We’re going!

We’re going to the Colorado Supreme Court! Today the Court granted the writ of certiorari for the most important issues raised in the lawsuit against Colorado and PERA. At this time, we do not have any more details than what is presented below on the Court’s website. Only 3 of 43 petitions were granted by the court today. Below is the announcement. Find the original set of announcements at http://www.courts.state.co.us/Courts/Supreme_Court/Case_Announcements/Files/2013/8C16A3AUG.5.13.pdf  We are on page 9.

 

MONDAY, AUGUST 5, 2013 ——————————————————————————————————————-

No. 12SC906

Court of Appeals Case No. 11CA1507

Petitioners/Cross-Respondents:

Gary R. Justus; Kathleen Hopkins; Eugene Halaas, Jr.; and Robert P. Laird, Jr., on behalf of themselves and those similarly situated,

v.

Respondents/Cross-Petitioners:

The State of Colorado; Governor John Hickenlooper, in his official capacity;

Colorado Public Employees’ Retirement Association; Carole Wright, in her official capacity; and Maryann Motza, in her official capacity.

Petition and Cross-Petition for Writ of Certiorari GRANTED. EN BANC.

JUSTICE EID and JUSTICE MÁRQUEZ do not participate.

Summary of Issues:

Whether the contracts clause framework articulated in In re Estate of DeWitt, 54 P.3d 849 (Colo. 2002), applies to all contract clause claims under the Colorado Constitution.

Whether Colorado Public Employees’ Retirement Association members have contractual rights to the cost-of-living adjustment formulas in place at their respective retirements for life without change.

Whether SB10-1, which adjusted cost-of-living adjustments 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.

DENIED AS TO ALL OTHER ISSUES.

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27 Responses to We’re going!

  1. Al Moncrief says:

    WHAT DO (A FEW) COLORADO DEMOCRATS HAVE IN COMMON WITH TEA PARTY ANARCHISTS?

    Yes, I know that the very idea of conflating the machinations of the Tea Party with past practices of Democratic members of the Colorado Legislature is repulsive. But, for a few minutes (for purposes of the following exercise) try to set aside your horror and dispassionately consider the behavioral commonalities noted below. (This hurts me more than it hurts you.) And, who knows? Members of the Colorado Democratic Party might benefit in the future by acknowledging and correcting a few past mistakes.

    To set the stage, a few particularly relevant lines from the platform of the Colorado Democratic Party:

    “At a time when public confidence in government is perhaps at its lowest in our history, when government has come to a standstill, held hostage by those who seek to serve themselves and not the common good, it is imperative that health and trust be restored to our democracy or we risk losing it all together.”

    “Above all, we expect officials to uphold and defend the Constitution of the United States.”

    http://www.coloradodems.org/sites/coloradodems/files/CDP2012PlatformProposal4%2014%20v2.pdf

    Today, (October 6, 2013) as I listened to the pundits analyze the Tealiban’s efforts to repudiate the debt of the United States, it occurred to me that many Democratic members of the 2010 Colorado General Assembly have something in common with these Tea Party anarchists. Steel yourself, dear reader, as we engage in a rather unsavory juxtaposition.

    Parallel #1: Here we are in 2013, and Congressional Tea Party anarchists are pushing Congress toward a default on the debt obligations of the United States. Incredibly, just three years ago, many (not all) Democratic Colorado state legislators supported a default on the debt obligations of the State of Colorado (contracted, accrued, Colorado PERA pension debts.) Colorado legislators defaulted on PERA pension debt with full knowledge of the fact that making such payments is a contractual obligation of the state.

    Colorado’s Democratic (and Republican) state legislators have been aware of the contractual nature of accrued public pension benefits in our state for more than 60 years (since the Colorado Supreme Court decisions in the public pension cases Bills and McPhail.)

    Colorado Court of Appeals 2012 decision in Justus v. State (October 11, 2012):

    “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

    Nevertheless, in 2010, many Democratic Colorado legislators embraced a contrivance advanced by lobbyists for Colorado state and local governments, unions and corporations that sought financial benefit through breach of contract. The lobbyists convinced many Democratic state legislators that the inflation protection provision in PERA pension contracts (COLA provision) could be altered retroactively.

    Yet, a public pension COLA provision is simply a method by which a total defined public 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. How many Colorado state and local government employees would have stipulated up front the right of the Colorado Legislature to claw back one-third or more of their total accrued PERA pension benefit after retirement?

    When the Colorado Legislature created the “automatic” Colorado PERA COLA provision in statute, the Legislature could just as well have offered PERA members a higher total pension benefit with no COLA provision attached. Instead, Colorado legislators chose to deliver accrued Colorado PERA pension benefits by means of a pension COLA “escalator.” For decades, Colorado PERA members have exchanged their labor (and their pension contributions) for this statutory offer of a PERA COLA benefit. Many have retired based on the PERA COLA benefit contractual offer.

    Note that many private insurance companies sell annuities that offer delivery of the total purchased annuity benefit by means of an annual COLA “escalator” on the purchased income stream. Having supported SB10-001 in 2010, taking contracted PERA COLA benefits, will these Colorado Democrats now argue that insurance companies that have sold annuities with contractual COLA provisions should have the right to unilaterally eliminate the COLA provisions after the fact? Do these Colorado Democrats support one constitutional standard for corporations (insurance companies) and a separate constitutional standard for public entities?

    Not all Colorado Democratic legislators supported the Colorado PERA pension contract breach in 2010. The Pueblo Chieftain quoting from House Minority Leader Sal Pace’s website in February 2010:

    “‘I voted against the proposal because I don’t believe that the problems with PERA need an immediate fix and the solutions proposed unduly placed a burden on our seniors,’ Pace said in a statement on his Web site Tuesday.”

    http://trsbaudit.wordpress.com/

    Thanks also to the following Colorado House Democrats who refused to go along with the lobbyists’ Colorado PERA debt-shift scheme in 2010: Representatives McFadyen, Merrifield, Massey, Weissman and Primavera. When the lobbying pressure was intense, these state legislators retained their integrity.

    Parallel #2: This week we see Congressional Tea Party anarchists decrying the level of the accumulated debt of the United States while ignoring the fact that these debts accrued in legislation adopted by the legislative body in which they currently serve. Tea Partiers refuse to acknowledge that the nation’s debt ceiling must be raised simply to meet debts that were previously incurred by Congress, legitimate debts of the United States.

    Similarly, in 2010, many Democratic Colorado state legislators decried the levels of the public debt in Colorado (unfunded PERA pension liabilities) without acknowledging that these debts were accrued as a result of legislation adopted by the legislative body in which they currently serve (the Colorado General Assembly.) The General Assembly sets PERA benefit levels in statute. Colorado PERA pension benefits are offered by the General Assembly in statutory contracts as deferred compensation for work performed in the past. In 2010, many of these Democratic state legislators enacted a bill that attempts to repudiate Colorado state and local debt. In essence, the Colorado General Assembly is attempting to shift accumulated PERA pension debts onto the backs of a relatively small group of elderly Colorado residents. (The Colorado General Assembly seeks to abrogate PERA pension contracts in spite of the fact that Colorado has the 16th lowest per capita public pension debt in the nation, according to the investment research firm Morningstar. The Colorado General Assembly seeks to repudiate its pension debts in spite of the fact that less than three percent of all Colorado state and local government expenditures support public pension obligations, hardly a financial “burden.”)

    Parallel #3: Congressional Tea Party anarchists have no interest in raising additional resources to meet financial obligations that Congress has approved in the past. Their preference is that the U.S. government default on its obligations. Similarly, in 2009 and 2010, the first preference of many Colorado Democratic state legislators (encouraged, of course, by 27 statehouse lobbyists) was also default. Rather than seeking additional resources to meet the accrued debts of Colorado state and local governments, these state legislators favored default.

    (As we have seen, additional resources have been readily available to meet PERA pension debts. For example, the legislators could have opted to honor their own contractual PERA pension obligations instead of appropriating $700 million for local government pensions that are not the state’s contractual obligation, Old Hire Fire and Police Pensions. Colorado legislators could have curtailed the state’s generous corporate welfare programs. Colorado legislators could have followed the example of other states and explored the use of mineral royalties to meet state pension obligations. Colorado legislators could have submitted referenda to the voters proposing new revenues to meet the state’s contracted debts. Again, many Democratic legislators preferred breach of contract in 2010.)

    Attention Colorado Democrats: Enough red flags have been raised by the party’s complicity in the 2010 PERA pension contract breach to drape six miles of the Arkansas River. The fact that I am able to draw any parallels at all between the behavior of some Colorado Democrats and the contemptible Teanderthals should raise concern in the party.

    Is it acceptable for Colorado Democrats to abandon core principles (even when the lobbyists are wrenching their arms?)

    More from the Colorado Democratic Party 2012 Platform:

    “We petition Congress to enact legislation preventing courts and bankruptcy laws to be used to abrogate labor contracts and pension obligations.”

    “Colorado Public Employees Retirement Association (PERA) should remain a defined benefit plan, directed by a board elected by the membership.”

    “Colorado Democrats support: ‘The implementation of cost of living adjustments on Social Security and Social Security disability benefits, equal to actual increases in the cost of living.'”

    (My comment: the party supports the enhancement of Social Security COLAs that ARE NOT contractual obligations. Should the party not also support the payment of COLAs that ARE INDEED contractual obligations?)

    “Every human being has the right to be treated with dignity and all persons residing in the United States deserve equal protection under the law regardless of their race, disability, gender or gender identity, religion, sexual orientation, national origin, age, or physical or mental differences.”

    (My comment: Do Colorado PERA retirees not deserve equal protection under the law? Is it acceptable that many Democratic Colorado lawmakers voted the break the contracts of this group in 2010?)

    “We expect our elected officials to be committed to the highest standards of behavior, personal integrity and honesty and to demand transparency and open government . . .”.

    “The people must be informed by facts, not deception.”

    “We support the enforcement of laws addressing the inequities between men and women.”

    (My comment: Note that women were disproportionately impacted by the Colorado PERA pension contract breach. Women make up 57 percent of all government workers, and 60 percent of local government workers. Under the PERA pension contract breach, women provide a disproportionate share of the PERA pensioner subsidy to Colorado governments.

    http://www.nwlc.org/resource/womens-stake-battle-over-public-employees-collective-bargaining-rights)

    Not surprisingly, the Colorado Legislature’s 2010 attempt to escape its contractual public pension obligations hits women, minorities, and particularly older women in Colorado hard. Also, as noted earlier, the Colorado Legislature has just finished paying off $700 million in local government fire and police pension debt (that IS NOT the contractual obligation of the State of Colorado.) It just happens that these local government pension contracts belong to primarily . . . males.

    http://www.coloradodems.org/sites/coloradodems/files/CDP2012PlatformProposal4%2014%20v2.pdf

    Colorado Democrats: We must examine the influence that lobbyists have on Democratic state legislators. We must ask why a Democratic state legislator would support breaking the contracts of workers in order to lower the tax burden of corporations and wealthy taxpayers in the nation’s 10th wealthiest state.

    We must ask why Colorado Democrats helped employers attempt this abandonment of contractual obligations to pensioners in 2010? Why a deal was cut in 2009 without deliberation of pension reform options in open legislative hearings in 2010? Why Democratic Leadership relinquished the Legislature’s public policy making authority regarding pensions to administrators and lobbyists in 2009? Why Democratic Leadership failed to appoint an interim study committee in 2009 to examine legal, prospective pension reforms that were being enacted by other state legislatures? Why Democratic Leadership failed to send an interrogatory to the Colorado Supreme Court in 2009 regarding PERA pension reform options? (Recall that the Legislature was encouraged to take this step.)

    Colorado Democrats; let’s clean up our act. The Colorado Democratic Party is better than breach of contract. The State of Colorado is better than breach of contract. Support contractual public pension rights at saveperacola.com. Friend Save Pera Cola on Facebook!

  2. Al Moncrief says:

    MORNINGSTAR: COLORADO HAS THE 16th LOWEST PUBLIC PENSION DEBT IN THE NATION.

    NEVERTHELESS, THE COLORADO LEGISLATURE SEEKS TO BREAK ITS PUBLIC PENSION CONTRACTS.

    According to the investment research firm, Morningstar, Colorado ranks 34th in the nation in public pension debt per capita. Only 16 states currently have a lower per capita public pension debt than does Colorado. The obligation of Colorado taxpayers for public pension debts remains easily supportable in spite of the fact that the Colorado Legislature has not paid its full Colorado PERA public pension bill for a decade.

    Colorado taxpayers (by contract of their representative governments) must meet relatively low public pension debt obligations. Yet, the Colorado Legislature seeks to escape these public pension obligations. The Colorado Legislature seeks to further cut the public pension debt of taxpayers in the 10th wealthiest state in the nation through breach of contract. (Perhaps Colorado taxpayers will reward the politicians who voted for pension contract breach at the polls.)

    According to a Morningstar study released two weeks ago, Colorado’s per capita public pension debt in 2011 was $1,804. That year, the state of Alaska had a per capita pension debt of $10,235 (the highest per capita pension debt in the nation.) The Alaska Legislature is not attempting a retroactive alteration of public pension contracts. The Alaska Legislature has not enacted legislation breaking “fully-vested” public pension contracts. Alaska legislators have not tried to set aside constitutional protections of a targeted group.

    “When measuring liability per capita, Alaska, Illinois and Hawaii recorded the highest amounts.”

    “The report employed two primary measures to assess pension funds. The funded ratios compare a system’s total assets to its liabilities. The second measure, unfunded actuarial accrued liability per capita, pegs the amount each state resident would need to pay to fully fund the system.”

    http://www.governing.com/gov-data/state-pension-funds-retirement-systems-unfunded-liabilities-obligations-data.html

    Recall that the bill breaking Colorado PERA retiree pension contracts, SB10-001, was enacted in 2010 and that the financial condition of the Colorado PERA pension trust funds in 2009 was put forth as a rationale for breaking PERA retiree pension contracts. Now, note the level of unfunded per capita pension liability for Colorado in 2009 ($1,349 per capita) on the spreadsheet in the cited Governing article (link above.)

    An unfunded per capita pension liability below $1,500 is considered a desirable level of liability according to this Morningstar state pension debt metric. Thus, when the Colorado General Assembly enacted legislation to break Colorado PERA pension contracts in 2010, the Legislature did so at a point in time when Colorado taxpayers enjoyed a “good” level of unfunded public pension liabilities according to the research firm Morningstar. Colorado taxpayers were not burdened by pension debt in 2010, yet Colorado PERA pension administrators, dozens of hired lobbyists for PERA-affiliated employers, and Colorado Legislative Leadership conspired to break PERA public pension contracts.

    “Thirteen states have a UAAL of less than $1,500 per capita, which is Morningstar’s threshold for ‘Good’ unfunded liability levels, and Alaska had the highest UAAL per capita for the second year in a row, currently more than $10,000.”

    http://www.plansponsor.com/NewsStory.aspx?id=6442494908

    Further, the Morningstar study reveals that, in 2009, as Colorado PERA administrators, Colorado union officials and some state legislators contemplated breach of Colorado PERA pension contracts, Colorado had the 13th lowest public pension debt per capita in the nation.

    MORNINGSTAR STUDY: A 70 PERCENT PENSION FUNDED RATIO IS “FISCALLY SOUND.”

    http://corporate.morningstar.com/US/documents/Retirement/StateofPensions2013.pdf

    At the time of the Colorado Legislature’s breach of Colorado PERA pension contracts in SB10-001, the combined funded ratio of the Colorado PERA pension system stood at 68.9 percent, a level 1.1 percent below that level considered “fiscally sound” by the research firm Morningstar.

    The Colorado Legislature sought to break “fully-vested” public pension contracts at a time when the Colorado PERA pension system enjoyed a “fiscally sound” financial condition.

    From the Silver and Gold Record archives:

    “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.”

    https://www.cu.edu/sg/messages/5245.html

    The actuarial funded ratio of the Colorado PERA pension system has fallen below the Morningstar “fiscally sound” threshold due to the simple fact that (as we have noted repeatedly) the Colorado Legislature has not been paying its public pension bills for a decade. If I avoid paying my debts in order to free up money for discretionary expenditures I will eventually encounter financial distress. This practice has been a standard operating procedure for the Colorado Legislature for a decade. In effect, the Colorado Legislature has been borrowing from the PERA pension system to pay for their preferred governmental programs. Now that the bill is coming due, many Colorado legislators want to skip out on the tab. If I ignore my contractual obligations for an extended period I should not be surprised to find my creditors seeking redress by judicial action.

    I ask: Why should Colorado PERA retirees accept the breach of their pension contracts as a result of the failure of the Colorado General Assembly to pay the full Colorado PERA public pension bill for the last decade? Rather than paying its full public pension bill (ARC) the Colorado Legislature has directed state funding to discretionary programs, including $100 million grants of property tax relief and, incredibly, payment of $700 million in local government legacy pension debt that is not the contractual responsibility of the State of Colorado (a $142 million grant for this purpose at the 2013 legislative session.) Why should Colorado PERA pensioners, a small group of Coloradans bear the burden of Colorado politicians’ historical budgetary mismanagement? The tenth wealthiest state in the nation, a state that can apparently afford to transfer hundreds of millions of dollars of its revenue stream to pay for pension obligations THAT ARE NOT ITS CONTRACTUAL OBLIGATION, now seeks to abandon its own contractual public pension obligations. In light of all this, the fact that the Colorado Legislature is attempting to push state and local government debt onto elderly pensioners is immoral and outrageous beyond measure.

    “Morningstar would like to highlight the UAAL per capita, which in our opinion is a useful metric not commonly applied in the current pension analysis narrative.”

    http://images.mscomm.morningstar.com/Web/MorningstarInc/%7B43f240a0-4c8f-47b5-bc01-45cbc9e9d33b%7D_StateofStatePensionsReport2013.pdf

    http://corporate.morningstar.com/US/documents/Retirement/StateofPensions2013.pdf

    Colorado PERA active and retired members, the Colorado Legislature’s attempt to escape its contractual obligations, to set aside the protections of the U.S. Constitution, is an ugly stain on our state. Continue to support public pension contractual rights with your contributions to saveperacola.com. Friend Save Pera Cola on Facebook!

  3. Al Moncrief says:

    COLORADO PERA’S PENSION CONTRACT BREACH RELIES ON “BIASED” RESEARCH.

    In 2010, a majority of Colorado state legislators, induced by lobbyists, passed a bill that attempts to illegally slash the accrued debt of Colorado state and local governments. The bill, Senate Bill 10-001, proposes to shift Colorado state and local government debt (an obligation of all Colorado taxpayers) onto the backs of elderly pensioners in the state. Apparently, in 2010, a majority of Colorado state legislators believed that, when one reaches a certain age, that person’s rights may be freely trampled and their property seized by the State. Apparently, many Colorado legislators, contravening their oaths of office, believe that protections afforded by the U.S Constitution no longer apply to this particular group of Americans.

    In 2010, Colorado PERA pension administrators scheming to take property from PERA retirees employed the mantra “shared sacrifice” in their propaganda. I will describe for you Colorado PERA’s idea of “shared sacrifice”: According to the provisions of SB10-001, those who ACTUALLY OWE the accrued PERA pension debt (Colorado state and local governments) “sacrifice” a fraction of a percent of future revenue streams; while those who DO NOT OWE the PERA pension debt (Colorado PERA retirees) “sacrifice” one-third or more of their contracted, earned deferred pension compensation. Colorado PERA pension officials consider this arrangement to be a “shared sacrifice.” In what universe is such outrageous deception considered to be “reasonable”?

    In 2010, Colorado PERA officials, self-interested lobbyists, and a majority of state legislators supported public relations, lobbying and legal campaigns with pension research published by the Pew Center on the States. Research disseminated by this organization has since been labeled “biased,” “flawed,” and “inflammatory” by the National Conference on Public Employee Retirement Systems.

    Yesterday (September 24, 2013) the Huffington Post published an exposé regarding Pew’s efforts to gut public employee pensions.

    HuffingtonPost.com:

    “Pew first thrust itself into the national debate on public sector pensions when its Center on the States released a headline-grabbing 2010 study claiming that the combined pension shortfall for all the states was a staggering $1 trillion.”

    http://www.huffingtonpost.com/2013/09/24/pew-trusts-pensions_n_3983654.html

    Pew’s “research” even made it into legal briefs filed in the Colorado PERA retiree pension COLA lawsuit, Justus v. State. Clearly, information that was relied upon by the Colorado General Assembly and Colorado PERA in their SB 10-001 political, lobbying and legal campaigns to break PERA pension contracts is of questionable validity. Below I provide examples of reliance on public pension statistics from the Pew Center in legal briefs filed in the case Justus v. State. From the PERA Defendants motion to dismiss of May 10, 2010:

    “According to a study cited in Plaintiffs’ Complaint, PERA experienced $11 billion in investment losses, with PERA’s assets falling from $43 billion to $32 billion. See Ex. A at 27 (Pew Center on the States, Pew Charitable Trusts, The Trillion Dollar Gap: Underfunded State Retirement Systems and the Roads to Reform (2010) (“Pew Report”)) (cited in Complaint ¶ 42).”

    (My comment: The bias in the Pew study is clear, Colorado PERA could only experience an “investment loss” after a market decline by liquidating its portfolio. Colorado PERA did not liquidate its portfolio after the 2008-2009 equity market volatility. Colorado PERA administrators invest over an “investment horizon” that extends to 70 years.)

    “According to the Pew Report, in 2008, PERA suffered investment losses of $11 billion, which constitutes a 26% decline in the value of its assets.”

    “Plaintiffs also cite to the Pew Report, which concluded that PERA was one of many pension funds facing significant shortfalls between the value of pension assets and the amount of benefit obligations encompassed within the system. Id. ¶ 42 (citing Pew Report (Ex. A) at 27). The Pew Report also identified PERA’s large investment losses during the market downturn as one of the causes of PERA’s unfunded liabilities.”

    (My comment: Colorado is a low-debt, low-tax state. Many Colorado taxpayers do not want to pay for governmental services. In 2010, Colorado state legislators bought the votes of these taxpayers with a pension contract breach. The funded ratio of the Colorado PERA pension system has declined because the Colorado Legislature has not paid its full pension bill for a decade.)

    Link:

    http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf

    HuffingtonPost.com:

    “And the head of the largest trade association for public sector plans finds serious flaws in Pew’s figures. Hank Kim, executive director and counsel of the National Conference on Public Employee Retirement Systems, says that ‘generally our position is that we are very disappointed in Pew. Since 2010, we’ve expressed to Pew that its methodology for reports is flawed. Their reports incite fear.’”

    “With its $5.6 billion endowment, the Pew Charitable Trusts ranks number 19 on a list of the world’s wealthiest charitable foundations. Originally called the Pew Memorial Trust, the foundation was created in 1948 by the heirs to the Joseph N. Pew Sun Oil fortune and hewed far more closely to the family’s conservative, small-government political beliefs.”

    “Pew first thrust itself into the national debate on public sector pensions when its Center on the States released a headline-grabbing 2010 study claiming that the combined pension shortfall for all the states was a staggering $1 trillion.”

    “’It’s an eye-popping number,’ Kim says of Pew’s claim. ‘But that trillion dollar deficit covers both pension and health care costs, and health care costs are at least 60 percent of that figure.’”

    “Whether the report reflected actual history or hyperbole, it launched Pew into the public-sector fixit business in a big way.”

    (My comment: Accrued public pension debts represent a fraction of all state and local government debt in the United States. Why do we see a corporate-funded public relations noise machine attacking public pension debt in the U.S., but ignoring all other state and local government debt? These think tanks churn out an endless stream of material advocating the breach of public pension contracts. Why do they not propose breach of state and local government contracts with corporations? Or, default on state and local government bonds held by wealthy investors? Why is public pension debt a “crisis” warranting breach of contract, but all other state and local government debt [multiples of public pension debt] is not a “crisis”?)

    HuffingtonPost.com:

    “To date, Pew has partnered with the Arnold Foundation in Illinois, Montana, Kentucky and Rhode Island, wading in with actuarial studies and polling data to prod municipal and state lawmakers into incorporating Pew-authored restructuring plans.”

    “Pew’s promotion of technocratic-sounding solutions to pension shortfalls, especially its mantra about ‘data-driven’ problem-solving, lends its white papers the texture of dispassionate scholarship. Its partnership with the Arnold Foundation, however, has created intense controversy and provided ammunition to its critics.”

    http://coloradopols.com.lb.soapblox.net/diary/19042/texas-enron-billionaires-pension-reform-efforts-arrive-in-colorado

    http://coloradopols.com/diary/19072/national-public-pension-coalition-criticizes-pew-center-on-the-states

    http://coloradopols.com/diary/19039/denvers-donnellkay-foundation-hears-pension-reform-ideas-from-pew-center

    HuffingtonPost.com:

    “Jim Wayne (D-Louisville), who has been a member of the Kentucky House of Representatives since 1991, says that Pew played a crucial role throughout the legislative process.”

    “‘They had a tremendous influence,’ says Wayne. ‘The parties interested in change needed to rely on an outside source. Pew drew up the proposal, they did the analysis and presented the information to a [legislative] task force.’”

    “Wayne says that Pew generally pushed the positions favored by his state’s Chamber of Commerce and League of Cities, working both behind the scenes and publicly.”

    (My comment: Colorado’s “league of cities” [the Colorado Municipal League] did nothing to defend the contractual rights of their retired municipal workers during the 2010 PERA pension contract breach. The CML, funded by Colorado cities, simply watched the efforts of pension administrators and legislators to slash the debts of CML’s municipal members. The CML did nothing in spite of the fact that its municipal members have benefited from the Colorado Legislature’s transfer of $700 million to cover legacy Colorado municipal pension debt that IS NOT the contractual obligation of the State of Colorado. [$142 million appropriated for this purpose at this year's Colorado legislative session alone.])

    HuffingtonPost.com:

    “’Pew gave them credibility,’ Wayne says of these two groups. ‘Pew is recognized nationally as experts, with facts and figures.’ As a result of Pew’s work, Wayne adds, ‘new workers have a much weaker pension program.’”

    “‘The fact is that they [Pew] go into states arguing they are non-partisan and then proceed to make recommendations and undermine and dismantle [public employee] pension plans,’ says Hank Kim. ‘They have a bias — that bias is that public plans ought to be closed or frozen.’”

    “Pew has called for transparency in other groups that conduct public surveys and the Arnold Foundation boasts about its research transparency. Yet both have given vague answers to specific questions about whether the Laura and John Arnold foundation has given financial support to Pew relating to work on public employee pensions.”

    “The collaboration between the two organizations, says Jordan Marks, could ultimately undermine Pew’s reputation for good works and non-ideologically driven research.”

    “‘If Pew had its way,’ Marks says, ‘it would retire teachers and firefighters and others into poverty.’”

    http://www.huffingtonpost.com/2013/09/24/pew-trusts-pensions_n_3983654.html

    The Executive Director of the National Conference on Public Employee Retirement Systems (NCPERS), Hank Kim, states in an address to NCPERS members via YouTube that his organization has discovered “bias” in public pension statistics provided by the Pew Center on the States.

    The National Conference on Public Employee Retirement Systems (I believe Colorado PERA is a member) has found the Pew Center’s public pension reports to be “inflammatory,” that the Pew Center’s methodologies have been “debunked,” that the Pew Center “has an agenda,” and that “they have been pitching themselves as honest brokers.”

    Here’s a link to the video:

    Here are a few important excerpts from Hank Kim’s presentation:

    “Pew has issued reports that are inflammatory.”

    “We have taken their reports and debunked a lot of the myths and methodologies they have used.”

    “They are partnering with the Arnold Foundation, which is a foundation out of Houston, Texas to really attack public sector plans at the state level.”

    “They have been pitching themselves as honest brokers.”

    “Their methodologies are quite flawed.”

    “It seems as if they do have an agenda.”

    “We have good documentation from reputable actuaries who find great flaws in the way Pew and the Arnold Foundation calculate the funding status and their criticisms of public sector pension plans.”

    “If the state legislature . . . has invited Pew to be an honest broker, let us know.”

    The National Conference on Public Employee Retirement Systems.

    “NCPERS is the leading advocate for public pensions on Capitol Hill and in federal regulatory agencies. To achieve our goal of preserving retirement benefits for public employees, our staff maintains strong working relationships with Members of Congress, Congressional staffers and regulatory agency officials.”

    Link to the website of the National Conference on Public Employee Retirement Systems:

    http://www.ncpers.org/

    The 2010 effort of Colorado state and local governments to escape their debts, to break fully-vested PERA pension contracts, rests upon a rotten legal foundation. Colorado PERA active and retired members, continue to fight for your constitutional rights.
    Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  4. Al Moncrief says:

    THE GAZETTE TELEGRAPH ON COLORADO PERA’S SELF-INFLICTED LEGAL FIASCO.

    The Colorado Springs Gazette Telegraph has broken the Colorado media radio silence on the state’s attempt to break its contracts. Last month, the Colorado Springs Gazette Telegraph ran a pair of articles on Colorado PERA. As expected, these articles were dripping with the Gazette’s consistent anti-government bias, but nevertheless, I found portions of the articles interesting. I give the Gazette Telegraph some credit. The newspaper has published an article that ACTUALLY MENTIONS the fact that the Colorado Legislature is attempting to escape contractual Colorado PERA pension COLA obligations. (For readers new to this topic, in 2010 the Colorado Legislature enacted a bill, SB10-001, that attempts to shift [through breach of contract] the accumulated public pension debts of Colorado state and local governments onto the backs of old people. The Colorado Legislature wants to seize up to 40 percent of Colorado PERA retiree’s accrued pension benefits.)

    Now, when the Colorado Legislature declares a new state amphibian, rest assured that Colorado media will provide exhaustive coverage of the event. However, if for the first time in the history of our state, the Colorado Legislature seeks widespread abandonment of the contractual obligations of the State of Colorado? Nothing. Why is that? How many times has the Colorado PERA retiree lawsuit, Justus v. State, been mentioned by Colorado media in the last three years? When a state government attempts to escape its contractual obligations is that not newsworthy? So, kudos to the Colorado Springs Gazette Telegraph.

    The two Gazette Telegraph articles on PERA were written by Gazette reporter Megan Schrader and published on August 17, 2013. Although Megan’s articles were badly bent when they were pressed through the Laugesen “Ayn Randian filter,” they serve an important purpose by letting Coloradans know that their governments are attempting to violate the contract clauses of the Colorado and U.S. constitutions.

    I also commend Gazette Telegraph reporter Megan Schrader for her interviews with John Sugden, senior director in Standard & Poor’s U.S. Public Finance Ratings Group, and Standard & Poor’s senior Colorado analyst, David Hitchcock.

    From Megan’s articles, John Sugden, Senior Director, Standard & Poor’s U.S. Public Finance Ratings Group:

    “You’re capturing at a potentially low point. We’re going to see the market strengthen. We’ve seen these numbers fluctuate over time. Back in 1975, it was 51 percent, and with the market boom in the ’90s, it was 100 percent or close to that.”

    (My comment: John Sudgen of Standard and Poor’s provides an important historical perspective on public pension funding ratios. Why are today’s public pension funding ratios [i.e., funding ratios that far exceed those of the 1970s] considered a financial “crisis” while public pension funding ratios of the 1970s were a nonevent? Answer, today we have a well-funded national political infrastructure that was created to promote a “pension crisis.” Note that, in 1975 Colorado PERA had a 59.6 percent actuarial funding ratio.)

    “One attendee asked if there was any similar controversy in the 1970s, when PERA’s unfunded liability went as low as 54.7 percent [1973]. [Colorado PERA Executive Director Meredith] Williams said former Gov. Richard Lamm, who co-chaired the PERA commission [Treasurer's Commission to Strengthen and Secure Colorado PERA] 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.”

    https://www.cu.edu/sg/messages/5245.html

    Megan, realize that if the Colorado Legislature skips out on its pension bills [as it has for a decade] Colorado PERA’s funding ratio will fall. Megan, if you choose to make only 60 percent of your mortgage payment, you will eventually encounter “foreclosure.” No surprises here.

    Below I provide historical perspectives on public pension funding ratios from Keith Brainard of NASRA, and Ronald Wirtz of the Federal Reserve:

    Keith Brainard;

    February 14, 2011, Subcommittee on Courts, Commercial and Administrative Law, Committee on Judiciary House of Representatives, Testimony of Keith Brainard, Research Director, National Association of State Retirement Administrators:

    “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.]

    “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.”

    http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf

    Ronald Wirtz;

    A 2006 Federal Reserve paper, by Ronald A Wirtz, notes that public pension funding 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—in fact, it’s [the stock market in recent decades] been a savior for most pensions. Rewind 50 years, and almost all pension assets were invested in U.S. bonds and other fixed-income sorts of securities. Though comparatively safe in terms of protecting assets, such a portfolio could not generate the returns necessary for pension funds to keep up with the benefits promised by generous government employers. During the 1970s, funding ratios generally hovered between 50 and 60 percent.”

    http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=1349

    “As of Dec. 31, 2008, the state’s Public Employees’ Retirement Association pension fund [excluding the health care fund] was 69.8% funded, down from 75.1% in 2007 and a high of 105.2% in 2000.”

    http://www.leg.state.co.us/clics/clics2009a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/6778eb9ddf2ca301872575ee0050f424/$FILE/0709AttachmentB.pdf)

    Gazette Telegraph reporter Megan Schrader quoting Standard & Poor’s senior Colorado analyst, David Hitchcock: “Colorado is a ‘low debt’ state.” I ask why a “low debt” state faces such a financial “crisis” that is must break its contracts.

    Megan quoting David Hitchcock:

    “Their debt load is pretty low, so it’s really the pension issue that is in our view creating a weakness. It does affect the rating. Most other things in the state are ranked relatively highly, and it is one of the things that is holding the state back from potentially a higher rating.”

    (My comment: Many Colorado politicians are primarily concerned with lowering taxes in the state, already a “low-tax,” “low-debt” state. Many of these politicians would gladly break state contracts if it results in lower taxes for constituents whose vote they seek. Many Colorado voters do not want to pay for the governmental services they receive, and in particular, they do not want to pay contracted deferred compensation, such as public pension benefits.

    If the Colorado Legislature’s 2010 bill retroactively taking Colorado PERA COLA benefits is upheld by courts, then the need to raise revenue from Colorado taxpayers will be reduced. Such a reduction of PERA’s unfunded pension liabilities might result in a better credit rating for Colorado state and local governments, further reducing the need for taxpayer support of public sector services. Morality and constitutionality aside, breaking the contracts of Colorado’s pensioners, taking their property, and shifting the debt of Colorado state and local governments onto the shoulders of the state’s elderly, would benefit Colorado’s taxpayers. Apparently, many Colorado state legislators would like to see our state become a place where the rule of law is a joke and immoral behavior by government is de rigueur, but hey . . . the taxes are low.)

    As we have seen over the last three years, the Colorado General Assembly has historically mismanaged the Colorado PERA pension system. Colorado PERA pension officials have failed to perform their fiduciary duty, to regularly and emphatically inform members of the Colorado Legislature’s Joint Budget Committee that payment of the full PERA pension actuarially required contribution [ARC] is not optional. The ARC is paid to meet contractual obligations.

    One aspect of the ongoing mismanagement of the Colorado PERA pension system that is not widely recognized is the assumption by Colorado legislators that when they set PERA contribution rates in Colorado statute their contractual obligations are met. This is an erroneous assumption that has resulted in declining public pension funding ratios in states where legislators have embraced this idea. Simply setting PERA pension contribution rates in statute does not ensure that the Colorado Legislature has met its contractual obligations, paid its ARC. The Colorado General Assembly must make additional annual appropriations to ensure that it has met the full PERA pension ARC obligation every year. Such fiscally responsible behavior would have required that the Colorado General Assembly refuse to abide by the wishes of local government lobbyists in recent decades who have successfully redirected state revenues to paying off local government legacy pension debt [that is not the contractual obligation of the State of Colorado.] Fiscally responsible behavior on the part of the Colorado General Assembly might have required the body to forego making $100 million appropriations for discretionary property tax relief that is popular with the electorate. Statesmanship demands that Colorado’s elected officials prioritize the sanctity of the Constitution of the State of Colorado ahead of next year’s reelection campaign.

    Below are a few excerpts from the first Gazette Telegraph article on PERA, “Legal issues cloud PERA’s future” published on August 17, 2013, and my comments:

    Gazette Telegraph reporter Megan Schrader:

    “Adding to the uncertainty for the Public Employees’ Retirement Association financial outlook are two pending court cases that could change the multibillion-dollar retirement fund’s bottom line.”

    Gazette Telegraph reporter Megan Schrader:

    “In a separate case with broad implications, the Colorado Supreme Court has agreed to rule on whether PERA violated its contract with current and future retirees when it lowered the annual cost-of-living adjustment.”

    “Lawmakers removed a guaranteed 3 percent annual cost-of-living increase to current retirees, instead capping the increase at 2 percent. If retirees win that case, the cost-of-living increases will continue into perpetuity, costing PERA millions every year.”

    (My comment: Note to Gazette reporter Megan Schrader, Colorado PERA is a public sector defined benefit pension plan. Here’s how defined benefit [DB] plans work: governments offer a “defined” benefit at retirement to workers in exchange for a worker’s labor and pension contributions over decades. The “defined” benefit contract includes a “base benefit” and, in the case of many public sector DB plans, a pension COLA “escalator.” These benefits, base and COLA, are paid for the LIFETIME of the beneficiary [see "annuity"], they are not paid in perpetuity. The Colorado Legislature could choose to end the payment of PERA pension COLAs in statutory contracts for NEW HIRES [although I do not support such a step.] This action would be constitutionally permissible as it would not impair existing PERA contracts. Thus, the payment of the PERA COLA benefit in perpetuity is a policy choice of the Colorado Legislature. Megan, just as you cannot unilaterally cut the rate in your mortgage contract, Colorado PERA’s payment of contracted PERA COLA benefits on EXISTING fully-vested PERA contracts is not optional.)

    Gazette Telegraph reporter Megan Schrader:

    “PERA is a more than $42 billion retirement fund that 500,000 public employees rely on. The outcomes of these lawsuits will not immediately affect the ability of PERA to meet obligations but will extend the fund’s growing unfunded liability.”

    (My comment: Megan, when the provisions of SB10-001 that seized PERA COLA benefits are found to be unconstitutional, this finding will not “extend” PERA’s unfunded liability. Since the provisions of SB10-001 taking PERA COLA benefits are facially unconstitutional, these provisions of SB10-001 never actually reduced PERA’s unfunded liability. PERA’s unfunded pension liabilities will remain unchanged. In 2010, Colorado PERA retirees agreed with the admonition of prominent public pension attorney Gino L. DiVito: “ . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.” In 2010, Colorado PERA administrators, Governor Ritter, and a misguided majority of Colorado legislators . . . all ignored this warning.)

    Gazette Telegraph reporter Megan Schrader:

    “Denver District Court will decide in coming months whether PERA is owed roughly $200 million by Memorial Health System for the unfunded liabilities of employees who departed when Memorial merged with University of Colorado Health. If PERA loses that case, it will force other local government employers and retirees around the state to absorb the liability.”

    (My comment: Megan, Colorado PERA retirees will not “absorb” a “liability” if PERA were to lose this Memorial case. Again, Colorado PERA retirees are members of a defined benefit plan. Colorado PERA-affiliated employers, such as municipalities that exist in perpetuity, are contractually obligated to pay benefits to PERA members who possess fully-vested public pension contracts. Colorado PERA pensioners have “defined” benefits. Your articles reveal that you are having trouble with this concept.

    If the City of Colorado Springs “wins” the PERA/Memorial case, and is allowed to escape its public pension debts, other Colorado PERA-affiliated local governments will pick up these costs for the City of Colorado Springs, including Colorado Springs Utilities. In that event, Colorado Springs Utilities would pass part of these costs along to Colorado Springs residents in the form of higher utility rates. On the other hand, if Colorado Springs loses the Memorial Hospital case the City will be forced to pay its debts. Spoiler alert! Colorado Springs will of course lose the case. Their statutory obligation is clear.)

    Gazette Telegraph reporter Megan Schrader:

    “As part of the reforms passed in SB1, the annual cost-of-living increase for current retirees was reduced. It had been a 3.5 percent annual guarantee.”

    “A group of retirees sued PERA, saying it was a breach of contract.”

    “Denver District Court ruled in favor of PERA, saying the annual increase was not contractual and could be adjusted.”

    “This month, the Supreme Court agreed to hear the case on appeal.”

    (My comment: Megan, your description of the status of the lawsuit, Justus v. State, omits an important fact. In 2012, the Colorado Court of Appeals REVERSED the decision of the Denver District Court on the contractual nature of PERA COLA benefits. I can forgive this omission, since Colorado PERA itself fails to acknowledge this aspect of the Colorado Court of Appeals decision in PERA propaganda.

    On October 11, 2012, the Colorado Court of Appeals confirmed the contractual, “automatic” nature of the Colorado PERA COLA benefit. 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.”

    http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf.)

    Link to the first Gazette Telegraph PERA article:

    http://gazette.com/legal-issues-cloud-peras-future/article/1504971

    Now to the second of the pair of August 17, 2013 Gazette articles on PERA, “Future of state retirement plan in doubt.”

    Link:

    http://gazette.com/future-of-colorado-retirement-plan-in-doubt/article/1504970

    Gazette Telegraph reporter Megan Schrader:

    “The financial stability of Colorado’s $42 billion state pension fund will get worse before it gets better.”

    (My comment: Megan, this is not necessarily true. Colorado PERA’s investment performance might continue to improve, or the Colorado Legislature might decide to begin paying its public pension bills. As noted earlier, the Colorado Legislature has not paid its full PERA public pension bill [ARC] for a decade. Your comment assumes that the Colorado Legislature will continue to ignore its contractual obligations.)

    Gazette Telegraph reporter Megan Schrader:

    “The Public Employees’ Retirement Association is $22.7 billion shy of what is needed to pay out retirement benefits over the next 30 years. That unfunded liability grew by $143.4 million in 2012 despite a 12.9 percent return on investments.”

    (My comment: Note that just 16 years ago, Colorado PERA’s statutory “maximum amortization period” [MAP] was set in law at 60 years, rather than 30 years. The PERA amortization period is set arbitrarily, federal agencies do not mandate a particular amortization period. Reductions of the MAP give public pension plan sponsors yet another tool by which to place artificial financial pressure on public pension trust funds. This pressure is useful to Colorado PERA and the Colorado Legislature in attempts to manufacture a rationale for the breach of PERA contracts.

    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.

    HB 97-1114
    – Reduced PERA’s maximum amortization period to 40 years from 60 years.

    Link:

    http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true.)

    Gazette Telegraph reporter Megan Schrader:

    “State Treasurer Walker Stapleton – who sits on the PERA board as an honorary member – said the fund is too far underwater for reforms made in 2010 to rescue the system from disaster.”

    (My comment: Megan, when the Colorado Legislature broke PERA contracts in 2010, PERA’s actuarial funding ratio was 68.9 percent. For the entire decade of the 1970s, PERA’s actuarial funding ratio was below this level. Ask yourself, why did the Colorado PERA pension system not suffer a “disaster” in the 1970s? Megan, protect your journalistic integrity. Your job is to find truth, not to advance a political agenda. Escape as soon as you can. Megan, see page 3 of this memorandum for an historical perspective on Colorado PERA’s funded status:

    http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true.)

    Gazette Telegraph reporter Megan Schrader quoting Treasurer Stapleton:

    “I want to see PERA succeed and make promises to workers it can fulfill,” Stapleton said. “First and foremost, PERA needs to get to a rational and realistic rate of return, and then it needs to fund the plan properly. They’re spending money in anticipation of investment returns that I don’t believe in the long run they are going to earn.”

    (My comment: Remember that in the most recent “highway bill,” Congress approved return assumptions for private sector defined benefit plans that average 7.5 percent . . . this level of return assumption is in the neighborhood with most public sector defined benefit plan return assumptions. Good enough for the private sector, but not for the public sector?

    “The bottom line is that those opposed to public employee pensions are forced to use low return numbers to grab headlines and try to make the case the systems are doomed. Ironically, since the push for this began after 2008–pension systems have beat the 7-8% assumed rate of return for the past 1, 3 and 5 year period. Apparently reality won’t interfere with your viewpoint.”

    http://www.reuters.com/article/2013/09/03/us-usa-states-pensions-idUSBRE9820YN20130903

    “Corporate defined benefit plans have on average a higher than 8 percent assumed rate of return while PERA’s assumed rate of return is in the mid-range of other public retirement plans.”

    https://www.copera.org/pera/about/issueslist.htm

    NASRA on public pension plan return assumptions:

    http://www.nasra.org/resources/InvReturnAssumption_Final.pdf)

    Gazette Telegraph reporter Megan Schrader quoting David Hitchcock, Standard & Poor’s senior Colorado analyst:

    “Even at 8 percent, they’re not funding what they would need to, to amortize the unfunded liability,” Hitchcock said. “You might say the 8 percent is aggressive or unaggressive, but even with 8 percent, they’re not funding what they need to.”

    (My comment: Here we have David Hitchcock, Standard & Poor’s senior Colorado analyst stating that the Colorado Legislature is not paying its public pension bills. At the 2013 session of the Colorado Legislature did state legislators decide to pay their complete Colorado PERA public pension bill? No, but they did manage to transfer $147 million of state revenue to pay for public pensions that ARE NOT the contractual obligation of the State of Colorado. Local government lobbyists earned their keep at the 2013 session.)

    Gazette Telegraph reporter Megan Schrader:

    “Almost all state pension plans across the U.S. are in the red – lacking the funds to cover the future cost of retirement pensions promised to workers.”

    (My comment: Megan, your statement here assumes that public pension plans must have a 100 percent funding ratio. They do not. Colorado PERA has had a 100 percent funding ratio in only two years since its creation in Colorado statute eight decades ago. In the past, the Colorado PERA Board of Trustees has sought to “cap” the funding ratio of the Colorado PERA trust funds at 90 percent. They did so, since public pension funds with 100 percent funding ratios invite mischief on the part of elected officials overseeing the plans. A decade ago, when PERA’s funding ratio [AFR] hit 105 percent, Governor Owens decided to raid the PERA trust funds to lower public sector labor costs in Colorado. Governor Owens championed legislation providing an incentive for the early retirement of older, “more expensive” public workers [sale of service credit.] Governor Owens’ bill also cut employer contributions to the PERA pension system. You can see that, where irresponsible elected officials oversee a pension plan, a 100 percent funding ratio is not necessarily desirable.

    Megan, you write that public pension systems across the U.S. are “in the red.” Megan, do millions of homeowners in the United States face a “crisis” because they are “in the red,” that is they have home mortgages? Are these homeowners in a “crisis” because they cannot pay off 100 percent of their home mortgages tomorrow? Public pension plans are well-funded at an 80 percent funding ratio according to Fitch Ratings. Public pension plans never have to be funded at a 100 percent funding ratio.)

    Gazette Telegraph reporter Megan Schrader:

    “PERA wasn’t always in bad shape. In 2000, PERA was 104 percent funded. Then Lehman Brothers collapsed in September 2008, and everything changed. That year, PERA lost $10.5 billion in the stock market.”

    (My comment: Megan, Colorado PERA did not “lose $10.5 billion in the stock market.” Colorado PERA’s investment staff could have only “realized” these losses if they liquidated PERA’s portfolio in 2008/2009. Colorado PERA did not liquidate its portfolio in 2008/2009 because Colorado PERA invests over a time horizon that extends to 70 years. Megan, if you put all of your 401K assets into cash when the 2008/2009 markets bottomed you could have “realized” losses that year. Colorado PERA did not.)

    For her article Megan sought out and interviewed a few relatively wealthy Colorado PERA retirees who supported the 2010 breach of PERA COLA contracts. A commentator has recently observed that wealthier PERA retirees were more likely to support SB10-001 in 2010 as the “COLA-theft” bill had little impact on their lifestyles or their ability to afford basic necessities such as health care. Here are the “representative” Colorado PERA retirees Megan sought out for her article: a six-figure school district superintendent, a relatively well-off chief financial officer for a school district, and a retired water engineer.

    Megan, where are your interviews with the typical PERA retiree? Where is your interview with PERA member David Holme? Remember, he was the PERA member who told the assembled Colorado PERA Board of Trustees in 2009:

    “As a state employee, I’m ready to sit down and work on whatever fixes are needed once the deadbeat employer has made arrangements to fully fund its share.”

    http://www.copera.org/Flash/DenverListeningTour/PublicComment.html

    Megan, how about an interview with a retired teacher or janitor? Megan, you should also take note of the fact that even wealthy PERA retirees have no power to abrogate the pension contracts of the average Colorado PERA retiree.

    From Megan’s interview with School Superintendent Walt:

    “I keep a pretty close eye on it, and I think that it is on the right track,” said Walt Cooper, superintendent of Cheyenne Mountain School District 12. “I don’t think it’s the looming crisis that some critics would level. I also don’t think that there aren’t other sacrifices and pieces that we should pay in there to help it to a greater solvency.”

    “In comparison, the private sector must pay 6.2 percent to Social Security – the government-run retirement system – and generally offers a retirement-fund match of 3 percent to 6 percent for a defined contribution plan like a 401(k).”

    (My comment: A recent Colorado WINS study revealed that, when past, skipped PERA employer pension contributions are considered, [addressed in Colorado law through the AED and SAED] Colorado PERA-affiliated employers make only a 3 percent state contribution to PERA retirement benefits. Megan, the state that puts forth the bare minimum of support for public pensions seeks to break its public pension contracts.

    http://coloradowins.org/2013/08/19/2014-total-comp-comparing-pera-and-private-sector-retirement-benefits/)

    Gazette Telegraph reporter Megan Schrader:

    “In the great shake-up of 2010, retirees sacrificed some cost-of-living adjustment. The 3 percent annual bump is no longer guaranteed. In fact, it is capped at 2 percent.”

    (Megan, what occurred at the 2010 session of the Colorado General Assembly was not a “great shake-up,” it was a “great shakedown.” In 2010, Colorado PERA retirees did not “sacrifice” their contracted pension COLA benefit, these COLA benefits were forcibly taken. A bank does not “sacrifice” its cash to a bank robber, that property is taken by force. Megan, in your article you write that Colorado PERA COLA benefits are “guaranteed,” and you write that PERA COLA benefits, after seizure by the Colorado Legislature are no longer “guaranteed.” Do you see anything wrong with that picture?)

    A commentator from the Colorado political website ColoradoPols.com on Megan’s PERA retiree interviews:

    “It appears as though they were both professional employees who were well compensated at the end of their public service careers. Perhaps a lower COLA on $75K plus annual pension is done with pragmatic acceptance and is easier to swallow for these guys than for those PERA retirees making much less and who have no Social Security benefit. It seems to me that retiree acceptance (or support) for SB10-001 goes up with increasing income.”

    (My comment: This relatively small group of wealthy PERA retirees does not feel the pain of the impairment of their PERA contracts like the average PERA retiree feels it. For some older PERA retirees, the taking of their property by the state means diminished access to needed health care, and diminished quality of life.

    At the beginning of PERA’s campaign to break pension contracts in 2009 PERA found a handful of PERA retirees who were willing to relinquish their contractual rights, and frightened a few more into agreeing to give up their contracted benefits. PERA officials argued that these few represented the acceptance of ALL PERA retirees for the breach of PERA contracts. But, of course, one PERA retiree who is willing to accept breach of his own contract has no power to relinquish contractual rights that are held by others.)

    Megan, to be fair you might also have noted in your article that the Colorado Springs region is home to thousands of U.S. military retirees who have federal military pensions.

    Megan, this should pique your interest: Recall that Colorado PERA and the Colorado Legislature attempted to break Colorado PERA pension contracts in 2010 when Colorado PERA’s funding ratio was 68.9 percent. Many proponents of PERA pension contract breach call a pension funding ratio in the “60s” a “crisis.” Get this Megan: U.S. military pensions have A ZERO PERCENT FUNDING RATIO. Military pensions are paid right out of operating budgets. Yet, we do not see Wayne Laugeson trumpeting the “crisis” in military pensions in the Gazette Telegraph. Why is that Megan? Full disclosure requires that the Gazette Telegraph inform its readers that U.S. military pensions have a ZERO PERCENT FUNDING RATIO.

    Megan, I hope that you now see the extent of the SB10-001 scam. The “crisis” atmosphere surrounding Colorado PERA is manufactured. Public pensions are “well-funded” at an 80 percent funding ratio according to Fitch Ratings. The unfunded liability will be paid off over 50-70 years . . . like a mortgage, it’s not due tomorrow.

    Colorado PERA active and retired members, the Colorado Legislature’s 2010 PERA reform was RETROACTIVE, and RETROSPECTIVE, that is, unconstitutional under our Colorado Constitution. The Colorado PERA pension system can be reformed LEGALLY, PROSPECTIVELY.

    When SB10-001 is struck down in the courts, Colorado PERA will begin where they should have started three years ago, with legal, prospective pension reform. Governments do not have the right to arbitrarily break their contracts. In making this attempt, Colorado PERA officials have embarrassed themselves and the State of Colorado. Continue to support public pension contractual rights and the rule of law, contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  5. Al Moncrief says:

    FORGET DENMARK, IT’S CLEAR THAT SOMETHING IS ROTTEN IN THE STATE OF COLORADO.

    COLORADO PERA: THE COLA BENEFIT IS OUR CONTRACTUAL OBLIGATION.

    COLORADO PERA: THE COLA BENEFIT IS NOT OUR CONTRACTUAL OBLIGATION.

    COLORADO PERA: WE’RE NOT SURE IF THE COLA BENEFIT IS OUR CONTRACTUAL OBLIGATION.

    If you are a party to a contract, and you are uncertain as to your obligations under the contract, and a process exists by which you might easily identify your contractual obligations, would you choose to ignore that process?

    In 2010, the Colorado Legislature placed itself in this very position, and ignored the opportunity to have the constitutionality of its pension “reform” proposal (taking accrued PERA COLA benefits from PERA pensioners) assessed by the Colorado Supreme Court. The PERA COLA benefit is an annual “escalator” of the pensioner’s benefits. In lieu of offering a larger fixed monthly pension benefit in exchange for a PERA member’s contributions and labor, the Colorado Legislature has offered to have the total accrued pension benefit delivered by means of this “escalator.”

    Late in 2009, Colorado PERA pension administrators testified that payment of accrued public pension COLA benefits is a contractual obligation of public employers affiliated with the PERA pension system.

    In 2009, Colorado PERA officials encouraged the members of the Colorado Legislature to ask the Colorado Supreme Court for an opinion on this question of taking back the accrued pension COLA benefits of pensioners. For some incomprehensible reason, the Leadership of the Colorado Legislature decided not to send this question to the Colorado Supreme Court. Why? Did they not wish to know the answer? Or, were they simply trying to buy time with the enactment of a pension bill they knew to be unconstitutional? Why did the Leadership of the Colorado Legislature not even bother to ask their own attorneys for an opinion on the constitutionality of taking the COLA benefit as has occurred in other states?

    “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

    Here we have the opinion of the proponents of breaking Colorado PERA pension COLA contracts in late 2009, BEFORE the contract breach, “the PERA COLA IS our 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 (in 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.”

    Here we have the opinion of the proponents of breaking Colorado PERA pension COLA contracts AFTER the contract breach, “the PERA COLA IS NOT our 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 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.)”

    Here we have the opinion of the proponents of breaking Colorado PERA pension COLA contracts later in 2010 . . . stating that they don’t know if the PERA COLA is their contractual obligation:

    Greg Smith at 2010 PERA Shareholder meeting – YouTube video 10-11 minutes into the video.

    “We need to know the answer of whether this action was constitutional.”

    Again, if Colorado PERA “needs to know” if the taking of the PERA COLA is constitutional . . . why not simply ask? Colorado law provides a mechanism for seeking such guidance from the Colorado Supreme Court. Use of this mechanism might have saved Colorado taxpayer’s millions of dollars in costs for fruitless litigation.

    Why did Colorado PERA choose the path of pension contract breach in 2009/2010? A commentator on the Colorado political website ColoradoPols.com speculates:

    “There are at least 6 likely reasons why the PERA Board and its General Counsel Greg Smith decided to go the way of a contract breach:

    1) Time test – buy time to allow economy to recover;
    2) Court test – let courts rule and take the political heat;
    3) Judge test – hope for a surprise ruling, such as the 2011 ruling by Denver District Court Judge Robert Hyatt;
    4) Retiree test – resolve and resources for legal challenge;
    5) PERA membership test – rift between retirees and members, and even a rift between retirees, due to anxiety over the lack of legislative taxing authority (TABOR) to properly fund PERA by making required actuarial contributions (ARC);
    6) TABOR test – ask voters whether they desire to maintain PERA going into the future. This would probably result in further contract breaches.”

    Colorado Treasurer Walker Stapleton: “Colorado is a low debt state.” So Walker Stapleton, do you not find it odd that Colorado, the 10th wealthiest state in the nation, a state you characterize as a “low debt state,” is trying to break its contracts?

    Colorado Treasurer Walker Stapleton, Colorado is a “low debt state.”

    “Long Term Liabilities. In addition to assets owned by state and local governments, governments also have financial liabilities – i.e. money owed over a period of time. Because of various state constitutional requirements, Colorado is considered a low debt state, since it borrows little money compared to other states.”

    http://www.colorado.gov/cs/Satellite/Treasury_v2/CBON/1251592046949

    (Note that the Colorado constitutional TABOR amendment recognizes public pension obligations as “debt” of Colorado governments and provides an exception for such debt.)

    Colorado PERA active and retired members. Forget Denmark, it’s clear that something is rotten in the State of Colorado. Support public pension contractual rights in our exceptional state. Colorado is better than breach of contract. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  6. Al Moncrief says:

    DENVER POST EDITORIAL BOARD: GOVERNMENT CANNOT BEGIN “UNILATERALLY IGNORING CONTRACTS.” THE CONTRACTS OF AIG EXECUTIVES MUST BE HONORED (2009 DP EDITORIAL.)

    SO, DENVER POST, WHERE IS YOUR EDITORIAL DEFENDING THE CONTRACTS OF COLORADO PERA PENSIONERS? THAT IS, THE CONTRACTS THAT WERE “UNILATERALLY IGNORED BY GOVERNMENT” IN 2010?

    Vince Carroll, Let’s See the Denver Post Editorial Board Act on Principle, Write a Column Defending Existing Public Pension Contracts.

    On March 18, 2009, in the thick of U.S. market turmoil, while the public was calling for the heads of the Wall Street banksters, and demanding that government break the contracts of AIG executives, the Denver Post Editorial Board admonished us all to keep our own heads and accept that governments in the United States cannot simply abandon their contractual obligations when it is politically popular to do so.

    Yet, just ten months later, when it was politically popular to break Colorado PERA pension contracts, when the political power of Colorado pension administrators, unions officials, corporate interests, statehouse lobbyists, politicians and lawyers fueled the campaign to break the contracts of elderly Colorado PERA pensioners, what did we hear from the Denver Post Editorial Board? Not a peep.

    The Denver Post Editorial Board:

    “Let AIG execs keep bonuses.”

    “Who isn’t angry about the $165 million in bonuses paid to executives at insurance giant American International Group?”

    “The company, on its fourth round of government bailout money, recently paid millions to executives who created the risky derivatives at the epicenter of the financial meltdown.”

    “The president is up in arms.” “And the public anger is palpable.”
    “We agree the bonuses are morally indefensible. But the payments should stand for several reasons.

    – The bonus contracts were in place long before the insurance giant took the first federal bailout money in September. And the bonuses were paid legally — part of a program that had been disclosed in advance in filings AIG made with the government, according to the Associated Press.”

    (My comment to the Denver Post Editorial Board: Colorado PERA pension contracts have been in place for many decades. The Colorado General Assembly has known for more than 60 years [since Bills/McPhail] that the payment of fully-vested Colorado PERA pension benefits is a contractual obligation of PERA-affiliated employers. If the members of the Colorado Legislature held the belief (during these six decades) that meeting PERA contractual obligations is a burden on governments in Colorado, they had ample opportunity to adopt PROSPECTIVE, LEGAL pension reforms for the PERA pension system. Colorado legislators have had six decades to enact PERA pension reforms that lessen any burden on Colorado governments without abrogating existing public pension contracts. Having enacted policies that reduced Colorado PERA’s funded ratio [cutting PERA pension contributions, selling service credit for less than its full actuarial cost in order to reduce state labor costs, failing to pay the full PERA pension bill, funding pensions that are not the State's responsibility, slashing state revenues beyond that required by TABOR] these politicians now seek to push their problem off onto old people. That is sick.)

    Denver Post in March 2009:

    “If the government begins unilaterally ignoring contracts, it will create more turmoil in an economic atmosphere that can’t sustain any more uncertainty.”

    (My comment: Denver Post Editorial Board, please tell us why the breach of the contracts of AIG executives in March, 2009 would create unsustainable “uncertainy,” yet the breach of the contracts of Colorado PERA pensioners ten months later does not result in such damaging “uncertainty.” Do corporations have greater rights under the U.S. Constitution than public sector workers?

    Denver Post Editorial Board, if the truth is that those with power and money have greater rights under the United States Constitution, then tell us so. Let’s get it out in the open.)

    http://www.denverpost.com/opinion/ci_11935720

    Wikipedia: “AIG Bonus Payments Controversy”:

    “The AIG bonus payments controversy began in March 2009, when it was publicly disclosed that the American International Group (AIG) was to pay approximately $218 million in bonus payments to employees of its financial services division.”

    “AIG is notable for having received taxpayer bailouts and in the fourth quarter of 2008 posted a loss of $61.7 billion, the greatest ever for any corporation. Beyond the $165 million in bonus payments that were recently announced, total bonuses for the financial unit could reach $450 million and bonuses for the entire company could reach $1.2 billion.”

    “A March 24, 2009 CNN article said that private companies wouldn’t feel comfortable doing business with the U.S. government if they thought the government would change the rules after the contracts have already been signed.”

    “Fred J. Joseph, commissioner of the Colorado division of securities and president of the North American Securities Administrators Association, said ‘If these people could get their hands on pitchforks, they really would storm the castle.'”

    “In a nationally syndicated opinion column, economist Thomas Sowell claimed that the politicians who did the most to create the situation that led to the use of taxpayer money to fund the bonuses are now the same ones who are complaining the most about the bonuses.”

    “AIG has defended the bonuses by citing contractual obligations.”

    “Sorkin also said not paying the bonuses could spark problems across the business community. ‘If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right . . .”

    (My comment: “Government abrogating contracts, left and right” . . . where is the condemnation of proposals that government break its contracts lately? The crowds with pitchforks want public pension contracts to be abrogated, will we appease them?

    Does governmental breach of contract not somewhat diminish the lustre of that “shining city on a hill”? If the rule of law in the United States is actually a myth, let’s be honest about it, and cease the claims of “American Exceptionalism.”)

    Wikipedia:

    “AIG has pointed out that Connecticut, the state where AIG is based, has a law called the Wage Act. According to the law, employers who don’t pay employees the money which they are contractually obligated to pay, could ultimately be required to pay twice that amount.”

    http://en.wikipedia.org/wiki/AIG_bonus_payments_controversy

    Now (For Balance) I Give the Denver Post Editorial Board Some Credit.

    In late 2009, the Denver Post did not condemn the ongoing public relations and lobbying campaigns to break Colorado PERA retiree pension contracts, but they did ask the Colorado General Assembly to check with the Colorado Supreme Court prior to acting (by submitting questions to the Colorado Supreme Court through an interrogatory.) Of course, the Leadership of the Colorado General Assembly ignored this advice. However, I give the Denver Post Editorial Board their due. (I give the Editorial Board the same amount of credit that I would give a bank customer who suggests to a bank robber that he check in with the local police regarding the legality of his intended act . . . not much credit, but some!)

    Denver Post Editorial Board in 2009: “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

    (My comment: DP Editorial Board, have you ever wondered why it is that the Colorado PERA pension system needed to be “rescued” when the funding ratio of the Colorado PERA pension system was 69.8 percent, but the PERA pension system did not require any sort of “rescue” in 1973 when PERA’s funding ratio was 54.5 percent? Doesn’t add up does it? By the way, don’t fall for Colorado PERA’s attempt to deceive the Colorado Supreme Court. Colorado PERA has inserted a “market-based” funding ratio into its legal briefs instead of the “actuarial funding ratio” it has traditionally used in order to mislead Colorado courts. This switch is not identified in Colorado PERA’s legal briefs and is intended to bolster PERA’s case for a PERA “financial crisis.” The funding ratios in SB10-001 and in the Colorado PERA statutes are “actuarial funding ratios.”

    Standard and Poor’s:

    “As of Dec. 31, 2008, the state’s Public Employees’ Retirement Association pension fund (excluding the health care fund) was 69.8% funded, down from 75.1% in 2007 and a high of 105.2% in 2000.”

    http://www.leg.state.co.us/clics/clics2009a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/6778eb9ddf2ca301872575ee0050f424/$FILE/0709AttachmentB.pdf)

    Denver Post Editorial Board: If you decide to act on principle and defend Colorado PERA pension contracts in an editorial, I suggest that you address one other matter in the same piece. In 2012, the Colorado Court of Appeals reversed and remanded the PERA retiree COLA case, Justus v, State, to the Denver District Court, simultaneously confirming the contractual nature of the Colorado PERA COLA benefit. Yet, your Denver Post reporter Tim Hoover, in an article addressing the Court of Appeals decision, labeled this reversal a “win” for Colorado PERA. Essentially, he parroted Colorado PERA propaganda. Colorado PERA was happy with the initial Denver District Court’s decision that the PERA COLA was not a contractual obligation. Why would Colorado PERA consider a reversal of the Denver District Court decision a “win” for PERA? They don’t. They are appealing this finding to the Colorado Supreme Court. So, Denver Post Editorial Board, publish a (belated) correction to this Denver Post story by Tim Hoover. Protect journalistic integrity!
    Denver Post, October 12, 2012:

    http://www.denverpost.com/newsheadlines/ci_21754161/pera-wins-ruling-cuts-pension-raises

    “WE ARE A COUNTRY OF LAWS. THERE ARE CONTRACTS. THE GOVERNMENT CANNOT JUST ABROGATE CONTRACTS.”

    Larry Summers, Harvard Professor, Director of the National Economic Council in the Obama Administration . . . and next Fed Chairman?

    http://www.latimes.com/la-oe-goldberg17-2009mar17,0,3689261.column

    “Lawrence Henry ‘Larry’ Summers (born November 30, 1954) is an American economist. He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton. He was Director of the White House United States National Economic Council for President Barack Obama from January 2009 until November 2010. Summers is the Charles W. Eliot University Professor at Harvard University’s Kennedy School of Government. He is the 1993 recipient of the John Bates Clark Medal for his work in several fields of economics.”

    http://en.wikipedia.org/wiki/Lawrence_Summers

    More on the Sanctity of AIG Executive Contracts, ABC News:

    “The potential for a costly lawsuit stems in part from state law in Connecticut, where AIG’s now-infamous financial products division — the arm of the company that employs the 400-some employees awarded the $165 million bonuses — is based.”
    “In a document submitted by AIG to Treasury Secretary Timothy Geithner, the company argues that were it to renege on contractual agreements to make retention payments — which were set in early 2008, before the government enacted compensation limits under its Troubled Asset Relief Plan — the firm could be liable for ‘double damages and attorneys’ fees’ under the Connecticut Wage Act.”

    (My comment: Conveniently, public sector entities are generally exempted in these “wage acts.” Thus, public sector workers are forced to rely on the Contract Clause.)

    ABC:

    “There ‘are legal, binding obligations of AIG, and there are serious legal, as well as business, consequences for not paying,’ Liddy wrote in a recent letter to Geithner.”

    “‘If we’re talking about the possibility of violating the Connecticut or other states’ wage act, then there is a real risk that one needs to be concerned about. … Some of these states are fairly punitive,’ said Donald P. Carleen, of the law firm Fried, Frank, Harris, Shriver & Jacobson LLP. ‘For AIG to do what the public seems to want them to do and certainly what Congress would like them to do could in theory expose them to liability.'”

    http://abcnews.go.com/Business/Economy/story?id=7097759&page=1

    NYT:

    “But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them.”

    “The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken.”

    http://www.nytimes.com/2009/03/15/business/15AIG.html?_r=0

    “We Can’t Break AIG Bonus Contracts But Worker Pensions? No Problem!”

    “But now that we’re talking about breaking contract to pay back pensions that middle class workers have paid into over the course of their professional careers, well — that’s another story.”

    “So, where was all this ‘fiscally responsible’ fighting spirit when it came to paying out $32.6 billion in taxpayer funded banker bonuses?”

    “Well, as Larry Summers said, ‘we are a country of law.’”

    http://fdlaction.firedoglake.com/2011/02/23/we-cant-break-aig-bonus-contracts-but-worker-pensions-no-problem/

    Politicsdaily.com:

    “The United States is a country that follows the rule of law. And it does so even if that means paying employees of AIG, the failed insurance company whose actions nearly caused a global economic collapse last year, millions of dollars in bonuses.”

    “The second contract problem, involving the bonus payments, follows from the first. One year ago, AIG revealed that it was paying its employees $165 million in deferred compensation, even though it was then effectively under government control.”

    “As then-CEO Edward Liddy explained to Geithner in a letter dated March 14, 2009, AIG entered into contracts with about 400 employees of the Financial Products division that guaranteed a minimum level of pay for 2008 and 2009 as retention bonuses. AIG wrote these contracts before it received the federal bailout and entered the TARP.”

    (My comment: Note that both the AIG controversy and the Colorado PERA retiree lawsuit, Justus v. State, surround the payment of deferred compensation.)

    Politicsdaily.com:

    “Despite the outcry, the money was paid. Liddy explained that ‘outside counsel has advised that these are legal, binding obligations of AIG, and there are serious legal, as well as business, consequences for not paying.'”

    “Additional details attached to Liddy’s letter explained that the tax code specifically limits a company’s ability to modify deferred compensation agreements.”

    “As Liddy emphasized, ‘Honoring contractual commitments is at the heart of what we do in the insurance business. I cannot have our clients lose faith in our desire and ability to do just that.”

    (My comment: Does it matter at all if citizens of the United States lose faith in the willingness of U.S. state and local governments to honor their contractual commitments?)

    Politicsdaily.com:

    “Like it or not, the sanctity of contracts rules the land. And, if AIG’s contracts say that AIG’s employees will receive $100 million in deferred compensation or that its counterparties will receive a $62 billion payment in full for their investments, then that’s what the law says.”

    http://www.politicsdaily.com/2010/02/06/aig-bonuses-why-those-pesky-contracts-cant-be-ignored/

    CNN Money, Corporations Won’t Feel Comfortable Doing Business with a U.S. Government that Doesn’t Honor Corporate Contracts:

    “AIG has been given access to $182 billion in taxpayer funds in the past six months. Recently it paid out $165 million in retention bonuses to employees in the company’s financial products division. Those bonuses were written into employee contracts written in early 2008.”

    “Another concern: Companies in the private sector won’t feel comfortable doing business with Uncle Sam if they think he’ll change the rules on them after a deal is done.”

    “One option: Legislative aides say lawmakers may try to find a face-saving way out of this — perhaps by passing something that beefs up rules concerning future bonuses while dropping the language about bonuses already paid.”

    http://money.cnn.com/2009/03/24/news/economy/bonus_tax_onsecondthought/index.htm?source=yahoo_quote

    Dean Baker, Co-director, Center for Economic and Policy Research, on Public Pension Contractual Obligations:

    “This is a contractual obligation, I just find it kind of striking here, because there is such a selectivity about how we view contracts. You might remember that back when AIG was bankrupt, there was a big issue that they had these bonuses for their top people, hundreds of thousands of dollars per person, and we ended up paying them, because we got lectures, including from people in the Obama Administration about the sanctity of contracts. Well, here you have contracts with workers that are actually guaranteed by the state constitution that apparently don’t mean anything.”

    News Program Moderator:

    “Let me just emphasize that, because that episode was, it was fairly early in the Obama Administration, there were all of these bonuses set to be paid to top AIG Executives . . . there was massive populist outrage across the political spectrum and the answer that came from everybody was that these was that these bonuses had to be paid because these were contractual obligations and you could not just rip up contracts.”

    Dean Baker:

    “Exactly . . . when it’s ordinary workers rather than folks on Wall Street, they’re prepared to rip up contracts. That’s what we’re talking about here. So, I think people should be outraged.”

    http://www.afscme.org/blog/saunders-on-msnbc-dont-scapegoat-detroit-workers

    (My comment: Note that the City of Detroit is currently trying to abandon its public pension contracts in bankruptcy. Note that the State of Colorado is currently trying to escape its contractual public pension obligations OUTSIDE OF BANKRUPTCY. World of difference. Also, note that pensioners in Detroit are paid contracted pension benefits that average $19,000 annually, and that most receive no Social Security benefits.)

    Dean Baker, Co-director, Center for Economic and Policy Research on Detroit Pensions:

    “But even if Detroit’s workers got a good deal with their pay and benefit package, so what? A contract is still a contract. Workers put in their time in exchange for a specific package of pay and benefits, how can the government arbitrarily change the terms of the deal after the fact.”

    “There are businesses that end up getting very good deals from the government all the time. How often does a state or local government end up selling a parcel of land for a price that turns out to be hugely below its true value. Or they may give tax concessions to lure businesses that prove to be overly generous. It looks like the City of Chicago made a really bad deal in leasing its parking meters to Morgan Stanley for three quarters of a century. Does Chicago get to just rewrite the terms of the contract?”

    “In these cases involving businesses, somehow a contract is a contract, end of story. The relationship is sacred and no one suggests changing the terms after the fact. However, in the case of the pensions for city workers, these are just office workers, custodians, or garbage collectors. The media would have us believe that contracts with these sorts of people aren’t real contracts. If they prove inconvenient, then they can be changed.”

    “While that may be the view that the media is trying to push, the rest of us should insist that the law and the constitution be respected. Detroit’s city workers have as much right to have their contracts respected as the Wall Street bankers making millions and billions off contracts that are often far more questionable.”

    “This is class war at its ugliest. The elites have to learn that they don’t get to change the rules as they go along, if they want their contracts to be respected they will have to respect contracts that protect working people as well.”

    http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/in-detroits-bankruptcy-why-are-contracts-with-workers-a-joke

    Colorado PERA members: In 2009, incredibly, Colorado’s public sector unions joined the effort to break the contracts of their retired union “brothers and sisters.” Sharp lawyers bought the support of Colorado’s public sector unions with the promise to bolster the PERA trust funds by raiding the assets of elderly PERA retirees, leaving the “dues-paying union members” relatively unscathed. In 2009, Colorado’s public sector unions joined the “class war,” playing into the sharp lawyers’ hands, dividing Colorado PERA members into a group of active members, and a group of retirees whose rights, they believed, could be trashed. This is the world we live in, and it is going to take time and effort to clean it up.

    Fight for your rights! Support Save Pera Cola! Contribute at saveperacola.com and Friend Save Pera Cola on Facebook.

    • Tim Hansford says:

      That’s a great quote from Dean Baker on the nature of contracts. That deserves to be etched in stone somewhere. Thank you, Al, for providing this, and for all of the hard work you have done to keep us all informed and aware of the merits of our case. We appreciate it.

  7. Al Moncrief says:

    AARP: WE WILL DEFEND THE CONTRACTS OF DETROIT’S PENSIONERS.

    AARP: WE WILL STAND BY AND WATCH, “MONITOR” THE BREACH OF COLORADO PERA RETIREE PENSION CONTRACTS.

    Today (August 23, 2013) the AARP published an article on the AARP Blog: “Cutting Detroit Retirees’ Pensions Violates State Constitution.” The AARP has decided to defend the contracts of retirees in Detroit. You may have heard that Detroit has filed for municipal bankruptcy and is attempting to take back contracted public pension benefits from the city’s pensioners (who receive an average annual benefit of $19,000.)

    Importantly, Detroit is trying to take contracted public pension benefits IN BANKRUPTCY. The Colorado Legislature is attempting (in SB10-001) to claw back contracted Colorado PERA public pension benefits OUTSIDE OF BANKRUPTCY. There is a world of difference between the two. Detroit is a municipality facing severe financial distress. Colorado is the tenth wealthiest state in the nation and has one of the strongest economies in the nation. Colorado PERA’s members include the State of Colorado and many Colorado local governments.

    The AARP Will Fight for Detroit’s Pensioners:

    “Last month, we heard the news about the City of Detroit filing for Chapter 9 bankruptcy protection in federal court, becoming the largest city to ever do so. The city’s financial crisis threatens the retirement security of more than 30,000 active and retired employees, and almost immediately, lawsuits were filed in state court to protect Detroit’s two pension funds during the city’s restructuring.”

    “Michigan Attorney General Bill Schulte has said that, under the state constitution, pension obligations to state and municipal employees and retirees in Michigan may not be ‘diminished or impaired.’”

    “Cutting the pension benefits of Detroit’s public employees, who have paid into the system over a lifetime of hard work, violates the constitution and the state’s contract with its retirees.”

    “In a statement, AARP Michigan State Director Jacqueline Morrison said, in part:

    ‘The firefighters and police of Detroit have dedicated their careers to protecting the city’s citizens. These first-responders – and other hard-working Detroit public employees – made their pension payments. They count on their health benefits. We can’t change the rules at the end of the game for these public employees.’

    – Many retired public employees live on fixed incomes.

    – Unlike most Americans, Detroit’s firefighters and police do not get Social Security, and instead rely more heavily during retirement on the pension benefits they earned.

    – The average firefighter in Detroit survives on a pension of only $30,000 a year.”

    “’Raiding the pensions of hard-working Michiganders to make bondholders whole is not the way to right Detroit’s fiscal house,’ AARP’s Morrison emphasized.”

    “Detroit’s retirees must have effective representation throughout
    the process of addressing the city’s challenges.” “We will continue to be a watchdog for our members and all older Michiganders, and will hold the politicians accountable for finding responsible solutions that protect retirees’ pensions and health benefits.”

    http://blog.aarp.org/2013/08/23/cutting-detroit-retirees-pensions-violates-state-constitution/

    THE AARP FAILED COLORADO PERA RETIREES IN 2010.

    The AARP did not “hold any politicians accountable” for the breach of Colorado PERA pension contracts in 2010. Instead, AARP officials “held” their tongues.

    Below, I provide an excerpt from a Colorado AARP statement regarding their decision to simply monitor the Colorado General Assembly’s 2010 pension default legislation (public pension contract breach) rather than defending Colorado public pension contracts.

    AARP:

    “The AARP state office, with input from our volunteer leadership, reached the decision to monitor SB10-001.”

    (My response: In my opinion, some of the 27 self-serving lobbyists and lawyers seeking to break Colorado PERA pension contracts got to the Colorado AARP early. I believe that the taking of earned, contracted deferred compensation from retirees in SB10-001 was patently immoral. Apart from the question of the constitutionality of SB 10-001, recognition of its immorality should have given pause to AARP officials and volunteers in 2010. In my opinion, the AARP abandoned its mission and will find itself on the wrong side of history in our state.

    The Colorado PERA public pension debate in 2010 provided an opportunity for the AARP to demonstrate its value to retirees in the United States, and to stand up for the many Colorado PERA retirees who are unable to defend their own contractual rights. (It’s true, for a number of reasons many of these retirees are unable to defend their rights.) The 2010 PERA debate was a missed opportunity for Colorado AARP officials to make it clear that the AARP is a champion of retiree interests.

    Support public pension contracts and the rule of law in the United States, contribute at saveperacola.com! Friend Save Pera Cola on Facebook!

  8. Al Moncrief says:

    PROPONENTS OF COLORADO PERA PENSION CONTRACT BREACH CONDEMN THE COLORADO GENERAL ASSEMBLY’S FAILURE TO PAY ITS PUBLIC PENSION BILLS.

    A few days ago, (8/19/2013) Colorado WINS (a coalition of public sector unions, “Colorado Workers for Innovative and New Solutions”) posted an article on its website condemning the historical underfunding of the Colorado PERA public pension system by the Colorado General Assembly.

    http://coloradowins.org/2013/08/19/2014-total-comp-comparing-pera-and-private-sector-retirement-benefits/

    In 2010, Colorado WINS supported SB10-001, a bill that broke the pension contracts of pensioners in the Colorado PERA pension system. The 2010 legislation sought to force a “sacrifice” from Colorado PERA pensioners, that is, forcibly take the property of these PERA pensioners, allowing Colorado state and local governments to escape their accrued pension debts. I believe, that Colorado WINS supported the breach of the public pension contracts of their retired union “brothers and sisters” in order to minimize the future pension contributions needed from their current active “dues-paying” union members. (Retired union members no longer pay union dues, why should their interests and contracts be protected by Colorado WINS? . . . follow the money!)

    Colorado WINS is looking out for their current, active members, but I think they made a mistake in 2010. What kind of a union casually tosses its retired members under the bus? There is scant precedent for this type of behavior in the history of the U.S. labor movement. This act was clearly immoral and treacherous. It undermines the moral standing of the U.S. labor movement. Public sector unions have done much to improve the working conditions of middle-class Americans over the last century, but advocating the breach of the contracts of their retired union members crosses a moral line.

    As we read on the Colorado PERA 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

    (My comment: Yes, Colorado PERA was able to frighten a few PERA retirees into supporting the breach of their own PERA pension contracts in 2009. The public relations campaign to take money from Colorado PERA retirees was, ironically, funded with these retirees money [from PERA pension trust funds.] It has been observed that many of the PERA retirees who supported the breach of PERA contracts in 2010 were among the wealthier PERA pensioners.)

    Rather than conspiring with others to “claw back” the earnings of Colorado’s pensioners, I think that Colorado WINS should be demanding that the Colorado Legislature actually pay its public pension bills. What are Colorado WINS’ lobbyists doing? For the last decade, they should have demanded that the Colorado Legislature meet its contractual obligations, that full payment of PERA’s pension bills be made. Colorado WINS lobbyists should have made these demands before the committees of the Legislature at every opportunity. In every year that the Colorado Legislature failed to make its PERA pension payments and instead appropriated funds to cover local government pension debt that IS NOT the contractual obligation of the State of Colorado, Colorado WINS lobbyists should have been there to demand an end to the practice.

    As we have seen, the Colorado General Assembly has not paid its full Colorado PERA public pension bill for a decade.
    2012 PERA CAFR, page 35 – “ARC Deficiency.”

    “In 2012, the actual (PERA) contributions, as set in statute, were $143.4 million less than the ARC as calculated by the actuaries.”
    “During the past 10 years, this shortfall in funding . . . has been $3.4 billion.”

    https://www.copera.org/pdf/5/5-20-12.pdf

    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 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.)

    The Colorado WINS article published on August 19, 2013 highlights the Colorado Legislature’s historical underfunding of the Colorado PERA pension system, and points out that the State of Colorado pays for only 17 percent of state employee retirement benefits. The WINS article emphasizes the fact that Colorado PERA retirees are not eligible to receive Social Security benefits and are accordingly entirely dependent on their PERA pension benefits. In the article, Colorado WINS states that the Colorado General Assembly “chose to underfund its portion of contributions,” and that the “underfunding” of the Colorado PERA pension system “is not the fault of state employees.” If this is true, why did Colorado WINS support a bill that shifts the burden of this PERA pension underfunding onto state employees (and PERA members employed by local governments?)

    Colorado WINS notes that the increased PERA employer costs (AED and SAED) put in place by the Colorado Legislature are the result of the Legislature’s failure to make pension payments identified by Colorado PERA’s actuaries [necessary to maintain a healthy public pension system, "actuarially required contributions, ARC."] Colorado WINS notes that the inclusion of the AED and SAED in public employee compensation studies leads to the false conclusion that the State of Colorado contributes more to retirement than do private sector entities in Colorado.

    Colorado WINS on Social Security:

    “What is important to remember, and which is often lost in the debate over public employee pensions, is that state employees do not earn Social Security while they are employed by the state. When someone in the general public hears about a PERA Pension they often are not aware of this fact and assume that a state employee’s pension is an add-on to their Social Security benefits, similar to the role of a 401k or a pension in the private sector.”

    (My comment: The fact that Colorado PERA pensioners are completely dependent to their pension contracts renders the Colorado Legislature’s self-serving breach of these contracts in 2010 unconscionable. Contractual obligations were broken to free up money for discretionary programs popular with voters.)

    Colorado WINS:

    “The actuarial costs however include moneys needed to make up for years when the state underfunded their portion of the PERA contribution and all other such accrued liabilities and any other contributions made to PERA.”

    (My comment: The underfunding of the Colorado PERA pension system by the Colorado Legislature was condemned at the 2009 Colorado PERA “Listening Tour” meeting in Denver, PERA member David Holme:

    “My decision to join the state was based on the PERA program.”

    “Any sort of a reduction in benefits today would be a violation of that contract, and bait and switch advertising . . . and so fraud.”

    “State employees have never failed to provide their contributions . . . and in fact we’ve paid more into the system than the employers have over the total of the years, according to PERA reports.”

    “The employers, starting in 2002, the last year of 100 percent funding, began providing less than the annual contribution requirement, setting contribution rates for the state of less than required.”

    “Today, the State of Colorado PERA employer is past due to the tune of $6.5 billion into the trust fund contributions, not counting any interest — if you do it at the three percent PERA interest, it would be another $1.1 billion past due over the last 9 years.”

    “PERA’s overall funds at the end of last year were about $30 billion, this bad debt constitutes about 25 percent of the PERA assets. If they were paid with interest to the PERA investment fund it would be at 94 percent funded on the actuarial basis or 76 percent on the market basis. Most experts believe that a fund at 80 percent is a healthy fund. We’d be above that.”

    “The survey today, that we just talked about, is a good example of this. If you look at that, 28 of the options on there cost the employees money, and only two cost the employers money.”

    “As a state employee, I’m ready to sit down and work on whatever fixes are needed once the deadbeat employer has made arrangements to fully fund its share.”

    http://www.copera.org/Flash/DenverListeningTour/PublicComment.html

    Colorado WINS:

    “Based on PERA’s report we see that a state employee pays 83% of the contribution necessary to pay for their future retirement benefits – this is significantly higher than what an employee pays in the private sector.”

    (My comment: The fact that the State of Colorado and other Colorado PERA employers put forth a minimal financial effort in the provision of public pension benefits renders the Colorado Legislature’s 2010 breach of PERA pension contracts that much more egregious.

    • 2.16 – percent of Colorado state and local government spending dedicated to public pension support in 2008 [Census Bureau/NASRA.]
    • 2.89 – average percent of state and local government spending dedicated to public pension support among the states in 2008.
    • 5.55 – highest percent of state and local government spending dedicated to public pension support among the states in 2008 [Nevada.]
    • #32 – Colorado 2008 rank among the states in taxpayer support for public pensions.

    Colorado WINS:

    “The added employer costs in the DPA analysis are a result of underfunding of the State’s pension obligation by the State in previous years.”

    “First, the underfunding that AED and SAED are designed to address (circumstances that) occurred through no fault of any State employees. Rather the State chose to underfund its portion of contributions. Employees should not have their benefits attacked because of an action that their employer freely took. Second, AED and SAED payments cannot be accurately categorized as part of the total annual compensation package for current employees. These are not new benefits; rather they are payments on already owed benefits.”

    “In that analysis it is clear that the State is simply not competitive in any real world, practical analysis of their retirement benefits plan.”

    Link to the complete Colorado WINS article:

    http://coloradowins.org/2013/08/19/2014-total-comp-comparing-pera-and-private-sector-retirement-benefits/

    A comment from ColoradoPols.com on the support of Colorado WINS for breach of PERA pension contracts in 2010:

    “However, (Colorado PERA’s) placing 90% of the reform burden on PERA retirees was the master stroke to win key employee groups, especially Colorado WINS.”

    http://coloradopols.com/diary/46912/truthout-illinois-plutocrats-manipulate-state-bond-ratings-to-escape-public-pension-contracts-lower-their-tax-burden

    The failure of the Colorado General Assembly to pay its public pension bills for the last decade has also been condemned by Colorado PERA officials:

    Colorado PERA Executive Director Greg Smith, August 11, 2009:

    “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.”

    (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.)

    http://www.copera.org/pera/about/listeningtour.htm

    Former Colorado PERA Executive Director Meredith Williams, February 23, 2012:

    “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.”
    (Testimony to the House Finance Committee relating to the Colorado Legislature’s historical underfunding of its PERA pension obligations.)

    As we have seen, a columnist for the Wall Street Journal’s Marketwatch.com has recently labeled such deliberate underfunding of public pension systems “corruption.”

    The columnist, Chris Tobe, has served as a trustee of a public pension system. Chris Tobe:

    “A corporate pension plan could not pay half the payments for ten years like the states like Kentucky and Illinois have done. Those guys would be in jail. I think that public pension plans should be held to the same standard as corporate defined benefit plans.”

    “I compare Kentucky to Illinois, much of whose real corruption happened maybe ten years ago and Blagojevich, the governor, was deeply involved with it. They’ve also underfunded their actuarially-required contribution [ARC], much like Kentucky. Those two things went hand-in-hand, in Illinois and Kentucky, probably the two worst state systems. If people are willing to look the other way at corruption in investments, they’re willing to look the other way at deliberate underfunding, which I consider corruption as well.”

    Link:

    http://www.publicsectorinc.org/podcasts/070613tobe.php#.UgQ3zr7nbX5

    Colorado WINS membership and organization:

    “The Colorado Association of Public Employees/Service Employees International Union (CAPE/SEIU); the American Federation of State, County and Municipal Employees (AFSCME); and the American Federation of Teachers (AFT) are joining forces to organize state employees. The new organization will be known as Colorado WINS (Workers for Innovative and New Solutions).”

    “In addition, Colorado WINS will have the ‘sole authority to advocate for legislation affecting state employees, including but not limited to legislation affecting PERA [the Public Employees' Retirement Association], the state personnel system, employee accountability and state employee protections.’”

    “Under the agreement, SEIU will provide 50 percent of the budget for Colorado WINS; AFT and AFSCME will provide the rest.”

    “The agreement also says that funding contributed by Colorado WINS members for political purposes will be divided, with 50 percent going to SEIU/CAPE and 50 percent to the AFT and AFSCME political funds.”

    “A copy of the agreement is available online at:

    http://www.eiaonline.com/coloradowins.pdf.”

    https://www.cu.edu/sg/messages/5895.html

    Colorado PERA active and retired members, your contracts have equal status to Colorado’s contracts with corporations. There is no reason why the contract of a public sector worker should be viewed as inferior to a contract between the State of Colorado and a corporation. Note that no Colorado state legislator has proposed breaking state contracts with corporations. Keep up the fight for your contractual rights! Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  9. Al Moncrief says:

    GRAND THEFT PENSION: LESSONS FROM THE COLORADO SUPREME COURT CASE, GOLDEN v. PARKER FOR THE COLORADO PERA RETIREE COLA LAWSUIT.

    The Colorado PERA retiree COLA lawsuit, Justus v. State, is currently pending before the Colorado Supreme Court. In this lawsuit, retirees in the Colorado PERA pension system contest the retroactive reduction of their contracted public pension COLA benefits by the Colorado General Assembly in 2010. (The Colorado Legislature seeks to take money from old people to maintain Colorado’s status as a “tax haven.” A deal IS NOT a deal, according to the Colorado Legislature. This is the politician’s idea of “good faith and fair dealing.”)

    In Colorado, we have long-standing, on-point public pension case law (Bills/McPhail) holding that, once a member of a public pension system meets all statutory conditions and retirees, the retirement benefits of that pensioner are inviolate . . . the contracted pension benefits cannot be reduced by the Colorado Legislature for any reason. Colorado’s public pension case law allows changes to be made to public pension benefits while a pension member is still working, under certain conditions.
    Colorado’s pension administrators at the public pension system Colorado PERA, and other conspirators truly want to claw back benefits from Colorado PERA pensioners. In 2010, their lobbyists passed a bill (SB10-001) to do just that. If they are successful in this pension “claw back” a significant chunk of the accrued pension debt of Colorado state and local governments will be wiped out with the stroke of a pen. (I wish I could do the same with my home mortgage.)

    In 2012, the Colorado Court of Appeals agreed with Colorado PERA pensioners that they have a contractual right to be paid the total amount of their earned, deferred compensation (PERA pension) that the Colorado General Assembly has chosen to deliver by means of a base benefit that is increased incrementally each year (a COLA.) (Private sector insurance companies also offer COLA provisions in contracted annuities that are sold to the public.) However, in the 2012 Decision, the Colorado Court of Appeals left open the possibility that “fully-vested” PERA retiree pension benefits can be reduced if it is “reasonable and necessary to serve a significant and legitimate public purpose.” This finding, that public pension benefits can be changed under certain circumstances after a pension member retires does not comport with Colorado’s long-standing public pension case law. So, the PERA pensioners appealed the decision of the Court of Appeals to the Colorado Supreme Court. The Colorado Supreme Court has agreed to take the case.

    If the Colorado Supreme Court follows the doctrine of stare decisis, and determines that Colorado’s public pension precedent (Bills/McPhail) continue to control, then PERA retiree COLA benefits will be confirmed as inviolate.

    But, since launching the scheme to take pensioner property, the proponents of SB10-001 have found a new argument. The proponents of SB10-001 now argue that a more recent Colorado Supreme Court decision addressing contractual rights is now in control (DeWitt.) The proponents of taking pensioner assets argue that this newer Supreme Court decision sets the bar a little lower, and might allow property to be taken from retirees under certain conditions. I believe that taking PERA COLA benefits from Colorado PERA retirees is not constitutionally permissible under Bills/McPhail, and further, that the taking is not constitutionally permissible even under the new rules (DeWitt) that the proponents of SB10-001 would like to see controlling. In spite of the desire of those who seek to break PERA pensioner contracts, DeWitt is not a “get out of your contractual obligations free card.”

    Yesterday, I read another decision of the Colorado Supreme Court (from 2006) that addresses contractual rights in our state. The Colorado Supreme Court decision in the 2006 case, City of Golden v. Parker, provides insight into the doctrinal views of the Supreme Court regarding the retroactive application of public acts in Colorado to existing contractual relationships. I read through the 2006 case with the Colorado PERA retiree pension case, Justus v. State in mind. Below are my layman’s reactions to the case, City of Golden v. Parker.

    City of Golden v. Parker.

    In its 2006 decision in City of Golden v. Parker, the Colorado Supreme Court determined that the retroactive application of a City of Golden Charter Amendment (that required voter approval of development incentive agreements) to existing agreements with the developers was “unconstitutionally retrospective.” The Supreme Court found that the developers had vested rights in their agreements and that these vested rights were not overridden by “public policy considerations.”

    Here’s a link to the Colorado Supreme Court decision in City of Golden v. Parker, June 26, 2006:

    http://www.cobar.org/opinions/opinion.cfm?opinionid=5666&courtid=2

    Here are some excerpts from the case, Golden v. Parker, and my comments. Colorado Supreme Court:

    “We granted certiorari to consider whether certain real estate developers . . . who entered into economic incentive agreements . . . with the City of Golden . . . and its City Council had vested rights in those agreements that could not be disturbed by an amendment to Golden’s home rule city charter . . . enacted subsequent to the Agreements which required, with certain exceptions, voter approval of all new grants of development subsidies or incentives in excess of $25,000.”

    “The Court of Appeals held that the Developers did not possess vested rights under the Agreements that precluded application of the Charter Amendment to subsidies and incentives paid to the Developers after approval of the amendment . . . We reverse the Court of Appeals’ judgment.”

    (My comment: The City of Golden created its economic incentives program in 1992. Under the agreements, developers were eligible for reimbursement of taxes and development costs in exchange for the economic activity and jobs their projects would generate. The Colorado Supreme Court notes, in the decision, that the TABOR amendment passed by Colorado voters in 1992 requires voter approval for the creation of multiple fiscal year debt.)

    Colorado Supreme Court:

    “All of the Agreements provided that the reimbursements did not constitute a multiple fiscal year debt or financial obligation and were subject to annual appropriations by the City Council.”

    Colorado’s Constitutional TABOR Amendment.

    (My comment: I have some views on Colorado’s 1992 TABOR constitutional amendment and its impact on the Colorado PERA pension system. The TABOR Amendment was adopted six decades after the creation of Colorado PERA. An exclusion of public pension debt is incorporated into the TABOR Amendment. Most current Colorado PERA retirees entered into a contractual relationship with Colorado PERA and their PERA-affiliated government employers before TABOR was adopted by Colorado voters. Since the adoption of the TABOR amendment, the Colorado Legislature has acted to restrict its available revenues beyond that required under the amendment. The existence of the TABOR amendment in the Colorado Constitution did not prevent the Colorado Legislature from improving the PERA COLA benefit in 2000 in HB 00-1458. Such improvements in the PERA COLA benefit are permissible as no harm is done to PERA retirees. The improvement of the Colorado PERA pension COLA provision to 3.5 percent [non-DPS], and further restriction of the State of Colorado’s revenue stream occurred AFTER the adoption of the TABOR amendment. Thus, the TABOR Amendment can provide no rationale for the 2010 breach of Colorado PERA pension contracts in SB10-001.

    Colorado’s TABOR Amendment recognizes public pension obligations as permissible multiple-fiscal year “debt” of Colorado’s “districts”: “(b) Except for refinancing district bonded debt at a lower interest rate or adding new employees to existing district pension plans, creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years.”

    A recent Denver Post article on TABOR:

    “But former state Rep. Brad Young, a Republican from Lamar and a former chairman of the legislature’s Joint Budget Committee, agrees with many on the left who say TABOR reduces the size of government over time.”

    “He and others point to state spending as a proportion of Coloradans’ personal income, which has dropped from 6.7 percent of personal income in fiscal 1993-94, the first year TABOR took effect, to 3.9 percent in fiscal 2011-12, the budget year that ended in June.”

    “Colorado ranks 45th in the nation in terms of combined local and state tax burden as measured by taxes paid per $1,000 earned. By that measure, Colorado’s combined state and local tax burden is lower than every one of its surrounding states.”

    “In 1999, the Republican-controlled legislature reduced the state’s income tax from 5 percent to 4.75 percent and then, a year later, to 4.63 percent.”

    “Meanwhile, lawmakers cut the state’s sales tax from 3 percent to 2.9 percent in 2000.”

    “But because of TABOR, those effectively became permanent tax cuts, Young and others say.”

    Link:

    http://www.denverpost.com/ci_22248157/two-decades-later-tabor-praised-blamed-limiting-government

    Since TABOR was adopted by the voters in 1992 the Colorado Legislature and Governor Owens have cut the state’s revenue stream, imposing even tighter budgets than would have otherwise existed under TABOR.

    Since TABOR’s adoption the Colorado Legislature has transferred $700 million of state revenue to pay off Colorado local government legacy pension debt that IS NOT the contractual obligation of the State of Colorado, while failing to pay PERA pension bills THAT ARE the contractual obligation of the State of Colorado. The Colorado Legislature has also limited its available revenues by granting discretionary corporate subsidies and foregoing opportunities to raise reasonable levels of revenue from mineral extraction. Legislative and executive actions that have diminished Colorado PERA’s funding ratio were taken with full knowledge of TABOR’s presence in the Colorado Constitution and the contractual nature of accrued Colorado PERA pension benefits. The decisions of Colorado voters at the polls over the last two decades have real consequences for our state; but, there is no polling booth lever that voters can pull to eliminate contractual protections in the Colorado and U.S. constitutions.)

    Colorado Supreme Court:

    “On November 6, 2001, Golden’s voters approved an amendment to the Golden City Charter, which required that the city obtain voter approval to grant development subsidies or incentives in excess of $25,000 in any one year.”

    “Subsequently, on June 13, 2002, Golden passed Ordinance No. 1590 . . . which provided in part that ‘economic development subsidy or incentive agreements in effect on November 6, 2001, shall remain in effect, subject however to the provisions and conditions of each such individual agreement.’ In July 2002, following the adoption of the Ordinance, Donald G. Parker, a Golden resident and the respondent here, filed a complaint in the trial court challenging Golden’s continuing obligation under the Agreements. Parker sought a declaratory judgment and injunctive relief to prevent further appropriations to Developers in excess of $25,000 absent voter approval.”

    “The (trial) court determined that the Developers had vested rights to have the City Council exercise reasonable discretion annually in determining whether or not to appropriate funds to reimburse the Developers under the Agreements. The trial court found that retroactive application of the Charter Amendment to the Agreements would violate the prohibition against retrospective law in the Colorado Constitution. Colo. Const. art. II, § 11. The Court of Appeals reversed the trial court, holding that the Agreements did not confer vested rights upon the Developers. We granted the Petitioners’ request for certiorari review and now reverse.”

    Retrospective.

    “Under the Colorado Constitution, the General Assembly is prohibited from enacting any law that is ‘retrospective in its operation . . . .’ Colo. Const. art. II, § 11. The prohibition against retrospective laws at the state level applies equally to local government.”

    “The general prohibition against retrospective legislation is intended to prevent any unfairness that might result from the application of new law to rights already in existence. In re Estate of DeWitt, 54 P.3d 849, 854 (Colo. 2002). Legislation is presumed to operate prospectively unless there is legislative intent to the contrary. Retroactive application of a law, although disfavored, is not necessarily unconstitutional and may be permitted if the law at issue effects a change that is procedural or remedial. Kuhn v. State, 924 P.2d 1053, 1056-57 (Colo. 1996). In order to distinguish legislation that is merely retroactive, we use the term ‘retrospective’ only in regard to legislation that ‘impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.'”

    “However, in Ficarra we also stated that a vested right may originate from a statute or the common law and it is only ‘once it vests that it is no longer dependent for its assertion upon the common law or statute under which it may have been acquired.’ 849 P.2d at 15. Our analysis in Ficarra in no way indicates that a vested right cannot originate from the common law.”

    (My comment: Colorado PERA officials have testified before the Joint Budget Committee of the Colorado Legislature that a reduction of the contracted PERA COLA benefit would necessarily operate retrospectively, impairing existing vested rights.

    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

    Statements made by the co-prime sponsor of SB10-001, Senator Josh Penry, document legislative intent that the bill operate in a retrospective manner:

    Senator Josh Penry, co-prime sponsor of SB10-001, 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

    SB10-001 co-prime sponsor Senator Penry states his intent here to use recent market volatility to justify the proposed PERA pension contract breach. His comments reveal an awareness of the recovery of equity markets in 2009, his intent to justify the breach of PERA pension contracts based on outdated PERA pension funding statistics (prior to the release of new pension funding ratios,) an intent to impose a new disability on Colorado PERA retirees, and an intent to defeat the expectations upon which these PERA retirees have altered the course of their lives.

    On-point Colorado public pension case law [McPhail] cites Retirement Board of Allegheny County v. McGovern, “The language of the [Pennsylvania] Court is applicable to the conditions which are here present: Retirement pay is defined as ‘adjusted compensation’ presently earned, which, with contributions from employees, is payable in the future. The compensation is earned in the present, payable in the future to an employee, provided he possesses the qualifications required by the act . . .”. “ . . . when the conditions are satisfied, at that time retirement pay becomes a vested right of which the person entitled thereto cannot be deprived; it has ripened into a full contractual obligation.”)

    Colorado Supreme Court:

    “We use a two-step inquiry to determine whether or not a law is retrospective in its operation. DeWitt, 54 P.3d at 854. First, we look to the legislative intent to determine whether the law is intended to operate retroactively. We require a clear legislative intent that the law apply retroactively to overcome the presumption of prospectivity.”

    (My comment: The mantra of the proponents of SB10-001 during the public relations, lobbying and legal campaigns to take fully-vested Colorado PERA retiree pension COLA benefits has been “shared sacrifice.” The proponent’s of SB10-001 seek to force a “sacrifice” from Colorado PERA retirees. Colorado PERA and the 27 statehouse lobbyists working SB10-001 in 2010 sought to force PERA retirees to relinquish their contracted benefits in order to diminish the accumulated pension debt of PERA-affiliated employers. Obviously, the “shared sacrifice” that was the object of SB10-001 is not achievable without retroactive application of the bill’s COLA provisions to existing PERA COLA contractual rights.

    If SB10-001 sought to alter the PERA COLA only on a PROSPECTIVE basis, the legislation’s pension debt “cost-shift” would not be possible [90 percent of the bill's "savings" resulted from shifting costs from PERA-affiliated employers to PERA retirees.])

    Colorado Supreme Court:

    “If we find intent of retroactive application, the second step of the inquiry is to determine whether the retroactively applied law operates retrospectively. A law is retrospective if it either “(1) impairs a vested right, or (2) creates a new obligation, imposes a new duty, or attaches a new disability.. ..” DeWitt, 54 P.3d at 855.”

    (My comment: Again, a defendant in the case Justus v. State [Colorado PERA] has previously acknowledged [in recorded testimony to the Colorado General Assembly] that a reduction in fully-vested PERA COLA benefits impairs a vested right: “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.”

    The administration of Governor Bill Ritter [who signed SB10-001 into law] has acknowledged that SB10-001 attaches a new disability on Colorado PERA retirees. Officials of the Ritter administration write that SB10-001 will cost an average PERA retiree $165,000 in the coming decades:

    August 2, 2010

    Ritter Administration letter to GASB on contractual public pension obligations:

    “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.”

    http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

    Vested Rights.

    Colorado Supreme Court:

    “We do not employ a fixed formula or a bright-line test for determining whether a right is vested. Rather, we look to three factors: “(1) whether the public interest is advanced or retarded; (2) whether the statute gives effect to or defeats the bona fide intentions or reasonable expectations of the affected individuals; and (3) whether the statute surprises individuals who have relied on a contrary law.” DeWitt, 54 P.3d at 855.”

    “A determination that retroactive application of a law impairs a vested right is not dispositive of the retrospectivity inquiry because such a finding ‘may be balanced against public health and safety concerns, the state’s police powers to regulate certain practices, as well as other public policy considerations.'”

    “Retroactive application of a law that implicates a vested right is only permissible, however, if the law bears a rational relationship to a legitimate government interest.”

    “In past cases, we have ‘appl[ied] a balancing test that weighs public interest and statutory objectives against reasonable expectations and substantial reliance.'”

    (My comment: Does government have a “legitimate interest” in arbitrarily breaking its own contracts? The taking of the Colorado PERA COLA benefit in perspective:

    • [54.5% to 105.2%] – 40-year range of the Colorado PERA actuarial funding ratio [AFR],
    • 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.
    • 2.16 – percent of Colorado state and local government spending dedicated to public pension support in 2008 [Census Bureau/NASRA.]
    • 2.89 – average percent of state and local government spending dedicated to public pension support among the states in 2008.
    • 5.55 – highest percent of state and local government spending dedicated to public pension support among the states in 2008 [Nevada.]
    • #32 – Colorado 2008 rank among the states in taxpayer support for public pensions.
    • [For the entire decade of the 1970s the PERA AFR was lower than it was at the time of the taking of the contracted COLA, yet there was no campaign to breach retiree pension contracts.]
    • 90 – percent of the financial burden of SB01-001 attributable to the taking of the contracted COLA benefit [according to Prime SB 10-001 bill sponsor, Senator Penry.]
    • 4 – number of “No” votes that could have stopped the breach of retiree contracts from squeaking through in the Colorado House [actual vote was 36-29]
    • 27 – number of registered lobbyists [PERA staff, PERA hired lobbyists, public sector union lobbyists] engaged in taking the fully-vested, contracted retiree PERA COLA benefit.
    • 5 – number of minutes after a PERA member retires that their PERA retirement benefits become “legally immune from any changes that would reduce their current, or future benefits,” according to Colorado PERA [Ewegen article].
    • 17 – number of years during which the State of Colorado mistakenly adhered to financial restrictions [Arveschough-Bird] artificially limiting its available resources.
    • 87% – level of Colorado PERA AFR that Colorado legislators contended was “too well-funded” in 1985 [Silver and Gold Record article.]
    • 2 – number of times the Colorado PERA AFR has exceeded a 100% funding level in the 83-year history of Colorado PERA.
    • 3.75% – Colorado PERA Board inflation assumption.
    • $100 million – amount of discretionary tax relief grants by the Colorado General Assembly at recent legislative sessions.
    • $700 million – amount of revenue the General Assembly has appropriated to pay for pension obligations that are not its legal responsibility (Old Hire Fire and Police Pension Obligations).
    • 13 – Colorado’s rank among the states in per capita income in 2009.
    • 9 – Colorado’s rank among the states in per capita income in 2013.
    • 10 – Colorado’s rank among the state’s in GDP per capita in 2013.

    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.”)

    Colorado Supreme Court:

    ” . . . we have prohibited retrospective application of a statute when the reasonable expectations and substantial reliance of a party vested prior to the enactment of the statute.”

    (My comment: From the Denver Post, November 30, 2008, Colorado PERA’s Executive Director, 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

    At the time of this statement, Greg Smith was Colorado PERA’s General Counsel. It appears that Colorado PERA’s General Counsel, prior to the attempt to break PERA pension contracts, held the reasonable expectation that PERA pensioner COLA benefits cannot be retroactively diminished by the Colorado Legislature.

    Colorado PERA’s attorneys have recorded their expectation that Colorado PERA pension COLA benefits are contractual obligations that will be honored “absent actuarial necessity”: “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.” If Colorado PERA’s attorneys have an expectation that the contracted 3.5 percent PERA COLA cannot be taken by the General Assembly short of “actuarial necessity,” then why should relatively unsophisticated Colorado PERA retirees [who possess fully-vested pension rights] not also have this expectation?)

    Colorado Supreme Court:

    “The Petitioners did not submit any evidence of legislative intent.”

    (My comment: Of course, the Colorado PERA retiree COLA lawsuit has not yet been before a jury, but evidence of legislative intent surrounding the General Assembly’s adoption of the “automatic” PERA COLA in 1993 is available:

    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.])

    Duty of Good Faith and Fair Dealing.

    Colorado Supreme Court:

    “Under Colorado law, every contract contains an implied duty of good faith and fair dealing. § 4-1-203, C.R.S. (2005); Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995). A violation of the duty of good faith and fair dealing gives rise to a claim for breach of contract. Cary v. United of Omaha Life Ins., 68 P.3d 462, 466 (Colo. 2003).”

    “The good faith performance doctrine attaches to contracts ‘to effectuate the intentions of the parties or to honor their reasonable expectations.’ Amoco Oil Co., 908 P.2d at 498. The duty of good faith and fair dealing may be relied upon ‘when the manner of performance under a specific contract term allows for discretion on the part of either party.'”

    (My comment: The payment of the PERA COLA “automatic” pension benefit is not discretionary. Colorado law provides that the PERA COLA benefit SHALL be provided. Former “ad hoc” language relating to the PERA COLA benefit has been removed from Colorado law.

    The provision in Colorado law requiring payment of 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.”

    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 DeWitt Standards.

    Colorado Supreme Court:

    “We now turn to the DeWitt factors to determine whether application of the Charter Amendment to the Agreements implicates a vested right of the Developers.”

    “First, we consider whether the public interest is advanced or retarded by retroactive application of the Charter Amendment. DeWitt, 54 P.3d at 855. Golden’s economic incentives program was enacted to advance the public interest in business ‘development, expansion, and upgrade, for purposes of the economic revitalization of the community.’ G.M.C. § 18.60.010 (2005).”

    (My comment: Compensation [salary, benefits, and deferred pension compensation] is offered by public employers to prospective public employees to attract a talented workforce. Colorado PERA pension benefits [including PERA COLA benefits] have been offered to prospective employees of Colorado PERA-affiliated employers to develop a skilled, valuable workforce. Colorado PERA-affiliated employers and Colorado residents have benefited from this workforce for decades. By attracting a qualified workforce, the PERA pension incentive advances the public interest.

    The Colorado General Assembly has opted to deliver the total contracted PERA COLA benefit by means of a pension escalator [COLA] in retirement. The General Assembly might just as well have offered a larger monthly pension benefit and no COLA to PERA members.)

    Colorado Supreme Court:

    “A countervailing consideration is the voters’ interest in limiting public expenditures, which likely motivated the passage of the Charter Amendment. The Amendment ensures that the majority of Golden’s electorate supports any city expenditure of more than $25,000 to promote business development. However, application of the Amendment to contracts made prior to its enactment retards the public interest by preventing the city from honoring its commitments.”

    “Because Golden entered into the Agreements for the advancement of the public interest and because the public interest is best served by honoring the city’s contractual commitments, we find that the public interest would be retarded by retroactive application of the Charter Amendment to the Agreements.”

    (My comment: Clearly, the proponents of SB10-001 were motivated by the prospect of limiting public expenditures in support of accrued pension obligations. Only ten percent of the SB10-001 “solution” came from those who actually owe the debt, Colorado governments in the PERA pension system.

    July 14, 2009 –

    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

    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

    In my opinion, the retrospective application of the provisions of SB10-001 to long-standing Colorado PERA pension contracts retards the public interest by preventing Colorado PERA employers from honoring their commitments.)

    Colorado Supreme Court:

    “Second, we look to whether the Charter Amendment gives effect to or defeats the bona fide intentions or reasonable expectations of the parties. DeWitt, 54 P.3d at 855.”

    (My comment: Here is an example of a Colorado PERA member explaining to Colorado PERA officials in 2009 [prior to the PERA COLA contract breach] exactly how PERA’s idea to take accrued COLA benefits defeats her expectations, 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.”

    http://www.copera.org/pera/about/listeningtour.htm

    Colorado Supreme Court:

    “Third, we examine whether the Charter Amendment surprises the Petitioners due to their reliance on contrary law.”

    (My comment: Below, I provide a few examples of testimony relating to reliance on the PERA statutory contract by PERA members presented to the Colorado PERA Board of Trustees and nine members of the Colorado General Assembly during the 2009 PERA “Listening Tour” meeting in Denver:

    David Holme:

    “My decision to join the state was based on the PERA program.”

    “Any sort of a reduction in benefits today would be a violation of that contract, and bait and switch advertising . . . and so fraud.”

    “State employees have never failed to provide their contributions . . . and in fact we’ve paid more into the system than the employers have over the total of the years, according to PERA reports.”

    “The employers, starting in 2002, the last year of 100 percent funding, began providing less than the annual contribution requirement, setting contribution rates for the state of less than required.”

    “Today, the State of Colorado PERA employer is past due to the tune of $6.5 billion into the trust fund contributions, not counting any interest — if you do it at the three percent PERA interest, it would be another $1.1 billion past due over the last 9 years.”

    “PERA’s overall funds at the end of last year were about $30 billion, this bad debt constitutes about 25 percent of the PERA assets. If they were paid with interest to the PERA investment fund it would be at 94 percent funded on the actuarial basis or 76 percent on the market basis. Most experts believe that a fund at 80 percent is a healthy fund. We’d be above that.”

    “The survey today, that we just talked about, is a good example of this. If you look at that, 28 of the options on there cost the employees money, and only two cost the employers money.”

    “As a state employee, I’m ready to sit down and work on whatever fixes are needed once the deadbeat employer has made arrangements to fully fund its share.”

    Mike Morris:

    “I just want you to know that our COLA benefit is the only thing that’s been between us and the increased cost of health care and numerous other issues during the last six or eight years.”

    Alan Chapman:

    “We shouldn’t be weighing things out on the future costs on the backs of those people who have already gone through the program, funded what was required of them, and now they’re in a position that they can’t recover.”

    http://www.copera.org/pera/about/listeningtour.htm)

    Colorado Supreme Court:

    “We find all three of the DeWitt factors for implication of a vested right are met by application of the Charter Amendment to the Agreements here. Additionally, we find no overriding public policy concerns that would justify retroactive application of the Charter Amendment to agreements entered into by the City of Golden that were already in existence at the time the Amendment was enacted. To the contrary, we find that the application of the Charter Amendment to the Agreement would frustrate the reasonable expectations and substantial reliance of the Developers in this case. See Kuhn, 924 P.2d at 1060.”

    (My comment: There is no overriding public policy concern that warrants breach of Colorado PERA pension COLA contractual obligations. Accrued PERA pension benefits will be paid over the next five to seven decades. There is no need for a radical solution that abrogates existing Colorado PERA pension contracts. Colorado PERA Board Trustee Casebolt has assured PERA retirees present at the August 11, 2009 Colorado PERA Denver “Listening Tour” 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.”

    http://www.copera.org/pera/about/listeningtour.htm

    The Colorado General Assembly has demonstrated [in SB12-149] that it is quite capable of enacting public pension reforms that are “less drastic” than the breach of PERA COLA contractual obligations in SB10-001. Such reforms, ignored in 2010, may be applied to the Colorado PERA pension system in the future. Even the current Colorado PERA Executive Director has argued that PERA will experience no “actuarial emergency” while it has billions of dollars in reserve in the PERA trust funds.
    February 21, 2004 – Rocky Mountain News, David Milstead:

    “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.”)

    Colorado Supreme Court:

    “For the foregoing reasons, we find that the Court of Appeals erred in its determination that the Developers did not have a vested right that was disturbed by the adoption of the Charter Amendment. We reverse the holding of the Court of Appeals and remand the case with directions to return it to the district court.”

    (My comment: In 2010, the Colorado General Assembly decided to attempt a “claw back” of compensation [deferred pension compensation] owed to retired workers. When the taking of Colorado PERA COLA benefits is viewed in light of Colorado case law, McPhail, Bills, or even DeWitt, one thing is clear . . . SB10-001 was not a valid use of the state’s police powers.)

    Colorado PERA active and retired members, continue to fight for your public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  10. Al Moncrief says:

    COLORADO, TENTH RICHEST STATE IN THE NATION, “FORCED TO BREAK ITS CONTRACTS.”

    Colorado is forced to break its contracts? The state that is now the 10th richest in the country faces such a financial “crisis” that it cannot pay its bills? The State of Colorado is forced to break its Colorado PERA public pension contracts while it has the 10th highest GDP per capita? (Colorado is 15th richest by median household income, 9th by per capita income.) Of course, as we have seen, the State of Colorado is selective about the contracts “that must be broken,” debts owed to corporations are of course off the table.

    Perhaps the Colorado Legislature must continue to break Colorado PERA pension contracts in order that it be able to supplement the $700 million that it has already pumped into paying off local government legacy pension debt that IS NOT the contractual obligation of the State of Colorado. It must break its own contracts to pay for the contractual obligations of other governments. Perhaps the Colorado Legislature must continue breaking its pension contracts in order that it retain the ability to provide $100 million discretionary grants of property tax relief, or as Senator Morse proposed earlier this year, enshrining another quarter billion dollar tax cut into the Colorado Constitution under TABOR.

    10 Richest U.S. States in 2013 (GDP per capita) – Colorado #10 ($51,940)

    See the Top Ten Richest States (by GDP) here:

    See all states by median household income and per capita income here:

    http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

    Colorado PERA active and retired members, fight for your rights! Contribute to the cause at saveperacola.com. Friend Save Pera Cola on Facebook!

  11. Al Moncrief says:

    WALL STREET JOURNAL COLUMNIST CALLS DELIBERATE PUBLIC PENSION UNDERFUNDING, LIKE THAT OF COLORADO PERA, “CORRUPTION.”

    STUDY: ABOUT 40 PERCENT OF PUBLIC PENSION PLANS REPORTING HAD LOWER FUNDING RATIOS THAN COLORADO PERA AT TIME OF CONTRACT BREACH.

    On February 28, 2011, Wilshire Consulting released its 16th consecutive annual report addressing the financial condition of state-sponsored defined benefit retirement systems.

    “This is Wilshire Consulting’s sixteenth report on the financial condition of state-sponsored defined benefit retirement systems and is based upon data gathered from the most recent financial and actuarial reports provided by 126 retirement systems sponsored by the 50 states and the District of Columbia.”

    Link to the 2011 Wilshire Report (covering 2010):

    http://www.nasra.org/resources/Wilshire_2010.pdf

    “About Wilshire Associates: Wilshire Associates, a leading global, independent investment consulting and services firm, provides consulting services, analytics solutions and customized investment products to plan sponsors, investment managers and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets.”

    “Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately US $7 trillion. With ten offices on four continents, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality counsel, products and services.”

    http://www.wilshire.com/aboutus

    From the February 28, 2011 Wilshire report:

    “Of the 125 state retirement systems that reported actuarial data for 2009, 100% were underfunded.”

    (My comment: As Colorado PERA officials have told us, the Colorado PERA pension system has been funded at a level exceeding 100 percent only twice in its history, since creation of the Colorado PERA pension system more than 80 years ago. Public pension liabilities are similar to a mortgage, they do not to be “paid off tomorrow.” Pension liabilities are paid off over many decades. Yet, the Colorado PERA Board of Trustees proposes to break Colorado PERA pension contracts and retroactively insert an unnecessary 100 percent funding requirement into PERA pension contracts. The PERA Board proposes to shift market risk onto Colorado PERA retirees to reach this 100 percent funding level, but members of public pension systems by definition and statute bear no “market risk.”

    “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 [2010] 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

    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

    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

    According to the Wilshire report, while the Colorado PERA Board of Trustees contemplated breach of Colorado PERA pension COLA contracts in 2009, 100 percent of public pension plans reporting in the nation were “underfunded,” i.e., the plans actuarial value of assets was less than plan accrued pension liabilities. Should all public pension systems in the USA break their pension contracts until they reach a 100 percent funding level? Do the United States Constitution and its Contract Clause mean nothing? Should public employees accept that they work for whatever compensation [deferred pension compensation] their employers choose to provide?)

    From the February 28, 2011 Wilshire report:

    “Actuarial value funding ratios declined between the years 2001 and 2005, falling from 100% to 86% and holding relatively constant until the 2009 fiscal year’s 6% decrease to an estimated 79%.”

    (My comment: The 99 public pension systems that reported final actuarial values for 2010 [in the Wilshire report] reveal an average actuarial funding ratio of 76 percent, and an average market-based funded ratio of 66 percent in 2010 [page 4.] This average actuarial funding ratio was just 7 percent higher than that of the Colorado PERA pension system at the time of the PERA pension contract breach.

    Note that approximately 40 percent of these public pension systems had actuarial funding ratios at or below that of the Colorado PERA pension system at the time of the 2010 PERA pension COLA contract breach [page 7]. In spite of the historical mismanagement and underfunding of the Colorado PERA pension system by the Colorado Legislature, approximately 40 percent of these pension systems had actuarial funding ratios at or below that of the Colorado PERA pension system. Should 40 percent of the public pension systems in the U.S. be permitted to break their public pension contracts due to the 2008/2009 market volatility?)

    Wall Street Journal Columnist: Deliberate Underfunding of Public Pension Systems is “Corruption.”

    As has been documented at saveperacola.com and at the Center for Retirement Research at Boston College, the Colorado General Assembly has not paid its full public pension bill (actuarially required pension contribution, ARC) for a decade.

    In 2009, 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.”

    http://www.copera.org/pera/about/listeningtour.htm

    This deliberate underfunding of the Colorado PERA pension system [ignoring contractual obligations] has permitted the Colorado Legislature to appropriate public funds for discretionary purposes that are popular with the voters who elect them, and popular with statehouse lobbyists. For example, paying off $700 million in legacy local government pension obligations [Old Hire Police and Fire pension debts] that ARE NOT the contractual obligation of the State of Colorado, and making $100 million discretionary grants of property tax relief.)

    Wall Street Journal Columnist Calls Public Pension System Underfunding “Corruption”:

    August 8, 2013

    “Chris Tobe is a columnist for the Wall Street Journal’s Marketwatch.com, a Chartered Financial Analyst and investment professional who has done consulting work on many public pension plans. He has also served as a trustee of the Kentucky Retirement System and is the author of a new book “Kentucky Fried Pensions: The Culture of Cover-up and Corruption.”

    Interview with Chris Tobe:

    “I compare Kentucky to Illinois, much of whose real corruption happened maybe ten years ago and Blagojevich, the governor, was deeply involved with it. They’ve also underfunded their actuarially-required contribution [ARC], much like Kentucky. Those two things went hand-in-hand, in Illinois and Kentucky, probably the two worst state systems. If people are willing to look the other way at corruption in investments, they’re willing to look the other way at deliberate underfunding, which I consider corruption as well.”

    “In this particular case, even though they put their stock market performance up at 11% for the year, the assets only grew about 3%, because they are still continuing to underfund and have a negative cash flow. So the state is only putting in 50% of what they’re supposed to, and negative cash flows have actually hurt and dampened the investment return. When you continue to underfund the ARC, it messes up all the usual mathematics.”

    “The real question is how much transparency is there. A lot of newspaper reporters don’t even know about the pension systems in their own communities. There’s not a whole lot of knowledge by the public. Where the public is engaged and there’s a culture of full disclosure and transparency, you tend to have better pension funds, and it depends on who the board members are on pension funds. If you have people who are sincere community people who are looking out for everybody’s best interests, and they’re willing to speak out, I think that creates the right atmosphere.”

    (My comment: As we have seen, Colorado PERA uses our PERA trust funds to produce propaganda supporting PERA pension contract breach. When the Colorado Court of Appeals reversed the decision of the Denver District Court, finding that Colorado PERA pension COLA contracts are a contractual obligation of PERA employers, the Denver Post inexplicably labeled this reversal a “win” for the Colorado PERA defendants. Clueless? or Biased?

    Colorado PERA pension administrators, members of the Colorado Legislature’s Joint Budget Committee, Legislative Audit Committee, and House and Senate Finance committees have historically “looked the other way” at deliberate PERA pension underfunding. For a decade, Colorado PERA pension administrators have been adhering to their own “Don’t Ask, Don’t Tell” policy relating to PERA pension underfunding. The failure of the Colorado Legislature to pay the PERA pension system “ARC” is regularly skimmed over in a few seconds in meetings with state legislators who, by design, do not even know what an “ARC” is. Colorado PERA seeks to break its pension contracts although Colorado governments contribute less than three percent of all revenue to public pension obligations, well below the national average.)

    Interview with Chris Tobe:

    “I’m more of a proponent for government in general, and I think that holding them to the ERISA standards would get rid of a big portion of the corruption that’s out there. A corporate pension plan could not pay half the payments for ten years like the states like Kentucky and Illinois have done. Those guys would be in jail. I think that public pension plans should be held to the same standard as corporate defined benefit plans. There may need to be some type of federal bailout. If there is, we want some accountability.”

    Link:

    http://www.publicsectorinc.org/podcasts/070613tobe.php#.UgQ3zr7nbX5

    (My comment: The Colorado General Assembly was fully aware that equity markets had recovered significantly when a majority of its members voted to break Colorado PERA pension contracts in early 2010.

    2009

    Senator Josh Penry, co-prime sponsor of SB10-001, 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

    I find it remarkable that the co-prime sponsor of SB10-001 intended to use recent market volatility to justify the PERA pension contract breach in early 2010, that he was fully aware that equity markets had recovered significantly, that he had no aversion to stating that his intent was to justify the SB10-001 PERA contract breach based on reported PERA funding ratios that he knew to be outdated, ratios that obviously did not reflect the current funding status of the Colorado PERA pension system.

    I find it incredible that THE CO-PRIME SPONSOR OF SB10-001 INTENDED THAT SB10-001 OPERATE RETROSPECTIVELY, IMPAIR VESTED PERA PENSION RIGHTS CREATED IN SUBSTANTIVE STATUTES, IMPOSE A NEW DISABILITY ON PERA RETIREES, AND DEFEAT EXPECTATIONS REGARDING THEIR PERA CONTRACTS (if you have time read the Colorado Supreme Court case, Golden v. Parker.)

    Link to complete Wilshire report:

    http://www.nasra.org/resources/Wilshire_2009.pdf

    Former Colorado PERA Executive Director Meredith Williams:

    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

    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

    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

    Colorado PERA active and retired members, defend your public pension contractual rights. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  12. Al Moncrief says:

    THE COLORADO SUPREME COURT FRAMES THE ISSUES IN THE COLORADO PERA RETIREE COLA LAWSUIT, JUSTUS v. STATE.

    The Colorado Supreme Court has recently announced that it will hear the Colorado PERA retiree pension COLA lawsuit, Justus v. State. The Supreme Court also “framed the issues” in the case. In my opinion, the Supreme Court simply adopted the framing of the issues in the case that were provided in petitions to the Supreme Court from BOTH the plaintiffs and the defendants.
    Colorado PERA officials, on their website, state that the Colorado Supreme Court “framed the issues” in the manner that PERA requested the issues be framed:

    “The Colorado Supreme Court framed the issue as PERA had requested. Specifically, PERA and the State of Colorado asked the Court to address whether or not the reduction in the COLA under SB 1 was constitutional under the contract clause analysis in the DeWitt case. Under the three-prong test set forth in DeWitt, the plaintiffs must establish: (1) that they have a clear and unmistakable right to an unchangeable COLA for the rest of their lives; (2) that the modification to the COLA was a substantial impairment that was inconsistent with their reasonable expectations; and (3) that the modification of the COLA was not reasonable and necessary to further or accomplish a legitimate public purpose.”

    “In its order, the Supreme Court set a briefing schedule for the parties, with the first brief due by the plaintiffs in October.”

    Link:

    https://www.copera.org/pera/about/latestnews.htm#supreme

    (Note here, that Colorado PERA officials write, on the PERA website, that their framing of the issue in the case is whether “the REDUCTION in the COLA under SB1 was constitutional,” rather than “ADJUSTMENT” of the PERA COLA.” Colorado PERA’s petition to the Supreme Court refers to the “adjustment” of the COLA.)

    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)

    Contrary to PERA’s claims that the issues in the case were framed by the Supreme Court according to its wishes, it appears to me that the Colorado Supreme Court simply adopted (blended) the framing of the issues of both the plaintiffs and the defendants.

    Here is my summary of the Colorado Supreme Court’s framing of the issue, and the framing of the issue by the plaintiffs and the defendants:

    Colorado Supreme Court framing:

    (1) whether Dewitt or Bills/McPhail control in public pension contractual disputes;

    (2) whether PERA retirees have a contractual right to their COLAs “without change”;

    (3) whether the reduction of the COLA in SB10-001 was constitutional because it was not a substantial impairment, and reasonable and necessary to the long-term viability of the pension fund, and was not a taking.

    Plaintiffs framing:

    (1) On-point Colorado public pension case law, Bills/McPhail, found that adverse changes can only be made to “partially-vested” pension rights if balanced by a corresponding change of a beneficial nature, and if actuarially necessary. The Court of Appeals, in its 2012 Decision, left open the possibility that “fully-vested” retiree pension benefits can be reduced if it is “reasonable and necessary to serve a significant and legitimate public purpose,” finding that Bills/McPhail are no longer “good law.” The plaintiffs frame the issue as to whether this finding by the Court of Appeals was error.

    (So, it looks like the plaintiff’s issue will be addressed by the Supreme Court in its decision on the first issue in its framing, i.e., whether DeWitt or Bills/McPhail control.)

    Defendants framing:

    (1) Whether PERA members have a contractual right to their COLA benefit in place at retirement “without change.”

    (2) Whether the “adjustment” of the COLA in SB10-001 was constitutional because it was not a substantial impairment, was reasonable and necessary for the plan’s viability and was not a taking.

    (Essentially, the Supreme Court’s second and third issues in its framing.)

    The plaintiffs wanted the Colorado Supreme Court to take the case, and the Supreme Court took the case. The Supreme Court will decide if Colorado’s on-point public pension case law (Bills/McPhail) is still good law. It seems to me that if the court decides that Bills/McPhail continue as controlling precedent, the court need proceed no further. Under such a finding PERA retiree COLA benefits would be inviolate.

    The court’s decision regarding its first “issue” (DeWitt or Bills/McPhail controlling) will determine if DeWitt standards are to be applied to the 2010 reduction in the PERA COLA. (As you probably know, I believe that the taking of the PERA COLA benefit is also constitutionally impermissible under the DeWitt standards.)

    In regard to the progress of the case, a PERA retiree asks:

    “Does the manner in which the Supreme Court accepted this case indicate that we do indeed have a valid contract as ruled by the Court of Appeals?”

    Note that I am not an attorney, and can only speculate. (For that matter, attorneys could also only speculate.) The Supreme Court asks whether PERA retirees have a contractual right to their COLAs “without change.” Does this question presuppose the existence of the PERA COLA contractual obligation? When the court asks if retirees have a contractual right to the COLA without change are they acknowledging the existence of the contract?

    An increase, “improvement” in the COLA is not a contractual violation, there is no harm. So, the only relevant question is whether a reduction in the COLA is permissible. If the COLA can be “changed” by the Legislature to completely eliminate it, then the automatic PERA COLA becomes an ad hoc COLA, and effectively there is no contractual right to the COLA benefit in place at retirement. How can there be a contractual right to something that can be legally taken? A contractual right to a COLA that can be eliminated has no value. A contractual right is a claim. By definition, in order for a “claim” to exist, something must be “claimed.”

    Would an ad hoc PERA COLA violate the anti-gratuity provision in the Colorado Constitution?

    If the Colorado Legislature can unilaterally reduce its contractual pension COLA obligations, do PERA benefits remain “definitely determinable”? In that event, would Colorado PERA remain a “qualified plan”?

    A statutory COLA provision is simply the method by which the total pension benefit is provided. The Colorado Legislature could just as well have provided in PERA statutes that the total accrued PERA pension benefit be delivered by means of a larger monthly pension benefit with no COLA.

    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

    Private sector annuities may be purchased with or without a COLA provision. Would a finding by the Supreme Court that the COLA is not contractual allow Colorado insurance companies to eliminate COLAs in annuities that they have sold? How could the court find that a COLA provision in a public sector annuity is not a contractual obligation, while a COLA provision in a private sector annuity is a contractual obligation?

    How could future Colorado courts find that a provision in a private sector annuity stating that a COLA “SHALL” be provided by the insurance company IS a contractual obligation, if the Colorado Supreme Court has found that a provision in a public sector annuity stating that a COLA “SHALL” be provided by IS NOT a contractual obligation?

    Are Colorado PERA members expected to work for whatever deferred pension compensation PERA employers choose to provide? At the end of each day of labor, they would have no idea what their ultimate “defined” and “deferred” pension compensation will be for that day.

    Colorado governments spend under three percent of revenues on public pension obligations, well under the national average, how can this minimal level of expenditures constitute a financial “crisis”?

    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.])

    A PERA retiree notes that:

    “The issue of purchased service credit seems to be included in our case in chief in that it supports the original and continuing legislative intent to enforce the 3.5% Annual Benefit Increase. Unfortunately it also tends to support a theory that one earns the ABI in place at the time of service.”

    Here’s the statute under which these service credit purchases were made:

    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.”

    For each day of labor by a PERA member subsequent to an “improvement” of the COLA by the Legislature, for example, improvement from “inflation to 3.5%” to “flat 3.5%,” a PERA member’s labor and PERA contributions are exchanged for that “improved” PERA COLA benefit.

    HB00-1458:

    “- 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. ”

    http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

    My guess is that the bulk of Colorado PERA service credit purchases have been made as a result of the “Bill Owens service credit purchase offer,” that is, after the 3.5% automatic COLA was placed in the statutory PERA pension contract. This contractual offer induced many PERA members to retire. They changed the course of their lives based on that reliance.

    A PERA retiree writes:

    “It also seems that the Court has bought into the sleight-of-hand presented by the opposition in the use of the word unchangeable when our position has been irreducible. What are the chances of this being addressed in the case?”

    The 2012 Colorado Court of Appeals Decision has exposed this “sleight of hand”:

    “We note, however, that plaintiffs contend that they have a reasonable expectation of an irreducible (not, as defendants assert, an unchangeable) COLA. Therefore, we direct the district court to consider whether there has been a substantial impairment with that in mind.”

    I cannot see how the members of the court might avoid recognition of this ploy, which I consider, along with PERA’s use of “market-based” pension funding ratios in briefs to be an attempt to deceive the court.

    Here is an article addressing Colorado PERA’s attempts to deceive:

    http://coloradopols.com/diary/18952/colorado-pera-attempts-to-decieve-the-colorado-supreme-court

    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)

    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

    A PERA retiree writes:

    “There also exists the issue of how the plan deficit is determined.”

    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.)

    PERA’s funding ratio was about three percent below the national average at the time of the SB10-001 COLA-taking. Should every public pension in the country be permitted to break contracts at this funding ratio?

    (Also recall the Colorado Supreme Court’s dicta in the 1963 case Keterring v. Retirement Board: “Claimant’s rights are in NO MANNER CONTINGENT on the fund being actuarially sound or unsound.”)

    From the Colorado PERA Supreme Court Brief:

    “It made ‘modifications to the public employees’ retirement association necessary to reach a one hundred percent funded ratio within the next thirty years.’”

    As we have seen, Colorado PERA has had an internal board policy in the past to cap the PERA trust funds at a 90 percent funded ratio. Thus, when Colorado PERA’s lobbyists put this “100 percent funded ratio” threshold into SB 10-001, they codified the hypocrisy of the PERA Board of Trustees.
    The retroactive insertion of a 100 percent funding ratio into the PERA contract was absurd and unnecessary, these debts will be paid off by PERA-affiliated employers over many decades. The debts are not due immediately as implied in the 100 percent funding ratio requirement. Colorado PERA’s funding ratio has reached 100 percent only twice since PERA’s creation in Colorado law.

    Also, we know that Fitch Ratings, one of the three large ratings firms in the United States, considers public pension funds to be “well-funded” at an 80 percent actuarial funded ratio. We also know that according to the 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.

    PERA retirees, I think we have much working in our favor:

    We have the defendant, (Colorado PERA officials) testifying and providing a written statement to the Legislature affirming the PERA COLA as a contractual obligation of PERA-affiliated employers;

    We have a unanimous and recent Court of Appeals finding that the PERA COLA is such a contractual obligation;

    We have long-standing precedent, Bills and McPhail, holding that the PERA COLA is a contractual obligation;

    We have a recent Attorney General’s opinion stating that reductions of retiree PERA benefits is not constitutionally permissible:

    “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.”

    We have yet another Attorney General’s opinion stating that any ambiguities in public pension statutes shall be construed in favor of the public employee:

    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 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

    The Colorado Legislature has demonstrated that it is capable of adopting prospective pension reforms for county governments, “arms” of Colorado state government, honoring retiree pension contracts:

    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.”

    We have evidence of actions by the Colorado Legislature (recently in receipt of $1 billion in unexpected revenue) that have contributed to the decline in PERA’s funding ratio, failure to pay the full ARC for a decade, appropriating $700 million for pensions that ARE NOT the contractual obligation of the State of Colorado, and making discretionary $100 million grants of property tax relief.

    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

    Support public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  13. Al Moncrief says:

    THE COLORADO LEGISLATURE’S PROSPECTIVE, LEGAL PENSION REFORM THAT HONORS THE CONTRACTS OF COLORADO’S COUNTY GOVERNMENT RETIREES.

    Colorado PERA retirees, for your information I am providing bill summaries from the website of the Colorado General Assembly for SB12-149, the bill adopted by the Colorado Legislature in 2012 that placed into Colorado law, PROSPECTIVE pension reform for Colorado county government pension systems. This bill permits Colorado county government pension systems to alter the rate of accrual of future public pension benefits, that is, the pension “multiplier.” I consider such pension reform to be clearly “less drastic” than the breach of fully-vested Colorado PERA pension COLA contracts in SB10-001. The SB12-149 pension reform concept is identical to that advocated by Professor Amy Monahan of the University of Minnesota School of Law in her paper, “Public Pension Plan Reform: The Legal Framework.” This PROSPECTIVE pension reform honors previously accrued public pension benefits and, in my opinion, existing public pension contracts.

    Read more about SB12-149 on ColoradoPols.com here:

    http://coloradopols.com/diary/39652/colorados-statutory-double-standard-on-public-pension-contracts

    (This article is also posted at saveperacola.com. Fascinating audio recordings of the hearings on SB12-149 are also available on the website of the Colorado General Assembly at this link:

    http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage)

    Final
    BILL SUMMARY for SB12-149

    HOUSE COMMITTEE ON FINANCE
    (Link:

    http://www.leg.state.co.us/CLICS/CLICS2012A/commsumm.nsf/CommByBillSumm/B695BC1290E34D25872579E4006BA1BD)

    April 18, 2012

    01:35 PM — Senate Bill 12-149 – Concerning Local Government Pension Plans

    Representative Priola, prime sponsor, explained that Senate Bill 12-149 authorizes the board of a defined benefit plan or system created by a local government to modify the benefits and the service requirements for the plan when the board determines the modification is necessary to ensure the plan’s sustainability. He closed by saying that modifications that affect vested benefits already accrued by members of defined benefit plans, include members who are retired or eligible to retire as of the effective date of the modifications.

    The committee discussed the differences between the statutory requirements of the Public Employees’ Retirement Association of Colorado (PERA) and local defined pension benefits plans.

    The following persons testified:

    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 (Attachment A). 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 stated that currently, pension boards have a very limited number of options to increase plan solvency, and this bill provides an additional tool for these boards to help secure plans that are in jeopardy. She concluded by stating that the bill will not affect benefits that are already accrued and vested or those benefits of retired members. Amendment L.002 (Attachment B) was distributed to the committee.

    (Link to Attachments A and B.

    http://www.leg.state.co.us/CLICS/CLICS2012A/commsumm.nsf/58e6d054c29cbe1287256e5f00670a70/b695bc1290e34d25872579e4006ba1bd/$FILE/HseFin0418AttachA.pdf

    http://www.leg.state.co.us/CLICS/CLICS2012A/commsumm.nsf/58e6d054c29cbe1287256e5f00670a70/b695bc1290e34d25872579e4006ba1bd/$FILE/HseFin0418AttachB.pdf)

    02:21 PM — Ms. Pamela Mathisen, representing the Adams County Retirement Plan, spoke in support of the bill. She talked about the history of the Adams County Retirement Plan and explained some problems the plan is currently facing. Ms. Mathisen talked about some details of the Adams County Plan, including employer and employee contribution rates, tiered benefits structure, vesting requirements, and benefits calculations. She concluded by stating that none of the other counties that are impacted by the bill are opposed to the changes made by the legislation.

    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.

    BILL SUMMARY for SB12-149

    SENATE COMMITTEE ON FINANCE

    (Link:

    http://www.leg.state.co.us/CLICS/CLICS2012A/commsumm.nsf/CommByBillSumm/8EAF024BD08E6F24872579C0006FB917)

    March 13, 2012

    02:20 PM — Senate Bill 12-149

    Senator Johnston called the committee back to order. 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 that the bill is about retirement security and enabling local governments to make decisions for themselves as to how to secure their pension funds. Senator King asked Senator Steadman if the bill requires these counties to have a certain assumed rate of return.

    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. Senator King talked about the issues that arise when there are no upper-end limits on employee and employer contributions.

    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. She stated that currently, pension boards have a very limited number of options to increase the solvency of a plan, and this bill provides an additional tool for these boards to help secure plans that are in jeopardy. She concluded by stating that the bill will not affect benefits that are already accrued and vested, nor those benefits of retired members.

    02:45 PM

    Ms. Johnson continued her testimony and further explained the rationale behind including certain sub-sections of the bill.

    02:52 PM — Ms. Pamela Mathisen, representing the Adams County Retirement Plan, spoke in support of the bill. She talked about the history of the Adams County Retirement Plan and explained some problems the plan is currently facing. She distributed a handout (Attachment C). Ms. Mathisen talked about some details of the Adams County Plan, including employer and employee contribution rates, tiered benefits structure, vesting requirements, and benefits calculations. She concluded by stating that none of the other counties that are impacted by the bill are opposed to the changes made by the legislation.

    (Link to Attachment C, Adams County Legislative Issues Fact Sheet:

    http://www.leg.state.co.us/CLICS/CLICS2012A/commsumm.nsf/58e6d054c29cbe1287256e5f00670a70/8eaf024bd08e6f24872579c0006fb917/$FILE/120313AttachC.pdf)

    03:00 PM — Mr. Robert Feis, Chairman of the Adams County Retirement Plan Board of Directors, spoke in support of the bill. He explained the changes that board has made to the plan as a result of the current and past economic climate in Colorado. Senator Johnston asked Mr. Feis to explain why the Adams County plan is under-funded compared to other county plans in the state.

    03:11 PM — Ms. Leslie Thompson, an actuarial consultant for Adams County, spoke in support of the bill. She explained that in order for a plan to be sustainable, 70-80 percent of its funding should come from investments and 20 percent should come from employee and employer contributions.

    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.

    04:29 PM

    The committee adjourned.

    Support public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

  14. Greg P Smith says:

    Yes, great news. And, thanks to all of you who continue to pursue justice for PERA retirees. Like many, I based my retirement planning and chose my retirement date assuming “guaranteed” 3.5% annual increases. Like Tim, I ran the numbers a few years back. If I or my spouse live to age 90 – a likely prospect – the difference amounts to more than $500,000.

    • Marilyn Sweet says:

      I also planned carefully and expected to at least stay up with inflation as promised by the state. I am hoping this goes thru at least for retirees who were already retired at the time of financial collapse.

  15. John A. Dunaway,Ph.D. says:

    Wonderful news, and great work on the part of our attorneys! I am sending an additional contribution to support our cause, and hope all other retirees will do so as well!

    Good luck to us all!

    John A. Dunaway, Ph.D.

  16. Excellent news…I hope our attorneys can find as many good arguments to support our case as Al has exposed on these pages. The more I read Al’s continuing comments the more outrageous I find this whole taking of the COLA to be. Thank you for keeping up the fight…another donation is on it’s way.

  17. Barry Thorpe says:

    Great news, and with the recent news regarding PERA’s investments, it’s quite clear that the State’s breach of contract was not necessary to ensure long term viability.

    Long term viability of the pension of public servants is the responsibility of the beneficiaries of those servant’s services, namely the citizens of the State whose children are educated, laws enforced, and judicial needs provided.

    Finally, if a retiree has no right to the conditions they agree to at retirement, what does the term “vested” even mean ? Indeed, the concept of “contract” becomes meaningless if one party can simply change the terms.

    The whole country is watching, what kind of State will Colorado turn out to be?

  18. Chris Dugan says:

    This made my day.

  19. Al Moncrief says:

    COLORADO SUPREME COURT TAKES THE COLORADO PERA RETIREE PENSION COLA LAWSUIT.

    I am very pleased that the Colorado Supreme Court has agreed to hear the appeal in the case, Justus v. State. In 2010, the Colorado General Assembly abdicated its policy-making authority relating to the Colorado PERA pension system to 27 statehouse lobbyists who represented self-interested parties. These lobbyists successfully persuaded a majority of Colorado legislators to attempt to shift the accumulated pension debts of the State of Colorado and many Colorado local governments onto the backs of elderly Colorado PERA retirees, whose PERA pension contracts are fully-vested.

    As the Colorado General Assembly demonstrated last year with the adoption of SB12-149, it is capable of adopting prospective public pension reform that does not trample on fully-vested pension contracts to which the State of Colorado is a party. (SB12-149 put in place prospective pension reform for Colorado county government pension systems, honoring the pension contracts of these county government retirees.) Numerous prospective pension reform options were available to the Colorado General Assembly in 2010, but were unfortunately ignored.

    Colorado is the 15th wealthiest state in the nation, it can afford to pay its debts. Colorado is better than breach of contract.

    Sadly, it appears that Colorado Supreme Court Justice Monica Marquez will be unable to participate in any ultimate decision in the case, Justus v. State as she has “worked on the case” according to a letter of recommendation written on her behalf by former Colorado Supreme Court Justice Jean Dubofsky. Further, Justice Marquez has previously advised Colorado PERA officials. From my perspective this is unfortunate as I believe Justice Marquez to be an unusually talented jurist, and I have complete confidence in Justice Marquez’s objectivity and dedication to the rule of law.

    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

    August 30, 2010

    Former Colorado Supreme Court Justice 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.”

    http://www.scrib.com/doc/36638245/Letter-for-Monica-Marquez-by-Jean-Dubofsky

    Continue your support of public pension contractual rights and the rule of law in Colorado. Contribute at saveperacola.com. Friend Save Pera Cola on Facebook!

    • deborahapy says:

      Wonderful!! Only fair. Thank you again and again for working so hard on behalf of all state employees, both retired and current.

    • Dave says:

      Algernon,
      Does the manner in which the Supreme Court accepted this case indicate that we do indeed have a valid contract as ruled by the Court of Appeals?
      The issue of purchased service credit seems to be included in our case in chief in that it supports the original and continuing legislative intent to enforce the 3.5% Annual Benefit Increase. Unfortunately it also tends to support a theory that one earns the ABI in place at the time of service.
      It also seems that the Court has bought into the sleight-of-hand presented by the opposition in the use of the word unchangeable when our position has been irreducible. What are the chances of this being addressed in the case? There also exists the issue of how the plan deficit is determined. Which method will the Court chose?
      Thank you for your observations.
      DFD

  20. Tim Hansford says:

    GREAT NEWS !!! Thank you for all of the work that you have done on this to take it this far. SB10-1 certainly DOES “substantially impair contractual expectations”. In my case, the difference in the COLA amounts to nearly $600,000 over thirty years, according to PERA’s calculations! I only hope that the Supreme Court sees the issue the same way that we do. Thank you again for continuing to push it forward.

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