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July 04, 2012 08:50 PM UTC

DENVER DISTRICT COURT: THE PERA COLA HAS "CHANGED," IT IS NOT CONTRACTUAL . . .

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  • by: PolDancer

THE PERA “BASE BENEFIT” HAS “CHANGED,” IT IS CONTRACTUAL.

In the initial Denver District Court Decision in the case Justus v. State, the Denver District Court concludes that the PERA COLA pension benefit has “changed” over time, and therefore the PERA COLA benefit is not constitutionally protected.  In addition, the Denver District Court found that Colorado PERA retirees can have no “reasonable expectation” that the PERA COLA will not be reduced in the future.  By some unidentified means, the Denver District Court also concludes that the PERA “pension itself” is UNARGUABLY a contractual obligation of Colorado PERA.

The Denver District Court Decision’s author reaches these conclusions in spite of the fact that both the PERA pension “base benefit” and the PERA COLA benefit are set forth in Colorado statutes with identical legal status and force of law, and together constitute “the PERA pension itself.”

The Decision’s author reaches these conclusions in spite of the fact that the PERA “base benefit” has also “changed” over the decades (even for current retirees at the time of the changes.)

The Decision’s author reaches these conclusions in spite of the fact that the “changes” made to the PERA retiree COLA over time “improved” the PERA COLA benefit for PERA retirees.

The Decision’s author reaches these conclusions in spite of the fact that such a holding contradicts long-established Colorado public pension case law.  How is it possible that the Denver District Court rendered a Decision in Justus v. State without making any mention at all of the 1989 Colorado Supreme Court’s determination in Colorado Springs Firefighters v. Colorado Springs?  In this case, the Colorado Supreme Court found that “ENTITLEMENT TO ANNUAL PENSION PAYMENT INCREASES,” “RIPEN(S) INTO VESTED PENSION RIGHTS” when public pension retirement eligibility conditions are met.  This Colorado case law exists . . . it will not simply evaporate.

The Decision’s author reaches these conclusions in spite of the fact that under the Colorado Constitution the PERA COLA benefit is, necessarily, earned, deferred compensation.  If the PERA COLA benefit were a “gratuity” (that is, if it had the discretionary nature of a “gift”) it would be unconstitutional under Article 5, Section 34 of the Colorado Constitution.  This section of the Colorado Constitution prohibits the Colorado General Assembly from using public funds “for benevolent purposes to any person.”  Throughout the history of Colorado PERA, if any pension benefit (“base pension benefit” or “pension COLA benefit”) has been paid to a PERA retiree as a “discretionary,” “benevolent” grant to that PERA retiree . . . then, that payment has been unconstitutional under Article 5, Section 34.

The obligation of Colorado PERA and PERA-affiliated employers to pay the PERA pension COLA benefit arises under an employment exchange transaction.  The PERA COLA benefit is an accrued public pension benefit.  The Colorado PERA statutes set forth conditions for future payment of the COLA benefit that are identical to the conditions set forth for future payment of the PERA “base benefit.”  Colorado PERA retirees have complied with these conditions . . . demonstrating their compliance through performance.  Therefore “all of the elements which are necessary to the formation and existence of an implied-in-fact contract,” at a minimum, are present.  The presence of “legislative intent” is not a necessary condition for the protection of “fully-vested” public pension rights under this contract.  The obligation to pay the COLA benefit is a legal responsibility of PERA-affiliated employers that these employers have no discretion to avoid.  Some Colorado PERA members altered the course of their lives under this agreement . . . they left their careers and became PERA retirees.  Colorado PERA retirees have “performed” under the pension contract.

Further, Colorado PERA is a party to a contract with PERA members who have purchased “service credit” in the pension.  Colorado PERA officials, in the past, encouraged PERA members to purchase “service credit” while a 3.5 percent “guaranteed,” “automatic” PERA COLA benefit was in place in law.  Some Colorado PERA members sent checks to PERA for tens of thousands of dollars as a result of this offer.  

When PERA members sent checks to Colorado PERA to purchase service credit in the pension (under the existing statutory 3.5 percent PERA COLA provision) the performance of these PERA members based on PERA’s offer of pension benefits in exchange for valuable consideration created a public pension “contract” to which Colorado PERA, PERA-affiliated employers, and PERA members purchasing service credit are parties.

The author of the Denver District Court Decision writes: “Plaintiffs’ takings and due process claims likewise are premised on the existence of a constitutional right to an unchangeable COLA formula . . .”.  This statement is both simplistic and false.  Plaintiffs claims in Justus v. State are not “premised on the existence of a constitutional right to an unchangeable COLA formula.”  Plaintiffs claims are premised on the existence of a PERA retiree’s constitutional right to avoid a diminution of their contracted, fully-vested COLA benefit, that is, to avoid a taking of their contracted PERA COLA benefit.  Changes to the PERA COLA benefit that do not impair the pension rights of PERA retirees, that do not diminish the contracted PERA COLA, are legally permissible.

The Decision’s author writes: “It is impossible to establish a contractual right to a particular COLA for life without change where Plaintiffs could have no reasonable expectation to a COLA for life given that the General Assembly (as well as DPSRS) has changed the COLA formula for those retired numerous times over the past 40 years . . .”.  Well, by the Denver District Court’s logic, it is impossible for the Court to establish an “unarguable” contractual right to “the PERA pension itself” for life without change since the General Assembly has “changed” the PERA “base benefit” formula (the bulk of “the PERA pension itself”) for PERA retirees numerous times throughout Colorado PERA’s history.

The author of the Denver District Court Decision writes that the court’s determination “deals only with the COLA and not with base retirement benefits.”  But, the finding of the Denver District Court, that “the PERA pension itself” is “UNARGUABLY” a contractual obligation of Colorado PERA is not possible without an examination of the contractual obligation of Colorado PERA to pay the PERA “base benefit.”

It is not logically possible for the author of the Denver District Court Decision to assert that the Decision does not “deal” with PERA “base benefits” while also maintaining in the Decision that the “PERA pension” is UNARGUABLY a contractual obligation.  A finding that the “PERA pension itself” is UNARGUABLY a contractual obligation IS, manifestly, “dealing” with the “base benefit.”

The author of the initial Denver District Court Decision writes that: “This Court finds, based upon statutory provisions of the last 40 years . . . that the General Assembly’s most recent change to the 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.”  Where is this section of Colorado law providing that “the fundamental mechanism for payment of pension benefits for PERA retirees” has always been “a base benefit set at retirement”?  Where is this section of Colorado law providing that the contracted PERA COLA benefit is not part of the “the fundamental mechanism for payment of pension benefits for PERA retirees”?  I do not see it.

What the author of the initial Denver District Court Decision is unable to explain is how one can have a reasonable expectation to an unchangeable PERA “base benefit” when the formula for that PERA “base benefit” has changed repeatedly for retirees over PERA’s history.

Below, I will demonstrate the “fluid” nature of the PERA “base benefit.”  According to the Denver District Court, the “fluidity” of the PERA COLA benefit denies it the nature of a contracted PERA benefit.  How is it possible then, by the court’s reasoning, that the “fluidity” of the PERA “base benefit” does not also deny the PERA “base benefit” the nature of a contracted PERA benefit?  It is a logical impossibility.

A simple way to begin a demonstration of the “fluidity” of the PERA “base benefit” is through reproduction of a helpful chart published in the May 1997, Colorado PERA “Legislative Update, Special Edition for PERA Members and Benefit Recipients.”  Here is the helpful Colorado PERA chart:

History of Improvements to Retirement Benefit Formula (as a percent of HAS):

Date      Years 1 to 20   Years over 20

1931-1967 2.5% per year   No credit,

1967      2.5% per year   1% per year, max.70%

1987      2.5% per year   1.25% per year,max.75%

1992      2.5% per year   1.5% per year, max.80%

1995      2.5% per year   1.5% per year,max.100%

1997      2.5% per year   2.5% per year, max.100%

When I look at this Colorado PERA chart, I am satisfied that the Colorado PERA “base benefit” has “changed” throughout Colorado PERA’s history.  This Colorado PERA chart informs us that (as with the PERA COLA benefit) changes made over time to the PERA “base benefit” have been “improvements” to the pension “base benefit.”

For more information regarding the Colorado Legislature’s attempt to take fully-vested Colorado PERA pension benefits visit saveperacola.com, or Friend Save Pera Cola on Facebook.

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