June 30, 2011 Update

June
30, 2011 Update

 Judge Robert S. Hyatt has ruled against all claims of a group of four PERA retirees who challenged Senate Bill 10-001 in a lawsuit.  Plaintiffs sought restoration
of their annual benefit increases (COLA) to the previous law that set them at
3.5% per year (3.25% for DPS Division). SB10-001 reduced the increases to a maximum of 2% per year.  Judge Hyatt granted PERA and the State of Colorado’s Motion
for Summary Judgment
, thus dismissing the case.

 

Plaintiffs and their attorneys are evaluating the decision.  The decision on whether to appeal will be made shortly. Any one (or more) of the named plaintiffs can choose to appeal.

 

Judge Hyatt wrote as follows:

 

“The motion for summary judgment is granted as to all of Plaintiffs’ claims. While Plaintiffs unarguably have a contractual right to their PERA pension itself, they do not have a contractual right to the specific COLA formula in place at their respective retirement, for life without change. Plaintiffs’ takings and due process claims likewise are premised on the existence of a constitutional right to an
unchangeable COLA formula and necessarily fail because no such right exists. The 42 U.S.C. § 1983 claims fail because the underlying constitutional claims fail. All material facts are undisputed and found in the public record. The COLA provisions themselves establish that Plaintiffs have no contract right to a COLA frozen at retirement and the latest COLA changes do not impair the parties’ reasonable expectations.

“This Court finds, based upon statutory provisions of the last 40 years, as well as

legislative history and DPS plan language, that the General Assembly’s most recent change to retiree COLA does not alter the fundamental mechanism for payment of pension benefits for PERA retirees. That has always
been and remains to this day, a base benefit set at retirement. There has also been a separately calculated cost of living adjustment based on a formula that has always been fluid and repeatedly changed. For 40 years the COLA formula has been subject to significant change without ever unconstitutionally altering the base pension payment to retirees.”

The full Order may be read at www.SavePERACOLA.com/Resources . A copy of the
Minnesota dismissal decision is also listed there.

We’ll get back to you shortly.

 

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21 Responses to June 30, 2011 Update

  1. barry thorpe says:

    Can we get a response from the attorneys representing the lawsuit?
    When will the appeal be filed?
    How about depositions by retirees regarding EXACTLY what their “reasonable expectations” were when making the retirement decision? How about depositions regarding direct sales-pitch from school administrators eager to retire those at the upper end of the salary schedule. MY “reasonable expectations” were at least partly based on administrator sales-pitch, along with direct research into the PERA documents.
    PERA documents ought to be evidence enough that conditions in place at the time of retirement could be reasonably expected in perpetuity, UNLESS there were provisions written, and made available to the retiree, outlining under what circumstances the provisions could be taken away. It’s not rocket science.
    Let’s Roll !

    • saveperacola says:

      A decision on whether to appeal will be announced within the next two weeks. Your suggestions concerning “reasonable expectations” depositions are noted. Thank you, Barry.

    • Deborah says:

      I’m all for appealing and eager to hear the attorneys’ recommendation. Are you still taking checks at this point? I will gladly send another donation.

  2. Al Moncrief says:

    Protections Afforded by the US Constitution Vary by State. Who Knew??

    The California state pension (CALPERS) has just released a document outlining the legal rights of their pension members. (Title: Vested Rights of CalPERS Members, Protecting the pension promises made to public employees, July 2011). Check it out at this link:

    http://www.calpers.ca.gov/eip-docs/about/press/news/vested-rights.pdf

    Here are some highlights from the document:

    Retirees have a vested right to “receive cost of living adjustments to their retirement allowance under the terms that existed in the law when they provided service.”

    “Even if a proposed amendment eliminated the (California) State Constitution’s Contract Clause in its entirety, the Contract Clause in the United States Constitution would give rise to the same protection of vested pension rights as the State Constitution.”

    So, COLA theft victims, there it is in writing, if you live in California the US Constitution affords you one set of protections. If you’re a Colorado resident? You get a different deal. (Where in the US Constitution are these variable rights by state delineated? I’m still looking, no luck yet.)

    Also, isn’t it strange that administrators and trustees of public pensions in some states work hard to protect the vested pension benefits of their members, while administrators and trustees in other states go to great lengths to breach contracts with their members?

  3. Al Moncrief says:

    Is our district judge fickle?

    Here’s an interesting comment from “Alan B” posted in the on-line version of the Denver Post. It would be interesting to look up this divorce case. If his post is authentic and accurate it makes one wonder whether or not the judge believes the COLA (aka, annual benefit increase) is contractually protected. In any event it’s worth checking out.

    “What truly confounds me in this case is that Judge Hyatt ruled the opposite in my divorce case. Which only shows what I have read before that it takes the courts 5 to 10 years to figure something out. He ruled that my wife was entitled to her share of PERA discounted at the legal rate assuming that PERA would pay my pension compounded at 3.5 percent for the rest of my life. Her lawyers argued that her social security could not be guaranteed yet the PERA could be. Judge Hyatt ruled for her and in this case he ruled the opposite of what he had ruled in the current case. Is the 3.5 percent annual adjustment guaranteed or not, Hyatt has spoken on the record, yes and no.”

  4. Charles Berendt says:

    The Denver Post article @ July 4, 2011 indicates that PERA has $2.2 million for attorneys and $400,000 for lobbyists. What do we have ?

  5. David McBride says:

    When used in statutes, contracts, or the like, the word “shall” is generally imperative or mandatory.[Independent School Dist. v. Independent School Dist., 170 N.W.2d 433, 440 (Minn. 1969)]

    “In common, or ordinary parlance, and in its ordinary signification, the term ‘shall’ is a word of command, and one which has always, or which must be given a compulsory meaning; as denoting obligation. It has a peremptory meaning, and it is generally imperative or mandatory. It has the invariable significance of excluding the idea of discretion, and has the significance of operating to impose a duty which may be enforced, particularly if public policy is in favor of this meaning, or when addressed to public officials, or where a public interest is involved, or where the public or persons have rights which ought to be exercised or enforced, unless a contrary intent appears; but the context ought to be very strongly persuasive before it is softened into a mere permission,” etc.[People v. O’Rourke, 124 Cal. App. 752, 759 (Cal. App. 1932)]

  6. Al Moncrief says:

    OUR STATE ATTORNEYS MAY HAVE TO REVISE THEIR DEFINITION OF “SHALL.”

    The attorneys at the Colorado Legislature have a “drafting manual” to assist them in preparing Colorado’s laws. It’s called the Colorado Legislative Drafting Manual. These attorneys wrote the Colorado law stating that PERA retirees SHALL receive the 3.5% COLA, and that PERA members who purchased service credit SHALL receive benefits based on that purchase that were in effect at the time of the purchase. According to their manual, the attorneys think that “shall” means mandatory. (See below.)

    In my opinion, these attorneys will have to rewrite their drafting manual to harmonize their understanding of “SHALL” with Judge Hyatt’s understanding of the word. If the attorneys and Judge Hyatt agreed on the definition, we would still receive our 3.5% contracted COLA. According to the drafting manual, the attorneys have another word that they use if they want to indicate that an action is discretionary. That word is “MAY.” See if you don’t agree with me:

    Colorado Legislative Drafting Manual, Revised 9/29/2010 (Available at this link: http://www.state.co.us/gov_dir/leg_dir/olls/LDM/OLLS_Drafting_Manual.pdf)

    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 COLA requirement in Colorado law:

    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 . . .

    The requirement for service credit purchase benefits in Colorado law:

    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.”

  7. Deborah says:

    This makes me so angry–and worried. At 65, I am wondering how we will be able to live on our retirement income in 10, 20 or 30 years. It’s not easy to find another job in this economy at our age to try to make up for what the state has decided to take back–nor should we have to. I believed them when they told me I could rely on a 3.5% annual benefit increase. Apparently, I was being played for a fool.

    It seems so arbitrary to have one judge dismiss this. What alternatives do we have? How can we appeal? What do we do next??

  8. SeaDee says:

    Judge Hyatt’s point seems to be that while the Colorado constitution does require the state to pay its retired employees our base pension, there is no constitutional mandate that they involve any particular COLA formula, or any COLA for that matter.

    However, before I retired, the fine print clearly indicated that I would be getting a 3.5% hike each year in perpetuity. There was no language to the effect of, “until and unless the state legislature decides otherwise.” I’m not a lawyer but that language certainly looked to me like an offer of contract. I and other retirees fulfilled our end of this contract and the state is reneging on part of its end. Whether the 3.5% annual pension hike is in the Colorado constitution or not seems irrelevant to me. A deal is a deal. The state of Colorado is in breach of contract. I mistakenly thought that was the basis of our lawsuit, not whether our 3.5% annual pension hike is mandated by the Colorado constitution.

    One other point. The judge referenced the document DPS retirees signed (stating that their annual pension increase was not guaranteed in perpetuity) as if this fact supported his decision. Actually, the existence of such language adds weight to our position, not his. Why, if the annual 3.5% pension hike is not an obligation of the state, were *any* retirees ever required to sign a document stating that it *wasn’t*? The very imperative to make employees sign such a document clearly implies that the state did believe the promised annual pension hike would be a perpetual obligation upon itself otherwise. And hence the state felt compelled to make new retirees sign away their right to their fixed annual pension hike to which they would otherwise be entitled.

    So, not only did the language in PERA documents and on PERA’s website lead us to believe our 3.5% annual pension hike was guaranteed for life, but judging by its behavior with the DPS retirees, the state itself believed this.

    Furthermore, given that the state felt it needed to get DPS retirees to sign a paper stating that their annual pension hikes weren’t fixed, does this not clearly imply that the rest of us Colorado retirees who never signed any such document *are* entitled to the fixed annual pension hike promised to us? Does that document DPS retirees signed mean anything, or not? Judge Hyatt seems to want it to be meaningful if such can be used to deny us part of the retirement benefit promised to us, and unmeaningful otherwise – whichever way makes us wrong and the state right.

    • Tim Hansford says:

      Thank you, SeaDee, for describing the heart of the matter so clearly. It cannot be stated often enough that this was NEVER referred to as a cost of living adjustment when we purchased previous years of service, but rather was an “annual benefit increase”. The fact that this was included certainly tipped the scales in favor of my own purchase of 22 years in 2004. I accepted the deal, knowing that I was trading potentially higher returns elsewhere on my investment in good economic years with a safer, guaranteed fixed rate of 3.5% from PERA — a figure that looks extremely attractive now, but was most certainly not in 2004. Without question part of my agreement with PERA, and what I paid for with the purchase, was the annual increase.

      We have complied with all of PERA’s rules and demands concerning costs of previous years, calculation of HAS, etc. I could not agree more: “A deal is a deal.” Is it to be honored, or is it not? If not, what other parts of the agreement will be changed at their behest in the future?

  9. Erroll Giddings says:

    The only power we have is the vote. We need to vote everyone out who supported this actual PERA payment reduction. We will have to vote against the judge when he appears on the ballot. The problem is that most of the legislators who voted for this are not in the legislature anymore. The bill allows teachers to become legislators and they receive their monthly PERA and their legislative salary. They are the only exception to the rule. The solution is simple. Run for office, Get the bums out and change the law.

  10. Al Moncrief says:

    I read through Judge Hyatt’s opinion and have the following observations. (Apologies for being long-winded.)

    (1) The Judge doesn’t seem to understand the difference between an “ad hoc” COLA and an “automatic” COLA. Surveys of defined benefit pensions in the United States identify Colorado’s pension COLA as an automatic COLA.

    (2) The Judge writes that “plaintiffs unarguably have a contractual right to their pension itself.” He further writes that the pension COLA provisions contain no durational language suggesting that a contract has been created, and that a pension provision requires a clear indication that the Legislature has intended to bind itself in a contractual manner. This begs the question, if the test of enforceability of a statutory pension provision is accompanying durational language or a clear statement of the intent of the Legislature to create a contractual obligation, then how did the Judge go about determining that “plaintiffs unarguably have a contractual right to their pension itself.” I do not recall that each separate provision of Colorado’s PERA pension statutes (there are hundreds) is accompanied by durational language and a clear statement that it constitutes a contractual obligation. I don’t recall any of our statutory pension provisions having such explicit qualifiers attached. If the Judge’s argument that a pension provision must be accompanied by durational language and a clear statement that the provision constitutes a contractual obligation, then public pension obligations across the country are unenforceable . . . mere gratuities, since they fail this test. Courts in the United States have found that pension provisions are contractual in nature. Judge Hyatt is arguing that somehow a certain type of pension provision (COLA) constitutes a gratuity rather than a contractual obligation.

    (3) The Judge’s ruling seems to contradict the opinion of the Nebraska Supreme Court which ruled in the pension COLA case Calabro v. Omaha that “due to the lack of information from which an employee could ascertain that the supplemental benefit plan (COLA) was a mere gratuity from the city, the city treated the supplemental benefit plan like a pension.” This placed the burden of proof on the city to eliminate the COLA, not on the retirees. Further, the court stated that nothing in the city ordinance “put the employees on notice that the supplemental benefit could be taken away with the stroke of a pen,” and that employees “may well have been induced to work for the city because knew they were guaranteed a COLA.” The Nebraska Supreme Court ruled that the supplemental benefit plan (COLA) constituted “pension.” So, who is correct? Is it Judge Hyatt or is it the Nebraska Supreme Court? Only one can be right.

    (4) The Judge and PERA are attempting to establish a legal distinction between statutory pension COLA provisions and statutory pension base benefit provisions. This attempt is a contrivance designed to permit defined benefit plan sponsors to escape their debts.

    (5) Question: As I understand it, the Dewitt case is an insurance case. Is it applicable to defined benefit pension law?

    (6) Judge Hyatt spends a good deal of space in his ruling laying out historical changes to the COLA. He does not seem to grasp that it is not unconstitutional to increase an automatic COLA. It is unconstitutional to reduce an automatic COLA. If a COLA benefit is improved, there is no harm done to the benefit recipient. The taking occurs when an automatic COLA benefit is diminished.

    (7) The Judge supports his opinion by noting that certain DPS retirees signed a document acknowledging that the COLA could be changed. How does this fact in any way invalidate the claims of retirees who did not sign such a document?

    (8) As I understand it, in law, the word “shall” means mandatory and imposes an obligation.

    (9) The Judge states that “plaintiffs are unable to explain how one can have a reasonable expectation to an unchangeable COLA formula.” If this is true, then why did PERA state in pension materials that retirees “will receive an automatic increase of 3.5 percent in their monthly retirement benefit to help keep up with the cost of living.” Is the Judge stating that PERA does not understand the pension that they administer? If a sophisticated organization such as PERA does not understand its own pension, how does the Judge expect a layman to comprehend it? Implicit in the Judge’s opinion is that public employees (and investors?) cannot rely on their plan documents to state the truth, that plan documents may legally deceive retirees (and investors?) How many legal decisions does this contradict?

    (10) The Judge writes that the “base pension benefit structure” was not altered by SB 10-001. This is an odd statement recognizing that SB 1: included anti-spiking language that altered calculation of the base benefit at retirement, reduced the base benefit of members who retire prior to eligibility for full retirement benefits, and permitted some retirees to work longer for certain PERA employers with no penalty applied to their base benefits.

    (11) The Judge writes that the “legislation bears a reasonable relationship to the legitimate governmental interest of reaching a one-hundred percent funded ratio.” This statement betrays a lack of understanding of defined benefit pension plans. Reaching a 100% funded ratio for a DB plan is not a legitimate governmental interest. As I understand it, according to GASB, DB plans are well-funded at an 80% actuarial funded ratio. It may be a legitimate governmental interest for a plan to reach 80 percent.

    (12) Senate Bill 1 included a provision requiring PERA to provide written notice to its members, that in the event of an actuarial emergency, the General Assembly may alter member benefits provided by the plan. Why did the Legislature feel compelled to put this provision in the law? Do they believe that they are limited in altering pension benefits short of an actuarial emergency?

    (13) I can imagine that Judge Hyatt’s opinion is quite a news flash for all working PERA members who thought that the “guaranteed” COLA was part of their pension benefits. Judge Hyatt has ruled that PERA doesn’t have to pay you any COLA at all. Accordingly, the value of your pension, for which you will work in the coming decades is significantly diminished. The Judge’s ruling will also be news to PERA’s actuaries, and to actuaries across the country who have been including pension COLA obligations when determining the funded status of DB plans. This is no longer necessary since, according to the Judge, the COLA is a gratuity. The Judge’s ruling will be news to S&P and Moody’s who have been using the funded status of DB plans when rating bonds issued by their governmental sponsors. The Judge may not realize it, but he has singlehandedly solved the pension “crisis” in the USA. Presto! Pension debts have vanished!

    • Barry Thorpe says:

      An excellent analysis, thank you ! I might just add one note……Very early on in this , even with the naming of the web page, several of us noted that it would prove to be problematic to call this a COLA. This judge seized on the mis-naming of the issue to somewhat skillfully dissociate this particular provision from the pension package. I contend that the “Annual Benefit Increase” is not, and never was a COLA. It is as firmly bound to the contract as ANY provision, and is stated as such, and named as such in the literature we all used to make the retirement decision. We must get stipulation on this point.

    • Tim Hansford says:

      I certainly hope that Judge Hyatt’s decision will be appealed. It makes no sense to me, legal or otherwise, that one part of the agreement with PERA can be considered contractural, but not another part of the same agreement. My understanding is that an appellate court would look at the constitutionality of SB001 with different criteria than did Judge Hyatt’s court, which is a criminal court. Whereas a criminal court is limited to looking only at facts that are present at the time, an appellate court is able to look at the broader question of whether the law violates other constitutional protections.

  11. Kellers says:

    What next?? What can we do to get further involved? How can we help?
    This decision is outrageous!

    • Robert says:

      What next?? Get prepared for the next economic downturn when PERA announces another fiscal emergency and abolishes COLA totally.

      • Kellers says:

        “What next” refers to the legal process.”How can we help?” speaks to a collective effort to actually do something to positively affect that next step, i.e., besides wringing our hands and waiting for something even worse to happen.
        As we have suggested in the past,let’s get all of PERA retirees behind this (half of my peer retirees with whom I talk were not even aware of this law suit).We need state and local meetings to really get organized. Every retiree should send $5 bucks, as a start. Then, we need to make our voices heard in the legislature, and out those legislators who voted for the bill to begin with.
        Mother Jones, “Quit agonizing and and start organizing.”

  12. Roderick says:

    “The motion for summary judgment is granted as to all of Plaintiffs’ claims. While Plaintiffs **unarguably have a contractual right to their PERA pension itself**, they do not have a contractual right to the specific COLA formula in place at their respective retirement, for life without change.”

    Is there a positive to this? The judge has stated that **unarguably have a contractual right to their PERA pension itself**, and am I right in thinking this would help in any further proceedings to diminish our retirement benefits in place?
    I would see it that way.

    • Barry Thorpe says:

      It does apparently make it harder for them to diminish the base pension by the stroke of a pen. However, living in a capitalist system already insures that the base benefit will continually erode, not in the number of dollars, but in their purchasing power. The elimination of an ” Annual Benefit Increase” in effect IS a real reduction in the Pension itself, because of the varying, yet consistent reduction in the value of each dollar, year after year in a market economy such as ours. Would ANYONE have signed on for PERA’s scheme if they knew they were agreeing to a continuously eroding income, as the cost of everything rises.

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