October 01, 2013 01:00 PM UTC

Morningstar: Colorado Has the 16th Lowest Public Pension Debt in the Nation, Yet the Colorado Legislature Seeks to Break These Contracts.

• 3 Comments
• by: PolDancer

According to the investment research firm, Morningstar, Colorado ranks 34th in the nation in public pension debt per capita.  Only 16 states currently have a lower per capita public pension debt than does Colorado.  The obligation of Colorado taxpayers for public pension debts remains easily supportable in spite of the fact that the Colorado Legislature has not paid its full Colorado PERA public pension bill for a decade.

Colorado taxpayers (by contract of their representative governments) must meet relatively low public pension debt obligations.  Yet, the Colorado Legislature seeks to escape these public pension obligations.  The Colorado Legislature seeks to further cut the public pension debt of taxpayers in the 10th wealthiest state in the nation through breach of contract.  (Perhaps Colorado taxpayers will reward the politicians who voted for pension contract breach at the polls.)

According to a Morningstar study released two weeks ago, Colorado's per capita public pension debt in 2011 was $1,804.  That year, the state of Alaska had a per capita pension debt of $10,235 (the highest per capita pension debt in the nation.)  The Alaska Legislature is not attempting a retroactive alteration of public pension contracts.  The Alaska Legislature has not enacted legislation breaking "fully-vested" public pension contracts.  Alaska legislators have not tried to set aside constitutional protections of a targeted group.

"When measuring liability per capita, Alaska, Illinois and Hawaii recorded the highest amounts."

"The report employed two primary measures to assess pension funds. The funded ratios compare a system's total assets to its liabilities.  The second measure, unfunded actuarial accrued liability per capita, pegs the amount each state resident would need to pay to fully fund the system."

http://www.governing.com/gov-data/state-pension-funds-retirement-systems-unfunded-liabilities-obligations-data.html

Recall that the bill breaking Colorado PERA retiree pension contracts, SB10-001, was enacted in 2010 and that the financial condition of the Colorado PERA pension trust funds in 2009 was put forth as a rationale for breaking PERA retiree pension contracts.  Now, note the level of unfunded per capita pension liability for Colorado in 2009 ($1,349 per capita) on the spreadsheet in the cited Governing article (link above.)

An unfunded per capita pension liability below $1,500 is considered a desirable level of liability according to this Morningstar state pension debt metric.  Thus, when the Colorado General Assembly enacted legislation to break Colorado PERA pension contracts in 2010, the Legislature did so at a point in time when Colorado taxpayers enjoyed a "good" level of unfunded public pension liabilities according to the research firm Morningstar.  Colorado taxpayers were not burdened by pension debt in 2010, yet Colorado PERA pension administrators, dozens of hired lobbyists for PERA-affiliated employers, and Colorado Legislative Leadership conspired to break PERA public pension contracts.

"Thirteen states have a UAAL of less than $1,500 per capita, which is Morningstar’s threshold for 'Good' unfunded liability levels, and Alaska had the highest UAAL per capita for the second year in a row, currently more than $10,000."

http://www.plansponsor.com/NewsStory.aspx?id=6442494908

Further, the Morningstar study reveals that, in 2009, as Colorado PERA administrators, Colorado union officials and some state legislators contemplated breach of Colorado PERA pension contracts, Colorado had the 13th lowest public pension debt per capita in the nation.

MORNINGSTAR STUDY: A 70 PERCENT PENSION FUNDED RATIO IS "FISCALLY SOUND."

http://corporate.morningstar.com/US/documents/Retirement/StateofPensions2013.pdf

At  the time of the Colorado Legislature's breach of Colorado PERA pension contracts in SB10-001, the combined funded ratio of the Colorado PERA pension system stood at 68.9 percent, a level 1.1 percent below that level considered "fiscally sound" by the research firm Morningstar.

The Colorado Legislature sought to break "fully-vested" public pension contracts at a time when the Colorado PERA pension system enjoyed a "fiscally sound" financial condition.

From the Silver and Gold Record archives:

“One attendee asked if there was any similar controversy in the 1970s, when PERA's unfunded liability went as low as 54.7 percent.  Williams said former Gov. Richard Lamm, who co-chaired the PERA commission, made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level.”

https://www.cu.edu/sg/messages/5245.html

The actuarial funded ratio of the Colorado PERA pension system has fallen below the Morningstar "fiscally sound" threshold due to the simple fact that (as we have noted repeatedly) the Colorado Legislature has not been paying its public pension bills for a decade.  If I avoid paying my debts in order to free up money for discretionary expenditures I will eventually encounter financial distress.  This practice has been a standard operating procedure for the Colorado Legislature for a decade.  In effect, the Colorado Legislature has been borrowing from the PERA pension system to pay for their preferred governmental programs.  Now that the bill is coming due, many Colorado legislators want to skip out on the tab.  If I ignore my contractual obligations for an extended period I should not be surprised to find my creditors seeking redress by judicial action.

I ask: Why should Colorado PERA retirees accept the breach of their pension contracts as a result of the failure of the Colorado General Assembly to pay the full Colorado PERA public pension bill for the last decade?  Rather than paying its full public pension bill (ARC) the Colorado Legislature has directed state funding to discretionary programs, including $100 million grants of property tax relief and, incredibly, payment of $700 million in local government legacy pension debt that is not the contractual responsibility of the State of Colorado (a $142 million grant for this purpose at the 2013 legislative session.)  Why should Colorado PERA pensioners, a small group of Coloradans bear the burden of Colorado politicians' historical budgetary mismanagement?  The tenth wealthiest state in the nation, a state that can apparently afford to transfer hundreds of millions of dollars of its revenue stream to pay for pension obligations THAT ARE NOT ITS CONTRACTUAL OBLIGATION, now seeks to abandon its own contractual public pension obligations.  In light of all this, the fact that the Colorado Legislature is attempting to push state and local government debt onto elderly pensioners is immoral and outrageous beyond measure.

"Morningstar would like to highlight the UAAL per capita, which in our opinion is a useful metric not commonly applied in the current pension analysis narrative."

http://images.mscomm.morningstar.com/Web/MorningstarInc/%7B43f240a0-4c8f-47b5-bc01-45cbc9e9d33b%7D_StateofStatePensionsReport2013.pdf

http://corporate.morningstar.com/US/documents/Retirement/StateofPensions2013.pdf

Colorado PERA active and retired members, the Colorado Legislature's attempt to escape its contractual obligations, to set aside the protections of the U.S. Constitution, is an ugly stain on our state.  Continue to support public pension contractual rights with your contributions to saveperacola.com.  Friend Save Pera Cola on Facebook!