Colorado’s Statutory Double Standard on Public Pension Contracts.

LAST YEAR, THE COLORADO LEGISLATURE ADOPTED LEGAL, PROSPECTIVE PENSION REFORM (FOR COUNTY GOVERNMENTS).  WE HONOR THE PENSION CONTRACTS OF THESE COUNTY PENSIONERS, WHY ARE WE ATTEMPTING A RETROSPECTIVE TAKING OF ACCRUED COLORADO PERA RETIREE BENEFITS?

As you know, the State of Colorado is trying to break its contracts . . . escape its legal public pension obligations.  In 2010, the Colorado Legislature passed a bill that proposes to take back accrued, earned, contracted, deferred compensation from public pensioners in the state.  The bill taking these pension benefits, SB10-001, proposes to shift the debt of Colorado state and local governments onto the backs of Colorado PERA retirees.

But, you may not know that a double standard exists in Colorado law on this matter of public pension contractual rights.  Under Colorado statutes, the public pension plans of certain Colorado county governments are to be reformed prospectively.  Respect for the vested, accrued benefits of pensioners in these counties has been codified in Colorado law.  While such legal pension reform is embraced in one article of the Colorado Revised Statutes for county governments, another section of the law (that governing the state’s pension plan, Colorado PERA) includes provisions that mandate state seizure of accrued, fully-vested pension benefits from Colorado PERA retirees.

Under current Colorado law, if you worked for one of these county governments and retired after 30 years, your accrued pension rights are protected.  Under Colorado law, if you worked for the State of Colorado, and retired after 30 years, the statutory double standard mandates that up to one-third of your retirement benefit will be seized by the state.

The existence of this double standard in Colorado law is particularly egregious given that some of the county governments for which prospective, legal pension reform is permitted have pension systems that are in far worse financial shape than was Colorado PERA at the time of the adoption of SB10-001.  In 2010, the Colorado Legislature determined that it was “actuarially necessary” to bolster the Colorado PERA pension plan by taking accrued pension benefits.  Two years later, the Colorado Legislature determined that it was NOT “actuarially necessary” to reform public pension plans that had lower funded ratios than Colorado PERA (county plans) by taking accrued pension benefits.

It should also be noted that public pensioners in these counties participate in Social Security.  Colorado PERA pensioners are not eligible to participate in Social Security.  They rely much more heavily on their contracted PERA benefits, while their counterparts in Colorado county governments have this “extra leg of the retirement stool.”  Yet, the accrued benefits of Colorado PERA pensioners are seized, while county pensioner accrued benefits are honored.

If legal, prospective pension reform is appropriate for an administrative division of Colorado state government (county government), why is legal, prospective pension reform not appropriate for the State of Colorado itself?  If the Colorado General Assembly had not abdicated its public pension policy making authority to 27 union and corporate lobbyists in 2010, it might have considered legal, prospective public pension reform options similar to those advocated by the proponents of SB12-149, the bill by which prospective pension reform for the county governments was permitted.  The proponents of SB12-149 include Cindy Birley, a public pension attorney with many decades of experience.  The 2012 decision of the Colorado Court of Appeals affirming the contractual nature of Colorado PERA COLA benefits reveals that the proponents of SB12-149 were correct to pursue prospective reform of their pension systems.  The proponents of SB12-149 rely on the DeWitt case to permit changes simply to future pension accrual rates.  Colorado PERA is relying on DeWitt for its ill-advised and reckless attempt to claw back fully-vested PERA retiree benefits.

“Cindy Birley has over 25 years of experience in the employee benefits and executive compensation field.  Ms. Birley is recognized in the 2009-2013 editions of The Best Lawyers in America in Employee Benefits Law.  She is a member of the American, Colorado, and Denver Bar Associations.  She is also a member of the National Association of Public Pension Attorneys, Denver Chapter of the Western Pension & Benefits Conference, and Colorado Municipal League.”

http://www.dgslaw.com/attorneys/cindy-birley

If the General Assembly had not abdicated its public pension policy making responsibility in 2010, it might have, rationally, sent an interrogatory to the Colorado Supreme Court regarding the constitutionality of the pension reform proposal, SB10-001.  The Legislature was encouraged to take this step.

In the past, we’ve looked at a prospective pension reform proposal offered by Professor Amy Monahan of the University of Minnesota School of Law.  Professor Monahan proposes that public pension reforms be adopted by state governments that alter the rate of FUTURE accrual of pension benefits, thus avoiding retrospective takings of such accrued benefits.  This proposal is made in Monahan’s paper “Public Pension Reform: The Legal Framework.”

In her paper, Professor Monahan writes:

“What if, ten years into X’s tenure with the state, the state announces that effective immediately, pension benefits will only accrue at the rate of 1% of salary per year?  I have argued that such prospective changes should be permitted absent an explicit agreement protecting against such changes.”

Professor Monahan concludes:

“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.”

Link to Monahan law article:

http://www.law.umn.edu/facultyprofiles/monahana.html

I consider Professor Monahan’s public pension reform proposal to be a “less drastic” public pension reform than Colorado PERA’s breach of the fully-vested public pension contracts of current retirees in 2010.

In 2012, when the Colorado General Assembly adopted SB12-149, the Legislature demonstrated that it is capable of adopting legal, prospective public pension reforms.  Here is a description of SB12-149 from the Colorado Municipal League:

“Permits the board of a defined benefit plan or system created by a local government to (for a specified period of time) modify the benefits and the age and service requirements for any such plan or system when the board determines the modification is required to ensure the sustainability of the plan or system.  Specifies that any modifications to the benefits and age and service requirements shall not adversely affect vested benefits already accrued by members of such defined benefit plans or systems.”

http://www.cml.org/uploadedFiles/CML_Site_Map/_Global/Legislative/laws_2012.pdf

Senator Pat Steadman was the prime sponsor of SB12-149 in the Senate.  Why did Senator Steadman agree to carry SB12-149?  It’s odd that Senator Steadman supports SB12-149, a bill proposing a prospective, legal public pension reform, while also supporting SB10-001 in 2010, a bill that operates retrospectively, taking accrued PERA retiree benefits . . . it just doesn’t add up.

From, “PERA Changes: Shape up or Shakedown?”

“Senator Pat Steadman (D-Denver) (on SB10-001) said, "I wasn't the first to jump into this wagon, but I think this bill is great progress."

http://www.coloradocapitolwatch.com/blog/2010/01/27/pera-changes–shake-up-or-shake-down/

Senator Steadman was present at the Denver meeting of the Colorado PERA Listening Tour on August 11, 2009 where he heard Colorado PERA Executive Director Greg Smith state:

“In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” “And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.”

The balance of this article provides summaries of legislative committee hearings on the bill, SB12-149 and quotations from these hearings pertinent to the breach of Colorado PERA retiree contracts.  During the legislative hearings on SB12-149, members of the Colorado General Assembly commented extensively on the concept of “actuarial necessity,” the DeWitt test in Colorado case law, prospective public pension reform, and the involvement of Colorado PERA and Colorado’s public sector unions in the development of SB12-149.

First, some excerpts from the Senate Finance meeting summary for SB12-149, March 13, 2012:

“02:20 PM — Senate Bill 12-149

Senator Steadman, prime sponsor, presented Senate Bill 12-149 concerning allowing local government pension plan boards to make modifications to defined benefit plans.  Senator Steadman stated that the bill impacts defined benefit plans in five counties in Colorado: Adams County, Arapahoe County, El Paso County, Pueblo County, and Weld County.  He explained that the bill seeks to get rid of the unfunded liabilities in the defined benefit pension plans in these counties and allows the pension boards to shore up the long term solvency of the plans.  He concluded his opening remarks by stating the bill is about retirement security and enabling local governments to make decisions for themselves as to how to secure their pension funds.”

“02:30 PM

Committee discussion ensued about differences between the statutory requirements of the Public Employees' Retirement Association of Colorado (PERA) and local defined benefits plans.”

“02:33 PM — Ms. Vicki Johnson, an attorney representing the Adams County Retirement Plan, spoke in support of the bill.  Ms. Johnson explained the difference between defined benefit plans and defined contribution plans, and stated that this bill does not impact counties with PERA, defined contribution plans, or home-rule cities.”

“03:16 PM — Mr. Michael McIntosh, member of the Adams County Retirement Plan Board of Directors, spoke in support of the board.  He discussed why the Adams County plan is currently under-funded.”

“03:23 PM — Mr. Erik Hansen, Adams County Commissioner, spoke in support of the bill.  He talked about the need to avoid reducing benefits for current retirees.”

“03:26 PM — Mr. Frank Weddig, former state senator and former Arapahoe County Commissioner, spoke in support of the bill.”

“03:29 PM — Mr. John MacPherson, a member of the Colorado Coalition for Retirement Security, spoke in opposition to the bill.  He stated that there is no need for the bill because it gives boards legal immunity for actions they are already legally able to take.  He stated that the bill does not give these counties any additional tools to manage their retirement plans.”

“03:33 PM — Ms. Cindy Birley, an attorney representing the Adams County Retirement Plan, spoke in support of the bill.  She summarized the testimony that was given by previous witnesses and discussed some case law that was used in developing the language of the bill.”

“03:43 PM

Ms. Birley continued her testimony.  Senator King asked Ms. Birley about the unfunded liabilities of the other counties that would be impacted by this bill.  She answered by reiterating that none of these other counties oppose the legislation.”

“03:54 PM

Senator Guzman asked Ms. Birley if this legislation would impose any new requirements or restrictions on the other counties affected by the bill.  Ms. Birley answered that making changes to a county plan by its board is voluntary and not required.  Senator Johnston asked Ms. Birley to confirm the three classes of rights that exist in the defined benefits plans.”

“04:05 PM

Committee discussion ensued regarding case law that is applicable to the bill.”

“04:16 PM

Senator Johnston spoke about his concerns with the bill and brought up the possibility of including a repeal date of one year.  Public testimony was closed.”

“04:23 PM

Senator Steadman gave closing remarks and stated that this bill is about retirement security and dealing with future liabilities in a responsible way.”

Link to meeting summary:

http://www.leg.state.co.us/clics/clics2012a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/8eaf024bd08e6f24872579c0006fb917?OpenDocument

Below, I provide quotations from the Senate Finance Hearing on SB12-149 on March 13, 2012 that are relevant to the taking of the Colorado PERA pension COLA benefit by the Colorado General Assembly in 2010.

Beginning 36 minutes into the meeting:

Senator Steadman noted that the bill affects five county defined benefit pension plans in Colorado.  Steadman:

“The impetus for this bill is; however, very similar to what we saw two years ago when we were looking at SB10-001.”

“The bottom there of page 3 actually talks about not impairing vested rights, and so really that’s just reciting some existing boundaries that exist.”

(My comment: Here is the language in the bill that Senator Steadman refers to:

“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”)

Senator Johnston, Chairman Senate Finance Committee:

“You (Adams County) are probably the most underfunded pension plan in the state, certainly the most underfunded that I’ve seen.”

Vickie Johnson, Davis Graham and Stubbs, attorney for the Adams County Retirement Plan, noted that her associate Cindy Birley, “is the tax and benefits counsel for more than 25 pension plans around the country and in Colorado.”

Vickie Johnson:

“Boards of pension plans have very limited options to improve the funded status of the plan.”  “They could cut benefits, but for incoming employees . . . employees that haven’t been hired yet.”

“Now, we’ve made clear that any modifications to benefits and age and service requirements shall not affect vested benefits already accrued.  So, it won’t affect benefits that are already earned or benefits of retired members.”

“When an employee begins working for a government entity that offers a pension, and the employee contributes to that benefit, the benefit offered to the employee is considered to be a contract right governed by the United States Constitution.”

“The legislation that we’ve drafted, we use the Dewitt case, and this is the case that PERA is using right now to argue that the court should uphold their cuts to the COLA.”

“There’s case law that says that . . . a board can make a change to limited vested rights . . . when it’s due to actuarially necessity.”

“PERA has been arguing that this Dewitt case, which comes after those cases, has wiped out that limited vested concept and the concept of actuarial necessity.”

“So, we had worked to maybe actually try to define what sustainability would be . . . like when a plan fell below 60 percent funded . . . but, there was a lot of concern that we shouldn’t define that.”

“As I said, in Subsection 3, we make clear in the proposed legislation that vested benefits already accrued, including the vested benefits of retirees, are not going to be touched.”
 
“So, if a board was going to go and make changes, it would be to future benefit accruals, not stuff that has already been earned.”

Vicki Johnson embraces the Monahan proposal:

“For example, if you’re going to be paid a 2.5 percent multiplier, we could say ‘you’ve earned it to this day,’ and here’s your benefits to this day, we may reduce your benefit multiplier going forward.”

Pamela Mathisen, Adams County Retirement Plan Administrator:

“The proposed legislation prohibits reducing benefits already accrued, and we do not intend to reduce those benefits.”

Leslie Thompson, actuary, Gabriel, Roeder, Smith:

“This reform looks at just amending the accruals in future years for current employees . . . nothing that has already been earned.  This is a standard tool in the private sector tool kit, and I know we’re not private sector, but private sector has always been allowed to amend future accruals, never touch what has already earned, that’s completely protected.”

Michael McIntosh, member of the Adams County Retirement Plan Board of Directors:

“We’re not talking about doing anything with the benefits that they’ve already accrued, we’re not going to touch those, it would just be things moving forward.”

“Anything going forward affecting my benefits, that’s different from what it is today, I need to obviously be able to plan for that.”

(My comment: Colorado PERA retirees with fully-vested pension benefits feel the same way.)

Cindy Birley, Davis Graham and Stubbs, (a 10-year member of the National Association of Public Pension Attorneys):

“Based on current case law, we do not believe that we are able to reduce benefits for people who are eligible to retire, without having this legislation.”  “So, for example at Adams County there are approximately 300 people that we could not reduce their future accruals.”

(My comment: SB12-149 allows Adams County to change the rate of future accrual of pension benefits for employees who are currently eligible to retire, assuming that they continue to work.)

Cindy Birley:

“For future service . . . we would like to be able to lower that benefit formula, multiplier . . .”.

“We’re unable to do that under some of the current case law, one of which is the ‘Police versus Bills’ case . . . “.

“These are fully-vested rights once the person is eligible to retire.”

“A partially-vested right you could eliminate due to actuarial necessity under some of the historical case law.”

“You’ve got fully-vested rights for everything that you’ve accrued, but your future accruals could be at a lower formula rate.”

Committee Chairman Senator Johnston:

“What you’re telling me is that you believe that this bill actually substantively changes the ability for us to eliminate fully-vested rights for someone who is eligible for retirement, but has chosen to keep working.”

Cindy Birley:

“Correct, on a prospective basis.”

“We did have . . . in initial drafts of the bill, we had a numerical test (a percent funded ratio threshold) . . .”.

“We met in Senator Steadman’s office . . ., at a reception that Senator Steadman had for stakeholders on January 9th, and we met with representatives from PERA, Colorado WINS, AFSCME, as well people from Arapahoe and Adams.”

“The various union groups and PERA were adamantly opposed to putting in an actuarial necessity test.”

(My comment: Well of course, the proposed test for “actuarial necessity” was lower than Colorado PERA’s funded ratio [69% AFR] at the time of the breach of Colorado PERA retiree pension contracts.)

Cindy Birley:

“We were asked to remove that, they urged us to remove it, and so at their request we took out an actuarial necessity test.”

“We were essentially told that if are unable to make that concession it would not pass through legislation, because there were enough Senators and Representatives who would vote ‘no’.”

Senator Steadman:

“If you study the DeWitt Case, you’ll find . . . is that when modifications are made in order to ensure sustainability of the plan, one of the things they’re going to look at is sort of who has been responsible for putting us into the ditch that we’re in now.”

“ . . . and if the plan was sort of deliberately driven into the ditch, that’s not an excuse for them coming in and undermining the benefits that your own . . . malfeasance and how you’ve, you know breach, perhaps, of fiduciary duty in managing the plan, isn’t going to save you at that point.”

(My comment: The fact that the Colorado General Assembly drove Colorado PERA into the pension “ditch” over the last decade is well-established . . . billions of dollars of underfunding, mismanagement, cutting needed state revenues, discretionary grants for state property tax relief in lieu of contractual pension payments, failure to propose measures to provide sufficient revenue to meet contractual obligations, funding local pension obligations that are not the state’s contractual duty, etc.)

Senator Steadman:

“I became increasingly convinced that any kind of numeric formula in statute was probably a bad idea.”

Senator King:

“Because, the formula was 60 percent.”

Senator Steadman:

“That was the one that was on the table at the time.”

(My comment: At this January 9, 2012 meeting, did Colorado PERA, or AFSCME, or Colorado WINS officials agree that a 60 percent standard was an appropriate threshold?  Remember, there is no threshold at which fully-vested retiree benefits can be taken by the state.)

Cindy Birley, said that actuaries in the 1990s told pension boards:

“You can afford to give a cost-of-living adjustment this year and here’s how much it’s going to cost in assets, and the boards would say ‘sure’.”

Senator Steadman:

“Just for the committee’s benefit, this Legislature did the exact same thing with PERA in that exact same time period, and PERA was like at 104 percent or 105 percent funded.”

Senator Johnston:

“We have three categories of rights here . . . “

“We have partially vested rights, which under the AG’s opinion of 04, they are still deferring to Bills and (McPail) that, that is an actuarial necessity standard . . .”

“So the legal standard for partially-vested is still actuarial necessity.  Is that correct?”

Cindy Birley:

“DeWitt blends and just chats about vested rights and so the question is, is whether there is a partially-vested and a fully-vested rights category.”

“I believe it was an amicus brief that was filed in connection with the PERA case . . . page 5, May 13, 2011.”  “It was a brief, it’s not a court order.”

Senator Johnston:

“The other two categories are vested rights not retired, and then vested rights already retired.”

“What you want us to do is reinforce the ‘defer to the legislative action’ part of DeWitt, rather than the three-part contractual test.”

(My comment: Remember that 30 to 40 years ago public pensions in the United States were “mostly pay as you go,” they had funded ratios of zero, yet contracts were upheld.  Indeed, pension contracts were upheld during the Great Depression.)

Senator Johnston:

“But, PERA is going to have win an actuarial necessity case at 64 percent . . .”.

(My comment: Colorado PERA’s “actuarial funded ratio” at the time of the PERA contract breach in perspective:

– (54.5% to 105.2%) – 40-year range of the Colorado PERA actuarial funding ratio (AFR), (source, Colorado PERA.)
– 78% – average PERA AFR over the 40-year period.
– 68.9% – PERA AFR at time of the taking of the contracted 3.5 % COLA benefit.
– 9.1% – difference between the PERA AFR at time of COLA taking and the 40-year average PERA AFR.
– 11.1% – difference between PERA AFR at the time of the COLA taking and an 80% AFR level considered “well-funded” by Fitch Ratings.
– 72% – average AFR at the end of 2009 for 57 state retirement systems reporting to Wilshire Associates.
– 3.1% – difference between the Colorado PERA AFR and Wilshire Associates average AFR for 57 state retirement systems at time of PERA COLA taking.)
Cindy Birley:

“The PERA order is just on DeWitt.”

Senator Johnston:

“So, if you don’t have us, you would have to use actuarial necessity instead of Dewitt which is a higher standard.”

Cindy Birley:

“But, we couldn’t make changes for people that are eligible to retire like Pam . . .”

“The three-part test only applies when you have a state statute.”

“Vicki is mentioning that the cases that had actuarial necessity also had state statutes.”

Senator Johnston:

“Has there never been a pension fund whose plan was modified without a preexisting state statute to support it?”

Cindy Birley:

“I think that pension funds have been modified, without preexisting state statutes, but they have not gone so far as to modify the benefits for people who have . . .and I’m not sure there is case law on it, that I’m aware of, in Colorado.”

“Generally, you would not change people who have already retired . . .”.

“There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.”

“The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . .  ‘definitely determinable’.”

“So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.”

“Because, it may not qualify as a defined benefit plan.’

“We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.”

“It still has to pass muster as a DB plan.”

Now, we move over to the Colorado House and the House Finance meeting where SB12-149 was considered on April, 18, 2012.  Here are excerpts from the summary of that meeting:

“01:48 PM — Ms. Vicki Johnson, an attorney representing the Adams County Retirement Plan, spoke in support of the bill and distributed a handout on the Adams County Retirement Plan.  Ms. Johnson explained the difference between defined benefit plans and defined contribution plans, and stated that this bill does not impact counties with PERA, defined contribution plans, or home-rule cities.”  “She concluded by stating that the bill will not affect benefits that are already accrued and vested or those benefits of retired members.”

“02:30 PM — Mr. Joseph Pacyga, representing the Adams County Retirement Plan, spoke in support of the bill and responded to committee questions about local government pension plans.”

“02:38 PM — Ms. Cindy Birley, an attorney representing the Adams County Retirement Plan, spoke in support of the bill.  Ms. Birley responded to committee questions about local government benefits under the pension plan systems.”

“02:45 PM — Ms. Diane Hunt, representing Gabriel, Roeder & Smith, spoke in support of the bill and discussed the need for reform.”

“02:51 PM — Sheriff Doug Darr, representing Adams County and Adams County Employees, spoke in support of the bill.”

“02:52 PM — Mr. Frank Weddig, former state legislator and former Arapahoe County Commissioner, spoke in support of the bill.”

Link to meeting summary:

http://www.leg.state.co.us/clics/clics2012a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/b695bc1290e34d25872579e4006ba1bd?OpenDocument

Here are some quotations from the Legislature’s House Finance Committee hearing of SB12-149 on April 19, 2012, (note that Representative Priola was the prime House sponsor for SB12-149):

Representative Priola:

“The purpose of this bill is very similar to why we passed Senate Bill 1 for PERA.”

“Paragraph 3. . . makes clear that the bill does not impair vested rights, meaning that vested benefits already accrued cannot be taken away, including the benefits of retirees or individuals eligible to retire.”

Representative Kagan:

“Under your bill, local boards . . . would be able to simply adopt a modification.”

“Would they get more authority under this bill than the PERA board has?”

“Will there be any check at all, if this bill should pass, on the action of the boards?”

Vicki Johnson, Davis, Graham and Stubbs:

“I specialize in defending pension plans when they get sued.”

House Finance Committee Chairman DelGrosso:

“Are you expecting lawsuits because of this?”

Vicki Johnson:

“It’s a possibility, yes.”

“So, let’s just say that you’ve worked for 25 years.  And, you’ve earned your benefits at this multiplier.  Those would not be taken away.  If you elect to stay on for five more years, then that accrual may be reduced.”

“If you’re a retiree, we’re not going to touch you.”

“Under the current law . . . once you start working as an employee for a governmental pension plan and you contribute to your pension benefits it’s understood that you have obtained a contract right.”

“And, as long as you continue to work it’s understood under the law that your benefits cannot be changed.  “So, what the boards do is they go out and they change the benefits of new employees, new hires because that’s what they can change.”

Representative Kagan:

“Can the Legislature affect the contractual rights of an employee?”

Vicki Johnson:

The DeWitt case says that . . . “if a Legislature passes a law that impairs a contract right, the law will be upheld if it is reasonable and appropriately serves a significant and legitimate public purpose when considered against the severity of the contractual (impairment).”

(My comment: Reasonable?  In 1977, the U.S. Supreme Court [in U.S. Trust Co, 431 U.S.] clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE'S SELF-INTEREST IS AT STAKE. As the court bluntly stated:

“A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote
the public good rather than the private welfare of its creditors.")

Vicki Johnson:

“Part of the reason why you came there is because of this promise of a pension in the future, and so if you worked to earn it, the courts have been very protective of that area.  We understand that and we think that that’s right.”

Vicki Johnson:

“There’s this case law out there that says you cannot cut benefits of current employees.”

“The case law would trump that as it currently stands.”

Cindy Birley:

“The case law says that if you take an action . . . that impairs a contract pursuant to that change in law that will be sustained and upheld under the Dewitt case, if it was a reasonable and foreseeable change.”

“We’re asking for a change in the law that we can point to if we are sued to say it’s a reasonable and foreseeable change that we would have modified the plan to . . . reduce a benefit formula, for example, on a prospective basis.”

Diane Hunt, Gabriel Roeder and Smith:

“My final comment is that this proposal only affects future accruals, and this is a tool that is used in private sector defined benefit plans.”

Below, I provide (from Adams County board minutes) the reaction of Cindy Birley to the Colorado Court of Appeals decision in 2012 reversing the decision of the Denver District Court and remanding the case to the lower court:

“PERA – Colorado Court of Appeals Update:

Ms. Birley indicated that the Colorado Court of Appeals reversed the motion for summary judgment for Colorado PERA indicating that the COLA is a contractual right.  She stated that the Court of Appeals sent it back down to the lower court to run the three prong test of DeWitt.  Ms. Birley indicated that this sounds like the legislation that Adams County Retirement Plan just got enacted for Senate Bill 12-149.  She stated that this action shows that Davis Graham & Stubbs was right with the language that was put in the legislation.”

“Article – PERA – Vicki Johnson:

Ms. Birley indicated that the Board packet contained an article with Vicki Johnson, Davis Graham & Stubbs being quoted on the PERA case.”

http://www.acretirement.org/minutes/201211_board_meeting_minutes.pdf

From the Adams County Retirement Plan website:

“Prior to passage of Colo. SB 12-149 in 2012, the laws governing the Plan were unclear about the Board’s ability to reduce benefits for current employees.”

“SB 12-149 permits the Retirement Plan Board to reduce future benefit accruals of current employees to ensure the sustainability of the Plan Vested benefits already earned cannot be reduced.”

http://www.acretirement.org/legislative_update.htm

“Any modification would be to future benefit accruals, refund provisions, or both and will not reduce vested benefits already accrued for any member, whether active or retired, or any beneficiary.”

http://www.acretirement.org/legislative_update/notice_possibility_of_future_reduction_in_benefits.pdf

“The Board will not reduce vested benefits already accrued for any member whether active or retired.  SB 12-149 specifically prohibits any such reduction.”

http://www.acretirement.org/legislative_update/201204MemorandumRE-ProposedLegislation.pdf

Colorado PERA active and retired members, support the rule of law and contractual public pension rights in Colorado!  Contribute at saveperacola.com, and “Friend” Save Pera Cola on Facebook!

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2 Community Comments, Facebook Comments

  1. MADCO says:

    I'm just one guy- but until you can fit this message on a bumper sticker …or maybe a large t-shirt, no one is going to notice. Well- not "no one" but no where near enough voters to make a difference in the legislature.

  2. hawkeye says:

    Chicago Tribune (3/21/13) – Illinois House Approves Major Pension Reform Bill

    http://www.chicagotribune.com/news/local/breaking/chi-illinois-house-approves-major-pension-reform-bill-20130321,0,3792169.story

    Illinois is considering a COLA claw back for current retirees.  However, it's questionable whether the Illinois Senate will go along.  Also, it looks like employee unions will fight against the proposed COLA theft, which the so-called reformers are calling "shared sacrifice".

    Rep. Elaine Nekritz, D-Northbrook, who sponsored the measure, said it was needed to demonstrate "shared sacrifice" after taxpayers saw their income taxes increase and recipients of state services were hit by funding cuts.

    Dan Montgomery, president of the Illinois Federation of Teachers, called the vote "disastrous" because teachers, who generally don't get Social Security, would see a decrease in purchasing power. Montgomery also dismissed estimates of savings with the legislation because the bill is "blatantly unconstitutional" and will be thrown out in court, meaning the state will "save nothing."

     

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