May 06, 2012 06:43 PM UTC

The Great Colorado Pension Heist of 2010: Monahan Paper

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• by: PolDancer

A New Review of the Monahan Paper, “Public Pension Plan Reform: The Legal Framework.”

Many of you are familiar with the public pension law analysis, “Public Pension Plan Reform: The Legal Framework,” by Professor Amy Monahan at the University of Minnesota School of Law.  Monahan’s paper addresses the legal obligations of state and local pension plan sponsors in the United States.

On page 28 of the paper Professor Monahan notes that public pension retirees in Colorado have a “contract, at some time prior to eligibility for retirement,” but that the point in time at which this contractual right arises is “unclear” based on the case law.  Further, Monahan writes “Colorado courts have held that prior to eligibility to retire, plan changes can be made if the changes ‘strengthen or better’ the retirement plan, or if they are actuarially necessary.”  Note the distinction “prior to eligibility for retirement.”

Read Professor Monahan’s paper here:

http://papers.ssrn.com/sol3/pa…

I recently came across a review of Professor Monahan’s paper by Paul M. Secunda, Professor of Law at the Marquette University Law School.  Professor Secunda published his review on February 16, 2012 at this site:

http://worklaw.jotwell.com/pub…

Particularly intriguing is this passage in Secunda’s review:

“Where states treat their pension promises as contracts, she (Monahan) discusses federal and state constitutional contract clause challenges when states seek to amend their state pension plans.  She points out, quite rightly, that such states are subject to these constitutional challenges because pension changes tend to cause a substantial impairment of the contract without being able to show that it was reasonable and necessary to an important public purpose (i.e., saving money alone has not been deemed an important public purpose).  The upshot is that it is very difficult for states with pensions based on contractual theories to reform their public pension plans even when the need to do so is obvious and dire.”

Reading Secunda’s review I wondered what “important public purpose” other than insufficient public sector resources might exist in Colorado that could justify the breach of fully-vested public pension rights . . . particularly given that partially vested pension rights in Colorado were relatively unscathed by SB 10-001.  (Recall the Penry/Brophy statement “Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees.”)

It’s clear that the Colorado General Assembly no longer believes that the state faces a fiscal “crisis.”  This fact was amply demonstrated a few weeks ago when the Legislature granted $100 million in discretionary tax relief.  Does the Colorado General Assembly want the power to beach public pension contracts on a whim?

Monahan’s paper also highlights a Nebraska Supreme Court decision relating to public pension COLAs:

“For example, in Calabro v. City of Omaha . . . the City of Omaha sought to eliminate a supplemental pension plan that paid cost-of-living increases to participants.  The Supreme Court of Nebraska found such a change to be an unconstitutional impairment of contract, even where third-party financial reports warned that “continued funding of the supplemental benefit would cause serious fiscal problems for the city.” (Calabro v. City of Omaha, 531 N.W.2d at 552).  In reaching its conclusion, the court focused on the fact that the same third-party financial reports emphasized the need for a new, alternative funding source for the benefits, not the elimination of the plan. As a result, the court was unconvinced that terminating the plan was the “only viable alternative for correcting its alleged fiscal woes.'”

What can you do?  Go to the saveperacola.com website, click on the “Support” tab, and send them a contribution.  Call or e-mail every PERA member and retiree you know and ask them send support.  Call your public employee union representatives and ask them how they can stand idly by while the Colorado Legislature attempts to breach its contracts with public employees.  Colleagues of our public sector union officials across the country are aggressively defending the pension rights of their union members.  What has happened in Colorado is truly bizarre.

To follow developments in the Colorado pension theft lawsuit sign up as a Friend of Save Pera Cola on Facebook.

Have your friends sign up as Friends of Save Pera Cola.  Copy this post and e-mail it to PERA members and retirees you know.