April 06, 2013 02:55 PM UTC

The Evidence Mounts: Politics Rather than Financial Necessity Motivated the Breach of Colorado PERA Pension Contracts.

•  
• by: PolDancer

Last week, the Colorado Legislature volunteered further evidence that it faces no financial need to break Colorado PERA pension contracts.

Incredibly, the Colorado General Assembly, while it is in breach of its own (PERA) public pension contracts, has included a transfer of an additional $142 million in this year's state budget (the Long Bill) to make discretionary payments for pension obligations of local governments.  This transfer will bring total state transfers to make pension payments that ARE NOT contractual obligations of the State of Colorado to approximately $700 million.

I repeat, these local government pension obligations (Old Hire Fire and Police pensions) ARE NOT contractual obligations of the State of Colorado.

I emphasize, the State of Colorado is currently in breach of its own Colorado PERA pension contracts.  From the Colorado Court of Appeals 2012 decision in the case Justus v. State:

“We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.”  In the cases McPhail and Bills, the Colorado Supreme Court “found a contractual right based on members’ provision of services and contributions to the retirement fund.”

Does this recent Colorado Court of Appeals decision motivate the Colorado Legislature to conserve available resources to meet its contractual pension obligations?  The reality of the situation does not even register with Colorado lawmakers.
 
From KDVR:

"House Republican leaders are floating a proposal to repay a longstanding debt (My comment, this is not a state "debt," sloppy reporting) to the state’s Fire and Police Pension Association in full as a way to get some GOP lawmakers to vote in favor of the $20 billion state budget for next year, which will be up for debate in the House on Thursday."

"'It’s (House Minority Leader) Waller’s effort to buy some Republican votes,' one GOP lawmaker told FOX31 Denver Tuesday.

Waller, who is almost certain to run for Attorney General (next) year, would like to be able to demonstrate that he leads a group of lawmakers who are pragmatic and responsible; and helping forge a bipartisan budget compromise would help him make that case."

http://kdvr.com/2013/04/02/republicans-considering-pension-deal-hoping-for-bipartisan-budget-vote/

I have no objection to discretionary expenditures on the part of the Colorado General Assembly. However, I do object to arguments by attorneys representing the State of Colorado that the state cannot meet its own contractual pension obligations while it is giving away revenues to pay off local government pension obligations.  I do object to attempts to break state pension contracts, while the Legislature is making discretionary expenditures to pay off public pension debts of local governments.  Having made such appropriations, the Colorado General Assembly cannot legitimately argue that financial need has forced the Legislature to break Colorado PERA pension contracts.

Have attorneys representing Colorado PERA in the lawsuit Justus v. State contacted legislative leadership recently?  I suggest that they pose the following questions to legislative leadership:

"How do you expect us to establish a financial need to break Colorado PERA contracts, when you have an extra billion dollars in revenue for the coming fiscal year, and instead of directing a dime of it toward meeting your own contractual PERA pension obligations, you allocate $142 million of the new revenue to pay for local government pensions that ARE NOT your contractual obligation?"

"Let's get this straight . . . you're asking the courts to allow you to break your own pension contracts, while you have simultaneously pumped $700 million into pensions that ARE NOT your responsibility?"

"You're asking the courts to allow you to retrospectively take accrued Colorado PERA pension benefits, when, last session, you enacted public pension reform for county governments that respects accrued public pension benefits (SB12-149)?"

"We are your attorneys . . . do you have the slightest concern about our ability to effectively argue on your behalf in court?"

Political considerations now trump even the need to build a case for SB10-001.

Is the leadership of the Colorado Legislature completely oblivious?  Or, have they simply given up efforts to make legal arguments for breaking Colorado PERA pension contracts?

This 2013/14 Long Bill local government pension appropriation should be welcomed by the plaintiffs in the case Justus v. State.  If the Colorado Supreme Court sends the case to trial, plaintiffs should add the 2013/14 Long Bill to the list of documents to be introduced into evidence.

At the Colorado Legislature, politics and political careers take precedence over the U.S. and Colorado constitutions.  There are no rational actors in sight, other than perhaps local government lobbyists.

Are local government lobbyists driving the $142 million local government pension appropriation in this year's Long Bill?  Perhaps these lobbyists, recognizing the rotten legal foundation on which SB10-001 rests, have urged the Colorado General Assembly to pay off their local government debts before SB10-001 is struck down in court.  (The local government lobbyists are, of course, acquainted with attorney Cindy Birley and her legal rationale for SB12-149.)

The Colorado Legislature simply has a political preference to break Colorado PERA contracts.  It is also the preference of many of their constituents to break PERA contracts.  It is the political preference of the 27 lobbyists who ran the SB10-001 show to break PERA contracts.  Like the Colorado legislators who initiated the decline in Colorado PERA's funded ratio a decade ago, many current legislators realize that, due to term limits, they won't be present to address the aftermath of their SB10-001 PERA contract breach fiasco.

For the time being, Colorado PERA members can only sit back and marvel at this surreal spectacle.

LOCAL GOVERNMENT (FPPA) PENSIONS ARE NOT THE CONTRACTUAL OBLIGATION OF THE STATE OF COLORADO.

In 2005, Colorado voters adopted Referendum C.  The language of this state-wide ballot measure makes it clear that local government FPPA pensions ARE NOT contractual obligations of the State of Colorado:

"TO FUND RETIREMENT PLANS FOR FIREFIGHTERS AND POLICE OFFICERS, SO LONG AS THE GENERAL ASSEMBLY DETERMINES THAT SUCH FUNDING IS NECESSARY . . .".

The discretionary nature of state grants to fund Colorado local government pensions is also stated clearly in the “Legislative Declaration” preceding (Section 31-31-101, C.R.S. ) set forth in Colorado law.

Here is the “Legislative Declaration”:

"31-31-101. Legislative declaration."

“The general assembly further declares that state moneys provided to municipalities, fire protection districts, and county improvement districts DO NOT CONSTITUTE A CONTINUING OBLIGATION OF THE STATE to participate in the ongoing normal costs of pension plan benefits, except for state funding of death and disability benefits as specified in this article, but are provided in recognition that the local governments are currently burdened with financial obligations relating to pensions in excess of their present financial capacities.”

This “Legislative Declaration” states that the Colorado General Assembly has provided state resources “in recognition that local governments are currently burdened with financial obligations relating to pensions . . .”.  Accordingly, the policy preference of the Colorado General Assembly is that discretionary grants of state resources should be made to Colorado local governments when they are “burdened by financial pension obligations,” but when the State of Colorado is also “burdened by financial pension obligations” the State of Colorado will break its public pension contracts.

For an accounting of the Colorado General Assembly’s historical discretionary grants to meet local government public pension obligations see pages 6 and 28 of the 2012-2013 Colorado Department of Treasury Budget Briefing document at this link:

http://www.state.co.us/gov_dir/leg_dir/jbc/2011-12/trebrf.pdf

Here is an excerpt:

“State Contributions for Local Fire and Police Pension Plans"

"Since 1980, the State has contributed almost $540 million to the FPPA to eliminate the unfunded liability of the ‘old-hire’ pension plans.”

From page 29 of the JBC document:

“To put this figure in perspective, the total state General Fund operating budget in the FY 1978-79 Long Bill was just over $1.0 billion.  Thus the $500 million shortfall in local plans represented nearly half of the annual state General Fund budget.  If the magnitude of this shortfall were adjusted for inflation, it would exceed $1.8 billion.”

From page 31:

“During the ensuing years, the State's contribution to the old hire plans equaled about 41 percent of the total combined contributions of the state, local governments and employees.”

(Note that the Colorado General Assembly has made discretionary grants to fund more than 40 percent of the total contributions made to these local government pension plans . . . and yet the Colorado General Assembly claims it has been “burdened” by the necessity to provide for PERA-employer pension contributions at a fraction of this level of commitment.)

In the coming years, judges may legitimately ask “Why should the state of Colorado be permitted to break its contractual PERA pension obligations when, for many years, it has opted to fund public pension obligations that are not its own?”

For your information, I am providing a link to a memorandum prepared by the Colorado Municipal League that discusses these historical, discretionary state grants to meet Colorado local government pension obligations:

http://www.cml.org/uploadedFiles/CML_Site_Map/_Global/pdf_files/pension_memo.pdf

Colorado PERA active and retired members, has the need for Judicial Branch oversight of the Colorado General Assembly ever been so clear?

Support the rule of law in Colorado.  Contribute at saveperacola.com, and "Friend" Save Pera Cola on Facebook!