Denver’s Donnell-Kay Foundation Hears Pension Reform Ideas From Pew Center.

On October 17, 2012, the Donnell-Kay Foundation held a “Hot Lunch” meeting in Denver with representatives of the Pew Center and the John Arnold Foundation.

My take is that Donnell-Kay is an organization that works for the betterment of Colorado’s education system, but is also an advocate for elimination of public sector defined benefit plans in favor of cash balance or defined contribution plans. I believe that Donnell-Kay finds a kindred spirit in the Pew Center/Arnold Foundation partnership.

Here’s a description of the “Hot Lunch” presentation:

“Josh B. McGee, Vice President for Public Accountability Initiatives at the Laura and John Arnold Foundation, presented ‘Affordable, Sustainable and Secure: Fixing retirement savings systems for future generations.” Also presenting at the “Hot Lunch” was David Draine, lead researcher on public sector retirement systems at the Pew Center on the States.

A Podcast of the presentation is available at a link provided by EdNewsColorado here:…

And, slides from the talk are here:…

I listened to the podcast and looked at the slides. I appreciated Josh McGee’s third slide titled “Colorado Pension Plans – Recommended and Actual Contributions.” This slide addresses the shortfall in the Colorado General Assembly’s annual required public pension contributions over the last decade. (Later in the presentation, David Draine of the Pew Center states that the Colorado General Assembly has underfunded Colorado PERA by $3.5 billion from 2000 to 2011.)

On Josh McGee’s seventh slide he suggests that: “The unfunded (pension) liability should be viewed as government debt.” (Agreed . . . in fact, I’ve noticed that Colorado’s TABOR amendment implicitly recognizes public pension obligations as state “debt,” not to mention Colorado case law, AG opinions, etc.)

On later slides Josh McGee presents the John Arnold Foundation’s advocacy of cash balance and defined contribution plans.

An article covering the “Hot Lunch” presentation quotes David Draine on the reasons for Colorado PERA’s financial downturn: “Contributions weren’t made, benefit increases weren’t paid for and investment returns didn’t materialize, he (Draine) said.”

A person named “Marilyn Sweet” has the following comment (in the comment section) under the article covering the Hot Lunch presentation:

“This article fails to mention that in 2000 the Republican governor and legislators made PERA refund money to employees in the form of Matchmaker which gave us each $40 a month in refunds from the pension system. The fund was 102% funded and apparently this was unbearable to the Repubs. The problem stems from the lawmakers messing with a good system and not ‘banking’ during the good years. Poor business practice at best. Don’t blame the retirees for this shortsightedness.”

(My understanding is that EdNewsColorado is funded by Donnell-Kay.)

In my opinion, the Pew Center appears to be ready to save public resources through the breach of public pension contracts where possible (see comments below in support of pension reforms adopted in Rhode Island and San Jose that seized contracted pension COLA benefits.)

Now for a few quotations from the podcast. David Draine of the Pew Center on the States:

“From 2000 to 2011 contributions from state and local governments in Colorado fell short of what they should have been by $3.5 billion.”

“Ultimately these benefit promises will need to get paid.”

“It is also clear that the longer states delay the more painful the fiscal impact will be.”

(This statement calls to mind an observation from the Illinois pension reform debate:

” . . . 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)

In his talk, David Draine also sang the praises of the San Jose and Rhode Island pension reform efforts (which, by the way, included COLA theft.) Finally, he noted that PERA’s new leader, Greg Smith, was also present at the hearing. As a newly anointed Executive Director, where does Greg Smith intend to take Colorado PERA next?

Josh McGee, of the John Arnold Foundation then spoke. Here are a few quotations:

“We’ve promised one thing and funded something completely different.”

“There is an incentive to underfund these systems.”

(I found it interesting that Josh McGee commented on the loss in pension wealth that his wife [who is teacher] incurred when the couple chose to move from Arkansas to Texas.)

Josh McGee then pointed out the benefits of cash balance and defined contribution plans, and said that the costs of transitioning to a new public pension system is a “red herring.”

“There are no costs to transitioning” to a new plan system.

So, in my opinion, it appears that the Pew Center and the John Arnold Foundation are not attempting to provide objective public policy research . . . they are advocates for specific policy solutions to the public pension underfunding problem, and are apparently apologists for the breach of public pension contracts. (Nothing wrong with being an advocate as long as you let people know!)

Here’s a link to a Josh Mcgee paper recommending DC plans, Cash Balance plans, and Hybrid pension plans:…

Here’s the Donnell-Kay’s position on Colorado PERA:

“The current pension system (PERA) provides none of these assurances; it ensures that salaries are held low, that once a person enters the teaching profession, for example, that they should stay for their entire lifetime, that there is only one way to save for retirement and that wildly optimistic earnings projections will mask a system that is and never will be fully funded.”


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