Plaintiffs’ Second Filing now posted

Due  to an oversight, Plaintiffs’ Second filing was not posted in January when it was filed with the court. We apologize for this error which caused some confusion about where it was and what the Defendants’ Second filing was referencing. You may view it now at . It is currently number 3 on the list and is dated 2014-01-10. Please notice the differences in substance when you compare the January filing with the February 21 filing by the Defendants. Commenter Algernon Moncrief has astutely pointed out many failings in the State and PERA’s arguments.

16 Responses to Plaintiffs’ Second Filing now posted

  1. Ron Vansyoc says:

    I apologize if this sounds too simple for all those lawyers and judges…but I am a DPS retiree spouse who was required to execute my DPS pension benefit survivor option within a given time window after my wife passed away in April 2009. I complied with the time requirement, given the best information I had at that time concerning the survivor benefit options. After executing the option to receive the lifetime monthly annuity benefit with the stated annual increase calculation in the contract…which required me to wait until I reached the age of 50 (Jan 2011) to begin receiving those benefits… the State of Colorado legislature seemed to think that they could change the executed contract. It sure seems simple to me that the state is in breech of the contract that I signed at that date. How do they think they can change an executed contract? I just don’t get it….this should be a slam dunk case.

    • saveperacola says:

      Of course the state is in breach of contract. The legislature’s overwhelming interest in passing SB10-001 was to absolve themselves of paying out a significant portion of that contract so they could spend money elsewhere and not feel guilty for stiffing the retirees. PERA’s interest was to overcome their bad investment decisions (where were the highly paid investment advisors?) and the service credit sale PERA created with Governor Bill Owens. They used fear of losing our pensions as a weapon to dupe retirees into supporting their pension COLA theft. Many fell for it…but not all of us. Now, whether the lawsuit is a slam dunk or not is debatable. The NCAA Final Four contains number 7 and number 8 seeded teams. Slam dunks are not a sure thing right now…for either team.

    • Al Moncrief says:

      Ron, here is some background information for you about the PERA contract breach. First, the members of the Colorado Legislature are subject to term limits. They have a limited amount of time in office to learn complex policy areas, such as public pension administration and pension contractual obligations. This educational process has never been a priority, it has never happened at the Colorado Legislature. Term limits necessarily place much power into the hands of lobbyists.

      Money buys lobbying muscle. Spend enough money and it’s possible to push an unconstitutional measure through the process. Easy access to retiree trust funds and lobbyists hired with these funds allowed the PERA Board to change statute in 2009: permitting them to hire outside attorneys (instead of relying exclusively on the AG’s office), and have these lobbyists amend legislation to create the impression that the Legislature independently “requested” the outsourcing of the pension reform discussion to the PERA Board.

      The Colorado law-making process is messy and heavily influenced by special interests. Hopefully, Colorado courts will not allow the chaotic and arbitrary legislative process to defile the Colorado Constitution.

      Rather than allowing a debate on the merits of various prospective changes to the PERA pension fund, in 2009 the Leadership of the Legislature outsourced this entire policy debate to union officials and the PERA Board. The union officials preferred a retroactive taking of retiree assets to an increase in employee and employer contribution rates. PERA assembled a team of 27 lobbyists to ram SB1 through the process (passing by a mere three votes in the House.) In 2014, the relatively small number of legislators who voted for SB1, and who remain in office, are hoping that the Colorado Supreme Court will set aside our foundational document and embrace the taking.

      Note that the Colorado Legislature has access to sufficient funding to meet its ARC obligations, but the question is not even on the table. The current members of the Legislature are granting even more tax credits to special interests, and spending hundreds of millions of dollars on their favorite political programs. Only a subset of the current members are even aware that the State of Colorado is in breach of contract. As we have seen, at last year’s session the Legislature appropriated $142 million to pay off local government pension obligations that are not the contractual obligation of the State of Colorado.

      In many past fiscal years the Legislature has had sufficient revenue available to pay the ARC and meet contractual obligations. It is simply the fact that in 2010 a majority of the members preferred breach of PERA pension contracts, allowing the appropriation of funds for preferred discretionary expenditures.

      The PERA COLA contract breach was orchestrated by PERA’s lobbyists and public sector union officials beginning in 2009. This was when PERA hired the attorney Dubofsky to create a legal rationale for the attempted COLA-taking. Her resume providing this information remains on-line:


      “at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights.”

      Jean Dubofsky in a Colorado PUC deposition (on-line):

      “My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”

      Since the PERA Board intended to embark on a bold adventure in litigation in 2009, they believed that they needed the ability to hire the best outside lawyers possible (and, of course, they had the money, i.e., trust funds, to spend.) But, even the ability to hire outside legal help could not provide the PERA Board with a consistent legal strategy. PERA’s legal strategy to break contracts shifted over time. The purchased Dubofsky product must have focused on an attempt to apply the concept of “actuarial necessity” to fully-vested contracts. This is the argument that was fed to co-prime sponsor Penry in 2009, and which he regularly and dutifully spouted to the press. This is the statement that PERA officials made to the JBC in 2009, yes there is a contract, but we think we can break fully-vested contracts with actuarial necessity. (It would be interesting to see how Dubofsky circumvents on-point Colorado case law in her reasoning.)

      Later, PERA’s tune changed. After having paid the lobbyists to push the bill through under one legal strategy, they shifted to the DeWitt strategy. As noted earlier, I believe that even if DeWitt is applicable to public pension benefit disputes (which I doubt) DeWitt does not lower the bar far enough to allow for clear, premeditated, brazen abandonment of contractual obligations.

      Some recent press on Colorado state revenues, Denver Post:

      “The $23 billion proposed fiscal year budget is the most money lawmakers have been able to spend in recent years, and represents a $1.1 billion uptick from the current budget.”

      “Democrats and Republicans introduced more than 40 amendments to the bill designed to benefit their constituents.”

      “The proposed budget for this year calls for the state to increase the money added to its reserve fund by about $130 million.”

      Gazette Telegraph:

      “Where the additional $600 million will go in fiscal year 2014-15 has become an interesting political battle at the General Assembly, although everyone seems to agree on the big recipients.”

  2. Stan Brown says:

    This report may be of interest to some retirees. Colorado appears to be in the middle among states in most regards.

    Financial Security Scorecard: A State-by-State
    Analysis of Economic Pressures Facing Future Retirees

  3. Stan Brown says:

    Interesting article …

    U.S. Public Pensions Need More Than Investment Windfall

    “Although Colorado is still absorbing losses from 2009, the main reason its funding gap is yawning is the state’s failure to make the contributions recommended each year by its own budget experts, Barkley said.”

    “Between 2008 and 2012, Colorado lawmakers short-changed the state pension fund by nearly $1.4 billion, and by $3.5 billion over the past decade.”

    • Al Moncrief says:

      Stan, thanks for sharing the article. I read it and found a few additional excerpts from the article interesting.

      From the Daily Finance article:

      “Speaking in general, public pension systems are badly underfunded in states, such as Colorado, that give elected politicians in the legislature the power to set funding levels. Oregon and other states that are mandated by law to meet annual funding requirements are in much better shape.”

      “By contrast, Oregon’s retirement system, covering about 95 percent of the workforce, is required by law to meet the annual funding recommendation of its own accountants.”

      Here are my reactions to the article:

      I can recall reading another article in the last year or so that
      made this same point, that state legislatures setting employer and employee pension contribution rates in statute are much more likely to have underfunded public pension systems. Note that this is a policy choice on the part of these legislatures [including the Colorado Legislature.] These legislatures could just as well have placed a requirement into statute that the pension ARC must be prioritized and paid in each budget cycle. The fact that these state legislatures [including the Colorado Legislature] have not prioritized payment of the public pension ARC in statute does not relieve the legislatures, or the pension plan sponsors they oversee, from meeting their contractual obligations.

      I consider the administrators of the Colorado PERA pension system, and the PERA Board of Trustees to be complicit in the underfunding of the PERA pension. If discovery ever actually occurs in the case, Justus v. State, those who are conducting the discovery should listen to the tapes of every meeting that PERA administrators (Greg Smith and Meredith Williams) have held with the Colorado Legislature’s Joint Budget Committee, Legislative Audit Committee and Joint Finance Committees over the last 12 years. These three regular PERA legislative presentations occur annually. As part of the discovery process, the tapes for these three annual meetings should be examined back to 2002 [about 36 presentations by Colorado PERA officials to legislative committees.] Tapes of these 36 legislative hearings should be examined for instances in which Greg Smith or Meredith Williams: (1) actually informed the legislators present that the Legislature had failed to pay the pension ARC in the prior fiscal year, (2) told the legislators that the PERA statutory contribution rates in effect would result in failure to meet the pension ARC obligation for the coming year fiscal, or (3) told the legislators that failure to meet the PERA pension ARC obligations was fiscally irresponsible on the part of the Legislature, and, in effect, constituted state deficit spending. I believe that such an examination would discover very few instances in which PERA officials (Greg Smith and Meredith Williams) informed state legislators of their PERA ARC obligations. This was mismanagement.

      If this matter (culpability of PERA officials in pension underfunding) were raised today with Colorado PERA officials, my guess is that the officials would reply that it is not their responsibility to encourage the Legislature to meet its ARC obligations, nor their responsibility to even inform the Legislature of its obligation to pay the pension ARC. I suspect that PERA officials would reply that ARC statistics are included in each PERA annual report submitted to the Legislature (somewhere in a document that exceeds 100 pages) and that inclusion of the statistics in their annual report relieves PERA officials of any further obligation. This is the sort of “leadership,” and “professionalism,” and “integrity,” that I have come to expect from the “transparent” organization, Colorado PERA. Are we not proud to have Colorado PERA as an agency of Colorado state government?

      It is conceivable that PERA officials feel no fiduciary obligation to encourage the General Assembly to meet its ARC obligations, yet PERA officials do indeed feel obliged to instruct their lobbyists to have a provision placed into statute (at the conclusion of the 2009 legislative session) requesting “pension reform” recommendations from the PERA Board, and further, these officials feel “obliged” to ultimately make “reform” recommendations for a clear pension contract breach designed to compensate for their years of mismanagement. I suspect that this is what has transpired.

      For the last dozen years, PERA administrators and PERA Board members should have emphatically insisted, at every opportunity, that the Colorado Legislature meet its ARC obligations, or amend the statutes to ensure prioritization of the ARC payment. These PERA administrators and PERA Board members have been negligent in this regard . . . I consider their failure to demand payment of the ARC a breach of fiduciary duty. What responsibility of the PERA Board could possibly be more critical than ensuring the appropriate funding of the pension? What PERA Board obligation can possibly be more fundamental?

      Our PERA administrators and PERA Board members have failed miserably. They have not insisted on the ARC payment, they have not even bothered to draw attention to the state’s failure to pay the pension ARC, they have unanimously agreed to Bill Owen’s PERA service credit “fire sale,” costing the PERA Trust Fund billions, they have set a past asset allocation that overemphasized alternative investments resulting in losses to the PERA trust funds, they opted for a “Match Maker” program instead of securing the PERA trust funds, and finally, they established a “90 percent cap” policy to underfund the pension by design.

      Given this documented history of mismanagement by PERA officials, one might expect to see contrition, but what did we observe in 2009/2010?

      We observed the PERA Board of Trustees endorsing a scheme to break fully-vested PERA pension contracts, an attempt to illegally shift market risk to retirees, in an effort to cover the tracks of their traditional mismanagement.

      In their most recent brief, PERA’s lawyers request that the Colorado Supreme Court not allow discovery in the case, Justus v. State. Why do PERA officials want to avoid discovery? Are the officials of the “transparent” organization Colorado PERA motivated by a desire to avoid judicial recognition and confirmation of past PERA pension mismanagement?

      Link to Daily Finance article:

      I ask, is the State of Colorado in such a financial “crisis” that it cannot meet its contractual obligations?

      Here is an excerpt from a recent Gazette Telegraph article:

      “Senate Republican Leader Bill Cadman said there’s about a half-billion dollars of spending waiting in line at the Capitol.”

      “It is amazing, though, to see how much money is starting to add up, mostly in the House appropriations, it’s really getting thick over there,” Cadman said.

      It is clear to me that most members of the Colorado Legislature do not know what a pension “ARC” is, and cannot possibly have knowledge of the fact that the pension ARC has not been paid for a dozen years. Payment of the ARC is simply not “on the radar” at the Colorado Legislature. Even if a legislative recognition of the need to pay the ARC existed, the desire of politicians to please special interests with discretionary appropriations would take precedence.

      So, we see the Colorado Legislature continue to grant more and more tax breaks to please special interests in 2014. Every year, billions of dollars of state revenues are lost to enterprise zone credits, sales tax credits, income tax credits, and discretionary homestead tax exemptions.

      We should not forget that recently (at the 2013 legislative session) the Colorado Legislature found that $142 million in state revenue was somehow available to meet local government pension obligations that ARE NOT the contractual obligation of the State of Colorado.

      As the sausage is being made, my guess is that only a handful of state legislators at the current session of the Colorado General Assembly are aware of the fact that the State of Colorado is presently trying to break contracts to which the State of Colorado is a party.

  4. Al Moncrief says:



    In 2009 (when the scheme to pay off Colorado state and local government debts by forcibly taking money from older Coloradans was hatched) there seems to have been an assumption on the part of the Colorado PERA Board of Trustees that PERA pensioners were (1) too weak politically to defend their contracts at the Legislature, (2) too unorganized to defend their rights in court, and (3) too unsophisticated to even research and comprehend the on-point Colorado court precedent supporting their PERA contractual pension rights.

    Well, in 2009, the Colorado PERA Board was wrong. Colorado public sector union officials complicit in the taking were wrong. And, those who conveniently reversed their long-standing recognition of contractual rights to the PERA COLA benefit, Colorado PERA Executive Director Meredith Williams and then General Counsel Greg Smith, were wrong.

    The weak, unorganized, unsophisticated Colorado PERA retirees challenged the breach of their contracts in 2010. The case, Justus v. State, has arrived at the Colorado Supreme Court.

    In recent years, Colorado PERA retirees involved in the public pension case, Justus v. State, have followed the work of Professor Amy Monahan of the University of Minnesota School of Law. Professor Monahan is the preeminent legal scholar in the United States on public pension contractual rights. “Amy Monahan is a professor and the Solly Robbins Distinguished Research Fellow at the University of Minnesota Law School.”

    Professor Monahan argues that previously accrued public pension benefits should be protected, but suggests that public pension plan sponsors should have the flexibility to alter the rate of FUTURE accrual of pension benefits:

    March 17, 2010

    Professor Amy Monahan in “Public Pension Plan Reform, the Legal Framework”: “This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”

    May, 2013

    Professor Monahan addresses the Colorado PERA retiree lawsuit, Justus v. State in her paper, “Understanding the Legal Limits on Public Pension Reform”:

    “In Colorado, retirees challenged actions by the state legislature that reduced the COLA retirees were eligible to receive. The plaintiffs included individuals who had retired under Colorado’s public employee retirement system at a time when there was a guaranteed 3.5 percent COLA in place.”

    Professor Monahan notes that the Denver District Court’s initial decision in the case, Justus v. State, was surprising in light of Colorado public pension case precedent:

    “The (Denver District) court’s ruling is surprising both because the court appeared to break from earlier Colorado decisions that found pension benefits to be contractually protected prior to retirement and because the change could be characterized as a retroactive change to benefits, which is the type of change that invites the most scrutiny under a contract clause analysis.”

    Professor Monahan on the public pension legal doctrine, the “California Rule” (embraced by Colorado courts):

    “The (Denver District) court’s ruling is surprising both because the court broke from the previously endorsed California Rule, under which it is clear that detrimental changes to the benefits of current employees are only permissible where they are offset with comparable new advantages, and because the change at issue is one that could be characterized as a retroactive change to benefits, which is the type of change that invites the most scrutiny under a contract clause analysis.”

    “Statutes as Contracts? The ‘California Rule’ and Its Impact on Public Pension Reform,” (Iowa Law Review article.)

    Recently, conservative legal scholar Alexander Volokh, added his voice to those questioning the “California Rule,” but Volokh (like Professor Monahan) defends contractual rights to previously accrued public pension benefits.

    Link to the Volokh paper:

    Volokh’s recent paper was published serially in the Washington Post:

    “Courts in California, and in other states following California’s example, follow a particularly strict rule: they hold not only that public employees are entitled to the pension they’ve accrued by their work so far, but also that they’re entitled to keep earning a pension (as long they continue in their job) according to rules that are at least as generous. Thus, in states where the California rule applies (my comment, including Colorado,) one can’t constitutionally increase employee contribution rates or reduce (my comment “automatic” as opposed to “ad hoc”) cost-of-living allowances.”

    Volokh in the Washington Post:

    “I argue that protecting pensions accrued based on past work is reasonable; protecting the current rules into the future is far less so.”
    “California case law holds that ‘a public employee’s pension constitutes an element of compensation and that the right to pension benefits vests upon the acceptance of employment even though the right to immediate payment of a full pension may not mature until certain conditions are satisfied.’”

    “But with defined-benefit pensions, which are more common in the public sector, the financial risk is borne by the pension provider.”
    (My comment: Colorado PERA officials seem to have conveniently forgotten this fact. They are attempting to unconstitutionally shift market risk to pensioners.)


    ” . . . governments, free from the ERISA regulations that govern private employers, find it easier to promise generous pensions and then underfund them, leaving future generations to pick up the bill. Underfunded public employee pensions are thus a form of deficit spending.”

    (My comment: In 2010, uninformed members of the Colorado Legislature were not aware of the fact that Colorado PERA-affiliated governments had not paid the full PERA pension ARC [annual required contribution as calculated by PERA’s actuaries] for a decade. Given that the plan to take PERA pensioner assets was developed outside of the open legislative process, most members of the Legislature could not be expected to comprehend that the failure to pay the ARC constitutes deficit spending in our state.)


    ” . . . borrowing money from future taxpayers by underfunding current pensions is less transparent than traditional borrowing.”



    “We can safely conclude that a contract not only exists but also covers at least the services performed so far. The government owes the employee for whatever work has been completed. Overdue salaries are owed, as is accrued vacation time . . . and the pension one has accrued so far. This much should clearly be within the bounds of federal deference.”

    Link to the Volokh paper:

    Excerpts from the Volokh paper:

    “Courts in California, and in other states following California’s example, follow a particularly strict rule: they hold not only that public employees are entitled to the pension they’ve accrued by their work so far, but also that they’re entitled to keep earning a pension (as long they continue in their job) according to rules that are at least as generous.”

    “. . . in 1977, in U.S. Trust Co. v. New York v. New Jersey, the Supreme Court reaffirmed that some limits remain on state abrogation of contracts, and that in fact the limits are stricter when
    the state seeks to abrogate its own (public) contracts since then its own ‘self-interest is at stake.’”

    “Ultimately it’s a question of federal law; otherwise, states—whether their legislatures or their courts—could define contract rights out of existence, making the Contract Clause ‘a dead letter.’”

    Volokh on the public pension case, United Firefighters of Los Angeles . . .

    “In the court’s view, the (my comment, in United Firefighters, prospective only) COLA cap had no relation to the goals of a pension system (it reduced retirees’ economic security rather than enhancing it); any unsustainability in the pension system came from the government’s history of underfunding rather than from the recent history of high inflation rates; and the city’s desire to ‘enhance [its] ability to predict and plan for long-range . . . budgeting and financing’ could also be fulfilled by, for instance, levying ‘a separate ad valorem property tax specifically to meet the pension system funding requirements.’ Thus, the city couldn’t show that its modifications were reasonable; nor could it show comparable new advantages, since the change to the pension system was merely disadvantageous on its face.”

    (My comment, if we allow a measure adopted by Colorado voters in 1992, TABOR, to justify the breach of contracts to which the State of Colorado is a party, we are granting Colorado voters the right to ignore both the Colorado and United States constitutions.)


    “It makes good sense to defer to California’s doctrine that pension statutes form a contract—even without analyzing the language of the statute—because pensions are a form of deferred compensation.”

    “Thus, ‘the circumstances’ of the statutory enactment ‘evince a legislative intent’ to be bound.”

    Volohk argues that the “California Rule” is constitutional, but it is bad public policy. (He believes that states should be allowed to change the rate at which pension benefits will be earned in the future):

    “If the legality of the California rule isn’t the problem, what remains is pure policy.”

    . . . “’deferred compensation in the form of pension rights has the status of a contractual obligation from the moment one accepts public employment.'”

    Colorado PERA members and retirees, please take note that the Colorado PERA Board of Trustees, through their lobbyists, are asking much more from the Colorado Supreme Court than simply eliminating Colorado’s historical embrace of the “California Rule.”

    Colorado PERA is asking that: (1) the California Rule be abandoned in Colorado public pension legal doctrine, (2) fully-vested contractual rights of current PERA retirees be discarded, and (3) certain specific accrued public pension benefits (COLAs) in our state be deemed gratuities, (of course, a finding that would itself conflict with the Colorado Constitution’s prohibition against gratuities.)

    In his paper, Volokh channels former Colorado Governor Bill Owens . . .

    “The inability to adjust pensions for existing employees may also lead to a bias in favor of replacing existing employees with new ones or encouraging existing employees to leave . . .”

    (My comment: Recall that this was Governor Bill Owens’ plan 14 years ago when he initiated the PERA “service credit fire sale” to encourage the early retirement of older, “more expensive” PERA members and (as has been documented) shift labor costs from PERA-affiliated employers [Colorado state and local governments] to the Colorado PERA trust funds.)


    “How much leeway to modify public pensions does a ‘fiscal emergency’ offer? Not much. As the Allen rule says, one can modify pension rights before retirement for the sake of flexibility in light of changed conditions, but the changes must be reasonable, which means both that they need to have a relation to pension theory and must compensate for disadvantages with comparable advantages. Clearly, merely reciting the need to shore up pensions is insufficient, and arguments in favor of COLA caps that ‘the integrity of the pension system is strengthened when it can be determined with certainty what the obligations of the system are’ are likewise insufficient.”

    To some conservatives (specifically, former United States Senator Hank Brown) the breach of Colorado state contracts is “Colorado Courage.” The legal analysis of the conservative Volokh truly sets former Colorado U.S. Senator Hank Brown’s simple-minded arguments in bold relief.


    “In United Firefighters, the Court of Appeal rejected the contention that the modifications were necessary to preserve the soundness of the system because it held that the fiscal crisis was caused by the government’s own conduct in inadequately funding the system: ‘a public entity cannot justify the impairment of its contractual obligations on the basis of the existence of a fiscal crisis created by its own voluntary conduct.'”

    “And even if the modifications are justified by sound pension theory, this doesn’t prevent the government from having to offer compensating advantages. So the ability to modify pensions seems to be of little help in resolving a fiscal crisis.”

    “Another possibility would be a state constitutional amendment abolishing the California rule and establishing that pension statutes only entitle the employee to that portion of the pension accrued so far.”


    “The Colorado lower-court case, Justus v. State, No. 2010-CV-1589 (Colo. Dist. Ct. June 29, 2011), has now been reversed, 2012 WL 4829545 (Colo. App. Oct. 11, 2012), and cert. has been
    granted by the Colorado Supreme Court, 2013 WL 4008216 (Colo. Aug. 5, 2013).”

    Link to the Volokh article:

    Alexander Volokh’s paper was written for the Federalist Society. What is the Federalist Society?

    “The Federalist Society for Law and Public Policy Studies, most frequently called simply the Federalist Society, is an organization of conservatives and libertarians seeking reform of the current American legal system.”

    “The Society asserts . . . that it is emphatically the province and duty of the judiciary to say what the law is, not what it should be.”

    “The Lawyers Division consists of over 30,000 legal professionals and others interested in current intellectual and practical developments in the law. It has active chapters in sixty cities, including Washington, D.C., New York, Boston, Chicago, Los Angeles, Milwaukee, San Francisco, Denver, Atlanta, Houston, Pittsburgh, Seattle, and Indianapolis.”

    The Federalist Society has a Denver Chapter. Our State Treasurer, Walker Stapleton, spoke to the Denver group of the Federalist Society in 2011:

    Who is Alexander Volokh? “Alexander ‘Sasha’ Volokh is an Associate Professor at Emory Law School. An economist by training, he has written numerous articles on law and economics, privatization, antitrust, prisons, constitutional law, regulation, and legal history.”

    Colorado PERA retirees, continue to demonstrate strength, unity, and sophistication in defending your contractual rights!

    • deborahapy says:

      I think Al’s right: the Colorado PERA Board was counting on us being too weak, too disorganized and too unsophisticated to defend our earned income. My sincere thanks to Gary Justus, Kathleen Hopkins, Eugene Halaas and Robert Laird, Jr. for showing the courage and fortitude to take this forward. Thanks to Save Pera Cola, and thanks to Al Moncrief for informing and educating us. Thanks to the Internet for existing. When SB 10-001 passed, my astonishment was matched by a strong sense of vulnerability. I take great satisfaction now in knowing I have been able to financially contribute to a just fight. My check’s not large, but it is regular. I’m proud to be a part of this group.

  5. Al Moncrief says:

    Hey DFD, Governor Bill Owens initiated the past “service credit fire sale bill” in 2000 to cut labor costs for the state and Colorado local governments. (This is on the record.) The idea was to prompt older, more expensive employees to retire and move from government payrolls to the PERA pension system.

    The Bill Owens PERA service credit “fire sale” was without question pension mismanagement. Bill Owens’ time in office will ultimately and unnecessarily cost Colorado taxpayers billions (so much for fiscal conservatism.) PERA retirees should not have to pay for this past state mismanagement of the PERA trust funds (which, not surprisingly, was supported by the PERA Board at the time.)

    The “fire sale” benefited a number of Bill Owens’ buddies, $17K legislators that Bill appointed to $90-100K administrative jobs, whose PERA retirement benefits were or will be calculated at the higher salary level. Our own Congressman Coffman (Treasurer at the time) recently admitted to Vince Carroll at the Denver Post that he also bought years in the system . . . some speculate that he bought up to 15 years during the “fire sale.” How many years did Bill Owens buy at the time? Was the entire PERA pension system’s funding ratio hammered by a scheme to provide pension benefits for a handful of connected politicians?

    I don’t blame PERA retirees who accepted the state’s contractual service credit purchase offer at that time and acted on statutes in place. I blame Bill Owens, and any others involved in this scheme, for harming the pension fund and for their fiscal irresponsibility.
    Retirees should not have to relinquish their contractual rights and annuity benefits due to past state pension mismanagement, nor should they be forced to pay for PERA’s (admitted) past investment mistakes (alternative investment failures noted by Meredith Williams.)

    DFD, here is the language for service credit purchases in Colorado law on which many current retirees have relied:

    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.”

    Note that this section of law uses the word “SHALL” in the same manner as statutes setting forth the COLA benefit that has been targeted. Note the words “benefit provisions in effect.” Again, many PERA retirees purchased service credit. They accepted Governor Owens offer to leave their jobs early, and paid (sometimes) tens of thousands of dollars to PERA for a specific benefit, not whatever benefit the state decides to give them for their money. As planned by Bill Owens, Colorado state and local governments have benefited from the scheme for almost 15 years through lower labor costs. By design, more expensive, older workers left their jobs.


    PERA Topics, May 2000, Official Bulletin for PERA-affiliated Payroll/Personnel Staff, No. 00-2

    “Cost to Purchase Service Credit: A separate component of the negotiations between PERA and the Owens Administration was the reduction in the cost to purchase service. The PERA Board of Trustees, as part of its program to facilitate earlier retirement, lowered the cost to purchase service credit to 15.5 percent of Highest Average Salary (HAS) for most PERA members (20.4 percent for State Troopers and CBI agents and 20.0 percent for judges), effective February 18, 2000. This change did not take legislation.”


    On another topic, you may have noticed that a judge has recently blocked Montana’s attempt at a COLA taking (the acronym for their COLA is “GABA.”) Here are a few links:

    And, an Arizona COLA taking was recently struck down:

    “The Arizona Supreme Court ruled today that the state legislature cannot cut state retiree COLAs . . .”

    “The high court agreed the increases are part of a promised retirement benefit and are protected by the pension clause of the state Constitution. That clause bars ‘diminishing or impairing’ public retirement benefits.”

    “Last week, the justices restored cost-of-living raises for retired members of the state’s Public Safety Personnel Retirement System, which includes police and fire personnel.”

    “The ruling means the board that manages the fund will now reimburse retirees $40 million for past cost-of-living adjustments and will have to shift $335 million to a reserve fund to cover future cost-of-living increases, PSPRS system administrator Jim Hacking said in a release last week.”

    And, the San Jose COLA-taking has been struck down. (Like Colorado PERA, San Jose’s pension is governed by the “California Rule” legal doctrine.)

    “And a cut of San Jose retiree pension cost-of-living adjustments for up to five years, if the city council declares a fiscal emergency, was overturned by Lucas as a violation of vested rights.”

    “Judge Lucas has issued a final ruling on the challenges to San Jose’s pension measure – ‘Measure B.’

    “No Reduction or Suspension of Cost of Living Adjustments (COLA). The pension system’s guaranteed annual 3% COLA benefit is a vested component of employees’ pensions, and the City cannot be authorized to suspend or reduce it, as contemplated by Measure B.”

    If the case. Justus v. State, goes to discovery and actuaries are hired, they should answer this question:

    What percentage of current PERA employer and employee contributions is paid simply to compensate for the Legislature’s past failure to pay its full pension bill? To compensate for these skipped ARC payments? Here’s the situation in New Jersey:

    “As Christie noted, ‘an astounding 78 percent of this year’s $2.25 billion payment goes to making up for the legacy of years of irresponsibility from governors and legislatures who paid little or nothing into the system.’”

    • saveperacola says:

      At a rate of 15.5% to purchase one year of service credit, the payback break even point comes at just 6.3 years (15.5/2.5). That’s a true investment bargain and one that PERA heavily pushed to its active members. Many members took out loans or sold other investments in order to buy service credit. They ran the “3.5% guaranteed annual benfit increase” numbers through spreadsheets with their investment advisors and made the prudent decision. No one ever said that PERA and the State of Colorado would or could renege on their contract. Retirees are mad for good reason.

      • GLN says:

        Retirees relied in good faith upon the assured 3.5% annual benefit increase for more than just determining if a service credit purchase made sense. For example, in determining whether to take a reduced monthly amount in exchange for co-beneficiary coverage of a spouse (the so-called retirement options 2 or 3). At the time of retirement, I calculated I could better financially cover my spouse through life insurance policies as compared to these reduced retirement options. But such calculations are dramatically altered if a reduced COLA is allowed to stand. Yet I don’t recall this ever having been pointed out as an issue in the class filings. What are the chances PERA will let us reopen our retirement option choices if SB prevails? None, I’d say.

    • Stan Brown says:

      Since the terms of the service credit “fire sale” over a decade ago were set administratively rather than through legislative action, perhaps there will be an attempt to claw-back or reduce purchased service credits in the future … or at least treat purchased service credits differently in terms of COLA calculation … especially if the plaintiffs prevail in the SB10-1 lawsuit. This may sound cynical, but it seems like contract law just keeps becoming more “flexible” with time and there seems to be a determined effort to reduce existing, vested public pension obligations.

    • GLN says:

      AL–I want to thank you for all your insightful and to the point comments over these past several years. Frankly, I’ve often felt the detail and extent of your writings, citations, etc have generally far exceeded the quality of the filings submitted by the lawyers representing we plaintiffs. I’ve wondered if being a class member if you’re allowed to file friend of the court briefs?

      • Al Moncrief says:

        Hey, thanks for the recognition, but for the record I think that we have excellent attorneys arguing the case Justus v. State. Their zeal and skill in fighting to correct this “crime” against many elderly Colorado residents makes me proud.

        My goal over the last few years has been to find and organize information relevant to the case. I hope that I have brought some information to light that would not otherwise have been found in a timely way, (at least prior to discovery.) That is a different objective than what our attorneys are doing, making legal arguments (which, as a layman, I am not qualified to do.)

        The voters of Colorado enacted TABOR back in 1992, restricting state revenues, but the voters do not have the power to violate the Contract Clause. Meeting the state’s contractual PERA obligations has simply not been a priority for the Legislature. Legislators have many other objectives, and in 2009/2010 honoring PERA contracts was low on the list.

        The Legislature never should have gone along with the backroom deal to push PERA debts onto vulnerable PERA retirees.

        Was the plan in 2009 simply to postpone needed PROSPECTIVE PERA reforms, such as the PROSPECTIVE alteration of the pension multiplier? That is, having members earn benefits at a lower rate, perhaps 2% going forward until an 80 (not 100) percent funding ratio is met?

        Does this explain the fact that Legislative Leadership ignored PERA’s suggestion (at one point during contemplation of the contract breach) to seek interrogatory direction from the Supreme Court on legal PERA reform alternatives? The entire COLA-theft scheme was really quite ugly. Just the idea that political muscle (purchased with PERA trust funds) could be used to violate the Colorado Constitution and on-point case law. The assumption itself reeks of arrogance, callousness, and a cavalier attitude toward the rule of law in our state. Colorado is better than this.

        I hope that the Supreme Court will send a clear message to the Legislature that meeting the state’s contractual obligations is not optional, meeting contractual obligations takes precedence over any legislator’s preferred discretionary expenditures.

  6. DFD says:

    If the State of Colorado had made the required contribution to PERA would the fund have been below 70% at the time of SB-1 or with the required contribution would the fund have ever dropped below 70%? The test of time seems to indicate this was and is a manufactured crisis.
    One other comment-legislative intent is clear in light of the purchased credit statute that directs that the benefit is set at the date of contract/purchase.

    • Walter Johnson says:

      No, it would have been less underfunded. It wouldn’t likely have been underfunded at all if the state had not done a temporary early retirement program without paying anything more to PERA to fund it, after the TABOR amendment was passed; if it had continued the 1.5% of payroll which was specifically funding for the Cost of Living Stabilization Fund that paid the COLA; and if it had not changed the full funding period from 40 years to 30 years.

      The main issue even then though is there was no reason to believe the PERA Fund was permanently reduced. PERA lost money on contributions for the first 2 or 3 years I worked for Colorado. That ended when the legislature let PERA manage its own funds instead of paying investment companies to do that. This period was similar in that low rates of return meant fees took a higher share of income, but it too was temporary yet used to justify permanent changes. My wife’s 403(b) plans lost 50% of their investment value, but they are now back to 49% higher than before the temporary loss of value. After all the capital stock used for investments was unchanged during The
      Great Recession and all that was necessary was to wait for recovery. They could also have asked employees to defer receiving all increases until the value was recovered but paid it then.

      For disability retirees they are much worse under PERA because of the COLA cut as well as a benefit reduction and slow salary increases than if they had only Social Security retirement instead of just contributing to Medicare. Yet voters insist because of low journalism standards on comparing PERA with private pension plans that are over and above the Social Security Retirement benefit. In my own case had I been under Social Security instead of PERA I would have received $19 more a month and not have take an option 3 retirement to assure my wife a benefit after my death, yet I paid about 50% more to PERA than if I had paid Social Security Retirement instead of PERA, which was not an option.

      Anyone who isn’t too far locked into the PERA plan is a fool if they work for Colorado or any of its political subdivisions for longer than one year as the law now stands. People will work for less for a year just to get that first crucial year of professional employment history and one year without Social Security contributions will only hurt those who become disabled and have only 9 years under Social Security at the time and thus fall one year short of the minimum cover employment to get any Social Security disability benefit.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: