has a contractual obligation to pay accrued Colorado PERA COLA benefits. Colorado PERA has testified before the Colorado General Assembly’s Joint Budget Committee that payment of the Colorado PERA COLA benefit is a contractual obligation of Colorado PERA and its affiliated employers. Finally, contract law itself makes it clear that Colorado PERA retirees are due their accrued, earned, deferred compensation . . . the Colorado PERA COLA benefit.
The Colorado Legislature has made a contractual “offer” to Colorado PERA members in an employment exchange transaction. The Colorado Legislature offered a Colorado PERA pension “base benefit” and Colorado PERA pension “COLA benefits” in exchange for a PERA member’s pension contributions and labor over the course of their careers. Colorado PERA retirees accepted this contractual offer . . . they made their contributions and did the work for their PERA-affiliated employers for decades. The Colorado Legislature entered into an agreement with Colorado PERA members that was supported by consideration. Colorado PERA and its affiliated employers must honor their contractual obligations.
I believe it is “imperative” that every member of the Colorado PERA pension system defend their contractual public pension rights. How to do this? Contribute to saveperacola.com. (Their website explains how you can make a donation.) Also, PERA members, “Friend” Save Pera Cola on Facebook!
DIVORCE CASE FILED: COLORADO PERA v. REALITY.
Colorado PERA public pension officials live in a different world than their counterparts in public pension administration across the nation. In Pennsylvania, state public pension administrators will NOT TAKE POSITIONS on their Governor’s proposed public pension reforms. On February 9, 2013 a Pennsylvania newspaper, The Morning Call, published a very thorough article addressing proposed reforms to pensions in Pennsylvania. According to the article:
“Officials at SERS and PSERS declined to comment on the governor’s plans, stating they do not take positions on proposed legislation to the systems.”
In Colorado, our state pension administrators at Colorado PERA not only take positions on public pension reform, they go a bit further:
- they hire a lobbying troop to implement their policy preferences;
- they run political, lobbying, public relations and now legal campaigns to break the pension contracts of pension members;
- they spend $400,000 annually on their lobbying efforts;
- they take money from Colorado PERA retiree resources (trust funds) to finance litigation to retroactively seize contracted benefits from those same PERA retirees; and
- as we have seen, they get angry when Colorado legislators do not march in lockstep with Colorado PERA dictates.
This active lobbying and advocacy on the part of Colorado PERA officials also calls to mind the words of Jeanne Chenault, spokeswoman for the $42 billion Virginia state retirement system. “We do not take positions on bills,” she said. “We provide information on bills.”
Another distinguishing feature of Colorado PERA’s world is the fact that Colorado public sector unions support the breach of the labor contracts of their retired union “brothers and sisters,” while Pennsylvania public sector unions defend labor contracts. Public sector unions in Pennsylvania are fighting proposed changes to the “partially-vested” public pension contracts of current employees. In 2010, Colorado public sector unions supported the breach of “fully-vested” public pension contracts of Colorado PERA retirees.
I believe that this support of Colorado public sector unions for the breach of labor contracts was rather myopic. If the Colorado Legislature succeeds in breaking Colorado PERA pension contracts once, this contract breach will without question be repeated. There will, in effect, be no Colorado PERA pension contract. The Colorado Legislature will use the resources of Colorado PERA at its pleasure in accordance with the formula: underfund PERA pension, create “crisis,” use “crisis” to justify PERA contract breach, repeat. The Colorado PERA pension plan will revert to the legal status of public pensions a century ago . . . that of “gratuities.”
The comprehensive February 9 article in the Pennsylvania newspaper, The Morning Call, reports the support of unions (AFSCME and the Pennsylvania Education Association) for public pension rights in their state:
“David Fillman, executive director of Council 13 of the American Federation of State, County, and Municipal Employees, said his union is not challenging Corbett’s plan to change contributions of future employees. That’s legal and was done in 2010, Fillman said. But it will fight Corbett’s attempt to change current employees’ future benefits, he said, because it would violate the 1934 McGovern decision. ‘For him to dabble in that area, I think is going against the Pennsylvania Constitution,’ Fillman said.”
“The Pennsylvania State Education Association, the state’s largest teachers union, is also pointing to the McGovern ruling. Like Fillman’s union, the teachers union also is against changing benefits for current workers. And it has expressed concern about moving new employees to a system like a 401(k), saying it could increase taxpayer costs in the long run.”
“‘The governor’s pension plan is unconstitutional, unpopular and incomplete,’ PSEA spokesman David Broderic said. ‘The fact is, the system he has proposed would actually cost more to operate than the systems we have now.’”
“After Corbett’s budget address, Senate Majority Leader Dominic Pileggi, R-Delaware, said the state should move to a 401(k) system because taxpayers demand it. But he said the administration could face legal challenges by trying to change existing benefits and Corbett could have a very hard time finding enough votes in the House and Senate to make it happen.”
“‘Changes to current employees has serious constitutional questions,’ he said.”
Here are a few more excerpts from The Morning Call article and my comments:
“Under Corbett’s plan, the state would not alter the benefits of current retirees or the benefits that current employees have already earned.”
(My comment: Governor Corbett is proposing changes to the rate of future accrual of pension benefits for current, active members of Pennsylvania public pensions. The theory is that, since these pension benefits have not yet been earned, changing them does not impair the pension members’ contractual rights. This is a legal theory advocated by Law Professor Amy Monahan of the University of Minnesota School of Law. Her paper on public pension contractual rights has been referenced many times in my earlier articles.)
The Morning Call’s description of Governor Corbett’s plan:
“But in 2015, current employees would have their future retirement earnings adjusted downward by a change in the retirement formula. Employees would have the option to offset that by increasing their own contribution.”
“The same year, all new hires would be given retirement packages like a 401(k) that would require them to contribute at least 6.25 percent of their salaries.”
“He wants to put new state and school employees into a separate retirement system that resembles a private sector 401(k), an idea that hasn’t ruffled many feathers. But some union leaders and lawmakers are calling his plan to reduce the future pension benefits of current workers unconstitutional.”
The Morning Call article addresses Pennsylvania public pension case law:
“In ruling against McGovern, the Pennsylvania Supreme Court said a pension benefit granted to workers could not be taken away as long as those workers abided by the terms of their employment. The court based its decision on a strict interpretation of the state constitution’s contract provision.”
“The decision set the precedent. It has been cited in legal opinions concerning pension-related lawsuits over the last 79 years.”
(My comment: Out west, we can’t be bothered with the niceties of constitutional law. Although we have ample, on-point Colorado Supreme Court precedent establishing the contractual nature of public pension rights in Colorado, this precedent was ignored by the Colorado Legislature in 2010. Colorado case law, AND a Colorado Attorney General’s opinion on the subject were disregarded by Colorado legislators in 2010 when they opted to attempt a Colorado PERA contract breach. How did a majority of Colorado legislators arrive at the conclusion in 2010 that they were above the law? This was no simple matter. The assistance of 17 statehouse lobbyists was required to force the blinders onto the faces of these Colorado legislators.)
The Morning Call article notes that states cannot declare bankruptcy under federal law:
“No matter how far the pensions slide into the red, they can’t bankrupt the state because unlike municipalities, states can’t declare bankruptcy.”
(My comment: Recall that we looked at the Northern Mariana Islands Retirement Fund’s efforts in this direction [declaring bankruptcy] last year. This public sector retirement plan confronted a brick wall in the form of a federal judge. “According to a federal judge, the answer is no.”
Links:
http://pensiondialog.wordpress.com/2012/04/24/can-a-pension-plan-go-bankrupt/
http://pensiondialog.wordpress.com/2012/06/01/can-a-pension-plan-file-for-bankruptcy-part-2/)
From The Morning Call article:
“In 1983, SERS and PSERS were in worse financial shape than they are today as the percentages of their unfunded liabilities were higher, according to state records.”
“Instead of letting the surpluses build and act as a cushion against hard times, the Legislature has offset the gains by reducing the payments the state and school districts have had to make.”
(My comment: Colorado PERA’s funded ratio was as low as 58 percent in the 1970s and yet Colorado PERA’s administrators at the time did not advocate breaking public pension contracts in Colorado. The fact that Colorado PERA’s funded ratio has been much lower in the past than the 69 percent funded level that was reached in 2010 demonstrates just how ridiculous Colorado PERA’s claim is that contracts must be broken at that level.
According to the U.S. Federal Reserve, public pension actuarial funded ratios in the 50 to 60 percent range were typical in the 1970s and yet pension contractual rights were, nevertheless, upheld by U.S. courts.
California’s huge teacher pension system, CalSTRS, reached a funded level as low as the “30s” during the decade of the 1970s, and yet contractual rights were upheld:
“After being about 30 percent funded during the 1970s, CalSTRS funding slowly improved with an increase in state funding in 1990 and then large investment fund earnings during a high-tech boom later that decade. As funding peaked at about 110 percent around 2000, the ‘surplus’ was not regarded as a cushion to offset future investment earnings shortfalls. As often happens with public pensions, the surplus was viewed as a windfall that should be spent.
Legislation began divvying up the windfall in 1998 when the surplus was still a projection. A cut began in the state contribution, 4.3 percent of pay, that would reduce the rate by half, a drop in pension funding of 2 percent of pay similar to the teacher diversion.”
http://calpensions.com/2013/02/15/how-much-calstrs-debt-due-to-mismanagement/
Colorado Governor Bill Owens followed this same playbook in our state in 2001.)
I’ll conclude with a bit more evidence that Colorado PERA officials have lost touch with reality. In December 2009, the official line at Colorado PERA was that Colorado PERA COLA benefits are contractual.”
Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
Link:
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf)
Sixteen months later, (after the contract breach) Colorado PERA officials were telling us that Colorado PERA COLA benefits ARE NOT contractual. The organization Friends of PERA notes (on their website) that Adam Franklin, senior staff attorney at PERA informed them on April 5, 2011 that: “PERA believes that the COLA formula is not contractual.”
Link:
http://www.friendsofpera.com/0405meeting.pdf
So dear reader, decide: Are Colorado PERA officials simply fickle? Or, is this borderline schizophrenia?
Complete article at The Morning Call:
http://articles.mcall.com/2013-02-09/news/mc-pa-corbett-pension-reform-sunday-20130209_1_pension-reform-sers-and-psers-pension-battle#.URvru78zD9s.facebook
P.S. While you ponder this question, don’t forget to support public pension contractual rights and the rule of law in the United States. Contribute to saveperacola.com. (Their website explains how to make a donation.) Also, Save Pera Cola is on Facebook. “Friend” them!
Thank You Mr. Moncrief !!!
Algernon, I appreciate all your scholarly research.
A number of detractors, including our state treasurer, are thoroughly convinced PERA’s assumed rate of return of 8% is too optimistic, even though it has been achieved in the past. Many of these fiscal conservatives are concerned our country is headed toward European-style socialism with its resultant ramping down of gross national product (GNP), and this fear of a slowing economy is, in part, driving PERA reform and the invocation of “actuarial necessity”.
There are many articles out there attesting to some major societal changes that may quench our national economic engine going forward. Below is an example of such:
Richard Vedder: The Wages of Unemployment
http://online.wsj.com/article/SB10001424127887324461604578193141690993174.html
Hi Stan, I haven’t spent much time investigating appropriate return assumptions for public sector defined benefit plans, since this matter is a “management issue” for governmental defined benefit plan sponsors.
Trustees of public pension systems must determine appropriate return assumptions for their plans based on the level of risk that they allow their investment professionals to take with plan assets. These trustees set limits on asset allocation for investment of plan trust funds.
Trustees structure their plan portfolios in accordance with their own ideas of what constitutes an acceptable level of risk. Some public pension trustees (like the Colorado PERA Board of Trustees) have failed to perform their fiduciary duty to regularly and emphatically implore politicians to set employer and employee pension contributions at levels sufficient to control the growth of unfunded plan contractual liabilities. Colorado PERA officials have met at least three times a year with state legislators for decades. PERA officials should have been in the faces of these legislators at every meeting, impressing upon the legislators the fact that CONTRACTUAL obligations take precedence over DISCRETIONARY expenditures. But, alas . . . such honesty requires backbone. If public pension plan trustees want to adopt lower plan return assumptions, or take less risk when investing plan assets, they should ensure that politicians set employer and employee contribution rates at levels that permit this.
Nothing prevents public pension plan trustees from proposing LEGAL, PROSPECTIVE changes to public pension statutory contracts. (Montana and Pennsylvania are considering such legal, constitutional public pension plan reforms as I type this response to your question.)
Also, remember that public sector retirees who have fully-vested contractual rights to benefits in their pension plans BEAR NO MARKET RISK. Participants in defined CONTRIBUTION plans DO have market risk. By definition, participants in defined benefit plans, legally, have no such risk. Such plans are “DEFINED” benefit plans, not “VARIABLE” benefit plans. Retirees in these plans did not work for their governmental employers and contribute to their pension plans for decades in exchange for “whatever” benefits politicians decide to award in retirement . . . these retirees held up their end of the agreement.
FYI, the most recent federal “Highway Bill” passed by Congress included a return assumption for PRIVATE sector defined benefit plans that averages 7.5 percent. This level is in the ballpark of most public sector plan return assumptions. Some argue that since public sector plans and their governmental plan sponsors “cannot go out of business” (they exist perpetually) a return assumption higher than that of private sector plans is warranted.
Apparently, it’s dangerous to ask me a simple question. I have just become so opinionated. Apologies, Al
COLORADO LEGISLATIVE ATTORNEYS AMEND THEIR DEFINITION OF “SHALL.”
Recall that the attorneys at the Colorado Legislature have a “drafting manual” to assist them in preparing Colorado’s laws. It’s called the Colorado Legislative Drafting Manual. These attorneys wrote the Colorado law stating that Colorado PERA retirees SHALL receive the contracted 3.5 percent PERA COLA benefit, and that Colorado PERA members who have purchased service credit SHALL receive benefits based on that purchase that were in effect in Colorado law at the time of the purchase. The Colorado General Assembly’s Legislative Drafting Manual is periodically revised. (It’s now updated electronically on the Legislature’s website.) According to the September 29, 2010 version of the Legislative Drafting Manual, these attorneys believe that “shall” means mandatory. The attorneys have another word that they use if they want to indicate that an action is discretionary. That word is “MAY.”
Colorado Legislative Drafting Manual, Revised 9/29/2010:
Drafting Manual, page 5-15 – “In the statutes, ‘shall’ should be used to indicate a command.”
Drafting Manual, page 5-18 – “Use the word ‘shall’ in statutory directions or requirements.”
Drafting Manual, page 5-19 – “‘Shall’ indicates a command.”
Drafting Manual, page 5-19 – “Use ‘may’ to grant discretion.”
The provision in Colorado law providing the contracted Colorado PERA 3.5 percent COLA benefit (prior to its retroactive alteration by SB10-001) read:
Colorado Law – Section 24-51-1002 (1), Colorado Revised Statutes “ . . .the cumulative increase applied to benefits paid SHALL be recalculated annually as of March 1 and SHALL be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective . . .
Under Colorado law, members of Colorado PERA who purchase PERA service credit SHALL receive Colorado PERA pension benefits in effect at the time of the purchase:
Colorado Law – Section 24-51-502 (3), Colorado Revised Statutes. “Service credit purchased by members . . . SHALL be subject to the benefit provisions in effect for the existing member contribution account.”
In November of 2011, the General Assembly’s Legislative Drafting Manual was amended. Drafting rules (on pages 5-16 through 5-20) relating to use of the word “shall” in Colorado law were changed. According to the November 29, 2011 version of the Legislative Drafting Manual, “shall” now means “has a duty to.” (Note that the date of revision on the Legislative Drafting Manual is found on the final page of the document.)
From the November 29, 2011 Legislative Drafting Manual:
“Shall” means that “a person ‘has a duty to.’”
“(a) Shall. Use ‘shall’ to impose a duty on a person. ‘Will’, ‘must’, and ‘should’ should not be used as a substitute for ‘shall’.”
“(II) When using ‘shall’ to mandate an action in which the outcome is in the discretion of the actor, include alternative actions the actor may take:
Avoid: The commissioner shall approve an application within thirty days.
Write: The commissioner shall approve or deny an application within thirty days.
(c) May. Use ‘may’ to permit or grant discretion or authority with regard to a thing or person.”
In my mind, it doesn’t really matter whether Colorado PERA is “commanded” to provide the 3.5 percent contracted COLA benefit, or Colorado PERA “has a duty to” provide the 3.5 percent contracted COLA benefit. Under either set of legislative drafting definitions, Colorado PERA is required by law to pay Colorado PERA retirees their contracted, accrued 3.5 percent COLA benefit as deferred compensation. Thus, Colorado PERA and the State of Colorado are currently in breach of contract.
For those who are interested in this topic, it has been thoroughly debated at meetings of the Colorado General Assembly’s Committee on Legal Services (extensive discussion at the March 22, 2012, April 27, 2012 and November 14, 2012 meetings.)
Here are archived minutes of these meetings:
http://tornado.state.co.us/gov_dir/leg_dir/olls/committee_on_legal_services_archive.htm
Here’s a link to Committee on Legal Services audio back to 2011:
http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage
Here’s a link to the latest version of the General Assembly’s Legislative Drafting Manual:
http://www.state.co.us/gov_dir/leg_dir/olls/ldm/olls_drafting_manual.pdf
I believe that every member of the Colorado PERA pension SHALL (in the sense of “has a duty to”) stand up for their contractual public pension rights. How to do this? Contribute to saveperacola.com. (Their website explains how you can make a donation.) Also, PERA members SHALL “Friend” Save Pera Cola on Facebook.
ACTUARY JOHN BURY: PUBLIC PENSION ACTUARIES MUST NOW INCORPORATE A “WELCH FACTOR” . . . CONSIDER “ETHICAL FIBER” OF POLITICIANS.
In his most recent column, actuary John Bury suggests that public pension actuaries in the United States consider incorporation of a “welch factor” into actuarial analyses. Historically, actuaries for public pension systems have assumed a degree of ethical, legal policy-making behavior on the part of elected officials overseeing public pension systems.
These actuaries have assumed that elected officials and public pension system trustees, in their fiduciary capacity, would act in conformance with the strictures of the U.S. Constitution. Given recent, brazen attempts by U.S. state and local governments to escape their contractual obligations (Colorado is cited as an example) such actuarial assumptions may no longer be prudent.
From the John Bury column of February 13, 2013:
“Possibly the next innovation in actuarial science in the ongoing quest to lower contribution amounts (e.g. asset smoothing, open-amortization periods) is to factor in the probability that a government would renege on the promised DB benefits. We are certainly building up enough data to support a welch factor.”
“Check with retirees in Prichard, Alabama or Central Falls, Rhode Island or Colorado or Minnesota or New Jersey. In the public sector DB promises are only as solid as the ethical fiber of the politicians making them and the judges enforcing them.”
(My comment: If Colorado PERA pension COLA benefits are not an “automatic,” contracted, accrued pension benefit, why have Colorado PERA’s actuaries incorporated provision of this deferred compensation into the calculation of future Colorado PERA public pension liabilities? Have Colorado PERA’s actuaries been mistaken in preparing Colorado PERA’s financial statements repeatedly . . . for decades?)
Link to Bury column:
http://burypensions.wordpress.com/2013/02/13/the-welch-factor/#comment-5756
Fight for public pension contractual rights and the rule of law in the United States. Support saveperacola.com with your contributions. Friend Save Pera Cola on Facebook!
A PUBLIC PENSION LAWYER ON CONTRACTUAL PUBLIC PENSION RIGHTS.
For those who have not yet heard, the State of Colorado is trying to break its contracts. Why is this news to so many people? I’m not aware of many other instances in which the State of Colorado has tried to break its contracts. This is not a commonplace. So, I’m surprised that the attempt has received so little attention from the Colorado press. Colorado is trying to break its contracts with retirees in the state pension system, Colorado PERA. This is quite peculiar given that Colorado is a rich state with very low state taxes. Why not just pay the state’s debt? Is that not what we teach our children? Pay your debts? Going forward, let’s make a point to teach our children, AND our politicians this important lesson. Although Colorado has the 15th highest per capita income in the nation and (almost) the lowest state taxes per capita (49th?), Colorado officials do not want to pay the state’s debt. Therefore, in 2010, the Colorado Legislature (at the direction of the state’s pension administrator, Colorado PERA) passed a bill to push a large part of the state’s PERA-related debt onto elderly pensioners in the state. Now that you’re up to speed we can get to the subject of this article.
Lawyers love to talk. As we have seen, attorneys for public pension systems are particularly communicative. Like all lawyers, public pension lawyers in the United States periodically congregate and discuss issues that affect their work . . . issues like the contractual rights of the members of U.S. public pension systems. Today I will address some of the advice that certain public pension lawyers give to other public pension lawyers about the contractual rights of the members of public pensions.
In this article I provide a few excerpts from (and comments on) an “outline” of public pension contractual rights written by a public pension lawyer entitled: “Constitutional Issues When Altering Public Pension Benefits.” This “outline” was written by an attorney, Nicholas Joseph Marcucci, who is Deputy Chief Counsel at the Pennsylvania State Employees’ Retirement System. He is an Emeritus Board Member at the National Association of Public Pension Attorneys (NAPPA), alongside our own Colorado PERA Executive Director, Gregory W. Smith. Marcucci’s legal “outline” was, apparently, presented at the 2010 NAPPA Legal Education Conference (June 23, 2010.) Perhaps Greg Smith was present at this conference?
Colorado PERA’s Executive Director Greg Smith was Colorado PERA’s lead attorney at the time that Colorado PERA retiree pension contracts were broken (three years ago) in the bill, SB10-001. Colorado PERA has an office full of other lawyers, and contracts for a few more outside private sector lawyers for good measure. (Heads up outside lawyers . . . clearly, Colorado PERA has little respect for its contractual obligations. Get cash.)
http://www.nappa.org/staff.asp?treeid=6&id=93
NAPPA makes the Marcucci “outline” available to the public on its website. To access the complete Marcucci “outline” of constitutional public pension rights (a Word document) paste the following into Google: “Constitutional Issues When Altering Public Pension Benefits Marcucci.”
In this article I do not summarize the Marcucci document, I merely comment on those portions that I find interesting or relevant to the Colorado Legislature’s ongoing attempt to escape its own public pension contractual obligations.
From the Marcucci “outline”:
“Does your jurisdiction have an anti-gratuity clause in its constitution? If so, then almost by default there needs to be a contract component to pension benefits.”
(My comment: As we have observed earlier, the Colorado Constitution does indeed have “an anti-gratuity clause.” Over the last couple of years, I’ve wondered how any court might possibly conclude that Colorado PERA pension COLA benefits are non-contractual pension benefits. Such a conclusion would require that PERA COLA benefits necessarily be gifts from the State of Colorado to PERA retirees, that is, a “gratuity” prohibited by the Colorado Constitution.
According to the Colorado Constitution, the Colorado PERA pension COLA benefit is inescapably earned, deferred compensation. If the Colorado PERA COLA benefit were a “gratuity” (that is, if it had the discretionary nature of a “gift”) it would be unconstitutional under Article 5, Section 34 of the Colorado Constitution. This section of the Colorado Constitution prohibits the Colorado General Assembly from using public funds “for benevolent purposes to any person.” Throughout the history of Colorado PERA, if any pension benefit (“base pension benefit” or “pension COLA benefit”) has been paid to a PERA retiree as a “discretionary,” “benevolent” grant to that PERA retiree . . . then, that payment has been unconstitutional under Article 5, Section 34.)
From the Marcucci “outline”:
“United States Trust Co. emphasizes that the impairment must be both reasonable and necessary. A State cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money on other public policy goals.”
(My comment: To elaborate, in 1977 the U.S. Supreme Court (in U.S. Trust Co, 431 U.S.) clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE’S SELF-INTEREST IS AT STAKE. As the court bluntly stated:
“A governmental entity can always find a use for extra money, especially when taxes do not have to be raised. If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors.”
For the last ten years, the Colorado Legislature has underfunded its contractual Colorado PERA obligations, giving it “extra money” to spend “without raising taxes.” The Colorado Legislature has used the Colorado PERA trust funds as a “credit card.”)
From the Marcucci “outline”:
“In most states there is a fairly clear demarcation between the gratuity theory and the contract theory and a seminal case or two where the courts make the change. Police Pension and Relief Board of the City and County of Denver, et al. v. McPhail, 39 Colo. 330, 338 P.2d 694 (1959); and, Police Pension and Relief Board of City and County of Denver, et al., v. Bills, et al.”
(My comment: It’s interesting that Marcucci highlights our Colorado Bills and McPhail public pension contract cases as “seminal” cases that constituted a “fairly clear demarcation between gratuity theory and contract theory.”)
From the Marcucci “outline”:
“For instance, if pension benefits are ‘deferred compensation for current service,’ they might be more difficult to change than if they are ‘retirement pay’ or ‘additional compensation.’”
“Even a reservation of rights clause, however, may not allow the reduction of already accrued benefits if the jurisdiction adopts the position that pensions are deferred compensation currently earned. To do so would be tantamount to retroactively decreasing salaries and trying to recoup money already paid in paychecks (or to decide not the pay the current paycheck that is two-weeks deferred under the payroll system.)”
(My comment: In the McPhail case, the Colorado Supreme Court found that public pension benefits constitute deferred compensation: “The fireman and policeman accepts less take home pay in order to provide a generous retirement system. The benefits thus provided are definitely a part and an important part of his compensation.”)
From the Marcucci “outline”:
“The Cliff Vesting Legacy. Many of the early cases arose in situations involving employees with 20 or 25 year cliff vesting. Police Pension and Relief Board of City and County of Denver, et al., v. Bills, et al., 148 Colo. 383, 366 P.2d 581 (1961).”
“Cliff vesting pension benefits present a different situation from accrual based pension benefits. Accrual based pension benefits make the connection between benefits being earned each year concurrent with the performance of service and making member contributions more apparent. The ability to change future accrual rates, so long as already accrued benefits are left intact, seems more commonsensical and palatable.”
“Courts seem more resistant to allowing changes where cliff vesting is involved and more apt to find a constitutionally enforceable implied promise that if at the time of commencement of work an employee worked X years, then Y benefits would be received.”
“PRACTICE TIP. When examining precedent and deciding cases, the courts do not seem to pay much attention to the distinction between cliff vesting and accrual based benefit structures and have uncritically grafted cliff vesting doctrines to accrual based fact patterns.”
(My comment: Marcucci addresses the idea of “cliff vesting” and again cites the Colorado case, Bills. Interestingly, he observes that courts are less likely to permit breach of public pension contracts in cases involving “cliff vesting.” Changes to future accrual rates seem “more commonsensical.”)
From the Marcucci “outline”:
“Does a jurisdiction’s domestic relations law treatment of pensions affect whether or not it is subject to pension contract protections?”
(My comment: This Marcucci question reminded me of a comment by “Alan B” that was posted in the on-line version of the Denver Post in 2010 in regard to the initial Denver District Court decision in the case Justus v. State. Here’s the comment: “What truly confounds me in this case is that Judge Hyatt ruled the opposite in my divorce case. Which only shows what I have read before that it takes the courts 5 to 10 years to figure something out. He ruled that my wife was entitled to her share of PERA discounted at the legal rate assuming that PERA would pay my pension compounded at 3.5 percent for the rest of my life. Her lawyers argued that her social security could not be guaranteed yet the PERA could be. Judge Hyatt ruled for her and in this case he ruled the opposite of what he had ruled in the current case. Is the 3.5 percent annual adjustment guaranteed or not, Hyatt has spoken on the record, yes and no.”
Marcucci cites the Colorado public pension case Ackman a couple of times in his “outline”:
“In Colorado pensions are part of the public employee’s compensation due under the employment contract, particularly where the pension is funded, at least in part, by employee contributions. City Of Aurora v. Ackman, 738 P.2d 796 (Colo.App. 1987).”
“In almost all states where contract rights exist, the terms of the contract are found in the enabling legislation. O’Dea v. Public School Employees’ Retirement Board, 66 Dauphin 58, 88 D&C 593 (1954) (The retirement code and its amendments establishing the retirement system are incorporated into and constitute the essential provisions of a member’s contract.)”
“In many states, enforceable pension terms attach at the start of employment.” City Of Aurora v. Ackman, 738 P.2d 796 (Colo.App. 1987).
(My comment: Here’s a link to our Colorado case, City of Aurora v. Ackman:
http://scholar.google.com/scholar_case?case=7030368230157738825&q=City+Of+Aurora+v.+Ackman,+738+P.2d+796+(Colo.App.+1987&hl=en&as_sdt=2,6
Ackman is a 1987 Colorado Court of Appeals decision, in which the court affirmed the decision of a District Court that the City of Aurora could not retroactively change its employees (fire fighters) eligibility for retirement.
Here are some excerpts from Ackman:
“Yet, any ambiguities appearing in statutes regulating pension and retirement funds must be construed favorably toward the employee. Taylor v. Public Employees’ Retirement Ass’n, 189 Colo. 486, 542 P.2d 383 (1975); Endsley v. Public Employees’ Retirement Ass’n, 33 Colo.App. 416, 520 P.2d 1063 (1974).”
“After a bench trial, the district court found that the increased service requirement of 25 years constituted, from the firemen’s perspective, an adverse change to the pension plan; that the rank escalator benefit did not represent a ‘corresponding contemporaneous increase,’ or a ‘substantial increase,’ in the plan’s benefits; and that, consequently, the City could not impose a 25-year service requirement upon its firemen until January 1, 1976, when the provisions of Part 5 became effective, and then such a requirement could be made effective only for firemen hired on or after that date.”
“This statutory provision, while not directly relevant to the issue here, does constitute, in our view, a general recognition by the General Assembly that it would be improper to attempt to apply the provisions of a new pension program to employees who have been employed in anticipation of the receipt of benefits under another program.”
“It is now well settled, however, that such a pension program constitutes a part of the public employee’s compensation due under the contract of employment, particularly where, as here, the pension program is funded, at least in part, by contributions from the employee. Consequently, a substantial adverse change cannot be made in the ‘vested’ pension rights of an employee who has already met the eligibility requirements of such a program. Police Pension & Relief Board v. McPhail, 139 Colo. 330, 338 P.2d 694 (1959).”
“Likewise, even though an employee’s pension rights may not yet have become vested, because he has not yet met the length of service or other eligibility requirements under the plan, once a prospective pension benefit is included in an employee’s employment contract, as one of his employment conditions, and he performs service for the public employer under that contract, he is normally entitled to receive benefits pursuant to the terms of that pension program, subject only to his meeting the program’s stated eligibility requirements. This contract between the public entity and the employee generally prohibits a change in the existing program which would have a substantially adverse effect upon the employee’s anticipated pension benefits. Police Pension & Relief Board v. Bills, supra. But cf. Peterson v. Fire and Police Pension Ass’n.”
If you made it this far, congratulations! You must truly find these court cases “appealing.” But, don’t stop now . . . remember to help support public pension contractual rights by contributing to saveperacola.com. (Their website explains how to do this.) Also, don’t forget to Friend Save Pera Cola on Facebook!
OREGON STATE LEGISLATIVE ATTORNEYS: TAKING ACCRUED PUBLIC PENSION COLA BENEFITS IS ILLEGAL.
In 2010, Colorado state legislators enacted a bill, SB10-001, that seized accrued, earned, fully-vested, contracted Colorado PERA retiree pension COLA benefits. A group of 17 statehouse lobbyists persuaded Colorado state legislators to attempt a retroactive taking of these contracted public pension benefits. In 2010, Colorado legislators abdicated their responsibility to make public policy in this arena to: the state’s pension administrator, Colorado PERA, to public sector unions in Colorado, and to these 17 statehouse lobbyists.
Oregon state legislators are not making the mistake made by Colorado legislators in 2010. They are taking the time to investigate the constitutionality of pension reform proposals prior to putting them into Oregon state law. This due diligence on the part of Oregon legislators will ultimately save Oregon taxpayers millions of dollars in costs for fruitless litigation.
Unlike Oregon state legislators, Colorado legislators did not bother to ask their own attorneys for an opinion on the constitutionality of their proposal to seize accrued pension benefits prior to acting. Incredibly, Colorado legislators ignored a 2004 Colorado Attorney General’s opinion on this subject, as well as on-point Colorado case law. Colorado state legislators were encouraged in 2010 to seek Colorado Supreme Court guidance clarifying the legality of their proposal to take accrued Colorado PERA pension benefits. The Colorado Legislature also ignored this advice (to submit a clarifying “interrogatory” to the Colorado Supreme Court) and forged ahead with SB10-001.
Prior to acting, the Oregon Legislature requested an opinion on a proposal to take back accrued public pension COLA benefits in their state from their in-house legislative attorneys, the Oregon Legislative Counsel. Here is the February 4, 2013 response of Oregon’s legislative attorneys:
“You asked about the legality of a proposal to limit the cost-of-living adjustment (COLA) to service retirement allowances of retired members of the Public Employees Retirement System (PERS) by applying the COLA only to the first $24,000 of annual benefits. The proposal would amend ORS 238.360, which has long required that PERS make annual adjustments to service retirement allowances based on changes to the cost-of-living as reflected in the Consumer Price Index.”
“Based on recent Oregon Supreme Court precedent, we conclude that an attempt to limit the COLA in this way would be found to be a violation of the contract rights of the members.”
“The Oregon Supreme Court has found several times that the 1953 law establishing PERA created a contract between public employers and public employees.”
“The court stated several times in Strunk that there is a contract right to the COLA. For example, the court found that:
‘We note that the status of the law is particularly clear with regard to retired members, and there can be little question that the COLA is a fully accrued benefit for a member who has retired.’”
Here is a link to the complete February 4, 2013 opinion of the Oregon Legislative Counsel:
http://media.oregonlive.com/politics_impact/other/LC%20Opinion.pdf
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RHODE ISLAND STATE TREASURER RAIMONDO: “YOU SHOULDN’T BREAK A (PUBLIC PENSION) CONTRACT WITH A STATUTE.”
Yesterday, Rhode Island State Treasurer Gina Raimondo was interviewed on WPRI-TV on the subject of public pension benefits (even though she is currently under a court gag order relating to a public pension COLA-taking lawsuit against the State of Rhode Island.) Raimondo was the champion of Rhode Island’s 2011 legislation that seized public pension retiree COLA benefits, breaking public pension contracts in the state.
In the interview, Treasurer Raimondo states in reference to public pension contracts: “You shouldn’t break a contract with a statute.” Raimondo should have followed her own advice, she has done precisely that . . . broken Rhode Island public pension contracts with a statute. This public pension breach of contract case is currently in mediation. The Rhode Island Legislature may very well have to begin at square one, and limit itself to consideration of the legal, prospective public pension reforms that are being adopted across the nation.
Link:
http://blogs.wpri.com/2013/02/10/watch-newsmakers-with-treasurer-gina-raimondo-4/
DISCOVERED IN THE LEGAL WEEDS: AN UNCONSTITUTIONAL COLORADO PERA REFORM BILL.
Now, some of you may be unaware that the State of Colorado is trying to break its contracts. I’ll catch you up . . . the Colorado Legislature and the state’s public pension administration arm, Colorado PERA, are attempting to break public pension contracts. The Legislature and Colorado PERA are essentially arguing that taxpayers in the state with the 15th highest per capita income in the nation and (nearly) the lowest state per capita tax burden (i.e., Colorado) do not want to pay for the state’s contracted debt. They note that since the state has not kept up with its obligations to pay this debt, it would be easier if the courts simply allowed the State of Colorado to escape its contractual obligations. It would be quite convenient for Colorado politicians if the debt that is the responsibility of all Colorado taxpayers (a big voting bloc!) were shifted onto a relatively small group of the state’s old people. That’s their case in a nutshell.
Further investigation of Colorado’s attempt to break its pension contracts requires one to begin digging into the legal weeds. Today, I want to briefly address an odd thing that I discovered in these legal weeds.
In 2011, Colorado PERA’s (then) General Counsel Gregory W. Smith wrote a helpful article for the periodical Government Finance Review. The article: “Adjusting Public Pension Benefits in Colorado: a Fiduciary Process,” lays out Colorado PERA’s rationale for breaching its public pension contracts.
For the complete article go to this link and scroll down:
http://www.thefreelibrary.com/Adjusting+public+pension+benefits+in+Colorado%3A+a+fiduciary+process.-a0290520595
In the article, Greg Smith writes about the concept of “less drastic” changes to public pension systems; and specifically, whether public pension systems should be permitted to break their contracts if “less drastic” alternatives to the contract breach are available.
Smith writes: “Necessity is judged on two levels: 1) whether a less drastic modification could have been implemented; and 2) whether, even with modification, the state could have achieved its stated goals. To determine whether the changes were reasonable, the changes must be the minimum changes necessary to solve the economic problems of the plan.”
Smith writes that the pension contract changes “must be the minimum changes necessary to solve the economic problems of the plan” in order to be legal.
Hold that thought for a moment until we hear from Colorado PERA’s actuaries.
When the Colorado Legislature passed the bill to break Colorado PERA pension contracts, SB10-001, it overreached by placing a “100 percent” funding goal into the bill. Public pension systems never have to be funded at a 100 percent level since, unlike private corporations, they never go out of business . . . they never have to fully “payoff” their pension debt. These pension obligations are due over the coming 50 years . . . they are never due “tomorrow.” Indeed, the Colorado PERA pension system has been funded at a 100 percent level just twice in its 81-year history. One of the big three U.S. credit rating agencies, Fitch Ratings, agrees and deems public pension systems to be “well-funded” at an 80 percent funded ratio, and “adequately funded” at a 70 percent funded ratio. Link:
http://www.ncpers.org/Files/2011_enhancing_the_analysis_of_state_local_government_pension_obligations.pdf
So, here’s the interesting thing I found in the legal weeds; even Colorado PERA’s actuaries point out that this 100 percent funding goal far exceeds federal pension regulatory standards. On page 112, of the 2011 Colorado PERA Comprehensive Annual Financial Report, Colorado PERA’s independent actuary, Cavanaugh MacDonald Consulting, LLC, reports:
“It should be noted that the changes made to the PERA structure as a result of SB10-001 have as a goal 100% funding of the accrued liability within 30 years for all divisions. The results of the December 31, 2011, valuations combined with financial projections of all divisions, indicate that this goal, WHICH IS A MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB STANDARDS, is still achievable with the exception of the Judicial Division.”
Link:
http://www.leg.state.co.us/OSA/coauditor1.nsf/All/641A0AB5B97D073C87257A3A0072FEA3/$FILE/2067-12%20CAFR_6-26-12.pdf
Now, let’s break this down into bite-size chunks:
(1) Greg Smith, Colorado PERA’s Executive Director, believes that changes to public pension contracts “must be the minimum changes necessary to solve the economic problems of the plan” in order to pass court muster.
(2) The Colorado Legislature passed a public pension reform bill in 2010 that includes the unnecessarily ambitious “change” in the Colorado PERA statutory contract of a100 percent pension funding goal.
(3) Colorado PERA’s own actuaries believe that this 100 percent funding goal is “much stronger” than needed (i.e., not the minimum necessary) to meet federal pension regulatory standards.
(4) Ergo, how can Greg Smith possibly fail to conclude that SB10-001’s Colorado PERA pension contract breach is unconstitutional?
If you also find the State of Colorado’s attempt to break its contracts inexplicable, support these contractual rights by contributing to saveperacola.com. (Their website explains how to do this.) Also, Friend Save Pera Cola on Facebook!
COLORADO LEGISLATURE KILLS ITS FIRST PERA REFORM BILL OF THE YEAR.
Yesterday, the Colorado Legislature’s House Finance Committee killed its first Colorado PERA pension reform bill of the year. The bill (HB13-1040) by Representative Priola would have changed the calculation of the Colorado PERA pension “base benefit” for new hires of Colorado PERA-affiliated employers. Rather than using the average of an employee’s three highest annual salaries during their career to calculate an employee’s “base benefit” upon retirement, the bill would have required the use of the employee’s seven highest annual salary periods. This change would have essentially lowered retirement benefits for new hires, and reduced PERA’s long-term pension obligations by $322 million. While I have no opinion on the merits of the Priola pension reform proposal, it is interesting to note that this bill by Representative Priola impacted only newly hired PERA members, and thus operated on a purely prospective basis. Unlike the Colorado General Assembly’s 2010 pension reform bill, SB10-001, Priola’s bill would not have impaired vested Colorado PERA pension contracts . . . Representative Priola’s bill was a constitutional pension reform proposal.
Representative Priola demonstrated that the members of the Colorado General Assembly are capable of proposing legislation to reduce Colorado PERA’s unfunded liabilities that does not impair existing, fully-vested, Colorado PERA pension contracts. The fact that Representative Priola introduced this prospective Colorado PERA pension reform proposal begs the question: “Why were all such legal, prospective Colorado PERA reform options not completely exhausted prior to the Colorado General Assembly’s breach of Colorado PERA pension contracts in SB 10-001?”
The pension reform idea presented by Representative Priola yesterday constitutes yet another “less drastic” alternative to the breach of fully-vested Colorado PERA retiree pension contracts in SB 10-001. Courts should see that many legal, prospective PERA reform options were ignored by the Colorado Legislature in favor of pension contract breach.
Here are a few highlights from yesterday’s hearing:
John MacPherson, representing the Colorado Coalition for Retirement Security, opposed Representative Priola’s bill as “unnecessary.” He stated his opinion that all of Colorado PERA’s divisions are now on the path to sustainability under SB10-001. (Of course, SB10-001 itself is not constitutionally sustainable.)
John MacPherson also pointed out that Colorado PERA, prior to its recommendation of SB10-001, “studied for a year,” and came up with 17 areas of potential PERA pension reform that were considered for inclusion in SB10-001. Since Colorado PERA had 17 potential pension reform options in its quiver in 2009, why did Colorado PERA administrators fail to eliminate from consideration those reform options that impaired Colorado PERA pension contracts? Why not remove from consideration those options that were clearly unconstitutional? Recall that PERA’s Executive Director, Greg Smith, told us on August 11, 2009 during the Colorado PERA Denver “Listening Tour” meeting: “We understand that some of these (Colorado PERA pension reform options under consideration) may not be legal.”
Greg Smith’s words on August 11, 2009:
“Also important is that there are constitutional limitations . . . on what the General Assembly can do with regard to benefits.”
“There’s always a big question in everybody’s mind . . . Well, what is actuarial necessity? I wish I could answer that question for you, it’s not that I haven’t tried, not that we haven’t researched it.” “In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” “And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.” “So, we have to look at what component parts can we address and adjust to meet this gap, and to fill this gap.” “We have several slides and they essentially track the lines on the feedback form that each of you have in front of you . . . and remember that we understand that some of these may not be legal, some of them may not be politically viable, but everything is on the table at this point in time, everything is being considered by the PERA Board in order to come up with a comprehensive plan to fill the gap.”
Why put Colorado PERA pension reforms “that may not be legal, on the table” when “less drastic” pension reform opportunities have not been exhausted? Why bother attempting to breach “fully-vested” PERA pension contracts when options for altering “partially-vested” PERA benefits remain on the table?
Mark Buto, representing the Colorado Association of State Patrol Professionals, testified at yesterday’s hearing that he became a state patrolman because of the PERA pension plan. “It was because of the retirement package . . . that was the single reason that I chose the State Patrol over any other law enforcement.”
I appreciated these comments from Mark Buto . . . many Colorado PERA retirees agree with him. These Colorado PERA retirees sought employment with their PERA-affiliated employers in part, due to the offer of a future Colorado PERA retirement benefit. These retirees accepted the contractual offer of a Colorado PERA pension benefit in exchange for their labor and for their pension contributions over the course of long careers. Membership in the Colorado PERA pension plan was an inducement for these retirees to take their jobs in the first place, and to remain with their PERA-affiliated employers for decades. Colorado PERA retirees fulfilled their obligations under their PERA pension contract. These contracts were breached by SB10-001.
Representative Swalm asked “What do you think those people thought then they saw their promised cost-of-living adjustment cut under Senate Bill 1? Do you think that they at one point believed that PERA was inviolable and those benefits would never be cut?”
(The Buto answer was non-responsive.)
Colorado PERA Executive Director Greg Smith testified that the savings in the Priola bill were far off in the future. He also told the House Finance Committee that the Colorado PERA Board of Trustees opposes the bill. (Note that the Colorado PERA Board of Trustees opposed this legal, prospective PERA pension reform, while in 2010 the PERA Board supported the breach of Colorado PERA retiree pension contracts.) Does the Colorado PERA Board of Trustees really have its priorities straight? The support of our Colorado state pension administrators for the breach of public pension contracts makes them quite an anomaly in the U.S. public pension community.
Significantly, Greg Smith stated “There was shared sacrifice in SB1 . . . this (Priola bill) alters that shared sacrifice.”
The “shared sacrifice” that Greg Smith refers to was the Colorado General Assembly’s shift of the state’s public pension debt onto the backs of Colorado PERA retirees in 2010. Meredith Williams (Greg Smith’s predecessor as PERA Executive Director) told us in the May 29, 2011 Pueblo Chieftain:
“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”
Another member of the House Finance Committee, Representative Wilson (a retired Salida school superintendent) identified himself as a “casualty of SB1.” “Being one of those casualties that Representative Melton was talking about in the PERA system on SB1.”
Incredibly, the recent Colorado Court of Appeals ruling that the provisions of SB10-001 taking PERA retiree COLA benefits violated PERA pension contracts never came up at this legislative hearing. Legislative heads are buried deeply in the sand. The members of the Colorado Legislature’s House Finance Committee should know that the Colorado Court of Appeals recently held:
“We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.” In the cases McPhail and Bills, the Colorado Supreme Court “found a contractual right based on members’ provision of services and contributions to the retirement fund.” The Colorado Court of Appeals also reversed the Denver District Court’s summary judgment on the plaintiff’s “Takings Clause claim.” On page 36 of its decision, the Colorado Court of Appeals restores the plaintiff’s Takings Clause claim and cites the case Lynch: “contract rights can constitute property interests protected by the Takings Clause.”
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105 YEAR-OLD RETIRED TEACHER PUTS FACE ON STATE PENSION CONTRACT BREACH.
In 2010, the Colorado Legislature passed a bill to take back public pension benefits earned by Colorado PERA retirees over many decades. Some of these retirees are in nursing homes. Some spend their days fighting chronic pain. Many were in no position to defend their rights in the lobbies of the Colorado Capitol in 2010. That year, state legislators and lobbyists took advantage of this weakness to retroactively seize Colorado PERA retiree pension benefits.
The Colorado PERA pension contract breach was supported by state pension administrators and a 17-member statehouse lobbying team. Taking money from elderly Coloradans has allowed the Colorado Legislature to continue to underfund its contractual pension obligations, give away $100 million in annual discretionary property tax relief, maintain the lowest per capita state tax collections in the nation, fund local pensions that are not its responsibility, and provide lavish corporate tax benefits.
In this short Chicago Tribune video, a 105-year old Illinois retired teacher comments on her dedication to public service and how she held up her end of the public pension contract:
http://www.chicagotribune.com/videogallery/74219274/105-year-old-retired-teacher-shares-view-on-teacher-pensions
Daisy Rittgers of Shelbyville, Illinois:
“I think about four Governors ago that they became stressed for money, so they took it from the teacher’s pension and put it in cash flow, and that’s where all of this has all started from . . . and now they’re having to want somebody else to pay for their mistake, it looks to me like.”
‘It might not be . . . but that’s the way it looks like, that they might be trying to get us to pay the mistake of them taking that money and not budgeting and putting it back.” “I may be wrong . . . I’m not a politician.”
Why does the Colorado Legislature value the contracts of its retired workers less than it values its contracts with corporations?
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PENNSYLVANIA PUBLIC SECTOR UNIONS: WE WILL SUE TO PROTECT PUBLIC PENSION CONTRACTUAL RIGHTS.
Unlike Colorado’s public sector unions, Pennsylvania’s AFSCME and the Pennsylvania State Education Association aggressively defend public pension contractual rights . . . indeed, they vow to protect these rights in court.
From delcotimes.com:
“Leaders of Pennsylvania’s two largest public employee unions on Friday vowed a court fight if Gov. Tom Corbett and lawmakers approve reductions in future benefits for current state workers and school employees.”
“The officials from the Pennsylvania State Education Association and Council 13 of the American Federation of State, County and Municipal Employees said case law makes it clear that any benefit rollbacks for active employees would violate the state constitution.”
Link to full article at delcotimes.com:
http://www.delcotimes.com/articles/2013/02/01/news/doc510bf0137134a023100312.txt
From timesonline.com:
“The unions, however, are willing to work with Corbett to find sources of revenue to help the state with the cost, PSEA President Mike Crossey said at a news briefing in Harrisburg organized by the unions. The PSEA’s 187,000 members include about 120,000 teachers.”
Full article at timesonline.com:
http://www.timesonline.com/news/state/pa-union-leaders-vow-court-fight-if-pensions-cut/article_3849fd35-830b-5e71-9e99-db08ac742bf1.html
Pennsylvania’s Governor Corbett believes that fully-vested public pension benefits earned in the past by public sector retirees in the state are contractually protected against retroactive state seizure. However, Corbett argues that the future rate of accrual of public pension benefits, not yet earned by public employees, may be legally altered by the state.
From PhillyBurbs.com:
“Corbett said in a recent press conference that he believes it is legally possible to limit the reduction to future benefits that employees have yet to accrue. For example, he said the ‘multiplier’ — a percentage applied to an employee’s years of service and final average salary to produce his or her retirement benefit — could be reset at a lower rate for the latter part of the employee’s career. ‘You can cut the multiplier for folks going forward even if they (are) vested … because they still have the benefit of that period that they had the multiplier,’ Corbett said. ‘Legally, can you do that? I believe you can.’”
Link to full article at phillyburbs.com:
http://www.phillyburbs.com/news/local/the_intelligencer_news/could-pennsylvania-pension-liability-hit-current-state-workers/article_c943dc72-424b-5e64-ba36-095c99decbd1.html
Governor Corbett’s public pension reform proposal has been advocated by Law Professor Amy Monahan at the University of Minnesota School of Law. In her paper, Public Pension Reform: The Legal Framework, Monahan writes:
“What if, ten years into X’s tenure with the state, the state announces that effective immediately, pension benefits will only accrue at the rate of 1% of salary per year? I have argued that such prospective changes should be permitted absent an explicit agreement protecting against such changes.”
Monahan concludes:
“This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”
Link to Monahan law article:
http://www.law.umn.edu/facultyprofiles/monahana.html
(As I have noted earlier, Monahan’s arguments in this paper have been challenged by other public pension legal scholars.)
It’s 2013, and Pennsylvania’s public sector unions are threatening lawsuits over public pension reform proposals in Pennsylvania. In 2010, Colorado’s public sector unions supported the breach of public pension contracts in Colorado. I am amazed at the divergence of opinion that exists among public sector unions in the United States on this question of public pension contractual rights. In some states, public sector unions aggressively defend contractual public pension rights. In other states, like Colorado, public sector unions support the outright breach of fully-vested public worker pension contracts. Since, presumably, these organizations share nearly identical public policy goals I find the disparity of opinion in the area of public pension contractual rights inexplicable.
Colorado’s public pension administration arm, Colorado PERA, tells us of the support of Colorado’s public sector unions for the Colorado General Assembly’s bill breaking public pension contracts in 2010, SB10-001:
“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”
http://www.copera.org/pera/about/ask.htm
I believe that Colorado’s public sector unions took a rather myopic view when they decided to support the breach of the pension contracts of their retired brothers and sisters in 2010. I wonder, did Colorado’s public sector union officials really think through the ramifications of their support for this Colorado PERA public pension contract breach? In the future, when the Colorado General Assembly inevitably attempts further breaches of Colorado PERA pension contracts, what credibility will our public sector union officials have as they attempt to defend public pension rights? At that time, it will correctly be pointed out that, in 2010, Colorado’s public sector unions went on record in support of SB10-001’s taking of Colorado PERA pension benefits. What force of argument will our public sector unions be able to bring to future debates of public pension contractual rights in Colorado? How will our public sector unions defend the “partially-vested” Colorado PERA public pension rights of their members in the future, when they have already supported the breach of “fully-vested” PERA pension contractual rights in 2010?
If Colorado politicians succeed in breaking Colorado PERA pension contracts via their 2010 “pension reform” bill, SB10-001, then going forward, the Colorado PERA pension plan will effectively be given the legal status of a “gratuity.” Early in the last century, public pensions in the United States were recognized as having this “gratuity” status . . . they were considered to be “gifts of a benevolent sovereign.” Since then, courts have recognized that participation in these pension plans is not optional for public sector employees. Courts have recognized that public employees have entered into an exchange transaction, trading their labor in part for retirement benefits, and contributing to the pension plans out of their salaries. U.S. courts have recognized that this exchange transaction establishes a contractual relationship between the public worker and their governmental employer. Courts now see that public pension benefits are earned by public workers . . . they are simply deferred compensation for work conducted in the past.
If the Colorado PERA public pension contract breach attempted in SB10-001 is successful, what incentive will Colorado politicians have to adequately fund Colorado PERA public pension obligations in the future? The answer is: “No incentive at all.” Such an outcome would make it clear to Colorado politicians that the underfunding of Colorado PERA public pension contractual obligations is an obvious and legal means of funding their discretionary legislative priorities. The “formula” will have been indelibly impressed on the legislative psyche: underfund public pensions to create a “crisis,” use money made available by underfunding for programs that attract votes, claim that the pension “crisis” necessitated the breach of pension contracts . . . ad infinitum.
In my opinion, Colorado’s public sector unions will have assisted politicians to legally establish that their union members have no contractual right to their earned retirement benefits. Was this the outcome sought by Colorado public sector unions in 2010? Did they take the time to carefully consider their support for the bill, SB10-001?
In 2010, did Colorado legislators not find it odd that the Colorado PERA Board of Trustees had so drastically altered its long-standing argument that earned, accrued, contracted PERA public pension benefits were beyond the reach of the General Assembly? A former Colorado state treasurer, and member of the Colorado PERA Board of Trustees, questioned this abrupt “about-face.”
Former State Treasurer, and Colorado PERA Board Member Mark Hillman writes:
“More significantly, PERA abandoned its long-held legal argument that benefits once promised to its members can never be scaled back, no matter how unaffordable they become. PERA proposes an immediate reduction of cost-of-living adjustments from the current 3.5 percent per year to no more than 2 percent.”
http://www.markhillman.com/2010/01/26/workers-cant-ignore-cost-of-pera-fix/
“PERA lawyers assert that benefits can be retroactively increased (as they have been), but that once increased, those benefits can never be reduced, even for someone who has worked just one day for a PERA employer.”
“. . . PERA’s party line is that the responsibility to make up for any shortfall rests with taxpayers, represented by state and local governments who contribute to PERA’s pension funds on behalf of their employees.”
http://www.markhillman.com/2009/01/26/get-taxpayers-off-the-pera-go-round/
A chairman of the Colorado PERA Board has assured PERA members that their benefits are “guaranteed.”
Kim Natale, Chairman, Colorado PERA Board of Trustees, February 15, 2002; March 2002, Colorado PERA Member Update:
“As a comprehensive retirement plan, PERA benefits are guaranteed for life.”
http://www.copera.org/pdf/Newsletters/MemberUpdate3-02.pdf
Even the Colorado Legislature’s own attorneys seem to recognize that retroactive changes to accrued Colorado PERA benefits are contractual violations. They write that lawsuits from the taking of public pension benefits are likely:
“Existing PERA members may view any change in their benefits allowed by proposed section 24-51-211.5, Colorado Revised Statutes, as a violation of their contractual rights. Have the proponents considered this issue and the likelihood that litigation may result from any changes to existing PERA members’ benefits?” (See Question #7 on this document.)
Link:
http://www.leg.state.co.us/lcs/0506initrefr.nsf/dac421ef79ad243487256def0067c1de/5ffa41a8d69d4076872571060055200a/$FILE/ATTG1YAQ/2005-2006%20%2381.pdf
The scale of the legal fiasco I ascribe to decisions of the Colorado General Assembly, PERA pension administrators and union officials in 2010 is breathtaking. Let’s ensure that such a colossal mistake is never again repeated.
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KENTUCKY CREDIT OUTLOOK DOWNGRADED DUE TO PUBLIC PENSION UNDERFUNDING – LEGAL CHALLENGE POSSIBLE OVER STATE PENSION COLA-THEFT.
S&P: PUBLIC PENSION “UNDERFUNDING” HAS CAUSED A “NEGATIVE” VIEW OF STATE CREDIT.
Yesterday, Standard and Poor’s lowered its outlook on Kentucky’s credit from “stable” to “negative.”
State underfunding of public pension obligations, similar to Colorado’s $4.5 billion in underfunding of Colorado PERA in the last decade, continues to draw the attention of U.S. credit rating agencies. (A few weeks ago, the State of Illinois received a credit rating agency “comeuppance” over its historic underfunding of public pension obligations . . . now the state of Kentucky has been targeted.)
From Kentucky.com:
“There also is a possibility that Kentucky pension reform will be challenged in court, S&P said. Groups representing state workers and retirees are protesting several of the proposed reforms, including the elimination of cost-of-living adjustments in pensions and a shift for future state workers away from defined-benefits pensions and into hybrid cash-balance plans that are more like private sector 401(k) accounts.”
Link to story at Kentucky.com:
http://www.kentucky.com/2013/02/01/2499515/kentuckys-financial-outlook-downgraded.html
From Reuters:
“‘The outlook revision reflects our concern over pension funded levels, which have declined and are likely to continue declining due to lower-than-actuarially required funding of pension liabilities, and budgetary pressures associated with funding post-retirement benefits,’ S&P credit analyst John Sugden said in a statement.”
Full article at Reuters:
http://www.reuters.com/article/2013/01/31/kentucky-outlook-idUSL1N0B0LK020130131
From Governing.com:
“The report added that ‘there is no clear timeline on when the state legislature will consider’ recommendations from the Kentucky Pension Task Force on how to improve the state’s pension funding status. ‘And even if the legislature adopts some of the recommendations, it’s unclear when the changes would take effect, especially if these reform efforts face legal challenges,’ the report added.”
“At Governing’s Outlook in the States and Localities conference held earlier this week in Washington, D.C., Sugden predicted that pensions and unfunded liabilities would have more of an impact on states’ and localities’ ratings this year.”
“‘Underfunding … or where there isn’t sufficient action on pension reform, it has affected our view of the credit negatively,’ he said.”
Link to Governing article:
http://www.governing.com/topics/finance/gov-kentuckys-outlook-downgraded.html
In 2010, the Colorado General Assembly attempted an unconstitutional taking of fully-vested Colorado PERA retiree pension benefits in the bill, SB10-001. Colorado PERA retirees immediately sued the State of Colorado and its pension administration arm, Colorado PERA, over the contract breach. Last year, the Colorado Court of Appeals held that Colorado PERA retiree pension COLA benefits taken by the Colorado Legislature are indeed contractual obligations of the state. Appeals to the Colorado Supreme Court are pending.
The “COLA-theft” bill enacted by the Colorado General Assembly in 2010 proposes to take contracted Colorado PERA pension COLA benefits until the “funded ratio” of the pension, Colorado PERA, reaches a level of 100 percent.
The Colorado Legislature placed this 100 percent funding threshold into the bill, SB10-001, in spite of the fact that a 100 percent funded ratio is unnecessary for public pension systems. Such a funded ratio is unnecessary since public pension systems exist in perpetuity, and never have to fully “payoff” their pension obligations. These pension obligations will come due three or more decades into the future . . . they are never due “tomorrow.” Indeed, the Colorado PERA pension system has been funded at a 100 percent level just twice in its 81-year history. Public pensions are analogous to home mortgages. If your home mortgage is 80 percent paid off, you congratulate yourself. You do not run in the streets screaming about your “crisis.”
One of the big three U.S. credit rating agencies, Fitch Ratings, deems public pension systems to be “well-funded” at an 80 percent funded ratio, and “adequately funded” at a 70 percent funded ratio.
“Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”
In a 2011 Fitch Ratings report, Fitch notes that a 70% actuarial funded ratio for public defined benefit pensions is considered an “adequate” actuarial funded ratio.
Link to the report:
http://www.ncpers.org/Files/2011_enhancing_the_analysis_of_state_local_government_pension_obligations.pdf
So, it was odd that the Colorado General Assembly felt the need for the clear overreach of a 100 percent funding level threshold in SB10-001. Even Colorado PERA’s actuaries note in Colorado PERA’s most recent financial statements that a 100 percent pension funded ratio far exceeds federal pension regulatory (GASB) standards.
On page 112, of the 2011 Colorado PERA Certified Annual Financial Statement, Colorado PERA’s Independent Actuary, Cavanaugh MacDonald Consulting, LLC, reports:
“It should be noted that the changes made to the PERA structure as a result of SB10-001 have as a goal 100% funding of the accrued liability within 30 years for all divisions. The results of the December 31, 2011, valuations combined with financial projections of all divisions, indicate that this goal, WHICH IS A MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB STANDARDS, is still achievable with the exception of the Judicial Division.”
Why did Colorado PERA’s actuaries not inform Colorado PERA in 2010 that the proposed 100 percent funded ratio requirement in SB10-001 was a ridiculous overreach? Perhaps, it wasn’t their place to do so.
The Colorado General Assembly’s underfunding of the Colorado PERA pension (for the last five years) is presented on page 30 of the 2011 PERA CAFR. The CAFR reports underfunding of the Colorado PERA pension of $122.6 million for the 2011 calendar year, following a $451 million underfunding of the Colorado PERA pension in 2010.
Link:
http://www.leg.state.co.us/OSA/coauditor1.nsf/All/641A0AB5B97D073C87257A3A0072FEA3/$FILE/2067-12%20CAFR_6-26-12.pdf
The Center for Retirement Research at Boston College, in its “Public Plans Database,” presents the Colorado Legislature’s underfunding of the PERA pension beginning in 2001 in percentage terms.
Link:
http://crr.bc.edu/data/public-plans-database/
The Colorado Legislature has underfunded its Colorado PERA public pension obligations in the last decade, particularly in regard to its “annual required contributions” for the PERA State and School Divisions where typically only 50 to 70 percent of annual obligations have been met. I believe that it is rather disingenuous for governments that have ignored their pension obligations to claim a need to breach public worker contracts. Why do public worker contracts appear to have a lower priority than the state’s corporate contracts?
The Colorado Legislature, having racked up its public pension debt through this habitual underfunding, decided in 2010 to attempt to extricate itself from its self-inflicted mess by shifting 90 percent of the cost of its 2010 “pension reform bill” onto the backs of Colorado PERA retirees . . . in breach of these retirees pension contracts.
Reasonable?
The Public Plans Database reveals the percent of the Colorado General Assembly’s pension bills that have actually been paid since 2001:
2001 Colorado School – 100% ARC Paid
2002 Colorado School – 100% ARC Paid
2003 Colorado School – 69% ARC Paid
2004 Colorado School – 51% ARC Paid
2005 Colorado School – 48% ARC Paid
2006 Colorado School – 62% ARC Paid
2007 Colorado School – 60% ARC Paid
2008 Colorado School – 68% ARC Paid
2009 Colorado School – 65% ARC Paid
2010 Colorado School – 70% ARC Paid
2011 Colorado School –
2001 Colorado State – 100% ARC Paid
2002 Colorado State – 100% ARC Paid
2003 Colorado State – 69% ARC Paid
2004 Colorado State – 51% ARC Paid
2005 Colorado State – 48% ARC Paid
2006 Colorado State – 58% ARC Paid
2007 Colorado State – 56% ARC Paid
2008 Colorado State – 63% ARC Paid
2009 Colorado State – 61% ARC Paid
2010 Colorado State – 62% ARC Paid
2011 Colorado State –
2001 Colorado Municipal – 100% ARC Paid
2002 Colorado Municipal – 100% ARC Paid
2003 Colorado Municipal – 69% ARC Paid
2004 Colorado Municipal – 62% ARC Paid
2005 Colorado Municipal – 64% ARC Paid
2006 Colorado Municipal – 85% ARC Paid
2007 Colorado Municipal – 84% ARC Paid
2008 Colorado Municipal – 98% ARC Paid
2009 Colorado Municipal – 96% ARC Paid
2010 Colorado Municipal – 101% ARC Paid
2011 Colorado Municipal –
A number of states, having underfunded their public pension obligations, are attempting to break their public pension contracts. An astute observer has noted that politicians take this approach (public pension contract breach) to deflect the responsibility of pension underfunding away from themselves, and onto their state court systems . . . making the courts appear to be “the bad guys” when illegal pension reforms are struck down. Such state attempts at pension contract breach force the courts, rather than the politicians, to uphold the rule of law and the sanctity of contracts.
According to this “observer,” states have nothing to lose in attempting to breach their public pension contracts. If the courts strike down state unconstitutional “pension reform” legislation, the state has the same public pension debt it started with, and the courts, the “bad guys,” can be blamed. Sick, isn’t it?
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COLORADO STATE SENATORS JUMP FOR ANGRY COLORADO PERA ATTORNEYS.
This article addresses ten of the most fascinating minutes of legislative debate in the history of the Colorado General Assembly. These ten minutes dramatically illustrate the control that lobbyists have over the members of the Colorado Legislature. Video of the ten minutes is available on the website of “The Colorado Channel.” Link:
http://www.coloradochannel.net/colorado-senate-2010-legislative-day-20
(Click on “SB10-001” on the right of the screen.)
BUT FIRST, SOME CONTEXT.
Before I address the significance of these ten minutes, I will provide a bit of background for readers new to the topic of Colorado’s attempted public pension contract breach. (Well-informed readers should feel free to skip ahead.)
Colorado has 73 cities, 196 towns, 64 counties, 179 school districts, a huge number of special districts and one “state” government. The state government and many of the smaller governmental entities are members of a state pension plan, Colorado PERA. Employees of the governmental entities that have affiliated with Colorado PERA are required to participate in the Colorado PERA pension plan. Money is taken from employee salaries every month to pay for a contracted benefit that they will ultimately receive at retirement. The Colorado Legislature is responsible for managing this public pension system, Colorado PERA. Over the decades, the Colorado Legislature has underfunded and mismanaged the pension plan . . . racking up the state’s debt.
As Colorado entered the twenty-first century, the Colorado General Assembly and a string of Colorado Governors continued the mismanagement of the Colorado PERA pension plan. In 2001, Governor Bill Owens, armed with a myopic strategy to shrink Colorado’s public sector regardless of the consequences, decided to rid Colorado’s state and local governments of their older, more experienced, MORE EXPENSIVE public employees. Toward this end, he put incentives into Colorado law for these workers to retire early, saving taxpayer dollars in the near term, but increasing the taxpayers’ debt significantly in the coming decades.
Well, a dozen years have passed since the Colorado Legislature and Governor Owens enacted Colorado PERA “early retirement incentives.” At the end of each of these dozen years Colorado PERA’s actuaries have presented the bill for the enacted pension policies to the Colorado Legislature. The Legislature has routinely ignored these bills, and has essentially put the pension bills on the state’s “credit card.” In just the last decade, the Colorado Legislature has placed $4.5 billion on this credit card. With interest, the credit card balance now exceeds $6 billion. Apparently, as a politician, it is much more enticing to spend public moneys for discretionary pet political purposes, than it is to meet the state’s contractual obligations.
In 2010, the Colorado Legislature decided to attempt to rectify its past mismanagement, and avoid its debt obligations, by breaching the state’s contracts for this pension debt. A majority of the 2010 state legislators determined that the solution to their mess was the shortcut of breaking Colorado PERA pension contracts. These legislators breached the state’s pension contracts, and then had the effrontery to congratulate themselves for violation of the U.S. Constitution’s Contract Clause. They suggested that their contract breach serve as a “model” for all states. Of course, the politician’s votes also violated the Contract Clause of the Colorado Constitution and necessarily, their oaths of office. This is reality.
A significant driver of the Colorado Legislature’s self-inflicted pension management fiasco has been its relinquishment of control in this policy area to lobbyists and lawyers who have their own agendas. Personal agendas blossom at the foot of every multi-billion dollar stack of money. Also, the state’s pension-administering arm, Colorado PERA, has its own agenda, and supports this agenda with a $400,000 annual statehouse lobbying budget. Colorado PERA’s hired-gun lobbyists were part of the 17-member lobbyist juggernaut that managed to force the 2010 PERA pension contract breach (SB10-001) through the legislative process.
Well, that should be sufficient background for readers new to the subject of Colorado’s attempt to avoid its debts. Now, to the meat of the article.
The “Colorado Channel” video segment mentioned above is a record of the Senate “Third Reading” debate on SB10-001. This video segment demonstrates the degree to which outside lobbyists and lawyers control the Colorado Legislature’s pension policy-making responsibility, and oversight of Colorado PERA. Below, I summarize the Colorado Senate’s debate on SB10-001, and then provide transcriptions of the most interesting statements made during the Senate’s “Third Reading” debate.
SYNOPSIS OF SB10-001 SENATE FLOOR ACTION.
The bill to breach Colorado PERA member pension contracts (SB10-001) cleared its first committee hearing and arrived at the full Colorado Senate. The Senate took up the bill on two occasions; “Second Reading” on January 29, 2010, and “Third Reading” on February 1, 2010. On “Second Reading,” a member of the Senate, Senator King, tried to amend the bill to provide that Colorado law would permit the breach of its public pension contracts if a financial condition called “actuarial necessity” could be established. The King amendment also stated that the Colorado Legislature could not break the contracts of Colorado PERA members who had already fulfilled all of the conditions of their pension contract and retired. This amendment proposed by Senator King was voted down.
Next up, Senator Renfroe proposed an amendment to SB10-001 on “Second Reading,” stating that if the Legislature intends to break its public pension contracts it must provide notice of the breach to the parties to the contract, i.e., PERA members. The Renfroe amendment also precluded the Colorado Legislature from breaking the contracts of Colorado PERA members who had already fulfilled all of the conditions of their PERA pension contracts and retired. This Renfroe amendment was passed by the full Senate on “Second Reading” and became part of SB10-001.
A few days went by before Colorado PERA officials realized that Senator Renfroe’s “Second Reading” amendment to SB10-001 would prevent their taking of PERA retiree’s contracted pension COLA benefits (which represented 90 percent of the cost-shift in the bill, according to the bill’s prime sponsors, Senator Penry and Senator Brandon, as well as Colorado PERA.) Apparently, the fact that some Colorado Senators had failed to march in lock-step with Colorado PERA orders resulted in raised tempers . . . and a decision to fix the Renfroe “Second Reading” amendment on the Senate floor on February 1, 2010 when the bill was to be heard by the Senate on “Third Reading.”
This effort to “fix” Senator Renfroe’s amendment makes for some of the most interesting action from the Colorado General Assembly’s debate of SB 10-001. Again, you can watch the Senate’s “Third Reading” debate on SB10-001 on the Colorado Channel here:
http://www.coloradochannel.net/colorado-senate-2010-legislative-day-20
(Click on “SB10-001” on the right of the screen.)
TRANSCRIBED HIGHLIGHTS OF SB10-001 SENATE “THIRD READING” ACTION.
On “Third Reading,” the members of the Colorado Senate disagreed about whether or not Colorado PERA members should be told of their contractual rights to their pension benefits. Colorado PERA’s attorneys in the lobby grew angry. The members realized that the presence of the Renfroe amendment in SB10-001was a tacit admission by the Legislature that it could not impair fully-vested, accrued, contracted PERA pension COLA benefits.
Watching the debate that occurred in the Colorado Senate on February 1, 2010, it is clear that the members of the Colorado Senate were unaware of the fact that, even in the event of “actuarial necessity,” the retirement benefits of PERA members who had already retired could not legally be modified by the General Assembly. Listening to the floor debate of SB10-001 it’s also clear to me, that PERA’s attorneys were running the show.
Here are transcribed highlights from the February 1, 2010 Senate “Third Reading” floor debate on Senator Renfroe’s amendment (that was placed in the bill two days earlier on “Second Reading”):
Senator John Morse stated:
“I ask permission for a Third Reading amendment.”
“Members, we put an amendment on the tail end of Second Reading and it turns out that that amendment had the effect of undoing the bill.”
Senator Renfroe stated:
“I think it’s an amendment we still need to keep in there, but modify the language to make the attorneys happy as opposed to just deleting it out.”
“I’m standing before you to tell you that I did not have ulterior motives, with this as has been suggested and that angers me to no end that I would receive phone calls from members and from the press about that.”
“Now, if the attorneys outside don’t like what we did, well then let’s fix it and let’s include it and go down the road.”
“I have another Third Reading amendment that would put my language back in without striking out the language that made the attorney or attorneys, or whoever it is, angry with what it was.”
Senator Harvey stated:
“The only thing we did compromise was on this amendment . . . that we would say that we would notify the (PERA) members of what their rights are.”
“Now we’re coming back two days later and saying ‘no’ we can’t even offer that amendment to tell the (PERA) members what their rights are.”
“If we can’t fix that technical issue and compromise in telling the (PERA) members just what their rights are, then we’ve got a more serious problem in this body than simple technical amendments on Third Reading.”
Senator Mitchell, (admits that Senator Renfroe’s language in the bill precludes the General Assembly from modifying fully-vested PERA retiree pension benefits):
“My understanding then is that Senator Renfroe offered an amendment that provided for notice to all PERA-covered employees of their rights under the changing programs, and that amendment was adopted by this body.”
“A unanimous vote by this body to give notice to PERA members of their rights . . . that sounds like a worthwhile and good government policy.”
“Now, we learn this mor