July 29, 2013 10:42 AM UTC
Save Pera Cola Friends . . . Tell Your Story! How Did it All Go Down? We Want to Know the Truth!
3 Comments- by: PolDancer
“I have no doubt that the nation has suffered more from undue secrecy than from undue disclosure. The government takes good care of itself.” ― Daniel Schorr
In 2010, the Colorado Legislature passed a bill that, for the most part, ignored prospective reform of the Colorado PERA pension system, and generated 90 percent of the cost savings in the pension reform bill (SB10-001) by retroactively taking up to 42 percent of contracted PERA COLA benefits. (That is, the inflation protection due under Colorado PERA pension contracts.)
Were you involved with the development of SB10-001 in 2009/2010? Tens of thousands of Colorado PERA retirees want to know the whole story. They deserve to have the whole truth! As it stands, they only have a murky sketch of what went down in 2009/2010. PERA retirees own a good part of the Colorado PERA trust funds, and they paid into the PERA trust funds for most of their lives. They should have complete information about this bill (SB10-001) that, if unchecked, will inexorably lower the quality of their lives in order to keep Colorado taxes low. Let's have complete transparency in Colorado government.
(I, for one, would find the full back-story on the 2009/2010 PERA COLA-taking fascinating.)
During debate on SB10-001, on the floor of the Colorado Senate, we heard that "this was a deal cut before this body met." So, how was the SB10-001 "deal" cut?
Who gets to claim credit for coming up with the original proposal to take PERA COLA benefits? Who brought the idea to the PERA Board? How did the board react initially? Who was not "on-board"? How did the PERA Board address the obvious constitutional questions? Were objections raised by PERA's legal staff? How difficult was it achieving board unanimity? What persuaded the trustees to run with the COLA-taking plan? What objections were raised by board members? Did the idea of a prospective reduction of the PERA pension multiplier ever come up? If so, why was this idea dismissed? Did the union's representatives resist going in that direction?
Why did the PERA Board opt against limiting PERA reform to the creation of new tiers as was their historical practice? What options for the creation of new tiers were priced out by actuaries?
What were the early conversations about the COLA-taking idea? Why were so many prospective public pension reform options excluded? (It was pointed out at PERA's Denver "Listening Tour" meeting that only a few reform options on the table impacted those who actually owe the PERA debt, i.e., PERA-affiliated employers.)
Who dissuaded Legislative Leadership from submitting an interrogatory (through Ritter) to the Colorado Supreme Court on the constitutionality of the developing SB10-001 proposal? We know that the PERA Board wanted to send this interrogatory to the Supreme Court, why were PERA's lobbyists not able to make this happen? Did Legislative Leadership shut it down?
How was Governor Ritter, an attorney himself, persuaded to make the COLA-taking attempt? What did he have to say about the adverse Colorado public pension case law?
How was the decision made to hire the Dubofsky law firm to create the legal opinion rationalizing the COLA taking? Who had the idea to hire Dubofsky? Was her firm hired for legal expertise in this area of the law or for other reasons?
How did Colorado PERA's lobbyists (including any of Senator Shaffer's "bad lobbyists") go about persuading the members to support SB10-001?
We know that certain lobbyists were assigned to target various caucuses at the Legislature, how did lobbying strategies differ for each caucus?
Former Colorado legislators involved in SB10-001's development, how were you lobbied? What was your role? Why were you convinced or unconvinced that SB10-001 was a real solution?
When did Colorado PERA officials first anticipate that they would have to fight a court battle to take the COLA benefit? Why was the decision made to proceed considering the significant legal battle ahead?
Who had the idea to put the "request" for the PERA Board to develop pension reform recommendations into SB09-282 at the end of the 2009 session? Did the PERA Board really "ask itself" to make these recommendations by having its lobbyists place that language into SB09-282? Who filed the amendment request with legislative staff? A PERA lobbyist? Senator Penry? Did a lobbyist take this idea to Senator Penry?
Did PERA's lobbyists coach Senator Penry on strategy to enact the SB10-001? Did they warn him against making public statements that the COLA was contractual, (happened.) Was PERA's legal strategy to take the COLA unsettled at that point in time? Why did PERA go forward with the COLA-taking attempt if the legal strategy was unsettled? PERA officials had the Dubofsky opinion in hand, was there a debate over attempting to use "actuarial necessity," or Dewitt? Why did we hear Senator Penry talking about "actuarial necessity" rather than Dewitt at the beginning of the 2010 session?
Why did PERA submit a written document to the JBC stating that the COLA was a contractual obligation prior to the attempt to take it?
Which state legislators were unhappy about having PERA run the COLA-taking show? Who originated the idea to have PERA pension reform recommendations developed outside of the Colorado legislative process? In most states, the members of the state legislature are educated about public pension administration and contractual obligations, then the state legislators actually make the policy decisions. In most states, it is the elected state legislators who debate and determine public pension policy. Why did Legislative Leadership agree to have this entire process moved outside of the Colorado legislative process? What advantages did moving the pension reform debate outside of a normal public policy-making process offer the various interested parties?
What is special about this policy area, Colorado public pension policy, that it should be developed outside of the legislative process? Too complex for state legislators to grasp? How do other state legislatures manage to debate public pension reform options in open legislative hearings? How many arrange to have a "deal cut" with union lobbyists and then ignore all other reform options?
How much of the ultimate 2010 PERA reform legislation was actually finalized by the Colorado PERA Board of Trustees in Executive Session?
Former Colorado PERA staffers, remember, you were employees of a "transparent" organization. Be transparent, what's the real story? What "deals" were cut? Who were the players in that "smoke-free" room?
What instructions were provided to Colorado PERA's actuaries during consideration of pension reform alternatives in 2009/2010? Why do PERA's actuaries feel compelled to continue to point out in PERA CAFRs that the 100 percent funded ratio in SB10-001 is a "MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB STANDARDS"? Don't they know that this harms the case for the bill? Did they suggest an 80 percent threshold as a more "reasonable" breach of PERA COLA contractual obligations? How was the decision reached to "go big" and seek a 100 percent funding ratio threshold in SB10-001?
Why has the PERA Board had a practice of limiting the PERA trust fund's funding ratio to 90 percent in the past? Was this official board policy? When was this policy scrapped? Did this board policy come up during the discussion of placing a 100 percent funded ratio threshold into the PERA statutory contract?
Why did Meredith begin job hunting in the months after SB10-001 was enacted? Did he just need a change of scenery? Was he fully on-board with the COLA-taking plan?
In light of his past comments supporting PERA COLA contractual rights, how was Greg Smith brought on board?
What were the roles of Colorado's public sector unions and the Colorado Coalition for Retirement Security in developing the COLA-taking plan?
Why were PERA's lobbyists unable to kill SB12-149 at the 2012 legislative session? Why were PERA's lobbyists or staff unwilling to put a pension funding threshold into SB12-149? How was Senator Steadman able to rationalize sponsoring a bill that honored the vested contracts of Colorado county government retirees, SB12-149, after having supported SB10-001 breaking Colorado PERA retiree pension contracts?
Who has lobbied the Legislature to finish paying off $700 million in local government legacy pension debt (Old Hire Fire and Police pensions) before the SB10-001 case is completed? Local government lobbyists perhaps?
During the meetings at which SB12-149 was developed did Cindy Birley make the case that prospective reform of Colorado pensions under Colorado case law was much more likely to pass court muster? What compromises were PERA's lawyers/lobbyists able to achieve in the developing SB12-149?
I think it was critical that Colorado PERA retirees decided to defend their PERA COLA benefits in court in 2010. I see that lawyers for the City of San Jose are arguing in court that, since city employees have agreed to increases in their pension contribution rates in the past, further increases in those contributions are now permissible. The lawyers make the argument that contributions can be increased, since the employees "cannot waive a legally protected vested right." My take-away is that public employees who do not defend their contractual pension rights in court, public employees who compromise, will eventually see lawyers for public pension plan sponsors arguing in court that those rights are not vested. What is not nailed down will be taken.
Words of wisdom: “Sunlight Is the Best Disinfectant,” U.S. Supreme Court Justice Louis Brandeis.
Let the world know what really happened with the 2010 Colorado PERA COLA-taking. Post the real story on the Save Pera Cola Facebook page, or post it anonymously on ColoradoPols if that is your preference, or send it anonymously to saveperacola.com. In any event, let's have the whole unadulterated truth! We only live once, let's seek truth while we have the chance!
Do your part to support contractual public pension rights in Colorado, contribute at saveperacola.com. Friend Save Pera Cola on Facebook!
http://saveperacola.com/
Hey Algernon, PERA runs a very tight ship, so inside stories will be scarce, if at all. My inside information is peripheral, coming from attending a number of board meetings along with some banter with board members and managers during breaks, and from conversations with a friend who is a former PERA employee.
I believe current PERA CEO Greg Smith (former chief legal counsel) made the final decision during Oct-Nov 2009 (prior to the Nov 2009 board meeting) to go after the ABI (aka COLA) for current retirees. But I also believe he was greatly influenced by CU Professor Barry Poulson (and other naysayers and alarmists), who provided expert testimony on behalf of SB10-001 during the 2010 legislative session.
Indeed, Mr Smith is no shrinking violet and has taken on leadership posts in his peer associations of public pension plan administrators, and has appeared before Congress to give expert testimony. He has boasted in PERA being among the first state pension plans recommending serious reform, a trendsetter. But to the dismay of retirees, 90% of the burden has fallen on us.
The reasons for the COLA clawback are many, but I believe the main reason was fear. The economic market descent was monumental, and PERA executives were forced to listen to many panicky voices, including their own. It is my belief that they also saw PERA retirees as somewhat overcompensated and undeserving of their 3.5% ABI due to the firesale of service credits and HAS (highest average salary) spiking, along with other loopholes, a convenient target providing immediate financial relief to the trust funds. They figured no one would lose sleep over taking some benefits away from retirees. And, they turned out to be correct so far, as the courts are not in any big hurry to decide on the SavePeraCola lawsuit, Justus et al v State of Colorado et al., and provide relief to the affected retirees.
In summary, I believe the main reason for the contract breach was fear. The claw back of benefits from current retirees provided immediate financial relief to the trust fund, and PERA management and state legislators were unsympathetic to the retirees' plight in part due to the 2003-2004 firesale of service credits and HAS spiking. Indeed, former Gov Bill Ritter is destined to become perhaps the chief pension spiker among PERA pensioners. Ironic, considering he signed off on SB10-001 …
Hey hawkeye, thanks for the insights. Agreed, I wish we could install some new slick bearings in those wheels of justice!
I wonder (if Greg Smith made the final decision on the COLA-taking in Oct/Nov 2009) why would PERA's lawyers tell the JBC in December of that year that the PERA COLA was their contractual obligation? I can only guess that, at that time, they thought their only legal strategy would be to claim "actuarial necessity," under Bills and McPhail (that would explain Penry's comments about needing "actuarial necessity" to break the contract in early 2010).
If this is the case, then it was only later that they switched their legal strategy over to Dewitt. Earlier, I had presumed that the Dubofsky COLA-taking legal opinion made the case for Dewitt, but perhaps Dubofsky's opinion simply relies on establishing "actuarial necessity."
If you scan through the legal briefs it looks like the first mention of DeWitt is March, 2011. So, it appears that PERA has changed its legal strategy mid-stream. That sounds legally suspect, that they would attempt to break contracts based on one legal theory and then change the entire rationale. It this is true, then perhaps they no longer rely on the Dubofsky legal opinion at all. But, the fact that they obtained this Dubofsky opinion, specifically addressing a COLA-taking in the first part of 2009 reveals that this was a premeditated, predetermined goal.
December 16, 2009
Colorado PERA officials in written testimony to the Joint Budget Committee: “The General Assembly cannot decrease the COLA (absent actuarial necessity) because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf
Greg Smith also told the JBC that December: “We have obtained outside counsel’s opinion on this issue.”
Dubofsky writes: “at request of PERA (Public Employees Retirement Association) in 2009, provided legal opinion that general assembly could repeal automatic 3% cost-of-living adjustment for retirees without violating their vested rights." Link to Jean Dubofsky’s resume:
http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf
Jean Dubofsky also notes in a deposition submitted to the Colorado PUC that she is the author of a legal opinion addressing the legality of reducing the PERA COLA benefit:
“My most recent legislative experience (within the past two years) is . . . a legal opinion addressing the constitutionality of reducing the cost-of-living increase for PERA recipients.”
(To access this document, paste “Colorado PUC E-filing system PERA legal opinion Jean Dubofsky” into Google.)
It would also be interesting if Greg Smith did indeed make the final decision on the COLA-taking. We don't have any evidence that this is the case, so I have always been open to the possibility that Greg Smith initially resisted the contract breach and went along with a PERA Board that was being pushed hard by the unions. On the other hand, why would a Board of Trustees that has had the contractual nature of public pension benefits drilled into them at conferences and seminars for years ignore all of that without their chief legal officer on board?
There is quite a diversity of opinion among attorneys at the National Association of Public Pension Attorneys (NAPPA). NAPPA makes their Marcucci “outline” of public pension contractual rights available to the public on its website. (To access the complete Marcucci “outline” of constitutional public pension rights (a Word document) paste the following into Google: “Constitutional Issues When Altering Public Pension Benefits Marcucci.”)
The Marcucci paper addresses contractual public pension rights in states (like Colorado) that have an "anti-gratuity" clause in their constitutions. From the Marcucci “outline”:“Does your jurisdiction have an anti-gratuity clause in its constitution? If so, then almost by default there needs to be a contract component to pension benefits.”
I wonder what Greg Smith's thoughts are on this legal argument made by one of his peers? How far afield is Greg Smith in public pension contract legal doctrine? He seems to frequently encourage other jurisdictions to join him on the contract breach side.
The Colorado Constitution's "anti-gratuity" clause: Article 5, Section 34 of the Colorado Constitution prohibits the Colorado General Assembly from using public funds “for benevolent purposes to any person.”
Will PERA make the case in court that they were afraid and thus had to break pension contracts? Will they argue that they held the opinion that PERA retirees do not deserve to have their contracts honored, and thus the contracts should be broken?
Hey Algernon, here's an interesting article "Will Your Congressman Retire Richer Than You", along with a link entitled "Are you worried your private or public pension will be cut, share your story" … some of the stories will be chosen for publication in CNN Money.
http://economy.money.cnn.com/2013/06/03/cnnmoney-your-economy/?source=yahoo_hosted
http://finance.yahoo.com/news/congressman-retire-richer-110100673.html