The Colorado General Assembly has been the primary contributor to the creation of Colorado PERA’s unfunded pension liabilities in recent decades.  For this body, the author of the PERA pension underfunding “problem,” to argue that the existence of this “problem” should somehow justify its breach of contractual public pension obligations is simply . . . outrageous.

Colorado is a relatively wealthy state.  There are sixty-four counties in Colorado.  Ten of these counties are among the 100 richest counties in the nation.  According to the U.S. Department of Commerce, Colorado now has the 15th highest per capita income in the nation.  I consider any attempt to breach contracts by a state that ranks 15th in the nation in per capita income to be outrageous.

As we have chronicled at, the Colorado General Assembly has traditionally and intentionally slashed its available revenues . . . revenues that would otherwise have been available to the General Assembly to meet its contractual pension obligations.  The General Assembly has ignored its PERA pension contractual obligations.  It has directed one-half BILLION dollars to fund public pensions that are not its responsibility. It has repeatedly and inexplicably made $100 million discretionary grants from its purportedly “tight” revenues.  

Further, over a 17-year period, the Colorado General Assembly has artificially reduced its available financial resources through its own faulty legal reasoning.  The Colorado General Assembly’s own ineptitude (a 1992 OLLS legal opinion’s misinterpretation of the Arveschough-Bird fiscal limitations) artificially diminished revenues available to the State of Colorado for a 17-year period.  How much damage has this legal blunder done to state coffers over this 17-year period?  How much revenue did the state lose as a result of this faulty legal analysis?  Tell me why a relatively small group of Coloradans, PERA pensioners, should have their contracts with the state discarded due to the General Assembly’s claims of insufficient revenues.  Particularly, when the General Assembly’s actions have significantly reduced these available resources.  Why should PERA pensioners bear the burden of the Colorado General Assembly’s past legal mistakes?

As we have seen, the Colorado General Assembly: has ignored $4.3 billion of its annual required contributions to the PERA pension in just the last decade, has ignored legal pension funding options adopted by other states, and has succeeded in transforming the State of Colorado into a “tax haven.”  Over the decades, the General Assembly has given Coloradans one of the lowest tax burdens in the country, and in doing so, has intentionally cut available revenues that might have shored up the PERA pension plan.  The General Assembly has voluntarily made grants from its General Funds for purposes of discretionary property tax relief, while simultaneously claiming that it faces fiscal strife.  Who cannot see that this claim defies logic?

Many members of the Colorado General Assembly have supported the severe restriction of public resources available to the state.  Many supported the adoption of the TABOR constitutional amendment in 1992, and continue to support TABOR’s extreme restriction of public financial resources.  Indeed, the author of 1992 TABOR constitutional amendment has served as a member of the Colorado General Assembly.

In 1999 and 2000, the Colorado General Assembly, at the prompting of Governor Bill Owens, enacted tax cutting measures that significantly reduced the state’s future revenue stream.  This constituted a nearly criminal disregard for the ability of the state to meet its contractual obligations over time.  A Colorado General Assembly that has, by design, decimated its tax base, now beseeches the courts to license the abandonment of its contractual obligations.

The General Assembly has slashed the pension contributions of PERA-affiliated employers over the years.  A quotation from the Colorado Statesman:

“PERA’s troubles date back to 1999-2000, when the pension plan peaked at 104.7 percent on its ratio of assets to obligations (liabilities).  The Legislature was feeling flush, and passed bills reducing the employer contribution.”



The group “Friends of PERA” tells us on their website:

“Rate cuts to PERA (affiliated employers) between 2000 and 2005 equaled some $325 million.”

Ten years ago, the Governor of Colorado allowed his own political preferences to harm the fiscal soundness of the PERA trust funds.  From the Silver and Gold Record archives:

“PERA reacted promptly to the market downturn in 2001.  In 2002, it developed a proposal that would have saved PERA millions of dollars in payments and brought in millions of dollars in additional revenue.  This plan was passed unanimously by the General Assembly in 2003 but was vetoed by Governor Bill Owens.”

How much damage to the PERA trust funds was caused by Governor Owens veto of this bill?  PERA retirees will not relinquish their vested pension rights in order to compensate for past pension mismanagement by politicians.

In 2009, the Colorado General Assembly could not be bothered to appoint a commission to study pension funding options prior to breaching pension contracts.  So it abdicated this policy-making responsibility to pension administrators and lobbyists.  Colorado PERA is one of the public pension plans in the United States that actively lobby its sponsoring governments, spending $400,000 for that purpose each year.  PERA pension administrators have used the trust funds of pension beneficiaries in a long-running and continuing program to influence members of the Legislature.  This fact alone should give pause to elected officials.  

One should also remember that the Colorado PERA Board determines the asset allocation for the PERA trust funds.  The PERA Board determined the portion of PERA’s portfolio that was exposed to equities prior to the most recent equities market downturn.  In lieu of increasing equity exposure in the PERA trust funds, the PERA Board had the option of requesting that the State of Colorado and other PERA-affiliated employers provide additional resources to invest in less volatile securities.  Has this ever occurred to the PERA Board?  Have they ever made this request?

Why should PERA pensioners, who bear no market risk, be forced to relinquish their property to compensate for asset allocation decisions made by the PERA Board?  The PERA Board intentionally places a significant portion of PERA trust funds into volatile common stocks and then is surprised that common stocks are volatile.  Then, the PERA Board argues that this volatility should permit their breach of contracts?

At the core of a defined benefit public pension plan is the assumption of market risk by the public pension plan sponsor.  This fact draws workers to the public employer members of the pension plan as part of the employment exchange transaction.  Will PERA’s administrators deny the very nature of public pension plans?

Further, administrators of public pension plans cannot reasonably claim ignorance of market volatility, even extreme market volatility.  They have experienced extreme market volatility on a number of occasions in just the last decade.  Public pension plan administrators are paid to manage this volatility, not to shift the consequences of their unsuccessful investment strategies onto others through the breach of contracts.  To paraphrase the author of a recent law review article: “The unanticipated severity of an anticipated event does not justify unilateral modification of a contract.”

Instead of adopting legal, prospective pension reforms (as have been adopted by numerous states) the Colorado PERA Board insisted that PERA pensioner contracts be breached.  This decision could ultimately delay true PERA pension reform in Colorado by 4-5 years.  These are years during which the PERA trust funds might have been on the road to financial strength through legal reform.

Make no mistake: Colorado taxpayers will eventually be forced pay billions of dollars in additional costs resulting from the Colorado PERA Board of Trustees’ decision to delay true, legal pension reform and instead pursue fruitless litigation.

A commentator in another state that is addressing public pension liabilities put it well:

” . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”

Gino L. DiVito, Tabet DiVito & Rothstein LLC, Chicago, ILL

Colorado law allows the Governor to submit questions to the Colorado Supreme Court regarding the constitutionality of proposed legislation.  This option was available to Governor Ritter and (through him) it was available to the General Assembly.  The Denver Post editorial board encouraged the General Assembly to make this request prior to enacting SB 10-001.  In addition to the Denver Post editorial board, Colorado PERA itself encouraged the General Assembly to send an interrogatory to the Colorado Supreme Court regarding the constitutionality of its proposed pension reforms.  The General Assembly failed to do so.  From the Colorado Statesman:

“PERA also is hoping the Legislature will ask the Colorado Supreme Court to review the matter through interrogatories before the end of the session.”



Question: If the Colorado PERA Board of Trustees possessed such confidence in its SB 10-001 pension reform proposal, why did the PERA Board of Trustees encourage the General Assembly to check the constitutionality of the proposal with the Colorado Supreme Court?  Obviously, the Colorado PERA Board of Trustees lacked confidence in the constitutionality of the proposal (contained in SB 10-001.)  If the PERA Board had complete confidence in the proposal . . . if the PERA Board had complete confidence in their 2009 outside legal opinion supporting the proposal . . . if the PERA Board had complete confidence in the legal advice they received from internal and external attorneys, then the PERA Board would not have desired that the Colorado Supreme Court check their work before they plunged headlong into litigation.

Question for the PERA Board and administrators: How did the leadership of the Colorado General Assembly explain their decision to forego a Colorado Supreme Court interrogatory on the constitutionality of SB 10-001’s provisions?  Who communicated this decision to you?  Senate President Brandon Shaffer?  What was the rationale?

Colorado is a Wealthy State, and . . . Colorado is a “Tax Haven.”

Should one of the wealthiest states in the nation (and a state that also enjoys one of the lowest tax burdens among the states) be permitted to breach its contractual pension obligations in order to further reduce that tax burden?

The Colorado Fiscal Policy Institute publishes a “Colorado Tax Fact Sheet.”  The source of much if the data in this fact sheet is the staff of the Colorado General Assembly.  The fact sheet is available at this link:

What does a “tax haven” look like?  The Colorado Tax Fact Sheet shows us:

–  Colorado’s state tax collections are the second lowest in the nation.

–  Colorado’s combined state and local taxes are the seventh lowest in the nation.

–  Total Colorado taxation per $1000 of income has decreased over the past ten years.

–  Colorado’s corporate income tax rate is 4.63%, the same as the individual income tax rate.

–  Colorado ranks 42nd of 46 states in corporate income tax collections.

–  Twenty-nine states have a flat corporate income tax rate.  The lowest is Utah.  Colorado’s is the second lowest.

–  In 2001, Colorado’s sales tax rate was lowered from 3.0% to the current rate of 2.9%.

–  Colorado taxes the fewest number of services of any state.

–  There are a total of 71 exemptions from state sales and use taxes in Colorado law.  In 2009, Colorado’s exemptions accounted for $1.8 BILLION in lost revenue.

–  Colorado ranks 44th of 45 states in sales and use tax collections.

–  All other states include more services in their sales tax mix than does Colorado.

–  Colorado ranks 32nd out of the 50 states in fuel tax collections.

–  When the combined state severance tax and the local property tax is considered, Colorado ranks 4th of 5 western states (Wyoming, New Mexico, Oklahoma, and Utah).

–  Colorado has no statewide property tax.  It was repealed by the legislature in 1964.  (My comment: In the decade following the repeal of the statewide property tax Colorado PERA’s actuarial funded ratio hit a low of 54.5 percent, yet there was no call to breach the state’s pension contracts.)

Colorado’s Public Expenditures Per Capita are 62 Percent Below the National Average.

The Colorado Fiscal Policy Institute also publishes a “Colorado Tax Primer.”  A PDF of the Colorado Tax Primer published on January, 2011 is available at the following link:…

Below I provide a few relevant excerpts from the Colorado Tax Primer:

“Adequacy Compared to Other States:”

” . . . adequacy is measured by whether the system generates sufficient revenue to fund legislatively-enacted priorities.”

“Certain states (such as Colorado with the implementation of the Taxpayer Bill of Rights) have ignored the fundamental principle that the need for public services should drive the collection of tax revenue.  Instead, these states have flipped the principle on its head by capping tax revenue based on a formula that attempts to define the need for public services based on allowable revenue.”

(My comment: Recall that the constitutional TABOR amendment recognizes Colorado public pension obligations as “debt.”)

“There are multiple ways of measuring the adequacy of revenue as it translates into services. One such measure is state rankings.  Colorado consistently ranks low on expenditures when compared to other states.  Overall, in 2009 Colorado ranked 47th in spending per $1,000 of income.  A recent analysis shows that in order for Colorado to reach the national average in total spending per $1000 in income, the state’s General Fund spending would need to grow by $4.9 billion or 62 percent.”

“The amount of taxes paid by Colorado taxpayers is low compared to other states.  Colorado’s state taxes, per $1,000 of income, rank second from the bottom (49th) in the nation.  Alaska has the highest and New Hampshire the lowest.”

“The income tax rate was subsequently reduced to 4.75 percent for calendar year 1999 and 4.63 percent beginning on Jan. 1, 2000.  This is the current tax rate.  Referendum C, adopted by the voters in 2005, allows the income tax rate to decline to 4.5 percent under specified circumstances after 2010.”

“Colorado ranks 42nd out of 46 states for corporate income taxes per $1,000 of income. The national average for all 46 states is $3.29.  Colorado businesses pay $1.55 per $1,000 of income.”

“In addition, many more income tax exemptions and special deductions are not reported at the state-level since they are applied to the calculation of federal taxable income.”

“There were a total of 71 exemptions from state sales and use taxes in Colorado in 2008.  In 2009, Colorado’s exemptions accounted for $1.8 billion in revenue.”

“Colorado’s sales tax ranks 44th of 45 states per $1,000 of personal income.  Five states have no state sales tax.  The average amount of sales tax paid by all states is $19.68 per $1,000 of income.  Colorado taxpayers pay $10.86.”

“Colorado is one of only four states in which the state government generates less tax revenue than the local governments.  Revenue collections by Colorado state government rank 47th per $1000 of income.  However, revenue collections by state and local governments combined move Colorado to 44th per $1000 of personal income.”

Observations From the Colorado Legislative Staff Regarding Colorado’s Level of Taxation:

“Since 1935, Colorado has enacted 71 sales tax exemptions. For FY 2009-10, estimates show that the total revenue impact of these exemptions was over $1.86 billion.”

Source: Colorado Legislative Council Staff:  


“Colorado’s combined state and local taxes were the seventh lowest in the nation – $95.53 per $1,000 of income, which was 14.7 percent below the national average of $111.99 in FY 2007-08.”

“Colorado had the second lowest state tax collections ($40.89) per $1,000 of personal income in FY 2008-09 in the country.  The state tax burden was nearly the same (the state ranked 47th ) ten years ago in FY 1997-98, although collections were higher at $54.68 per $1,000 of income.”


Clearly, over the decades, the Colorado General Assembly has obliterated its tax base . . . it now seeks to obliterate its contractual pension obligations.  Nevertheless, the Colorado General Assembly is the creator of the Colorado Public Employees’ Retirement Association.  The Colorado General Assembly freely entered into contractual relationships with all PERA members.  Having created these contracts, the General Assembly must now honor them.

“No State shall . . . pass any . . . Law impairing the Obligation of Contracts.”

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