Montana Public Sector Unions to Sue Over Pension COLA Theft. (Colorado’s Unions Supported the Taking of the Contracted Colorado PERA COLA Benefit from Pensioners.)

In 2010, Colorado public sector unions supported the Colorado Legislature's breach of the contracts of Colorado PERA retirees (in SB10-001.)  This bill took earned, accrued, fully-vested, contracted PERA COLA benefits from retirees, i.e., the PERA retiree's "inflation protection" provided for in their PERA contracts.  A lawsuit over this taking, Justus v. State, is now pending before the Colorado Supreme Court.

Colorado PERA Executive Director Meredith Williams recorded the names of Colorado public sector unions supporting the taking of the PERA COLA benefit here:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA . . . the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”

http://www.copera.org/pera/about/ask.htm

In 2010, the Colorado General Assembly colluded with those who ACTUALLY OWE the Colorado PERA pension debt, Colorado PERA-affiliated employers (the State of Colorado and Colorado local governments) and those seeking to lower future PERA pension contributions for their "dues-paying," (non-retired) members (Colorado public sector unions.)  This collusion culminated in the bill, SB10-001, breaking the pension contracts of Colorado PERA retirees.

By taking the contracted PERA COLA benefit, the Colorado Legislature is attempting to slash the PERA pension debt of Colorado state and local governments in order to further lower taxes in the state with the lowest per capita state tax burden in the nation.  The Colorado Legislature is attempting to use a legal contrivance to justify the taking of one-third to one-half of the accrued PERA pension benefit from Colorado PERA retirees.  The Colorado Legislature is attempting to "inflate away" its PERA pension debt, breaking the statutory requirement to pay the PERA COLA, while the Colorado PERA Board of Trustees' own long-term actuarial inflation assumption is 3.75 percent.

In 2010, financially self-interested parties told Colorado PERA retirees that they were greedy to expect the State of Colorado and Colorado local governments to honor their Colorado PERA pension contracts.

In 2010, the Colorado General Assembly spat in the faces of those who have given their lives in public service . . . Colorado PERA retirees.

Rather than supporting the breach of pension contracts like Colorado's public sector unions, today, Montana's public sector unions announced that they will sue the State of Montana over the Montana Legislature's recent taking of retiree pension COLA benefits.  (In Montana, the COLA is known as the "GABA," "guaranteed annual benefit increase."):

MEA-MFT:

"We keep getting calls and emails asking if MEA-MFT is in fact going to litigate legislated amendments seriously truncating and delaying Guaranteed Annual Benefit Adjustments or GABAs in PERS and TRS.

The answer is YES!

MEA-MFT is right now working with other advocate organizations representing current and future retirees on a common, comprehensive legal challenge to the legislature's GABA attacks. We have retained counsel. We are developing compelling legal arguments. We are vetting possible plaintiffs. We will file when it is the right time to file. And we expect to win.

MEA-MFT President Eric Feaver"

From helenair.com:

"Bullock signs pension fixes, school funding bill."

"The plan is expected to face legal challenge from unhappy retirees who will argue in court that the changes unconstitutionally break the contractual obligations the state made to employees."

"The state's largest employee union, MEA-MFT, said it expects to support the litigation — even though it also still supports the overall fixes."

http://helenair.com/news/state-and-regional/bullock-signs-pension-fixes-school-funding-bill/article_3502dd1e-d19b-5d69-bb25-c77671a6792f.html

Eric Feaver, President, MEA-MFT:

"There are constitutional questions, questions of contract rights that are raised by so doing (changing guaranteed annual benefit adjustments.)"

MONTANA GOVERNOR: THE COLA TAKING IS UNCONSTITUTIONAL.

From helenair.com:

"In response, Bullock’s budget director Dan Villa said the governor’s office opposed the amendment that sought to change the GABA (COLA) and questioned its constitutionality."

"'We understand that both current employees and retirees are considering legal challenges to address the amendments, and we support that action,' Villa said. 'It’s important to keep in mind that this likely unconstitutional amendment doesn’t change one important fact: by implementing the remainder of Gov. Bullock’s plan, Montana is the first state in the nation to fix our pension system without raising taxes.'"

http://helenair.com/news/legislature/feeling-betrayed-retiree-group-asks-governor-to-veto-pension-bill/article_a6b2eaac-b2eb-11e2-b352-0019bb2963f4.html

Montana pensioners:

"The Legislature’s own attorneys have repeatedly advised it that GABA is a constitutionally-protected contract with public employees and should not be broken. If the Legislature chooses to advance legislation to renege on this important commitment it has to raise concerns with all citizens as to what other contracts the state may choose to ignore. If a 'deal’s a deal' only when the Legislature chooses to honor it, then what about Montana’s other contract commitments?"

"The Legislature should not violate the contract it statutorily committed to with Montana’s public employees. Rather, it should honor the commitments made to current and future government retirees including fully funding GABA."

"Unlike other states that have variable Cost of Living Adjustments in their pension plans, Montana enacted a guaranteed statutory annual percentage adjustment for its public employees."

http://helenair.com/news/opinion/readers_alley/montana-should-keep-commitments-to-its-public-employees/article_8cee6aac-98c8-11e2-8aaf-001a4bcf887a.html

(My comment: Like Montana, Colorado has an "automatic" public pension COLA benefit, that is a contractual obligation of the Colorado PERA pension system.  For every day of labor that Colorado PERA retirees provided, with every monthly PERA contribution that Colorado PERA retirees made, they paid for their contracted PERA COLA.  Having benefited from this labor, Colorado PERA-affiliated employers now want to retroactively take this earned "deferred compensation" from PERA retirees.

In Colorado, the Legislature did not bother to ask its legal staff for a legal opinion addressing the taking of  the Colorado PERA COLA benefit.  Although encouraged to do so, prior to the taking, the Colorado Legislature did not bother to ask the Colorado Supreme Court for an opinion on the constitutionality of their PERA pension proposal (through an interrogatory.)  The Colorado Legislature did not appoint an interim study committee to examine legal, PROSPECTIVE, PERA pension reform options, instead abdicating its policy-making authority in this area to lobbyists representing self-interested Colorado PERA employers trying to escape their debts.)

Colorado PERA active and retired members.  Support public pension contractual rights in the USA.  Contribute at saveperacola.com, and "Friend"  Save Pera Cola on Facebook!

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  1. hawkeye says:

    Orr says bankruptcy decision could come within 30 days: 'We are tapped out'

    Emergency Manager Orr recognizes the state constitution protects retiree pensions but wants to negotiate anyway – or possibly change the law.  “We might need legislative relief,” he said. “This is the culmination of years and years of kicking the can down the road and borrowing from wherever they could.”

    http://www.detroitnews.com/article/20130614/METRO01/306140057

    It looks like Detroit will need to go into Chapter 9 bankruptcy to get out of their pension obligations.  This article is interesting in that Manager Orr is attempting to treat all city creditors equally, not only hitting city retirees.  In Colorado, 90% of the financial hit of SB10-001 is on retirees, 10% on PERA-affiliated employers, and leaving other bonded creditors totally intact.  Why break contracts only with PERA retirees … why not shared sacrifice with bondholders? 

    • Algernon Moncrief says:

      Hey hawkeye, it's interesting that even Chapter 9 bankruptcy by municipalities does not always allow them to escape their public pension debts.  Note the proposed settlement in Stockton that was reported this morning.  Like the Vallejo bankruptcy, Stockton's bankruptcy will trim not a penny of its public pension debts:

      "Under the deal with some 1,100 retired employees – Stockton's largest group of unsecured creditors – the city will pay a lump sum of $5.1 million to reflect the loss of their health benefits in retirement and leave their current pension benefits intact."

      http://www.recordnet.com/apps/pbcs.dll/article?AID=/20130613/A_NEWS/306130321

      And, of course, state governments cannot declare bankruptcy under federal law.

      A few more thoughts:

      State and local governments in the U.S. have three times much bonded debt as they do public pension debt.  Why is public pension debt such a "burden," while all other state and local government debt (300 percent greater debt) is not a burden?  ($2.8 Trillion, total state and local government bonded debt, according to the U.S. Census Bureau.)

      How is the fact that state and local governments have not "banked" the three percent of future revenues needed to support their public pension debt a "crisis," while the fact that state and local governments have not banked the 97 percent needed for all other future public expenditures is not a "crisis."  Doesn't fit the political agenda does it?

      The return assumption for PRIVATE sector defined benefit pension plans in the U.S. is now 8.1 percent, higher than the return assumption for most public sector defined benefit pension plans.  Good enough for the private sector, not good enough for the public sector?

      The ratings agencies, Fitch and S&P believe public pension systems to be well-funded at 80 percent actuarial funded ratios, the average funded ratio for US public pension systems is currently in the 70s.  Why is pension debt owed by "well-funded" pension systems considered to be a "crisis"?   Why did the Colorado Legislature decide to attempt to break public pension contracts until a funding level 20 percent beyond "well-funded" is achieved?  In the words of Meredith Williams, "It's just easier that way."   

  2. hawkeye says:

    Hey Algernon, I agree there's a political agenda in play.  On June 29, 2011, MN District Court Judge Gregg Johnson and CO District Court Judge Robert Hyatt both simultaneously rendered their decisions to breach public retiree contracts.  At first glance, one would think neither judge wanted the distinction of being the first to breach public retiree contracts, so they agreed to a "tie".  However, on second thought, it's pretty obvious these judges at at least unwitting participants in the retroactive claw-back of retiree benefits.

  3. hawkeye says:

    Algernon, I don't know if you've considered the timing of the pending SavePeraCola lawsuit before the Colorado Supreme Court, but I anticipate a delay until after the Nov 4th elections so as not to influence the outcome of the school tax ballot measure.  However, do you think anything unfavorable to SavePeraCola would bolster the changes of passage of the ballot measure?

    • Algernon Moncrief says:

      Hey hawkeye, I think that the possibility of a Colorado Supreme Court decision in Justus v. State, prior to the election, is remote.  Even if the Supreme Court takes the case (rather than letting it go back for trial) typically, it would take the court at least six months to render a decision.  Caveat: I believe that they were faster than that in Lobato!  Also, why is the connection between the PERA pension debt and public school finance significant?  The PERA debt would remain even if we completely privatized Colorado schools.  The PERA debt is owed to PERA pensioners who worked in hundreds of public sector positions other than "teacher," or "school administrator."  Al

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