August 03, 2013 12:43 PM UTC

How the Colorado Supreme Court Can Fix Colorado PERA's Self-inflicted Legal Fiasco.

• 2 Comments
• by: PolDancer

Here is a simple way for the Colorado Supreme Court to clean up Colorado PERA's self-inflicted legal mess.  The Colorado Supreme Court should grant cert in the case Justus v. State, and quickly strike, as a question of law, the COLA provisions of SB10-001 (as facially unconstitutional.)  The PERA COLA is "pension," and it is a contractual obligation of PERA-affiliated employers.  The court should simultaneously invite the Colorado General Assembly to submit an interrogatory (through Hickenlooper) seeking guidance on the constitutionality of potential pension reform alternatives.

The Leadership of the General Assembly should send this interrogatory to the court for clarification on the following points:

To what extent can the Colorado General Assembly increase employee contributions to address unfunded pension liabilities?

To what extent can the General Assembly alter the PERA pension multiplier on a prospective basis to address unfunded pension liabilities?  (i.e., without impacting previously accrued Colorado PERA pension benefits.)  See Professor Amy Monahan's paper, "Public Pension Plan Reform: The Legal Framework."

The Colorado General Assembly should then appoint an interim study committee that is limited to consideration of reforms that the Supreme Court deems constitutionally permissible in its response to the interrogatory.  (This interrogatory should have been submitted in 2009.)  The General Assembly should price out these reforms using multiple independent actuaries.  The General Assembly should not again relinquish its policy-making authority to outside parties.  The General Assembly should enact these legal, prospective pension reforms, restoring PERA's funding ratio to an 80 percent (well-funded) position in the coming decades, honoring existing pension contracts.  The 100 percent threshold in SB10-001 is an absurd and unnecessary overreach.

The fact that Colorado PERA's funded ratio will fall during this year of transition is irrelevant, PERA's accrued pension debt will be paid out over the next 50-60 years.  (As Judge Casebolt, a PERA Trustee, has informed us, PERA can pay benefits for decades with current resources.)  The Colorado PERA Board of Trustees will not be pleased with efforts to reform PERA in a prospective, legal manner, but they are culpable in creating the existing PERA legal fiasco.  This plan allows all parties involved to move forward with the sanctity of Colorado contracts and the Colorado Constitution intact.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1573864