Colorado PERA is Concerned About Legal Protection of Benefits in non-PERA Colorado Pension Systems. Why?

Recently, a number of Colorado PERA retirees sent emails to members of the Colorado Legislature expressing concern regarding the Legislature's failure to pay the full "actuarial required contributions" (ARC) to the Colorado PERA pension system since 2003, i.e., pay the pension system's bills. The Legislature's failure to pay the Colorado PERA pension system ARC for the last decade has racked up the PERA pension system's debt. (Note that simply placing Colorado PERA employee and employer contribution rates in Colorado law IS NOT THE EQUIVALENT of paying the Colorado PERA pension system's "actuarially required contribution" as calculated by Colorado PERA's actuaries.)

The Colorado PERA retirees, in their e-mail, highlighted past statements from Colorado PERA officials lamenting the failure of the Colorado Legislature to pay the pension system's bills.

http://www.patsteadman.com/

On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s (then) General Counsel Greg Smith commented on the decline of PERA’s actuarial funded ratio: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.” Link:

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

On February 23, 2012 (then) Colorado PERA General Manager Meredith Williams, before the Colorado House Finance Committee, testified relating to the Legislature’s historical underfunding of its PERA pension obligations, i.e., the failure of the Legislature to ensure payment of the ARC through appropriate statutory contribution rates, or supplemental appropriations. Colorado PERA General Manager Meredith Williams: “We’ve had a significant problem over the years, in that . . . contributions, payments by (PERA) employers into PERA have been kind of the last thing in the budget building process, and we have not made the required payments. Unfortunately, in our line of work, where we’re involved in compounding shortfalls grow, particularly when the shortfalls continue year after year after year.”

Colorado Senator Pat Steadman (a member of the Colorado Joint Budget Committee) should be commended for recently responding to the PERA retiree's e-mail, and stating that he is committed to doing what he can to protect Colorado public employee pension systems in the future.

Senator Steadman should also be commended for placing language into Colorado law (in 2012, SB12-149) that protects accrued benefits in Colorado's county-run public pension systems.

The statutory language protecting accrued benefits in Colorado county-run pension systems, that was sponsored by Senator Steadman, and adopted by the Colorado Legislature, DOES NOT apply to accrued benefits in the Colorado PERA pension system.

Senator Steadman, why not seek similar legal protection of accrued benefits for members of the Colorado PERA pension system? I have no doubt that Senator Steadman would agree that the labor of Colorado public servants who are members of the Colorado PERA pension system is as valuable as the labor of Colorado public servants who are members of Colorado's county-run public pension systems.

I propose that similar language be placed into Colorado law providing such legal protection for accrued Colorado PERA pension benefits.

Public records (recordings) of legislative testimony on SB12-149 reveal that, at Senator Pat Steadman's "stakeholder" meetings for the development of SB12-149, Colorado PERA officials opposed the placement of a test for "actuarial necessity" for reduction of accrued pension benefits in county-run pension systems into Colorado law.

Why were Colorado PERA officials present at these SB12-149 stakeholder meetings that addressed vested pension rights in Colorado's county-run public pension plans?  (Separate from Colorado PERA.) Why do Colorado PERA officials care about statutes relating to vested rights in Colorado public pension plans other than their own?

Why did Colorado PERA officials oppose the placement of a test for "actuarial necessity" into Colorado law at these meetings? Why are Colorado PERA officials so concerned about placing a test for "actuarial necessity" into Colorado law?

Senator Pat Steadman's emailed response to a Colorado PERA retiree:

"Dear Randy,

Thank you for contacting me regarding your concerns about adequate funding of our PERA system. Last session, I sponsored a bill on behalf of the Joint Budget Committee that required our personnel director to contract a third party compensation consulting firm with actuarial expertise to study the overall effectiveness and health of our PERA compensation system. This will allow us to assess the ongoing sustainability of PERA and adjust the appropriations towards the program. I am adding a link to the entire bill here for your review:

http://www.leg.state.co.us/clics/clics2014a/csl.nsf/fsbillcont2/DE9404F7F0E17CC587257C600001DF7C/$FILE/214_01.pdf

The bill was signed by the governor and is currently being implemented. As you can see in the legislation’s language, the full report is due on January 15, 2015.

Please know that I share your concerns about the health of our public employee pension systems and that I am committed to doing what I can to protect it for the future.

I remain available to hear your concerns and answer any questions you may have.

I have added you to my e-mail list to keep you updated about this and other legislative matters relevant to you. You can opt-out of these at any time.

Regards,

Pat Steadman

State Senate, District 31"

Colorado Senator Pat Steadman is responsible for placing language into Colorado law that protects vested benefits in Colorado county-run public pension systems (no such statutory protection for Colorado PERA members.) In Senator Steadman's bill, the Colorado Legislature  demonstrated that it is capable of adopting prospective pension reforms (honoring accrued benefits) in county government pension systems (county governments are "arms" of Colorado state government) and honoring Colorado retiree pension contracts. The 2010 Colorado PERA "COLA-taking" bill, SB10-001, was "retrospective" in its operation, taking back benefits already earned.

Language from SB12-149:

“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”

From the Senate Finance meeting summary for SB12-149, March 13, 2012:

“02:20 PM — Senate Bill 12-149

Senator Steadman, prime sponsor, presented Senate Bill 12-149 concerning allowing local government pension plan boards to make modifications to defined benefit plans. Senator Steadman stated that the bill impacts defined benefit plans in five counties in Colorado: Adams County, Arapahoe County, El Paso County, Pueblo County, and Weld County.

(Public pension attorney) Cindy Birley before the Senate Finance Committee:

“We did have . . . in initial drafts of the bill, we had a numerical test (a percent funded ratio threshold) . . .”.

“We met in Senator Steadman’s office . . ., at a reception that Senator Steadman had for stakeholders on January 9th, and we met with representatives from PERA, Colorado WINS, AFSCME, as well people from Arapahoe and Adams.”

“The various union groups and PERA were adamantly opposed to putting in an actuarial necessity test.”

(My comment: Well of course, the proposed test for “actuarial necessity” was lower than Colorado PERA’s funded ratio [69% AFR] at the time of the breach of Colorado PERA retiree pension contracts in 2010.)

Recently, the Colorado Supreme Court decided that the Colorado Legislature's historical underfunding of the Colorado PERA pension system could be addressed by clawing back accrued public pension benefits in the PERA pension system.

In its 2014 decision, the Colorado Supreme Court endorsed the 2010 PERA legislation, the subject of a PERA retiree lawsuit, SB10-001. Ninety percent of the state's "cost savings" in the 2010 bill are derived from taking accrued Colorado PERA COLA (statutory "annual benefit increase") benefits. Some members of the Colorado Legislature opposed these Colorado PERA shenanigans (i.e., theft).

Example:

Minority Leader and House Finance Committee Chairman Brian DelGrosso, February 23, 2012:

"I voted against Senate Bill1, and I voted against Senate Bill 1 not because I felt like we didn't need to fix PERA, I agreed with that part of it, but I voted against Senate Bill1 for the fact that it did adjust some of the COLAs and it did adjust stuff for folks that were already retired and people that were about ready to retire, and to me I felt like that was violating a contract that those people had got into . . . they played by the rules that were of the game at the time, and these folks . . . got up to where they about to retire or were retired, and now all of a sudden we were going to change the rules of game on them after they were done playing.  So to me, that was why I voted against Senate Bill 1, because I felt like that violated some of the contractual issues that we had."

Rep. DelGrosso: "The problem that we ran into with Senate Bill 1 . . . is that when they start adjusting things like the COLA . . . that's where it opens us up to lawsuits, because people are like 'hey, I'm five years away from retirement, I'm ten years away from retirement, I'm one year away, I am retired,' and then we go and make changes that's where we have lawsuits, because hey this a violating a contract . . . "

The premeditated scheme to claw back accrued Colorado PERA pension benefits, from its inception in 2009, was to forcibly take Colorado PERA retiree' assets outside of bankruptcy. (State governments cannot declare bankruptcy under federal law.) The only way that the Colorado Supreme Court (in concert with the Colorado Legislative Branch) could achieve this goal was by ignoring on-point Colorado public pension case law, and all evidence in the Colorado PERA retiree lawsuit, Justus v. State. In its October 2014 decision in the case, the Colorado Supreme Court ignored the testimony of Colorado PERA's own lawyers (in 2009) stating, on the record, that the Colorado PERA COLA benefit was a contractual obligation of Colorado-PERA affiliated employers. The Colorado Supreme Court embraced the original Denver District Court decision in this case, which did not even mention Colorado's public pension case law, (Bills and McPhail.) Is it possible that Denver District Court Judge Hyatt and his staff (in 2011) just happened to be such bad legal researchers that they were unaware of Colorado's on-point public pension case law that was being read by Colorado's relatively unsophisticated PERA retirees? This case law was indeed recognized by the forthright members of the Colorado Court of Appeals (in 2012) who found the case law to be "dispositive" in establishing the contractual right of PERA retirees to their accrued PERA COLA (ABI) benefits.

So, let's get this straight for posterity: The Colorado Court of Appeals (in 2012) found the relevant Colorado public pension case law in the case, Justus v. State, to be "dispositive," as to the contractual right to accrued PERA COLA benefits, yet Denver District Court Judge Hyatt (in 2011) acted as if this Colorado public pension case law did not exist (he did not mention it in his decision,) and Judge Hyatt's Denver District Court decision in the case was later embraced by the Colorado Supreme Court (in 2014.) So, here we have a situation in which state government forgives state government debt without the heightened scrutiny (no discovery) required under federal law, in US Trust.

All nice and tidy.

Chalkbeat, May 6, 2014 comment on the ongoing Colorado PERA studies, mentioned (above) by Senator Pat Steadman in his email:

"And the House Tuesday gave preliminary approval to Senate Bill 14-214, a bill that could have future implications for the 130,000-some teachers who are covered by the Public Employees’ Retirement Association. The bill proposes three studies of PERA, possibly setting up pension legislation in the 2016 legislative session. The measure needs Senate approval of a minor House amendment."

http://co.chalkbeat.org/2014/05/06/final-school-funding-debate-fails-to-materialize/#.U2orzGcU-14

Chalkbeat:

"The problem, (Colorado Budget Director) Sobanet notes, is 'you really don’t know until 30 years from now' if the rate of return assumption was correct."

“'Isn’t it more important to think about what we could do along the way to know if we’re off' in the effort to make the system solvent, he said."

(My comment: Budget Director Henry Sobanet, one way to ease your concerns about being "off" in efforts to make PERA "solvent" is to request that the State of Colorado actually pay its bills. The Colorado Legislature's PERA "bill" (ARC) is presented to the Legislature each year by Colorado PERA's actuaries. This is a responsible means by which you can begin to allay your concerns: As Budget Director, insist that the State of Colorado make the pension contributions that are actuarially required to meet the state's contractual obligations.)

http://co.chalkbeat.org/2014/06/02/pension-study-bill-may-set-stage-for-future-pera-debates/#.U432l2cU-14

Here we have Governor Hickenlooper aggressively defending the contractual property rights of oil and gas companies:

“Whether it’s local government or state government, I don’t think government should come in and snatch somebody’s property.” . . .

http://www.gjsentinel.com/news/articles/fractious-issue-of-fracking-may-reach-voters/

Yet, Governor Hickenlooper casually dismisses the contractual property rights of elderly Colorado pensioners:

". . . Sobanet is careful in discussing the studies, noting that his boss, Gov. John Hickenlooper. . . supports defending Senate Bill 1.'”

http://co.chalkbeat.org/2014/06/02/pension-study-bill-may-set-stage-for-future-pera-debates/#.U432l2cU-14

Henry Sobanet, Governor Hickenlooper's Budget Director, was "intimately involved" in crafting SB10-001, the 2010 Colorado PERA "COLA-taking" legislation. Henry Sobanet has also worked as a "consultant," and a "policy advisor" for the business group "Colorado Concern."

From the Colorado Association of School Boards:

"Sobanet also served under former Gov. Bill Owens and was intimately involved in the crafting of SB 10-001, the bill passed in 2010 to shore up PERA."

http://www.casb.org/event/casb-annual-convention/saturday-sessions

THE SOBANET/COLORADO CONCERN CONNECTION:

The business organization Colorado Concern lobbied in support of SB10-001 at the Legislature in 2010. Henry Sobanet is a former "consultant" for Colorado Concern.

Hickenlooper Budget Director Henry Sobanet's employment history includes:

"- Consultant: Colorado Concern

– Economic and Policy Advisor: Colorado Concern

– Director: Colorado Office of State Planning and Budgeting."

Link:

http://www.zoominfo.com/p/Henry-Sobanet/58878975

From State Bill News in 2011:

"Henry Sobanet, now president of Colorado Strategies LLC, a private consulting firm that specializes in economics, Colorado budget issues, legislative affairs and strategic management, is joining the governor’s office as budget director.

Sobanet also consults for a pro-business advocacy group, Colorado Concern."

http://statebillnews.com/2011/01/sobanet-returning-to-state-government-as-hickenloopers-budget-chief/

THE COLORADO CONCERN/SB10-001 CONNECTION:

The Colorado Secretary of State’s Directory of Lobbyists by Bill for SB10-001 includes the following two Colorado Concern lobbyists listed as supporting SB10-001:

Peter Kirchhof – Colorado Concern – supporting

Janice Sinden – Colorado Concern – supporting –

(http://www.coloradoconcern.com/, Colorado Concern is a business organization. Janice Sinden is now Denver Mayor Hancock's Chief of Staff.)

Link:

http://www.sos.state.co.us/lobby/SubjectSearchResults.do?&cmd=passgo&pi1=1

THE SOBANET/GOV. BILL OWENS/GOV. JOHN HICKENLOOPER CONNECTION:

From Governor Hickenlooper's website:

Gov. John Hickenlooper named Henry Sobanet to return as Director of the Office of State Planning & Budgeting in 2011. In this role, Sobanet is responsible for the budget forecasting of the State’s revenue and budget planning."

(There is no mention of Henry Sobanet's Colorado Concern consulting services on this page of the Governor's website.)

http://www.colorado.gov/cs/Satellite/GovHickenlooper/CBON/1251588314689

From cbslocal.com:

"The Democrat also appointed Henry Sobanet to be director of the Governor’s Office of State Planning and Budgeting. Sobanet also served as GOP Gov. Bill Owens’ budget director."

(My comment: Recall that it was Governor Bill Owens who championed the Colorado PERA service credit "fire sale" a dozen years ago, costing the Colorado PERA pension system billions of dollars.)

http://denver.cbslocal.com/2011/01/04/hickenlooper-appoints-another-cabinet-member/

From the Denver Post:

"Gov.-elect John Hickenlooper today named a Republican and one of the most experienced hands in state fiscal issues to head his Office of State Planning and Budgeting."

"Hickenlooper, a Democrat, named Henry Sobanet, formerly a budget director for Republican Gov. Bill Owens, to do the same job for him."

"Sobanet worked for the Office of State Planning Budgeting as deputy director from 1999 to 2004, when former Owens appointed him as director."

http://blogs.denverpost.com/thespot/2011/01/04/hickenlooper-names-former-owens-budget-director-henry-sobanet-to-same-job/20061/

(My comment: Henry Sobanet was Governor Owen's Deputy Budget Director in 2000 when Governor Owen's Colorado PERA pension "fire sale" legislation was adopted. It would be interesting to hear Henry Sobanet's perspectives and recollections regarding the Bill Owens "fire sale."

Denver Post editorial page editor Vince Carroll in the (July 31, 2013) Denver Post: "The administration of Gov. Bill Owens, in a major blunder, lobbied for the (Colorado PERA) fire sale as a shortsighted way to encourage early retirement . . ."

http://www.denverpost.com/carroll/ci_23762597/carroll-secret-rep-mike-coffmans-pera-pension)

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