Impartial Montana Judge Rebuts Colorado Judiciary’s Pension Contract Breach Cover Up.

(Interestingly, the Montana Court Wrongly Believes that the Colorado PERA Statutory “Annual Benefit Increase” is Tied to the “Cost of Living,” When, in Fact, it is Identical to the Montana Pension Benefit.)

This recent Montana District court decision draws a bright line under our historic and brazen Colorado pension theft, a theft that makes Bernie Madoff look like a pickpocket.

From Helenair.com: “Retirees’ cost-of-living increases preserved.”

“A state district court judge on Wednesday struck down a legislative attempt to cut the annual cost-of-living adjustments for retired state and local government employees.”

“District Judge James Reynolds issued a permanent injunction blocking the attempt by the 2013 (Montana) Legislature to reduce what is known as the Guaranteed Annual Benefit Adjustment, or GABA, from 3 percent to 1 percent for retirees under the Montana Public Employees’ Retirement System (PERS).”

“After the Legislature adjourned, the Association of Montana Retired Public Employees and four retirees filed the lawsuit challenging the cut in GABA.”

(Colorado public sector unions joined in the campaign to break Colorado PERA pensioner contracts. Retirees generally don’t pay union dues.)

Helenair.com:

“’By reducing the GABA, the state has significantly decreased the benefit payments that retired public employees receive,’ Reynolds wrote Wednesday. ‘Decreasing benefits for those who have already given their entire working life to the state, benefits to which they are contractually entitled, is not reasonable or necessary when other broader remedies were available.’”

“In his decision, Reynolds listed some other options available other than cutting the GABA that the Legislature could have used, citing the arguments of the retirees’ group.”

“These included: extending the pension debt amortization period beyond 30 years, adopting the bill as proposed without the GABA reduction, increasing the employer’s contributions, making a one-time payment to PERS from the state general fund reserves, diverting money from other accounts such as the coal severance tax trust fund, the tobacco settlement trust fund or the Big Sky Economic Development trust fund into PERS, or raising revenue through tax increases.”

(All of these options, including a prospective reduction of the rate at which PERA benefits accrue, that is, a reduction in the Colorado PERA pension “multiplier” going forward, were available to the Colorado politicians who broke the Colorado PERA ABI contract in 2010.)

Helenair.com:

“‘The court thus concludes that reducing the GABA was not reasonable and necessary to achieve the legitimate purpose of maintaining actuarial soundness in PERS,’ Reynolds wrote. ‘The substantial impairment caused by Section 5 of House Bill 454, therefore, is in violation of the contract clause of both the Montana and U.S. Constitutions.’”

“Reynolds said that he was persuaded that reducing GABA ‘constitutes a substantial impairment of retired public employees’ contract rights.’”

“’From a strictly financial point of view, the reduction in the GABA would have a substantial effect on the total value of payments a retiree could receive over his or her retirement – thousands of dollars in some cases,’ Reynolds wrote.”

“He said the publications distributed by the Montana Public Employees’ Retirement Administration made available to PERS members support the interpretation that the GABA is part of the members’ contract. Handbooks from PERS and workshops put on by its board did the same, he said.”

“’These publications show that public employees were told before and after they retired that they could count on the GABA,’ Reynolds said.”

(Colorado PERA publications demonstrating the contractual nature of the Colorado PERA ABI benefit are archived at the website: saveperacola.com.)

http://helenair.com/news/local/retirees-cost-of-living-increases-preserved/article_89db3266-00a0-5893-bb81-1f313351b836.html

Published comments on the Helenair.com article:

“In terms of the state pension, the only reason it was ever in trouble is that the legislature and Administrations, both Democratic and Republican ignored their obligation to fund it adequately, both by raising state contributions and employee contributions. By assuming that the stock market would always be super healthy, they assured the program would ultimately be in crisis.”

“I point out Bullock for his hypocrisy of being the one who introduced the amendment to cut GABA. On that day in April, 2013. He then vetoed it saying it was unconstitutional, as you say. So why did he drag everyone through it?”

“Note to reporter. You start the article saying Reynolds struck down legislature’s attempt to cut cost of living adjustments, Reynolds specifically said they are not COLA’s but are a specific 3% amount guaranteed by the law.”

(This ruse was quite useful in securing the Colorado Supreme Court’s political decision in the Colorado PERA public pension case, Justus v. State.)

THE MONTANA DISTRICT COURT DECISION.

Link to the Montana COLA (GABA) Decision:

http://mpera.mt.gov/docs/GABAdecision2015.pdf

Excerpts From the Montana Court Decision:

“The GABA is not, strictly speaking, a cost-of-living adjustment (COLA) because it is not dependent on the actual cost of living at the time. Rather, the GABA is applied regardless of whether it is higher or lower than the change in the cost of living.”

(This is a pertinent observation on the part of the Montana Judiciary that unaccountably escaped the Colorado Judiciary.)

“Leading up to the 2013 legislative session, the funding ratio of the (Montana) PERS was 67 percent, meaning the fund was only able to meet 67 percent of its current liabilities.”

(The Colorado PERA pension system had a 69 percent funded ratio at the time of the PERA ABI contract breach in 2010.)

“AMRPE claims that HB 454 violates the contract clause of both the Montana and United States Constitutions because retired public employees have a contractual right to the GABA and, by unilaterally reducing the GABA, the legislature has impaired that right.”

“Beneficial amendments automatically become part of an employee’s contract because acceptance of the modification is presumed, but acceptance cannot be presumed when a modification is detrimental to the employee.”

 (Another important observation by this Montana District Court judge.)

“Montana’s Constitution has no such provision that directly addresses the contractual nature of public retirement benefits.” (Well, just like the Colorado Constitution.)

“The (Colorado) Court compared the COLA statute to other laws it had previously determined created contractual rights, using words such as ‘entitled,’ ‘future,’ and ‘payable for the life of the retiree,’ and noted that the COLA statute did not contain any such language. (Justus) Moreover, the Court noted that ‘[b]y its very nature a statutory cost of living adjustment is a periodic exercise of legislative discretion that takes account of changing economic conditions in the state and/or nation.'” (Justus)

(The Montana court is unaware that the Colorado statutory language creating the Colorado PERA base benefit contract is identical to the statutory language creating the Colorado PERA ABI benefit contract. Both contractual obligations “SHALL” be paid under Colorado statutes. How is it that ordinary public pensioners possess knowledge that court officials miss?)

The Montana Court is Under the Impression that Colorado’s Statutory Annual Benefit Increase [ABI] is a COLA, When in Fact, It is Identical in Form to the Montana Pension GABA, a Fixed Statutory, Periodic Increase.

Montana Court: “While these cases from other states are helpful to the Court’s analysis, none address an identical situation to that in the present case. The (Montana) GABA is not a COLA that is tied to economic factors outside the control of the legislature. It is a fixed percentage that compounds annually, regardless of market performance. In that sense, the GABA is unlike the COLAs in New Mexico, Maine, or Colorado which were not contractually protected because, in part, they were subject to the whims of the economy.”

(The Montana court failed to consider the political nature of the Colorado court’s treatment of the ABI benefit in the case, Justus v. State and thus misinterpreted the legal status of the Colorado PERA ABI benefit.)

“Once that enhancement was made, it became part of the contract.”

(This is the historical [pre-contract breach campaign] position taken by Colorado PERA officials.)

“The legislature did not reserve the right to reduce that enhancement in the future, nor did it declare that the GABA was not part of the contract. The legislature knew that public employees had a contractual right to retirement benefits and chose to guarantee an additional benefit beyond those in existence at the time.”

(Evidence Ignored by the Colorado Supreme Court, Colorado PERA’s Former General Counsel and Current Executive Director:

August 17, 2005, Rocky Mountain News:

“His [Colorado PERA General Counsel Greg Smith’s] briefing paper said ‘there has never been a finding in Colorado that the state has reserved its power to make changes’ in PERA’s benefit structure.”

“Smith said in his opinion that ‘other [non-Colorado] courts have set a high burden to meet the necessity threshold.'”

“The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member. That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan.”

“Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem.”

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/

Again, Greg Smith:

“Shrink the COLAs: ‘The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments,’ Smith said.”

http://www.denverpost.com/news/ci_11105271)

Back to the Montana Court Decision:

“Given the structure and language of the relevant statutes, and the promises made to public employees, the Court concludes that the GABA is part of the contract between public employees and the state.”

“The Court is persuaded that, by reducing in the GABA from three percent to 1 percent, HB 454 constitutes a substantial impairment of retired public employees’ contract rights. From a strictly financial point of view, the reduction in the GABA would have a substantial effect on the total value of payments a retiree could receive over his or her retirement-thousands of dollars in some cases.”

“As described above, PERB distributed literature and held seminars and workshops that repeatedly assured employees that the GABA was guaranteed, not subject to the whims of the market, and something on which they could rely.”

Colorado PERA’s lawyers, 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

If Colorado PERA’s lawyers believe that the PERA ABI benefit is a contractual obligation, why should the relatively unsophisticated PERA pensioners not also hold this belief?)

Montana Court:

“Retired public employees reasonably expected that the GABA would not decrease, despite the fact that the GABA statute had been amended in the past, because the GABA had never been reduced, except for new hires.”

“In 2007, the Montana Legislature reduced the GABA to 1.5 percent for employees hired after January 1,2007. This further strengthens AMRPE’s reasonable expectation that the GABA, as applied to them, would not decrease.”

(As we have observed, similar legislation was adopted in Colorado in 2005.)

“Public employees have a legitimate expectation that the GABA is part of their contracts with the State, and a reduction in GABA substantially frustrates that expectation.

“The burden is on the State to prove that the impairment was reasonable and necessary.”

(Colorado PERA’s lawyers agreed with this point, until they shifted their legal strategy for the PERA pension contract breach from “actuarial necessity” to a simple denial of contractual obligations. The Colorado Judiciary circumvented this problem of having the defendants prove reasonableness and necessity by accepting the defendant’s suggestion that the court simply deny the existence of the PERA ABI contract, a contract which PERA’s lawyers and the sponsor of SB10-001 had previously acknowledged.)

Note that the Montana court cites the federal case, US Trust, a case the Colorado Supreme Court artfully ignored:

Montana District Court:

“Though courts generally defer to the legislature’s judgment, in this case ‘complete deference to a legislative assessment of reasonableness is not appropriate because the State’s self-interest is at stake…. If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all.” (US Trust)

“Nevertheless, the cases both parties cite make clear the when the State is a party to the contract that is substantially impaired, complete deference to the legislature is inappropriate. And the State is clearly a party to the employment contracts of public employees. The Court, therefore, will not grant complete deference to the legislature and will instead apply a heightened level of scrutiny.”

“Even if alternatives might be ‘politically more difficult,’ the State is limited in its ability ‘to abridge its contractual obligations without first pursuing other alternatives.'”

“Decreasing benefits for those who have already given their entire working life to the State, benefits to which they are contractually entitled, is not reasonable or necessary, when other broader remedies were available.”

“The substantial impairment of contract rights caused by Section 5 of HB 454, therefore, is in violation of the contract clause of both the Montana and United States Constitutions. AMRPE is entitled to summary judgment and a permanent injunction.”

“The State is permanently enjoined from enforcing the amendments to § 19-3-1605, MCA, contained in section 5 of HB 454, reducing the GABA for retired public employees.”

From the Montana PERA website:

March 4, 2015

“Judge Reynolds today granted PERS retirees’ request for a permanent injunction to prevent the Board from implementing the decrease in GABA under Section 5 of House Bill 454 (2013).”

“The Judge ruled that the PERS retirees have a contract right to the GABA increases and that the State’s reduction of the GABA to address the actuarial soundness of PERS was not ‘reasonable and necessary’ and thus violated the contract clauses of the Montana and the US Constitutions.”

http://mpera.mt.gov/perslawsuitamrpe.shtml

For reference, I provide links to a few previous ColoradoPols.com articles addressing the attempted governmental theft of the Montana retiree’s GABA pension benefit:

http://coloradopols.com/diary/41512/montana-governor-likely-to-sign-a-pension-reform-bill-he-believes-is-unconstitutional#sthash.1Y5eOS6k.dpbs

http://coloradopols.com/diary/46521/montana-retiree-cola-theft-lawsuit-progressing-colorado-pera-retiree-cola-theft-lawsuit-cert-petition-pending#sthash.1bmBRUM8.dpbs

http://coloradopols.com/diary/44462/montana-public-sector-unions-to-sue-over-pension-cola-theft-colorados-unions-supported-the-taking-of-the-contracted-colorado-pera-cola-benefit-from-pensioners#sthash.Hmot55ms.dpbs

Readers should note that protections afforded to public pensioners by the US Constitution vary dramatically depending on which side of a state line a pensioner happens to be standing. To wit:

http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out#sthash.XwxTOij1.dpbs

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Colorado PERA’s Executive Director: Fiduciary, or Politician?

Association of State Retirement Administrators: Colorado PERA Pension Has 5th Worse Funding Discipline in the Nation.

The Executive Director of Colorado’s largest public pension plan (Greg Smith of Colorado PERA) knows quite well that the pension plan he leads has a lower level of funding (funded in the low 60 percent range) than is needed to meet the pension system’s long-term financial obligations. Greg Smith knows that the payments received by the PERA pension system from its state and local governmental sponsors, since 2002, have been well below the funding levels calculated by Colorado PERA’s own actuaries as necessary to maintain the solvency of the pension system. Executive Director Greg Smith represents a board of fiduciaries, the Colorado PERA Board of Trustees.

Yet, Greg Smith recently testified to the Colorado Legislature that the pension system requires no “additional contributions.” In my opinion, the Colorado PERA pension system (a Colorado state agency) must have a leader who will speak the truth to Colorado’s state and local elected officials, rather than a leader who seeks to perpetuate financial mismanagement of the pension system.

Historically, the fact that Colorado PERA officials have acted in a political manner rather than as fiduciaries is largely responsible for the decline in the pension system’s funded ratio. (Note the past unanimous support of the PERA Board of Trustees for Governor Bill Owens PERA “service credit fire sale,” and the fact that state agency Colorado PERA has spent many millions of trust fund dollars on lobbyists and political/public relations campaigns.) Colorado does not need a “politician” at the helm of this state agency. Colorado PERA members desperately require a pension leader who will consistently act as a fiduciary. This public pension system itself cries out for greater oversight.

PERA Executive Director Greg Smith contradicting PERA General Counsel Director Greg Smith.

On December 11, 2014, Colorado PERA’s Executive Director Greg Smith testified to the Colorado General Assembly’s Joint Budget Committee: “We don’t need additional contributions.”

On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s (then) General Counsel Greg Smith blamed the Colorado General Assembly for the decline 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.”

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

Colorado PERA’s Greg Smith may very well be alone in the nation in that he, as a fiduciary who heads a major public pension system that has been grossly and historically underfunded, testifies to elected officials overseeing the pension system “we don’t need additional contributions.”

http://coloradopols.com/diary/66484/colorado-pera-fiduciaries-severely-underfunded-but-see-no-problem#sthash.VIa8SL5T.dpbs

Note the testimony of the previous Executive Director of Colorado PERA (Meredith Williams) to the Colorado Legislature’s House Finance Committee on February 23, 2012 (relating to the Legislature’s historical underfunding of its PERA pension obligations):

“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.”

I ask: Were Colorado PERA officials speaking the truth to Colorado legislators on February 23, 2012 when [then] Colorado PERA General Manager Meredith Williams, testified to the Colorado House Finance Committee “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.”

Or, were Colorado PERA officials speaking the truth to Colorado legislators on December 11, 2014 when JBC members heard from Colorado PERA that “we don’t need additional contributions”?

Logically, only one of these Colorado PERA statements to Colorado state legislators can be true.

http://coloradopols.com/diary/66279/colorado-pera-officials-corrupt-state-budget-process-joint-budget-committee-analyst-silenced

The National Association of State Retirement Administrators (NASRA) recently released a study addressing the extent to which public pension plan sponsors in the United States have made  “actuarially required contributions” (ARC) to the pension plans.

From the Colorado Springs Business Journal: “Colorado Ranks 46th for Pension Funding”:

“Colorado has made 74.5 percent of its annual required contribution to its public employee retirement plans from 2001 through 2013, placing it 46th in terms of average state pension funding, a report suggests.”

“While most U.S. states are meeting their pension commitments, a report by the National Association of State Retirement Administrators shows Colorado has lagged for more than a decade.”

“Colorado placed behind New Jersey, Pennsylvania, Washington, North Dakota and Kansas, and is just ahead of Virginia, Illinois and Oklahoma, according to the report. The report also included the District of Columbia.”

“The report, ‘Spotlight on The ARC Experience of State Retirement Plans, FY 01 to FY 13,’ examines how state governments performed meeting the annual required contribution (ARC) of their public employee retirement plans,” according to NASRA. It details the ARC experience of 112 state-wide and state-sponsored public pension plans in the U.S. Together, these plans account for more than 80 percent of all public pension assets and participants.”

http://csbj.com/2015/03/13/report-colorado-ranked-46th-for-pension-funding/

Link to the NASRA Report:

http://www.nasra.org/files/JointPublications/NASRA_ARC_Spotlight.pdf

Excerpts from the NASRA Report:

“A government that has paid the ARC in full has made an appropriation to the pension trust to cover the benefits accrued that year and to pay down a portion of any liabilities that were not pre-funded in previous years. Assuming projections of actuarial experience hold true, an allocation short of the full ARC means the unfunded liability will grow and require greater contributions in future years.”

“The annual required contribution, or ARC, refers to the amount needed to be contributed by employers to adequately fund a public pension plan. The ARC is the sum of two factors: a) the cost of pension benefits being accrued in the current year (known as the normal cost), plus b) the cost to amortize, or pay off, the plan’s unfunded liability. The ARC is the required employer contribution after accounting for other revenue, chiefly expected investment earnings and contributions from employee participants.”

“Only a few states have conspicuously failed to adequately fund their pension plans.”

“Most states made a good-faith effort to fund their pension plans; a good-faith effort is defined here as paying 95 percent or more of the ARC.”

“Failing to make even a good-faith effort to fund the ARC increases future costs of funding the pension.”

 “The median ARC experience is 95.1 percent, meaning that one-half of the plans received at least 95.1 percent of their required contributions.”

 “All but six states paid at least 75 percent of their ARC.”

The Disparity of Colorado PERA Governmental Employer Contribution Legal Frameworks:

“For the Colorado Affiliated Local plan, statutes require employers to fund the actuarially determined contribution. Employers who participate in the Municipal, School, State, and Denver Public Schools plans under the Colorado Public Employees’ Retirement Association contribute a fixed percentage of compensation specified in statutes.”

(My comment: Public pension plans that rely on fixed statutory contribution rates, like Colorado PERA, rather than regularly paying the pension’s full ARC have the lowest funded ratios.)

The Colorado PERA State Division has paid only 67.5 percent of its ARC requirement [FY05-FY13.]

 http://www.nasra.org/files/JointPublications/NASRA_ARC_Spotlight.pdf

A few years ago, Colorado PERA officials and their hired lobbyists argued that the PERA public pension system’s 69 percent funded ratio was such a crisis that the contracts of Colorado PERA pensioners just had to be broken. They contended that the Colorado PERA pension system’s 69 percent funded level constituted an “actuarial emergency” that justified the breach of Colorado PERA retiree pension contracts.

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

In spite of the fact that Colorado PERA officials had previously admitted to the existence of the PERA “ABI” (COLA) contractual obligation, these officials hired lobbyists to enact a bill to break the contract. In 2010, the Colorado Legislature (with help from 27 lobbyists) passed the bill, in effect asking the Colorado Supreme Court for the political favor of ignoring their own court’s precedent to break the contract. The Colorado Supreme Court, as a political entity itself, obliged. Since Colorado courts refused to grant discovery in the case, PERA’s claims of an actuarial emergency received no judicial scrutiny. This is our government theoretically constrained by the Colorado and US Constitutions.

http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out#sthash.gcpgGTWh.dpbs

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Former Colorado Springs PERA Members Sue City.

From Plan Sponsor: "Hospital Employees Sue Colorado Springs for Colorado PERA Pension."

"A lawsuit claims the City of Colorado Springs’ termination of Memorial Health System’s affiliation with the state pension system violated state law."

"Employees of Memorial Health System, owned by the City of Colorado Springs, Colorado, have sued the city, claiming they were unlawfully removed from the state’s Public Employees Retirement Association (PERA) and subsequently not given promised benefits."

"Prior to termination of the City’s administration of Memorial, Memorial employees were repeatedly told that when PERA affiliation was terminated, their pension plan would be replaced by another plan that would be at least as good as the PERA benefit plan."

"The lawsuit alleges the new employee pension benefit plan for Memorial employees after October 1, 2012, is inferior to the benefits they would have accrued under PERA."

"For Memorial employees (except the Children’s Hospital sublease employees) the retirement benefits accrue at the rate of only approximately 1% of the average of the highest five years of service per additional year of service, instead of 2.5% of the average of the highest three years of service under PERA."

(This rate of accrual of PERA benefits is called the pension "multiplier." In 2010, rather than PROSPECTIVELY reducing this PERA pension multiplier from a 2.5 percent level for PERA benefits not yet accrued, the sponsors of SB10-001 sought a RETROSPECTIVE reduction of Colorado PERA pension [ABI] COLA benefits that had already accrued, that is, PERA pension benefits that had already been earned by Colorado PERA retirees. SB10-001 was challenged in court [Justus v. State] and ultimately blessed by a Colorado Supreme Court that: disregarded 50-year old Colorado public pension precedent, ignored federal case law [US Trust,] ignored ubiquitous evidence of the contract, and failed to conduct a "contract analysis" . . . all of this to summarily eliminate legal Colorado governmental debts. The plaintiffs, Colorado PERA retirees, had exchanged years of labor and pension contributions for this ABI benefit. How did the Colorado Supreme Court justices reach the conclusion that Colorado PERA members do not exchange their labor and contributions for the ABI benefit? In their superficial, state-serving review, the justices did not address this question.)

Plan Sponsor:

"In addition, as newly minted private-sector employees, these employees now must contribute to and qualify for Social Security. They have not accrued Social Security credits because previously they did not contribute to Social Security."

(The Colorado PERA pension system is theoretically a replacement for Social Security. The Colorado PERA pension system is theoretically a "qualified" public pension plan under the Internal Revenue Code. "Qualified public pension plans" must have "definitely determinable" benefits under the Internal Revenue Code. The Colorado Supreme Court recently ruled in [willful?] ignorance of this federal requirement. Evidence and law are much easier to bury when no trial or discovery are allowed.)

Plan Sponsor:

“'These differences amount to tens of thousands, or even hundreds of thousands of dollars per employee, in lost retirement benefits,' the lawsuit says."

"The lawusit is filed on behalf of all affected employees, and the city has acknowledged that approximately 4,000 or more such employees of Memorial Hospital existed as of October 1, 2012."

Complete article at PlanSponsor:

http://www.plansponsor.com/Hospital_Employees_Sue_Colorado_…

The complaint, Romstad v. City of Colorado Springs:

http://www.plansponsor.com/…/RomstadvCityofColoradoSprings.…

http://coloradopols.com/…/the-colorado-supreme-court-politi…

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New Jersey Court: Pension ARC Must Be Paid. Colorado PERA: Unnecessary.

Coverage of today's New Jersey Superior Court Decision:

"(New Jersey Governor) Christie has said the pension cuts (failure to pay public pension 'actuarially required contributions, ARC') were necessary to balance the state’s budget and that 'there are no alternatives' to such reductions. At the same time, he has backed record amounts of new corporate tax subsidies — some of which flowed to Republican campaign contributors. He has also vetoed legislation to increase taxes on income above $1 million. That legislation was projected to raise $1.1 billion, which proponents said would have allowed the state to make its required pension contribution."

http://coloradopols.com/diary/66484/colorado-pera-fiduciaries-severely-underfunded-but-see-no-problem

http://www.ibtimes.com/chris-christie-court-overturns-new-jersey-governors-pension-cuts-1825710

Today (2/23/2015), the Superior Court of New Jersey forced the State of New Jersey to abide by a recently enacted statutory requirement that public pension ARCs be paid. In Colorado, the issue of the payment of the Colorado PERA pension ARC isn't even on the table. Colorado PERA's Executive Director recently testified to the Colorado Joint Budget Committee that the PERA ARC need not be paid, i.e., he stated that, although the PERA ARC has not been paid for thirteen years in Colorado, and is not currently being paid, the PERA pension fund needs no additional contributions. As far as I can tell, Colorado PERA is the lone public pension system in the United States taking the position that public pension ARCs need not be paid. See the following article for Greg Smith's testimony:

http://coloradopols.com/diary/66484/colorado-pera-fiduciaries-severely-underfunded-but-see-no-problem

Link to the complete New Jersey court opinion:

http://www.judiciary.state.nj.us/pension_payment/FINAL%20decision%202-23-2015.pdf

A few interesting excerpts from the New Jersey Court's opinion:

"And, history has shown that the public pension system and its members routinely have been targeted by administrations of both parties when budget problems arise."

"See Berg v. Christie . . .describing a 'series of Executive and Legislative policy decisions' that 'resulted in underfunding of the pension systems' and deciding whether a legislative act suspending cost of living adjustments for current and future retirees violated the contract clause."

"Now, for the first time, Chapter 78 expressly provides that members of the public pension systems 'shall have a contractual right to the annual required contribution amount being made by the member’s employer or by any other public entity.'”

"The Legislature directed that the required contributions be made annually on a timely basis 'to help ensure that the retirement system is securely funded and that the retirement benefits to which the members are entitled by statute and in consideration for their public service and in compensation for their work will be paid upon retirement.'”

"Indeed, the Governor himself characterized this pension legislation as constituting 'historic reforms' that 'bring to an end years of broken promises and fiscal mismanagement by securing the long-term solvency of the pension and benefit systems.'”

"Under the statutory framework requiring employer contributions, the State is required to make an 'annually required contribution' (ARC) which is composed of the 'annual normal contribution' and the 'annual unfunded accrued actuarial liability contribution' (UAAL)."

"The State has failed to pay its full ARC every year from FY 1997 to 2012."

"The State’s continued failure to make the full ARC payment results in exponential growth in the UAAL through both lost contributions and lost expected return on the investment of the contributions."

"Courts in New Jersey have consistently viewed pension payments as a form of 'deferred compensation' that an employee earns for prior service. ('Deferred compensation benefits have been earned by an employee and are no longer considered a gratuity.”)

“Pension statutes should be liberally construed . . . because they represent deferred compensation for a government employee’s service.”

"Despite the broad reach of the doctrine of sovereign immunity, there are several exceptions to the doctrine. For example, the doctrine does not apply if a plaintiff seeks relief from state laws that violate the Federal Constitution."

"This court and the United States District Court for the District of New Jersey previously held in a similar suit brought by the NJEA, challenging Chapter 78’s suspension of the COLAs and seeking enforcement of plaintiffs’ contracts with the State, that these types of claims essentially seek specific performance of their contracts with the State."

"As these two decisions explain, actions seeking specific performance of a contract do not fall under Ex parte Young’s exception from the doctrine of sovereign immunity, largely because they seek retroactive, rather than prospective, relief."

"Notably, both the Federal and the State Contract Clauses speak of a violation of the Clause’s guarantee as an 'impairment.' Consequently, when the Legislature chose to use the term 'impairment' in Chapter 78, it did not intend to limit plaintiffs’ constitutional protections to the New Jersey State Constitution."

"Like any private party to a contract, then, the State may repudiate a contract, as long as it is willing to pay the damages resulting from the breach."

"Consequently, although plaintiffs’ Federal Contract Clause claims are not necessary to the outcome of this case, the court concludes that plaintiffs have properly asserted claims arising under the Federal Constitution, which support their parallel claims arising under the New Jersey Constitution."

"The court is unwilling to rely on what has now become a succession of empty promises. Defendants’ assertions about the health of the fund also do not take into account the fact that the State’s failure to make its payments in a timely fashion results in the loss of interest on the investment of money that otherwise should have been put into the pension funds. The continued failure to make timely payments therefore causes the unfunded liability to increase exponentially."

"Further, after a State binds itself in a contract, 'a State is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives.U.S. Trust Co."

"Although a state’s asserted justifications for impairing private contractual obligations are typically given significant deference by the courts, less deference is accorded to a state in regard to public contracts because a state’s self-interest is at stake."

" . . . a contract impairment will be considered unreasonable if the State considered impairment of the contract right “on a par with other policy alternatives. U.S. Trust"

"The court cannot allow the State to simply turn its back on its obligations to New Jersey’s public employees–especially in light of the fact that the State’s failure to make its full payment constitutes a substantial blow to the solvency of the pension funds in violation of plaintiffs’ constitutional rights, and due to the fact that the terms of the UAAL payments were set forth–and even publicly endorsed–by the Governor himself."

"The complaints raise a number of other claims that were not argued by plaintiffs either in the moving briefs or in the reply briefs. For example, the complaints allege estoppel, unconstitutional taking, breach of the implied covenant of good faith and fair dealing . . ."

http://www.judiciary.state.nj.us/pension_payment/FINAL%20decision%202-23-2015.pdf

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Colorado PERA: Forcing Retirees to Eat 90 Percent of Pension Reform Costs was “Sensitive” and “Equitable.”

Yes dear reader, in 2010, a juggernaut of 27 Colorado statehouse lobbyists "sensitively" forced the PERA reform bill (SB10-001) through the legislative process.

The propaganda produced by our Colorado state pension administrative agency, Colorado PERA, simply boggles the mind. It is boundless . . . and unconstrained by normal human decency.

Allow me to translate this recent Colorado PERA propaganda piece: Colorado PERA officials recently argued, on their website, that using PERA trust funds (in part, the property of PERA retirees) to pay for public relations, lobbying, and legal campaigns to take the retirees' accrued statutory PERA benefits (benefits that PERA officials have, in legislative testimony, confirmed as PERA contractual obligations) and thus push 90 percent of the cost of the 2010 PERA reform bill onto the backs of these elderly PERA retirees, was "sensitive," and an "equitable distribution of costs."

Elderly PERA retirees eat 90 percent, PERA employers and taxpayers, who actually owe the debt, bear ten percent of the burden. This is the Colorado PERA definition of "equitable"?

In my opinion, Colorado PERA officials are now capable of writing anything, even the most outrageous lies, without compunction. No other Colorado state agency can approach the Colorado PERA talent for propaganda.

http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out

A few days ago this statement was posted on Colorado PERA's website:

"The goal of the General Assembly’s reforms enacted in 2010 was for PERA to achieve fully funded status – thus ensuring retirement security – WITH SENSITIVITY TO THE EQUITABLE DISTRIBUTION OF COSTS AND BURDENS ASSOCIATED WITH THE REFORMS." (My emphasis in caps.)

https://www.copera.org/about/pera-on-the-issues/conversations-about-colorado%E2%80%99s-public-employee-retirement-system-should

Implicit in this Colorado PERA statement is a belief that accrued Colorado PERA ABI (COLA) benefits ARE NOT a Colorado PERA contractual obligation. Surely, Colorado PERA officials do not believe that the breach of a public pension contract can be "equitable," or "sensitive."

But, if Colorado PERA officials believe that the statutory PERA ABI benefit is not a Colorado PERA contractual obligation, then why did they provide this perfectly contradictory legislative testimony in 2009?

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

COLORADO PERA OFFICIALS AND SB10-001 SPONSORS: PERA RETIREES WILL EAT 90 PERCENT OF THE COSTS OF THE 2010 REFORM:

January 22, 2010

SB10-001 co-prime sponsor Senator Josh Penry and bill sponsor Senator Greg Brophy: “Fully 90 percent of the PERA fix comes from benefit cuts to current and future retirees.”

http://www.denverpost.com/search/ci_14242354

January 26, 2010

"The difference between the past approach and SB1, Penry said, is that the new plan boldly tackles benefit reductions, which he said will constitute 90 percent of the PERA fund's recovery and generate plenty of opposition along the way."

http://www.chieftain.com/news/local/legislators-pera-changes-will-be-painful/article_b82cee28-328f-59ba-91c0-a480e5f719c8.html

October 26, 2011

Colorado PERA Executive Director Greg Smith, at the “Fall 2011 PERA Shareholder’s Meeting,” (thirty-six minutes into the video):"‘Only ten percent of the fix” of the [SB10-001] reforms in 2010 came from additional employer contributions."

http://www.youtube.com/watch?v=F8LB7t5HMBo

April 17, 2011

Senator Brandon Shaffer, co-prime sponsor, SB10-001, Denver Post: “I sponsored last year's legislation, known as Senate Bill 1, to protect PERA. The bill required shared sacrifice, but frankly most of it — 90 percent of the burden — falls on the shoulders of PERA's current and future members and retirees.”

http://www.denverpost.com/opinion/ci_17858107

May 29, 2011

Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain:

“In fact, about 90 percent of the changes enacted by Senate Bill 1 are falling on the shoulders of current and future PERA members and retirees — not other taxpayers.”

http://www.chieftain.com/opinion/ideas/legislative-changes-have-put-pera-fund-on-a-solid-footing/article_3080a01c-88cd-11e0-ad01-001cc4c03286.html

We see above that Colorado PERA officials have testified that the PERA statutory ABI (COLA) benefit is a Colorado PERA contractual obligation. (For the record, this evidence was conveniently ignored by the Colorado Supreme Court in its 2014 Decision in the case, Justus v. State.) In 2014, Colorado state government CONVENIENTLY forgave Colorado state government debt (violating federal case law, US Trust.)

"The Colorado Supreme Court: Politicians in Black Robes."

http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out

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The Traditional Colorado State “Screwing” of Colorado Teachers and Public Sector Workers.

Former Colorado Union (AFSCME) Officials Weigh In, and Comment on the Legacy of Colorado State Senator Pat Steadman.

I provide below, for the record, a few examples of the historical state deception of Colorado teachers and other Colorado public sector employees. It's important that Colorado teachers, and Colorado state and local government workers, be fully informed relating to their employment situations. For the most part, Colorado's public sector unions have not fully informed their members.

Examples of the historical deception of Colorado public sector workers:

The reduction of Colorado state employee compensation by means of a promised "performance pay" scheme that was subsequently not funded by the Colorado Legislature.

The past repurposing of resources allocated for state employee compensation, to pay the salaries of hundreds of new Executive Branch political appointees.

The retention of gubernatorial political appointees in high-salaried administrative positions across both Democratic and Republican administrations (including, many former Colorado state legislators whose ultimate Colorado PERA retirement benefits will be based on their new six-figure salaries rather than on their $30,000 legislative salaries.)

The annual Legislative transfer of billions of dollars of Colorado state and local government resources to corporations (in the form of "tax expenditures") while actuarially required contributions to the Colorado PERA pension system are ignored. (Google: "Colorado Tax Expenditure Report.")

The 2010 Colorado (union supported) elimination of state employee and teacher contractual rights to pension inflation protection in retirement (a benefit that these employees had already paid for with their contributions and labor.)

The immoral 2009 use of teacher and public employee PERA pension contributions to pay for political and legal campaigns to break the PERA pension contracts of these same teachers and public employees.

The Colorado Legislature's past transfer of $700 million to pay off legacy pension debts of Colorado local governments (debts that are not Colorado state contractual obligations) while the Legislature failed to pay actuarially required contributions for their own Colorado state contractual obligations in the PERA pension system.

The Colorado PERA Board's past unanimous endorsement of Governor Bill Owens' "service credit fire sale," designed to reduce the labor costs of Colorado PERA-affiliated employers by ridding government of "expensive" older employees. (This scheme increased the debt of the Colorado PERA pension system by billions of dollars.)

These few examples characterize the employment environment of Colorado teachers, and Colorado state and local government workers. Only fully-informed workers are able to make rational decisions regarding their ongoing participation in this Colorado public sector employment environment.

The Colorado SB10-001 Deception:

The most recent deception of Colorado teachers and Colorado state and local government workers occurred in 2010. In that year, a group of proponents of breaking Colorado PERA pension contracts successfully divided active Colorado PERA members from retired members in order to take their contracted inflation protection in retirement. (This taking was supported by Colorado's public sector unions.) The support of Colorado's public sector unions contributed to the elimination of the contractual rights of their own union members to inflation protection in retirement. In 2010, Colorado's public sector unions supported the bill (SB10-001) that allows Colorado governments to inflate away legal governmental pension debts. Colorado's unions are unique in the history of the Labor Movement in that they have facilitated the destruction of their own members' contractual rights.

The primary interest of Colorado politicians is reelection. Pleasing voters is simply more important than speaking the truth about TABOR to Colorado voters, or honoring state contracts. Colorado politicians have no desire to tell voters that they must actually pay for governmental services. Breaking Colorado PERA contractual obligations, and directing the resources that support these contractual obligations to pay for public services allows politicians to avoid speaking the truth to voters. Ignoring state financial and contractual obligations to pensions frees up money to fund programs that help legislators get reelected. Political connections in the courts have smoothed the path to the desired Colorado PERA pension contract breach.

See the article: "The Colorado Supreme Court: Politicians in Black Robes" at ColoradoPols.com.

http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out

Colorado legislators have not paid the full annual Colorado PERA pension bill, as calculated by Colorado PERA's actuaries, since 2002. They are not paying this "ARC" pension bill even today. Colorado PERA's Executive Director Greg Smith is alone in the nation in claiming that a public pension system does not have to pay the pension bill calculated by its own actuaries.

Initially, in 2009, Colorado public sector unions and other proponents of SB10-001 sought a one-time reduction of this contractual inflation protection (ABI, "COLA") for PERA retirement benefits, based on a claim of financial need, i.e., "actuarial necessity." Colorado's unions did not realize that their support for SB10-001 would ultimately wipe out the entire contractual right of teachers and state workers to inflation protection in retirement. Teachers be sure to thank your CEA officials!

Although they had already admitted to the existence of the contractual PERA COLA obligation in 2009, the proponents of SB10-001 later realized that establishing "actuarial necessity" would be difficult, so they switched their legal strategy to a simple denial of the existence of the PERA COLA contract. Although their testimony as to the contractual inflation protection obligation was on the record (written and recorded at a Colorado Joint Budget Committee hearing) this admission meant nothing to the Colorado Supreme Court. The Court threw out the worker's contract right without examining evidence in the case.

I find it ironic that in 2010, Greg Smith, Executive Director of the Colorado PERA pension system argued that the PERA COLA (inflation protection) contract must be broken when the funded ratio of the PERA pension stood at 69 percent, yet now that the funded ratio of the Colorado PERA pension system is in the low 60s, Greg Smith has recently stated that the pension system does not need additional contributions. It looks like he just makes this up as he goes along.

Imagine what life is like as one of the 4,500 employees of the Colorado Judicial Branch. These employees are enrolled in the Colorado PERA pension system. They watched in 2012 as the Colorado Court of Appeals found Colorado public pension case law (Bills and McPhail) "dispositive" as to the contractual right of Colorado PERA members to their statutory "inflation protection" in retirement (which the PERA members have paid for with labor and contributions.) Then, in 2014, they were forced to watch the politicians installed at the top of their organization (Supreme Court Justices) ignore all evidence in the case Justus v. State, ignore federal case law (US Trust), and embrace a Denver District Court decision that conveniently failed to even mention Colorado's on-point public pension case law (Bills and McPhail.) The reality is that these 4,500 employees work for an organization that is ultimately arbitrary, political, and not guided by the Rule of Law. The Judicial Branch employees get a paycheck, but in their heart of hearts, realize that their organization is unprincipled, ignores the US Constitution when convenient, and so serves no higher purpose.

Recently, an article relating to the support of Colorado State Senator Pat Steadman for the taking of the PERA COLA benefit in 2010 was posted on the blog ColoradoPols.com and on Facebook. This article elicited some commentary from a few former Colorado public sector union officials that documents the historical deception of Colorado teachers and other public sector workers.

Comments of Former AFSCME Colorado Official Guy Santo:

"Guy Santo . . . Facebook's still new to me; but some things aren't so novel…like the duplicitous incompetence of a professional politician; e.g, Mr. (Colorado State Senator Pat) Steadman and his role in the Great Colorado Pension Heist of 2010, a.k.a. Senate Bill 1 (SB-001).

As background: I met Mr. Steadman before he was a lobbyist or legislator (his only jobs besides lawyer), when he was staff attorney with our national umbrella labor organization, American Federation of State County & Municipal Employees (AFSCME), in which capacity he single- handedly botched a lawsuit against reclassifying all state jobs in the early 90's. The lawsuit concerned an obviously flawed 'Class Description' project based on management buzz words. New class descriptions squeezed existing job descriptions into fewer general ones and replaced the old merit-based pay structure with performance pay (which was never funded); and the whole thing was just another way to cut workers' pay. I speak from my experience as a state employee and an officer of the state employees' local that relied on our national AFSCME office for legal support (since that's why we paid dues); and although my perception of events may seem biased; what is not open to interpretation is the importance of deadlines and submitting appeals timely … and I remember Mr. Steadman as the person who failed to file our appeal on time.

Fast forward 17 years, and he's representing the people from Senate District 31 (but definitely not workers, particularly public servants) and he's the mouthpiece for PERA staff and management in railroading through SB10-001's onerous measures to once more balance the state budget on the backs of state employees and raid their pensions. In 2010, Mr. Steadman chaired the (Colorado House) Finance Committee responsible for PERA oversight . . . and despite numerous pleas to him to show PERA members the financial records purportedly necessitating the draconian actions of SB10-001, Mr. Steadman would only give me his word that the financial situation was dire, as he personally looked at the books (which would be much too complicated for people like me to comprehend). NOT very reassuring, coming from a lawyer-lobbyist turned career politician who apparently couldn't read a calendar.

'nuff said. – Guy Santo

(My comment: Remember that the proponents of SB10-001 argued that the financial position of Colorado PERA was so dire [at a 69 percent funded ratio in 2010] that PERA pension contractual obligations had to be broken, yet now that the PERA funded ratio is in the low 60s, PERA officials argue that no additional contributions to the pension system are necessary.)

Comments of Former AFSCME Colorado Official Jeremiah Attridge:

"As the former President of AFSCME Local 3534 I would like to confirm the statements that Mr. Santo has made regarding a class action grievance filed on behalf of employees of the Colorado Department of Labor regarding the proposed 'class description' changes proposed by the Romer administration, and that the lawyer provided by AFSCME Council 76, Patrick Steadman, failed to file the suit in a timely fashion. As I recall, Mr. Steadman had been handed the final copy of the grievance written by Mr. Santo and Mr. William Lafferty a week before it was due, and for reasons unknown, Mr. Steadman waited until the last day the grievance was to be filed and then stated: 'When I got there, the courthouse was already closed.' As the complaint was not filed in a timely fashion in accordance with the rules of procedure, the state employees lost their rights to be heard, and the case was dismissed without any chance of appeal. The irony of this situation was that the basis of the employees' grievance was that management of the CDLE had failed to follow the correct procedures when implementing this reclassification of public employees, and as a result of this procedural flaw, their actions were arbitrary, capricious, and contrary to the rule of law. The case was a 'no-brainer.' It would have been an easy win, and would have increased the union's standing among state employees. Due to the case dismissal, the opposite took place and AFSCME membership plummeted.

Aside from the possible need of (Colorado State) Senator Steadman to revise and edit his resume, there is still a residual effect on the way state government functions and how PERA benefits are paid to certain individuals, that is a direct result of the Romer administration's 'Class Description,' program that Mr. Santo had tried to challenge. The reasons why the Romer Administration chose this course of action was due to the fact that the Governor had sought to expand the number of political appointees he could place in upper management positions. State Representative Tony Grampsas and State Senator Dave Owens who ran the JBC at the time informed the Governor that he could have his additional 125 appointees in the Senior Executive Service, only if the hiring of these upper level managers was 'revenue neutral.' In other words, if Romer wanted an additional 125 hacks on the payroll, then existing payroll had to be cut to pay for this increase in salary. This is why the 'Class Description' changes had to be made. Rank and file employee pay and the possibility of being promoted had to be severely cut. The reason why these changes to employee compensation still have an effect on the pension fund itself is due to this dirty, little secret, that nobody in the fourth estate, the State Legislature, the Governor's office, or even Jon Caldara and the guys over at the Independence Institute really like to talk about: You see, not all political appointees leave when their political patron leaves office. Some of them really like their high paying jobs, and quite a few of them stay in those positions for years, and thanks to some sort of unwritten rule of the Sherman Street Country Club, while political fealty may have been a prerequisite to becoming employed, once you get the job, it's yours for life. Almost all these jobs pay well over 100 grand a year, and if you can add in all those years as a State Legislator (you know like Joe Donlon, or Doug Dean, or Tom Plant, or Vicky Armstrong) to your total state service time, with the top three years deciding your pension level, well, gosh, I guess there really is a 'pot-o-gold' at the end of the PERA rainbow for some very special people, who, like the upper level managers of Pinnacol Assurance who all were allowed to grandfather in PERA pensions when Workers Comp was privatized (just like the guys in the other privatized agencies) well, you deserve to pull in 60 to 90 grand a year, without question. If you are an employee of PERA and you have never worked for the State in any capacity, you too can pull in a pension not only for your salary, but also for the bonuses you paid to yourselves while declaring a fiscal emergency at the same time. When State Treasurer Walker Stapleton tried to pull the lid off the cesspool two years ago, the PERA Board took him to court, and members of the Judiciary (who receive PERA pensions at a higher rate than other state employees) agreed with them that the State Treasurer had no business inquiring where and to whom state funds were being paid. It was a matter of 'privacy' the court said. That was a close one, after all, now with the passage of Amendment S, Governor Hickenlooper will be able to expand the SES from 125 to 270 positions and that means a lot more deserving people will be able to bleed the fund dry. Who knows, what with term limits and all, maybe the Governor can find a position for a Democratic State Senator in need of a job and having a really nice, well-edited resume."

More comments on Colorado Senator Pat Steadman's work for AFSCME Colorado (from Facebook:

"I believe, actually I know, that there were quite a few of us who thought he wasn't representing us correctly, particularly during a grievance and lawsuit filed regarding the changing of job classification and pay rates back around in about 1993 or so. Back then, Romer was proposing the creation of the Senior Executive Service that would allow him to expand the number of political appointees up to about 125 positions. (Hickenlooper's Amendment S increases it to about 350.) Well, as I recall, Steadman failed to file the initial court challenge in a timely fashion. I remember the grievants' disgust at the time and their quoting of Steadman's statement that: 'when I got there, the court was closed, and it was too late.' A lot of people dropped out of AFSCME because of this. Somehow Steadman's explanations didn't ring true and it was suspected, but never proven . . . told by AFSCME 76 to drop the matter. In the lovely world of AFL-CIO internal politics a lot of back room deals got cut. (They still are; it's a favorite past time of union staff reps to ____ each other over and cut political deals. I think the straw that broke the camel's back with Steadman, though, was that he failed to represent people in AFSCME Local 935 (Correctional Officers in Canyon City) in disciplinary hearings. Local 935 was the biggest local and they wanted Steadman gone due to the fact that he wasn't doing his job and was working on his Amendment 2 instead. After Steadman, there was a lawyer named Carol Iten who actually did the job, but then quit to go to work for Salazar when he became AG. She was replaced by Mark Schwanne who . . . CFPE for failing to file the necessary paperwork on behalf of grievants in the UI Tax Division about their job classifications. Schwanee went on to become the Executive Director of AFSCME 76 and was the guy who signed off on endorsing the PERA ____ over, and then selling off the AFSCME state employee locals to the SEIU (without a vote of the membership) to Colorado WINS, that thereupon hired him for a while, and then he  . . . after Scott Wasserman, his friend at WINS, got a job in the Lt. Governor's Office. As a result, AFSCME in Colorado is a pathetic organization . . . representing a few employees in Pueblo, DU, and a dying local in the City of Denver. Their one employee who is an 'Assistant Director' is Cheryl Hutchinson. She started out as a Business Agent at the same time as Steadman and she might have the exact details . . .

One of my . . . contacts is a guy named Bill Lafferty. He was also involved in the job classification PPQ grievance: Let me clarify the background to that. Back then, (Governor) Romer wanted the Senior Executive Service, but (State Senators) Tony Grampsas and Dave Owen, on the JBC, wanted it to be 'revenue neutral.' In order to achieve those raises for upper management the Personnel Director, Andre Pettigrew along with Jeff Schutt and Ken Ailikian came up with the reclassification of all state employees: It eliminated many of the different job classes and put them into classes that were defined with broader, generalized titles. As a result, there were fewer steps and grades of employees which meant that there was a de facto elimination of career ladders and promotions on the lower levels of government and a general lowering of wages, resulting in a surplus of funds to pay for the Senior Executive Service. That was the court case Steadman dropped the ball on. The problem with the Corrections Local 935 had to do with disciplinary hearings: In all of the (state) departments, CDOT and Corrections always have the most disciplinary hearings. (They used to be called R-8-3's back then, now they are R-6-10's.) They are a pain in the ass to do, and there was a Business Agent named ____ (now deceased) who was supposed to do the R-8-3's but Reyes Martinez, the Local 935 President wanted 'the lawyer' to do them, and I guess (current State Senator Pat) Steadman didn't show up or something.

(My comment: It looks to me like insane, shady crap has been happening in the Colorado public sector unions historically and SB10-001 provides an example of these shady deals reaching the level of state government administration, the Colorado Legislative Branch, and Colorado courts. Perhaps if Colorado had stronger labor unions they would not have been tempted to support the breach of the contracts of their former members. This was kind of cannabalistic.)

Response:

"Well, that's the sad thing about it all: You see, unions were supposed to exist for the betterment of the rank and file, and in Colorado things got turned around and completely out of whack, particularly in the public employee unions where it got to the point that the rank and file existed for the benefit of the union staff reps who, actually, never were members of the rank and file; Wendell Pryor, the former Director of CAPE who endorsed (former Colorado Governor) Bill Owens' preventing public employees from having their union dues deducted from their paychecks and then was appointed to be Director of the Colorado Civil Rights Division over in DORA; Miller Hudson, who sold CAPE to the SEIU without a vote of their rank and file; Schwanne; Wasserman and Steadman, all had variations on the same theme.

While (current Colorado State Representative) Crisanta Duran who sat on the JBC last year had her law school tuition paid by grocery workers in UCFW Local 7, while she also pulled in 35 grand a year compliments of her dad, Ernie, the Local President. The list goes on and on from Joe Donlon to Ellen Golombek at the CDLE  . . ."

In a recent article AFSCME (International) writes:

"The very Wall Street-backed politicians who raided and underfunded the pension systems in the first place are now 'using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities . . ."

http://www.afscme.org/blog/lawmakers-loot-public-pension-funds-then-blame-retirees-for-underfunding

Here is my posted response to the AFSCME article:

"AFSCME, if you really believe this, why did you allow your affiliate, AFSCME Colorado, to support the breach of Colorado PERA pension contracts in 2010, after the Colorado Legislature had underfunded the pension for a decade?  The Colorado Legislature has failed to pay its pension bills for a decade, essentially borrowing from the pension fund, now they seek to shift their debt onto the backs of retired public sector workers. It's sick, but your own people supported this in 2010."

I received this response from a former AFSCME Colorado official:

"Actually . . . that isn't what happened: The rank and file members of Colorado State Employees AFSCME Local 821 had their local dissolved by a unilateral decision of AFSCME International and the Executive Board of Colorado AFSCME Council 76, prior to the sellout, as they were to be 'incorporated' into the Colorado WINS 'partnership' created with Ritter: without their consent or even being given the right to vote on the matter. The AFSCME 'representatives' who endorsed the PERA plan (i.e. Vivian Stovall and company) weren't even state employees: they were members of Denver City employees AFSCME Local 158, who aren't even covered by PERA.  The Colorado State AFSCME retirees (Phyliss Zamaripa, Kathy Bacino, and Guy Santo) opposed the PERA plan put forth by Ritter, Schaffer, and Penry at the public hearing where proponents were allowed to testify first, and at length while opponents had their testimony relegated to the end of the hearing, and had their testimony time truncated. So please don't give the impression that the rank and file members of Colorado State AFSCME Local 821 had anything to do with this sellout, because we didn't. Give the credit to where it is due: Give it to Colorado WINS, and the SEIU."

(My response: "Thanks for this new information. I have noted that Colorado AFSCME supported the PERA pension contract breach since Colorado PERA has made this claim in its propaganda.")

Yet another reply from a former AFSCME Colorado official:

"The entire AFSCME endorsement of screwing public employees out of their pension (Colorado PERA pension) COLA's in Colorado is unfortunately quite true, however, it should be remembered that AFSCME no longer represents Colorado State Employees, and it hasn't for about 7 years now. It was decided 7 years ago in a backroom deal in Washington that the three state employee unions would become Colorado WINS. The rank and file members of AFSCME Locals in Colorado were not given the right to vote on this, nor were the members of CAPE or the CFPE. The people who espouse 'democratic labor trade unionism' in America, wouldn't allow it to take place in Colorado. Ritter and company granted an exclusive franchise to Colorado WINS (which is a subsidiary of SEIU) and Colorado State employees do not have the right to belong to any other union, as both Change To Win and the AFL-CIO have prevented other unions (such as the CWA, which has had a consistent record of fighting for public employees' pensions) from organizing. Thanks to their betrayal of Colorado State employees, Colorado AFSCME Council 76 is now a bankrupt shell of an organization that represents some county employees in Pueblo, city employees in Aurora, the remnants of Denver City employees Local 535 and 158 and the maintenance staff at DU. They have one 'assistant Executive Director' and two clerical workers for a staff. All they are is a paper tiger, shell organization that is used as a conduit to 'move money' in state elections."

(My response: "That seems rather disingenuous on the part of Colorado PERA to attempt to rationalize the PERA COLA-taking by citing the support of AFSCME Colorado, if AFSCME Colorado does not actually represent any employees in PERA." "Have you ever heard any sort of an explanation from Colorado WINS for breaking PERA contracts? I have always assumed it was to minimize future contributions that might be needed from active Colorado WINS members. To the extent that money can be taken from PERA retirees, the needed pension support from current workers is diminished, not a very good reason to trash the Colorado Constitution.")

Former AFSCME official:

"Yes, doesn't it? But then again, let us not forget the first piece of legislation that Colorado WINS supported was the bill written by Democratic Senator Dan Gibbs to do away with state employees having the right to strike or engage in labor stoppages. The 'S' in AFSCME is supposed to stand for 'State' but the International of AFSCME basically gave up on Colorado when Wellington Webb failed to deliver his campaign promise to give Denver City employees collective bargaining. The grand plan was 'First we'll get collective bargaining for Denver, then we'll repeal 8-73-104 (C) of the Colorado Labor Peace Act, and get all public employees' collective bargaining rights.' After they realized that wasn't going to happen, Gerry McEntee, Paul Booth, and Larry Scanlon decided to cut their losses, and 'traded' the Colorado State Employee locals to the SEIU which had acquired CAPE (that had gone into virtual bankruptcy when Bill Owens prohibited employees having their dues deducted from their paychecks.) All in all, it was a rather tawdry affair, and for AFSCME Council 76 to come out in favor of screwing public employees out of their pensions by having members of Local 158 of who were hacks from the Denver Democratic Party and Ritter supporters is just reflective of the fact that AFSCME has always placed the interests of the union and the Democratic Party above that of rank and file employees they profess to represent."

(My response: "As I recall, Miller Hudson, formerly of CAPE also supported SB10-001. This is ironic since Bill Owens eviscerated CAPE financially. Bill Owens is very culpable in the decline of PERA's funded ratio [selling PERA service credit cheap to encourage the departure of the more 'expensive' older employees, i.e., shifting labor costs from Colorado governments to PERA.] Why would Miller Hudson go along with pushing the PERA debt burden onto Colorado PERA retirees when the problem was caused by Bill Owens, and Bill Owens actions harmed CAPE?  It doesn't make sense.")

Former AFSCME official:

"You'd have to ask Miller about that one. Now as far as Colorado WINS goes, well, you have to understand the way union organizers think: Why should they be concerned about the pensions of state employees who were not members of their union? What WINS wants is current state employees, and most of them who have been hired since 2005 don't have the same pension plan as older state employees, and that is not what they are concerned about: By concentrating on health care costs, and doing away with the inequitable 'pay for performance' plan proposed by Penn Pfifner and signed into law by Romer, Colorado WINS needs to play nice with the legislature and the executive branch so that they can market themselves with a 'victory,' to the majority of state employees who don't belong to their organization, or care about somebody else's pension. So why play the heavy and alienate the incumbent politicians in somebody else's fight? If you win, well, good. They'll get up there and say they were with you all the way……"

Quotations of Miller Hudson, formerly of CAPE:

"They will pay their taxes and rely on politicians to keep the promises made to them when they were hired. After 30 or more years, they will rely on their Public Employee Retirement Association (PERA) pensions rather than social security to provide a modest but dignified retirement."

"In fact, they (Colorado PERA retirees) will shoulder more than 90 percent of the costs of fixing PERA. This isn’t because they haven’t been doing their part. They have."

"If state employees have learned little else, it should be that when economic times get tough both Democratic and Republican administrations will move swiftly to balance state budgets on their backs."

"Miller Hudson is a former state representative from Denver who served five years as executive director of the Colorado Association of Public Employees."

http://www.coloradostatesman.com/content/991576-so-called-perasites-are-tired-having-budget-balanced-their-backs

Miller Hudson states that Colorado PERA faces no financial "crisis," yet Miller Hudson "helped negotiate" the COLA-taking bill:

"Taxpayers have been told they will be held responsible for an imminent fiscal catastrophe projected in the tens of billions of dollars. These scare tactics fail to put the true situation in perspective. PERA benefits are much like the mortgage on your house. They will be paid out over the next 30 to 50 years. If Colorado misses a payment — or, more accurately, fails to collect as much as revenue as it should for a year or two — these shortfalls can be remedied in succeeding years. A home mortgage doesn't become due and payable just because a homeowner loses his or her job. Payments can be made out of savings."

"For Colorado's public employers, total contributions into PERA represent about 3 percent of their annual budgets. If this were to be doubled, it would be less than half the current 'sequester' cuts being absorbed in the federal budget. PERA is not a fiscal calamity."

"Unfortunately, when the plan went into surplus during the dot.com boom at the turn of the century, the Legislature reduced the state's contributions, increased the match for refunds paid before normal retirement eligibility and held a fire sale on the purchase of unearned years of service credit at a fraction more than 15 cents on the dollar."

"Miller Hudson served as executive director of the Colorado Association of Public Employees for six years (2003-10) and helped negotiate the 2007 and 2010 PERA reform bills."

http://www.denverpost.com/ci_23167652/there-is-no-need-panicky-fixes-pera

Miller Hudson:

"It is important to understand why tax credits and exemptions are referred to as tax expenditures. Without loopholes, taxpayers (both individual and corporate) would otherwise pay higher taxes dumping additional moneys into the general fund. Business and special interest lobbyists have understood this relationship for decades. Find a plausible rationalization and then you can begin campaigning for special treatment."

http://thetaborfoundation.org/hudson-the-math-isnt-so-simple/

Alan Greenblatt in Governing in 2006:

"In Colorado, at least some of (Governor) Bill Owens' pension problem was self-inflicted, the result of his pressuring PERA to sell discounted 'service credits' to public employees, allowing them to buy more time on the job." "Owens hoped that state employees would retire early, helping his efforts to streamline government." "Because pensions are, by their nature, a long-term problem, it's difficult to get public officials – classic short-term thinkers – to pay them serious attention even when the bills are coming due."

http://www.governing.com/topics/economic-dev/Plight-Benefits.html

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Does Colorado State Senator Pat Steadman Actually Seek “Justice FOR ALL”?

Today's Denver Post reports that Colorado State Senator Pat Steadman, a sponsor of the bill that took Colorado PERA pensioners' contractual rights (SB10-001) has stated that he seeks "Justice FOR ALL."

But, does State Senator Pat Steadman actually desire "Justice FOR ALL"? Apparently, Senator Steadman is not interested in seeking justice for the elderly Colorado PERA pensioners whose constitutional rights he considers irrelevant, and whose property rights he has ignored.

If Senator Steadman is truly interested in "Justice FOR ALL," would he not have pointed out on the floor of the Colorado Senate, at every opportunity, legislative testimony from Colorado PERA's lawyers regarding the constitutional rights of PERA pensioners? That is, part of the evidence supporting the contractual rights of Colorado PERA pensioners that was recently and conveniently ignored by the Colorado Supreme Court?

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

See the article: "THE TRADITIONAL COLORADO STATE 'SCREWING' OF COLORADO TEACHERS AND PUBLIC SECTOR WORKERS."

(Former Colorado Union [AFSCME] Officials Weigh In, and Comment on the Legacy of Colorado State Senator Pat Steadman.)

http://coloradopols.com/diary/66972/the-traditional-colorado-state-screwing-of-colorado-teachers-and-public-sector-workers

Colorado State Senator Steadman rightly fights for the constitutional rights of a group (of which he is a member) . . . a group that has been politically weak and accordingly targeted in the past. But, is Senator Steadman truly interested in "Justice FOR ALL"? When Senator Steadman states that he seeks "Justice FOR ALL," does he simply mean that he seeks justice for members of groups of citizens to which he belongs? Would Senator Steadman have supported the targeting of the constitutional rights of elderly Colorado pensioners if he were a member of that particular group? Does Senator Steadman believe that only the constitutional rights of certain politically weak US citizens should be defended? The rights of others discarded, if this abandonment conforms with prevailing public sentiment toward the politically weak group? The rights of others discarded if this taking of rights frees up money that politicians would like to use elsewhere? Apparently, the constitutional rights of some citizens are disposable.

In granting a judicial blessing to the SB10-001 Colorado PERA COLA taking, and in ignoring long-standing case precedent, the Colorado Judicial Branch has provided a political favor to the Colorado Legislative Branch.

"The general liberty of the people can never be endangered from the judiciary, so long as it remains truly distinct from both the legislature and the executive.”

Alexander Hamilton, Federalist 78

The Legislative and Judicial taking of the constitutional rights of Colorado PERA retirees continues and excuses a long history of mismanagement of the Colorado PERA pension system. If our State Senator Pat Steadman truly desired "Justice FOR ALL" he would have refused to have been part of this scheme in 2009. Sadly, Senator Pat Steadman's support for SB10-001 is now part of his legacy.

From the Denver Post:

"The Pledge of Allegiance follows the prayer, and Steadman loudly accentuated the final two words.”

“'With liberty and justice FOR ALL,' said Steadman."

“'And not just for some,' Newell loudly added."

http://blogs.denverpost.com/thespot/2015/01/16/morning-prayer-riles-senate-democrats/116412/

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Colorado PERA Fiduciaries: Severely Underfunded, But See No Problem.

Colorado PERA Fiduciaries: Severely Underfunded, But See No Problem.

"We Don't Need Additional Contributions," Colorado PERA General Manager Greg Smith.

A few years ago, Colorado PERA officials and their hired lobbyists argued that the PERA public pension system's 69 percent funded ratio was such a crisis that the contracts of Colorado PERA pensioners just had to be broken.

They contended that the Colorado PERA pension system's 69 percent funded level constituted an "actuarial emergency" that justified the breach of Colorado PERA retiree pension contracts.

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

http://coloradopols.com/diary/66279/colorado-pera-officials-corrupt-state-budget-process-joint-budget-committee-analyst-silenced

Since Colorado PERA officials have held the position that a 69 percent funded ratio is a financial crisis, and the pension system is currently funded in the low 60s, it seems odd that Colorado PERA officials are now suddenly complacent about Colorado PERA's funded level.

December 11, 2014, Colorado PERA public pension General Manager Greg Smith testifying to the Colorado General Assembly's Joint Budget Committee: "We don't need additional contributions."

Colorado PERA's Greg Smith may very well be alone in the nation in that he, as a fiduciary who heads a major public pension system that has been grossly and historically underfunded, testifies to elected officials overseeing the pension system "we don't need additional contributions." This is a truly bizarre position for a public pension fiduciary. Colorado PERA is a public pension with a funded ratio currently in the low 60s, headed up by a General Manger who claims that the pension system does not need any additional funding. Rather than serving in the capacity of a fiduciary, Greg Smith appears to motivated primarily by political concerns. The Colorado Legislature has paid only 73% of the actuarially required contributions (ARC) for the Colorado PERA pension system over the last twelve years                                                                                                                  

I ask: Were Colorado PERA officials speaking the truth to Colorado legislators on February 23, 2012 when [then] Colorado PERA General Manager Meredith Williams, testified to the Colorado House Finance Committee, in regard to the Legislature’s failure to pay the Colorado PERA ARC? 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.”

Or, were Colorado PERA officials speaking the truth to Colorado legislators on December 11, 2014 when JBC members heard from Colorado PERA that "we don't need additional contributions"?

Logically, only one of these Colorado PERA statements to Colorado state legislators can be true.

http://coloradopols.com/diary/66279/colorado-pera-officials-corrupt-state-budget-process-joint-budget-committee-analyst-silenced

Greg Smith's position on public pension underfunding is at odds with the position of the National Governors Association, the National Conference of State Legislatures, the Council of State Govern­ments, the National Association of Counties, the National League of Cities, the U.S. Conference of Mayors, the International City/County Management Association, the Govern­ment Finance Officers Association, the National Association of State Auditors, the Comptrollers and Treasurers Association; the National Association of State Retirement Administrators (NASRA); the National Council on Teacher Retirement, and the credit rating firms Standard and Poor's, and Morningstar.

NASRA:

"Employer Contributions: A variety of state and local laws and policies guide governmental pension funding practices. Most require employers to contribute what is known as the Annual Required Contribution (ARC), which is the amount needed to finance benefits being accrued each year, plus the cost to amortize unfunded liabilities from past years, minus required employee contributions."

http://www.nasra.org/files/Issue%20Briefs/NASRACostsBrief.pdf

NASRA:

"PENSION FUNDING: A Guide for Elected Officials, Report from the Pension Funding Task Force 2013."

"The 'Big 7' (National Governors Association, National Conference of State Legislatures, Council of State Govern­ments, National Association of Counties, National League of Cities, U.S. Conference of Mayors, and the International City/County Management Association) and the Govern­ment Finance Officers Association established a pension funding task force in 2012. The National Association of State Auditors, Comptrollers and Treasurers; the National Association of State Retirement Administrators; and the National Council on Teacher Retirement also serve on it. The Center for State and Local Government Excellence is the convening organization for the Task Force."

"The Task Force recommends pension funding policies be based on the following . . . have a pension funding policy that is based on an actuarially determined contribution."

"The Task Force recommends that state and local governments . . . stay within the ARC calculation parameters established in GASB 27 . . ."

"The most important step for local and state govern­ments to take is to base their pension funding policy on an actuarially determined contribution (ADC). The ADC should be obtained on an annual or biannual basis."

http://www.nasra.org/files/JointPublications/PensionFundingGuide.pdf

Colorado PERA General Manager Greg Smith at 2/31/40 on the recording of the December 11, 2014 Colorado Joint Budget Committee meeting (available on-line):

"I'm not a huge fan of the credit rating agencies and the job that they do."

Standard and Poor's:

"We believe that not fully funding the ARC is a short-term solution that will likely result in a larger unfunded actuarial accrued liability down the line."

"We've observed that persistent underfunding of ARC correlates highly with pension funding contributions that are statutorily or contractually determined."

http://www.nasra.org/Files/Topical%20Reports/Credit%20Effects/A_Bumpy_Road_Lies_Ahead_for_US_Public_Pension_Funded_Levels.pdf\

S&P emphasizes the importance of pension ARC funding discipline. Yet, Colorado PERA staff casually dismiss ARC funding discipline, and ignore the fact that (as S&P's analysts have noted) fixed statutory contribution levels, like those set for Colorado PERA, result in pension systems "with the weakest funded ratios."

Morningstar Analyst Rachel Barkley:

"Although Colorado is still absorbing losses from 2009, the main reason its funding gap is yawning is the state's failure to make the contributions recommended each year by its own budget experts, Barkley said."

"Even if public pensions realize their projected investment returns on average over coming years, the failure by many plans 'to pay less than the full ARC . . . will produce less than full funding over the next 30 years,' according to a recent report by the Center for Retirement Research (CRR)."

http://www.reuters.com/article/2014/03/10/us-usa-pensions-rally-analysis-idUSBREA2907320140310

A recent study by the Tennessee Treasurer's Office reveals that the cost of delaying public pension plan actuarially required contributions [with an assumed 7.5 percent return assumption] for a 12-year period [the Colorado Legislature began underfunding the PERA pension system 12 years ago] is a premium of 138.2 percent of the skipped pension contribution.

Link to the Tennessee Treasurer's report:

http://s3.amazonaws.com/s3.documentcloud.org/documents/1012837/pension-report.pdf

Read the complete article at:

http://coloradopols.com/diary/66279/colorado-pera-officials-corrupt-state-budget-process-joint-budget-committee-analyst-silenced

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Why Has AARP Colorado Opted Against Defending Colorado PERA Retirees?

WHY HAS AARP COLORADO OPTED AGAINST DEFENDING COLORADO PERA RETIREES?

A few years ago, when the Rhode Island Legislature broke the public pension COLA (inflation protection) contracts of Rhode Island retirees, the AARP provided legal representation to fight the breach of pension contracts. As I understand it, AARP continues the legal battle in Rhode Island on behalf of these retirees. Yet, in 2010, when the Colorado Legislature took COLA benefits from Colorado PERA retirees AARP Colorado simply "monitored" the taking.

How was the AARP decision made to defend public pensioner rights in one state, but not in another? I can't believe that this was a question of available resources. It doesn't consume a significant amount of organizational resources to have an AARP representative show up to testify at a bill hearing. Is the defense of retiree interests not a central purpose of the AARP?

An AARP representative informed us that the decision of AARP Colorado to simply "monitor" the Colorado PERA COLA taking in 2010 was made with input from AARP Colorado's "volunteer leadership." Who were these persons, serving as AARP Colorado volunteer leaders, whose "input" eliminated the possibility of an AARP Colorado defense of Colorado PERA retiree rights?

Were these individuals (the AARP Colorado volunteer leadership) involved with the Colorado PERA political campaign to take Colorado PERA retiree COLA benefits?

What is the value of the legal resources that the AARP has brought to bear in defending the contractual rights of Rhode Island pensioners? Tens, or hundreds, of thousands of dollars? Why is it that a local AARP chapter, such as AARP Colorado, cannot spend a few hundred dollars fighting for pensioner rights in their home state?

The AARP has worked with the Pension Rights Center to defend public pension contractual rights in the US. Recently, a Pension Rights Center representative (on Facebook) explained that the Center has limited resources, and cannot defend against every attack on public pension rights in the nation, and accordingly has been unable to assist in the defense of Colorado PERA pensioners' rights. But, this begs the question, how is the decision made to defend the rights of some retirees in the United States, but not the rights of others? What amount of Pension Rights Center organizational resources would have been consumed in simply sending a letter or an email to Colorado state legislators objecting to a violation of retiree pension rights?

http://coloradopols.com/diary/66348/why-has-aarp-colorado-opted-against-defending-colorado-pera-retirees

http://www.providencejournal.com/business/pensions/content/20111025-opponents-supporters-prepared-for-battle.ece

AARP Fights Rhode Island Pension Contract Breach, "Monitors" Colorado Pension Contract Breach.

"AARP Foundation Legal Advocacy – Advocacy Issue Teams.

AARP Foundation Litigation (AFL) is an advocate in courts nationwide for the rights of people 50 and older, addressing diverse legal issues that affect their daily lives and assuring that they have a voice in the judicial system."

http://www.aarp.org/aarp-foundation/our-work/legal-advocacy/afl-teams.html

Jay E. Sushelsky, Attorney, AARP Foundation Litigation – (Fighting for Rhode Island Public Pension Contractual Rights.)

"ATTORNEYS OF RECORD

Rhode Island Public Employees’ Retiree Coalition, et al. Carly Beauvais Iafrate, Esq., (401) 421-0065, ciafrate@verizon.net

Jay E. Sushelsky, Esq., (202) 434-2151, jsushelsky@aarp.org

Jay E. Sushelsky, Mo. Bar # 30934, AARP Foundation Litigation

jsushelsky@aarp.org"

http://www.courts.ri.gov/Courts/SuperiorCourt/DecisionsOrders/decisions/12-3166.pdf

http://www.ricouncil94.org/Portals/0/Uploads/Documents/PC-2010-2859_R%20I%20_Council_94_v%20_Carcieri_.pdf

"Jay Sushelsky is a Senior Attorney at AARP Foundation Litigation (AFL), where he practices in the areas of Employee Benefits and Investor Protection. He graduated from Tufts University and Washington University School of Law. Mr. Sushelsky was in private practice in St. Louis for twenty-five years prior to joining AFL in 2005."

http://www.americanbar.org/content/dam/aba/events/labor_law/2014/02/employee-benefits-committee-midwinter-meeting/bio/sushelsky.authcheckdam.pdf

"AARP is represented by Jay Sushelsky of AARP Foundation Litigation and Michael Shuster of AARP, both in Washington. The New York City pension funds are represented by Michael A. Cardozo of the City of New York. 

The Colorado Public Employees' Retirement Association of the City of New York is represented by Gregory W. Smith of the Colorado Public Employees' Retirement Association in Denver."

http://www.lexisnexis.com/legalnewsroom/securities/b/securities/archive/2012/11/06/high-court-asked-to-decide-whether-securities-suit-may-proceed-as-a-class-action.aspx

"MOTION OF PENSION RIGHTS CENTER AND AARP FOR LEAVE TO FILE AMICI CURIAE BRIEF IN SUPPORT OF PANEL REHEARING AND/OR REHEARING EN BANC

Mary Ellen Signorille

Jay E. Sushelsky

AARP Foundation Litigation

Melvin Radowitz

AARP

601 E Street, NW

Washington, DC 20049

Counsel for AARP"

"The local chapter of the (Rhode Island) AARP has been lobbying its 135,000 Rhode Island members to oppose the existing (pension COLA-taking) bill and is also asking its members to attend Wednesday's hearing, which begins at 11 a.m."

"In a recent mailer to 20,000 members who are retired, the AARP said the suspension of the COLAs – which could be frozen for up to 19 years – was 'unthinkable' and could make it 'impossible for many retirees to afford life-saving drugs and basics, such as food and heat. We have to tell lawmakers this is unacceptable.'"

"AARP spokesman John Martin said Tuesday that the position the local AARP has taken with the pension proposal 'is consistent with AARP's advocacy for the retirement security for older Americans, I should say, for half a century. It's consistent with our advocacy for protecting Social Security and Medicare benefits.'"

http://www.providencejournal.com/business/pensions/content/20111025-opponents-supporters-prepared-for-battle1.ece

Here is the AARP Colorado statement (on Facebook) regarding their decision to simply "monitor" the Colorado General Assembly’s 2010 pension reform legislation (public pension COLA taking) rather than defending Colorado public pension contracts:

“The AARP state office, with input from our volunteer leadership, reached the decision to monitor SB10-001.”

AARP: Cutting COLAs is Wrong, (Well, unless it's the Colorado Legislature Breaking Contracts.)

"AARP strongly objects to any cuts to the pension benefits of current retirees, many of whom live on $20,000 per year or less. AARP will continue to fight for solutions that keep the retirement promises made to older Americans."

"What You Can Do

If you agree that it is wrong to cut benefits for those who are already retired, whether it's Social Security or earned pensions, then sign up today to be an e-activist. We will let you know the best time to communicate with your elected representatives.

A. Barry Rand is the CEO of AARP."

http://www.aarp.org/politics-society/advocacy/info-01-2014/tell-congress-protect-retirees-pensions.html

The Interconnected World of Public Pensions: AARP, NIRS, Colorado PERA and the NCTR.

Jay E. Sushelsky, Attorney, AARP Foundation Litigation, Defending Rhode Island Public Pension Contracts.

("NRTA: AARP’s Educator Community has joined the National Institute on Retirement Security, a research and education not-for-profit organization in Washington, DC.)

A few members of the Board of Directors of the National Institute on Retirement Security:

Gregory Smith, NIRS Chair and Executive Director, Colorado Public Employees' Retirement Association;

Meredith Williams, (former Executive Director, Colorado PERA,) NIRS Vice Chair and Executive Director, National Council on Teacher Retirement;

Hank H. Kim, Esq., NIRS Secretary/Treasurer and Executive Director and Counsel, National Conference on Public Employee Retirement Systems;

Bill Finelli, Board Member and Trustee, Employees' Retirement System of Rhode Island;

http://www.nirsonline.org/index.php?option=com_content&task=view&id=13&Itemid=42

"NRTA: AARP’s Educator Community has joined the National Institute on Retirement Security (NIRS), a research and education not-for-profit organization in Washington, DC. NIRS was established to fill a gap in understanding on the value that defined benefit pensions play in ensuring retirement security for workers, as well as their value to employers, and the economy.

Through the collaboration with NRTA, active and retired educators can now access NIRS products and services — at no cost. NIRS programs and information serve as valuable tools to help educate local officials and stakeholders about teacher retirement issues. NIRS member services include: Research, Education Materials, Counsel, Commentary, Events/Speakers, and Technical Assistance.

NRTA and NIRS will continue to work together to help ensure that public pensions remain the cornerstone of retirement security for America’s teachers.

About National Institute on Retirement Security

Founded in 2007 by the National Council on Teacher Retirement, the Council of Institutional Investors, and National Association of State Retirement Administrators, NIRS has a diverse membership of organizations including employee benefit plans, state or local agencies that manage retirement plans, trade associations, financial services firms, and other retirement service providers."

http://www.aarp.org/about-aarp/nrta/info-04-2010/nrta_nirs.html

The taking of earned, contracted deferred compensation from Colorado PERA retirees in SB10-001 was patently immoral. Apart from the question of the constitutionality of SB10-001, recognition of its immorality should have given pause to AARP officials and volunteers in 2010.

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Colorado PERA Considers Entering Hedge Fund Investments.

At a recent meeting of Colorado PERA officials with members of the Colorado Legislative Audit Committee, a Colorado PERA official stated that approximately eight percent of the Colorado PERA portfolio (trust funds) is currently invested in "alternative investments," including private equity investments. What investment fees have been paid on this portion of the Colorado PERA portfolio that is invested in alternative investments in the last fifteen years? What percentage of total Colorado PERA portfolio investment fees have been paid each year on alternative investments? What percentage of total portfolio growth can be attributed to PERA's alternative investments in the last fifteen years? Colorado PERA officials noted, at the Legislative Audit Committee meeting (recording available on-line) that the PERA Board is currently "researching" potential Colorado PERA portfolio investments in hedge funds (recently banned in California by the public pension fund CALPERS.) If the nation's largest pension fund has recently banned investments in hedge funds, why are Colorado PERA officials currently "researching" potential investments in hedge funds?

"CALPERS Dumps Hedge Funds Citing Cost, To Pull $4 Billion Stake."

"The California Public Employees' Retirement System, the largest U.S. pension fund, said on Monday that it will pull all $4 billion it has invested in hedge funds because it finds them too costly and complicated."

"The $300 billion fund, known as Calpers, invests with firms including Och-Ziff Capital Management, Deepak Narula's Metacapital Management and Bain Capital's Brookside Capital and plans to pull the money out over the next year. The fund will also exit from fund-of-funds Pacific Alternative Asset Management Co and Rock Creek Group."

"(Former CALPERS Chief Investment Officer Joe) Dear, who joined Calpers in 2009, embraced riskier assets including hedge funds and private equity funds, to help recover losses suffered during the financial crisis when its investments lost 23.6 percent during the fiscal year that ended on June 30, 2009."

"But in the last years, most hedge funds have not delivered the out-sized returns the industry became famous for, prompting many pension funds and other large institutional investors to question hedge funds' fees which often include a 2 percent management fee and 20 percent of the gains achieved. Hedge funds returned 4.10 percent this year through August, according to Hedge Fund Research, lagging the Standard & Poor's 500 9.87 percent gain."

"The fund's alternative asset program has had its ups and downs in recent years. Former Calpers Chief Executive Officer Fred Buenrostro pleaded guilty earlier this year to bribery and fraud in a federal conspiracy case."

http://www.businessinsider.com/r-calpers-dumps-hedge-funds-citing-cost-to-pull-4-billion-stake-2014-9

Is the Colorado PERA Board "researching" potential investments in hedge funds as a means of increasing the funded ratio of the Colorado PERA pension system from the low 60's? If the PERA Board believes that the funded ratio of the PERA pension system is too low, then why did PERA General Manager Greg Smith recently testify to the Joint Budget Committee that the pension system does not need additional contributions? How can a public pension system with this level of taxpayer liabilities not need additional contributions? Since the pension system's actuarially required contributions (ARC) have not been paid for twelve consecutive years, investment returns on the missing (ARC) funds are lost, and compound each year. Why would the PERA Board not simply endorse a prospective reduction of the 2.5 percent PERA "multiplier" as a means of addressing system unfunded liabilities? (A public pension system's "multiplier" is the percentage of employee salary that accrues for each year worked as the ultimate retirement benefit.) How does the Colorado PERA 2.5% "multiplier" compare with "multipliers" of other major US public pension systems?

"No Vested Right in Pension Multiplier, Supreme Court Majority Says."

http://www.wisbar.org/NewsPublications/Pages/General-Article.aspx?ArticleID=23775

Matt Taibii:

"This is done in the name of saving taxpayer money, even though these 'alternative investments' involve fees paid to billionaire money managers that are often nearly as high as the cuts to public worker benefits."

"In more than a dozen states, legislators have enacted exemptions for hedge funds and other alternative investments to laws such as the Freedom of Information Act."

http://www.afscme.org/blog/its-time-to-hold-wall-street-accountable

From a recent Colorado PERA CAFR:

"The Total Fund underperformed the policy benchmark return by approximately 53 basis points (0.53 percentage points) for the year ended December 31, 2012."

"Alternative Investments was the primary contributor to the underperformance . . ."

What has been the performance of PERA's investment staff historically?  In what years have they missed their peer benchmarks? What has been the cost to the PERA trust funds of these missed benchmarks?

Colorado PERA Executive Director Meredith Williams, February 23, 2012, on the Colorado PERA Board’s historical investing mistakes, and the impact of these mistakes on the Colorado PERA Trust Funds:

“Ten years ago we were pretty aggressive in real estate, very aggressive might be a better characterization. We were very aggressive in what I’ll call private equity or alternatives. At the board’s direction we’ve pulled in our horns substantially, about seven and a half of the portfolio in each of those two, used to be fifteen in each. I think that the portfolio as we headed into the dotcom bust was far riskier than it is today. We paid the price for that.”

(My comment: Meredith Williams tells us here that PERA “paid the price” for its past investing mistakes. Here he admits that the Colorado PERA Board of Trustees has historically made mistakes in setting the asset allocation of the Colorado PERA trust funds. Colorado taxpayers bear the burden of these investment mistakes.)

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Colorado PERA Officials Corrupt State Budget Process. Joint Budget Committee Analyst Silenced.

Colorado state agencies will be surprised to learn that answering questions posed by the Joint Budget Committee's staff and members in the state budget oversight process is optional.

Colorado PERA administrators have manipulated the Colorado state budgetary process to avoid answering budget process questions posed by the members and/or staff of the Colorado Joint Budget Committee (JBC.) This recent Colorado PERA action continues an historical pattern of manipulation of Colorado state legislators by Colorado PERA officials.

The non-partisan JBC staff analyst, who posed the inconvenient budget questions, relating to Colorado PERA pension oversight, is a staffer named Alfredo Kemm. An investigation is warranted of what is clearly political interference with the duties and professional obligations of a non-partisan Joint Budget Committee analyst.

On December 11, 2014, the Colorado Joint Budget Committee set aside 30 minutes for their annual review of this state agency, Colorado PERA. The state's historical mismanagement of the Colorado PERA pension system has racked up nearly $30 billion in state debt. (Yet, 30 minutes were set aside for this review.)

But, even this 30 minutes of Colorado legislative scrutiny of the state agency, Colorado PERA was too much for Colorado PERA administrators to bear. Accordingly, it was arranged that the most difficult budgetary questions posed by the members and/or staff of the Joint Budget Committee would be quashed.

The JBC prepared five sets of questions for Colorado PERA's response at the December 11, 2014 hearing. Colorado PERA officials agreed to answer only the four questions that posed no threat to their political agenda. The fifth set of questions, of the greatest consequence for the State of Colorado, were suppressed. Apparently, state agency administrators have the power to ignore JBC budget questions that they might find politically inconvenient to answer. That is, some state agency administrators (such as Colorado PERA's administrators) view questions posed by the members of the Colorado Joint Budget Committee as optional.

The five question sets posed by the JBC staff and/or members are listed at the end of the PERA response document (at the link below, beginning on page 24.) Note that, at the beginning of this PERA response document Colorado PERA administrators choose to respond to only four of the question sets (beginning on page 1 of the document.)

http://www.tornado.state.co.us/gov_dir/leg_dir/jbc/2014-15/perahrg.pdf

Here is the comprehensive set of questions from the Joint Budget Committee that Colorado PERA ignores in their response to this legislative committee:

"22. Do current normal yearly contributions – member and state contributions – fully fund the retirement liabilities generated over the year for state employee PERA members? If not, what is the projected percentage of current year liabilities that are being funded by the normal yearly contribution and how much should the normal yearly contribution rate increase to fully fund the liability?

IF NOT, WHY HASN'T PERA REQUESTED AN INCREASE IN THE NORMAL CONTRIBUTION RATES FOR MEMBER AND STATE CONTRIBUTIONS IN ORDER TO FULLY FUND CURRENT YEAR LIABILITIES?

OR WHY HASN'T PERA REQUESTED AN ADJUSTMENT TO FUTURE MEMBER BENEFITS THAT WOULD BE FULLY FUNDED BY NORMAL YEARLY CONTRIBUTIONS? (My emphasis.)

If not, what percentage of AED and SAED are for the purpose of fully funding liabilities generated due to the shortfall in normal yearly contributions and what percentage are for the purpose of back-filling or paying off the unfunded liabilities that were recognized at the point that AED and SAED were implemented? Are AED and SAED compensation provided to current state employees or are they payments made for underfunding PERA benefits for state employees in the past? If AED and SAED are intended to cover a shortfall in the normal yearly contribution for current state employees, why shouldn't that percentage be included directly in the normal yearly contribution rather than being lumped in with amortization payments intended to cover existing unfunded liabilities?"

The JBC staff asks why Colorado PERA officials have not sought increased contributions or pension benefit cuts to meet the annually accruing actuarial liabilities of the PERA pension fund. Colorado PERA officials quash and ignore their questions. The fact that questions of such moment for Colorado state finances have been ignored or suppressed by a Colorado state agency does not pass the smell test.

Colorado Revised Statutes: "2-3-203. Powers and duties of the joint budget committee.

(1) The committee has the following power and duties:
(a) To study the management, operations, programs, and fiscal needs of the agencies and institutions of Colorado state government."

"The JBC is statutorily charged with analyzing the management, operations, programs, and fiscal needs of the departments of state government."

http://www.tornado.state.co.us/gov_dir/leg_dir/jbc/jbcrole.pdf

"JBC hearings provide an opportunity for members to question department staff about programs, needs, new funding initiatives and other issues for the upcoming fiscal year."

http://cclponline.org/wp-content/uploads/2013/12/Colorado-Budget-Primer-2012_DOC-6.6.12.pdf

The Joint Budget Committee staff provides an annual written and verbal update to the members of the JBC regarding Colorado PERA. Here is a link to the 2014 JBC staff written PERA update:

http://www.tornado.state.co.us/gov_dir/leg_dir/jbc/2014-15/perbrf.pdf

In this document, the JBC staff reports Colorado PERA's claim that ARC underfunding is $1.4 billion (in the period 2009 to 2013.)

"An amortization contribution deficiency is generated when the actual contributions flowing into PERA are less than the annual required contribution that is calculated as a part of the actuarial liability analysis. PERA reports that the 30-year amortization contribution deficiency over the period from 2009 through 2013 totaled just under $1.4 billion."

The JBC staff document notes that the payment of Colorado PERA pension benefits is a payment of Colorado state and local government debt to creditors:

"Employees earn their pensions while working as a part of their compensation; pensions are not earned when they are received. The retirement pension payment is a payment of debt to the creditor – the retiree – who has already earned that payment. As a matter of fairness, the people who receive that employee's services should pay for those services at the time services are provided."

The JBC staff notes that additional payments must be made into the Colorado PERA pension system to address pension fund deficits:

"Therefore, normal yearly contributions should be fully funding those retirement liabilities. A normal yearly contribution that does not fully fund those retirement liabilities necessarily pushes the unpaid cost to future payers that did not receive those services. Underfunding the normal yearly contribution creates a debt that will have to be repaid by others. If a significant pension fund deficit develops due to underfunding or due to financial market declines, the government must make additional payments to eliminate that deficit with unfunded pension amortization payments."

The JBC staff criticizes the current AED/SAED pension funding mechanism as "back-loaded":

"However, the amortization of unfunded liabilities through the AED and SAED payments was structured as a percentage of payroll amortization rather than as a flat amount amortization over the 30-year projected period of amortization. Further, both AED and SAED payments were also structured to ramp-up the percentage of payroll over a period of time. This ramped-up percentage of payroll payment structure even further back-loaded the amortization period."

The Colorado PERA Board Has Reduced the PERA Portfolio Return Assumption. The Cost of the Reductions Was Paid by Colorado PERA Pensioners with the Taking of Their Statutory "Annual Benefit Increase" (COLA) in 2010.

"In 2013, PERA reduced its investment rate of return and discount rate assumptions to 7.5 percent from 8.0 percent. This followed PERA's reduction in 2009 from 8.5 to 8.0 percent. The rate reduction in 2009 generated a $4.8 billion loss or increase in liabilities in PERA's actuarial liability analysis. The 2013 reduction generated an additional $3.1 billion increase in liabilities.

These changes in rate are responsible for a total of $7.9 billion in actuarial unfunded liability.

These actuarial loss figures give an idea of the scale of change in fund status that is implied when assuming a more conservative rate of return or discount rate."

The 2014 JBC Staff Budget Briefing document for Colorado PERA is available at the following link:

http://www.tornado.state.co.us/gov_dir/leg_dir/jbc/2014-15/perahrg.pdf

For the record, Alfredo Kemm's presentation of his PERA briefing to the JBC begins at 2/06 on the recording of the December 3, 2014 JBC hearing.

To me, it really isn't surprising that Colorado PERA pension administrators have refused to answer the questions of the Colorado Joint Budget Committee relating to the underfunding of the pension system. Colorado PERA administrators recently refused to answer this identical question when posed by Colorado PERA retirees. Colorado PERA retirees requested that lawyers at the Office of the State Legislative Counsel (or the Office of the State Economist) examine the payment of the PERA pension system ARC historically, and provide a comparison of "ARC funding discipline" among major US public pension systems.

Instead of the requested ARC statistics, the Office of the Legislative Counsel acted as a conduit for a Colorado PERA political response, sending the following off-topic political commentary:

“I learned that the State of Colorado has always paid PERA the amount that has been owed by statute.” (My comment: This is an answer to a question that PERA retirees did not ask.)

“According to PERA staff, PERA has never been shorted on receiving these contributions.”

(My comment: Again, PERA retirees inquired about the failure to pay the pension ARC, not statutory contribution rates. There is no issue regarding the payment of statutory contribution rates by PERA employers or employees. The current statutory contribution rates are insufficient to cover the pension ARC.)

“PERA staff also explained that the ARC is just an actuarial calculation and measurement, and it roughly amounts to $3.3 billion for the whole system since 2001.”

(My comment: This $3.3 billion figure does not consider lost investment opportunities for funds not contributed, and is accordingly false. The provision of this figure is intended to minimize the significance of the Colorado PERA pension system ARC underfunding, and mislead the state legislators who followed up on the retirees' request for information. Expecting Colorado PERA officials to casually dismiss the historic lack of Colorado PERA ARC funding discipline, PERA retirees sought out an independent agency to provide the information, the Legislative Counsel. The PERA retirees were disappointed by the political response they received from the Legislative Counsel, but are encouraged by the forthright examination of state pension debt by the Joint Budget Committee staff.)

The December 11, 2014, Colorado Joint Budget Committee annual review of the state agency, Colorado PERA, was recorded. Listen to the JBC agency hearing for Colorado PERA at this link (arrow down to December 11, 2014):

http://www.leg.state.co.us/clics/clics2014A/cslFrontPages.nsf/Audio?OpenPage

Below I provide a few of the most pertinent comments made during the December 11 PERA hearing and my reactions. At 1 hour/49 minutes into the recording of the JBC's December 11, 2014 agency hearing schedule, Greg Smith begins the Colorado PERA testimony to the JBC:

" . . . appreciate the opportunity to be here and meet with you all and answer any questions including the predetermined questions."

(My comment: Greg Smith appreciates the opportunity to answer any of the JBC's "predetermined questions," with the exception of the JBC's question set #22, or any other question that is contrary to the Colorado PERA political agenda.)

"We've provided each of you a packet that consists of a brief slide show that I'll go through . . . also HAS THE WRITTEN RESPONSES TO YOUR QUESTIONS . . ." (my emphasis.)

(My comment: Given the fact that JBC Question #22 to Colorado PERA was ignored or suppressed, this appears to be a false statement by a state agency head. What are the standards that must be met by state agencies in our state budgeting process? Are agency heads granted the power to ignore or suppress budgetary questions at their pleasure? If this is indeed the environment in which Colorado budgeting occurs, I am not surprised that the Colorado PERA ARC under-funding has been successfully ignored for 12 years.)

At 1/56/51 on the recording Greg Smith states: "We don't need additional contributions."

(My comment: Colorado PERA's Greg Smith may very well be alone in the nation in that he, as a fiduciary who heads a major public pension system that is grossly and historically underfunded, testifies to elected officials overseeing the pension system "we don't need additional contributions." This is a truly bizarre position. Colorado PERA is a public pension with a funded ratio in the 60s, headed up by a General Manger who claims that the pension system does not need any additional funding.

I ask: Were Colorado PERA officials speaking the truth to Colorado legislators on February 23, 2012 when [then] Colorado PERA General Manager Meredith Williams, testified to the Colorado House Finance Committee, in regard to the Legislature’s failure to pay the Colorado PERA ARC? 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.”

Or, were Colorado PERA officials speaking the truth to Colorado legislators on December 11, 2014 when JBC members heard from Colorado PERA that "we don't need additional contributions"?

Logically, only one of these Colorado PERA statements to Colorado state legislators can be true.

Greg Smith's position on public pension underfunding is at odds with the position of the National Governors Association, the National Conference of State Legislatures, the Council of State Govern­ments, the National Association of Counties, the National League of Cities, the U.S. Conference of Mayors, the International City/County Management Association, the Govern­ment Finance Officers Association, the National Association of State Auditors, the Comptrollers and Treasurers Association; the National Association of State Retirement Administrators (NASRA); the National Council on Teacher Retirement, and the financial firms Standard and Poor's, and Morningstar.

NASRA:

"Employer Contributions: A variety of state and local laws and policies guide governmental pension funding practices. Most require employers to contribute what is known as the Annual Required Contribution (ARC), which is the amount needed to finance benefits being accrued each year, plus the cost to amortize unfunded liabilities from past years, minus required employee contributions."

http://www.nasra.org/files/Issue%20Briefs/NASRACostsBrief.pdf

NASRA:

"PENSION FUNDING: A Guide for Elected Officials, Report from the Pension Funding Task Force 2013."

"The 'Big 7' (National Governors Association, National Conference of State Legislatures, Council of State Govern­ments, National Association of Counties, National League of Cities, U.S. Conference of Mayors, and the International City/County Management Association) and the Govern­ment Finance Officers Association established a pension funding task force in 2012. The National Association of State Auditors, Comptrollers and Treasurers; the National Association of State Retirement Administrators; and the National Council on Teacher Retirement also serve on it. The Center for State and Local Government Excellence is the convening organization for the Task Force."

"The Task Force recommends pension funding policies be based on the following . . . have a pension funding policy that is based on an actuarially determined contribution."

"The Task Force recommends that state and local governments . . . stay within the ARC calculation parameters established in GASB 27 . . ."

"The most important step for local and state govern­ments to take is to base their pension funding policy on an actuarially determined contribution (ADC). The ADC should be obtained on an annual or biannual basis."

http://www.nasra.org/files/JointPublications/PensionFundingGuide.pdf

Colorado PERA General Manager Greg Smith at 2/31/40 on the recording:

"I'm not a huge fan of the credit rating agencies and the job that they do."

Standard and Poor's:

"We believe that not fully funding the ARC is a short-term solution that will likely result in a larger unfunded actuarial accrued liability down the line."

"We've observed that persistent underfunding of ARC correlates highly with pension funding contributions that are statutorily or contractually determined."

http://www.nasra.org/Files/Topical%20Reports/Credit%20Effects/A_Bumpy_Road_Lies_Ahead_for_US_Public_Pension_Funded_Levels.pdf\

S&P emphasizes the importance of pension ARC funding discipline. Yet, Colorado PERA staff casually dismiss ARC funding discipline, and ignore the fact that (as S&P's analysts have noted) fixed statutory contribution levels, like those set for Colorado PERA, result in pension systems "with the weakest funded ratios."

Morningstar Analyst Rachel Barkley:

"Although Colorado is still absorbing losses from 2009, the main reason its funding gap is yawning is the state's failure to make the contributions recommended each year by its own budget experts, Barkley said."

"Even if public pensions realize their projected investment returns on average over coming years, the failure by many plans 'to pay less than the full ARC . . . will produce less than full funding over the next 30 years,' according to a recent report by the Center for Retirement Research (CRR)."

http://www.reuters.com/article/2014/03/10/us-usa-pensions-rally-analysis-idUSBREA2907320140310

A recent study by the Tennessee Treasurer's Office reveals that the cost of delaying public pension plan actuarially required contributions [with an assumed 7.5 percent return assumption] for a 12-year period [the Colorado Legislature began underfunding the PERA pension system 12 years ago] is a premium of 138.2 percent of the skipped pension contribution.

Link to the Tennessee Treasurer's report:

http://s3.amazonaws.com/s3.documentcloud.org/documents/1012837/pension-report.pdf

From the Tennessee Treasurer's report:

"It costs an additional $435,000 to delay a one million dollar pension payment for five years assuming an earnings rate of 7.5%. This is a 43.6% increase in the amount to be paid. The pension cost more than doubles by delaying a payment by 10 years. A $1 million pension cost becomes $2.06 million if delayed 10 years. See Attachment 2 that illustrates the cost of delaying employer pension contributions."

"GASB noted in its release accompanying Statement No. 68 that pension contribution issues are public policy matters. Indeed, leading finance professional organizations, including the Government Finance Officers Association have adopted positions calling for governments to adopt a funding policy based on an actuarially determined annual funding amount."

"Failure to pay annually when due the full actuarially required contribution is in effect underfunding the pension plan. The amount that is not funded increases the unfunded accrued liabilities of the plan. Further, the pension plan will not have the under-funded amount available to invest, thereby resulting in lost earnings opportunity."

"The funding for a pension plan assumes that 100% of the ARC will be paid annually, and further assumes that those contributions will be invested to earn at least the assumed rate of return for the pension plan. Thus, the failure to pay 100% of the ARC can quickly lead to a serious underfunding of the pension plan. Chronic underfunding of the ARC will eventually make the pension plan financially unstable. Nationwide, multiple severely underfunded pension plans that are now financially unstable are examples of the failure to pay annual funding requirements."

Greg Smith states (at 2/03/29 on the recording of the December 11 JBC PERA hearing) that the Colorado Supreme Court Decision regarding SB10-001 "was exactly what we had advocated for."

This statement is not entirely accurate. The Colorado Supreme Court Decision in the case, Justus v. State, found that Colorado PERA retirees had no contractual right to the statutory pension COLA benefit (that it can legally be reduced by the Legislature after it has been supported by employee labor and contributions.)

Colorado PERA officials, in 2009, admitted the existence of the PERA COLA contract to the members of the Joint Budget Committee (audio recording and in writing.) Accordingly, in the case Justus v. State, Colorado PERA's lawyers did not initially deny the existence of the contractual right to the PERA COLA, as is implied by Greg Smith's statement at 2/03/29 on the recording. In the case, Colorado PERA officials originally admitted that the contractual obligation to pay the PERA COLA existed, but they argued that a retroactive taking the COLA benefit was "actuarially necessary." As we know, the Colorado Supreme Court ignored this evidence in the case, Justus v. State.

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

Representative Jack Pommer, JBC Chairman in 2009, asked if the Legislature could legally alter the statutory parameters of the PERA pension to manufacture a “crisis” in order to justify its breach of pension contracts. At the December 17, 2009 meeting of the Joint Budget Committee, Representative Pommer asked: “Are we not just saying we’re going to pick 30 years (as a PERA investment time horizon) because if we’re not balanced within 30 years that creates actuarial necessity which then let’s us change retiree benefits?”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

January 29, 2010

Rep. Lambert on SB 10-001:

 “I have heard from my constituents, as many of you have, that this proposal will breach retiree’s contracts.”

March 11, 2009

Colorado PERA officials place blame on the Colorado General Assembly for creating the latest PERA financial downturn: “Other notable factors (for the downturn in PERA’s fiscal position) include employers not contributing the actuarially determined contribution rates, the sale of purchased service credit at rates below actuarial costs, and the raising of benefits in the late 1990’s coupled with decreasing employer contributions.”

http://www.kentlambert.com/Files/PERA_Response_Pt_1.pdf

August 11, 2009

Colorado PERA’s General Counsel Greg Smith blames the Colorado General Assembly for PERA’s fiscal downturn: “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.”

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

Greg Smith comments at 2/06/26 regarding the PERA Board's authority, telling the legislative members of the JBC, "you determine what the benefits in the PERA system are exclusively."

I also find this statement by Greg Smith to be disingenuous given Colorado PERA's extensive lobbying activities. Later in this article I provide an example of the level of control of Colorado PERA's lobbyists and lawyers over the Colorado Legislature. A level of control that demonstrates the falsity of Greg Smith's comment "you determine what the benefits in the PERA system are exclusively."

Greg Smith neglected to mention to the JBC members that PERA administrators spend up to $400,000 each year lobbying the legislators to help them "determine what the benefits are."  What is the total Colorado PERA lobbying expenditure related to "determining the benefits" in SB10-001?

From the Denver Post:

"The system budgeted $400,000 for lobbying this year, although it receives help at the state Capitol from influential unions including the Colorado Education Association."

"The fund also has spent as much as $2.2 million per year on staff and contracted attorneys, who advise on benefit disputes with retirees and review investment contracts."

"The fund's $49.6 million administrative budget includes $28 million for salaries and benefits."

http://www.denverpost.com/ci_18404598

A 2009 article in the publication “State Bill Colorado,” addressed the initial recruitment of the Colorado PERA SB10-001 lobbying troop:

“PERA is ‘obviously gearing up for some heavy-duty lobbying, one observer noted. The agency has hired two lobbyists from the firm Colorado Communique, Collon Kennedy and Steve Adams, former president of the Colorado AFL-CIO. The pension system also has hired Mary Alice Mandarich, a well-connected Democratic lobbyist who formerly was chief of staff for Senate Democrats and who worked on campaigns for former Senate President Joan Fitz-Gerald, former Gov. Roy Romer and gubernatorial candidate Gail Schoettler. Coalition members have their own lobbyists, and the well-staffed higher education lobby is sure to be involved in this issue as well.” “All that lobbying power will be focused on 100 legislators . . .”

Link:

http://statebillnews.com/2009/10/pera-woes-loom-large-for-education/

At 2/08/09 on the recording of the JBC PERA oversight hearing Greg Smith comments on a recent e-mail from Colorado PERA retirees to state legislators addressing the failure of the Legislature to pay the PERA pension system ARC.

Greg Smith: "There's been a recent e-mail transmission to a number of legislators questioning whether or not PERA has been paid the contributions that were due to it."

The PERA retirees' "e-mail transmission" did not question whether PERA has been paid the statutory contributions that are due from PERA employers and employees. The e-mail drew attention to the fact that PERA ARC is not being paid. The e-mail states that setting a fixed contribution rate in statute IS NOT THE EQUIVALENT OF PAYING THE ARC."

Greg Smith states: "The concern is that we have not been receiving the ARC for the past many years, AND THAT IS AN ACCURATE STATEMENT, WE HAVE NOT BEEN RECEIVING THE ARC," (my emphasis.)

On the recording, Greg Smith goes on to rationalize the failure of the Legislature to ensure that the PERA pension ARC is paid, stating that since 2010 paying the ARC would have been difficult. He then presents false choices. He presents the false choice of immediately raising both employer and employee contribution rates by four percent in 2010, and ignores the option at the time of PROSPECTIVE benefit reductions, for pension benefits not yet earned, as a means of reducing PERA liabilities. In lieu, of prospective reductions of benefits not yet earned in the PERA pension system, the Legislature enacted a retrospective claw back of contracted pension ABI (COLA) benefits. Colorado's public sector unions wanted to protect active members at the time, and so went after the PERA retirees' contractual inflation protection.

Greg Smith fails to mention that the PERA Board could have proposed a simple reduction in the PERA pension system "multiplier" in 2010. That is, the rate at which PERA benefits accrue each year. A reduction in the PERA pension system multiplier was a policy option available to the General Assembly, as a means of reducing unfunded liabilities and facilitating payment of the pension ARC. The Colorado PERA "multiplier" is currently set at 2.5 percent per year. Rather than reducing the PERA pension "multiplier" the unions involved in the development of SB10-001 schemed to push almost the entire cost of the SB10-001 reform [90%] onto the backs of PERA retirees (who don't pay union dues.)

Some courts have recently sanctioned the prospective reduction of public pension "multipliers":

http://m.jsonline.com/news/milwaukee/supreme-court-oks-milwaukee-county-cuts-to-pension-benefits-b99411960z1-286363761.html

At 2/10/33 on the recording, Greg Smith plays the JBC members like a fiddle, misdirecting the members, and wasting the JBC's time with a red herring. Greg Smith states:

"The other part of that communication that's important is that there was a suggestion that some of the employers are not paying in or PERA is not working to collect those dollars. Every single employer without exception, every single employee without exception has paid all of the statutory contributions that the law of the State of Colorado requires them to pay."

Greg Smith goes on at length, piously assuring the JBC members that something is not happening, that no one has suggested happens. In their e-mail, PERA retirees did not suggest that PERA employers and employees are failing to pay their statutory pension contributions.

Here is the text of the e-mail sent by a number of Colorado PERA retirees to all Colorado state legislators:

"Request for Information Re: Colorado PERA.

Hello, my name is _______. I am a Colorado PERA retiree who is concerned about financial management of the Colorado PERA pension system.

Recently, a letter was published that pointed out the failure of the Colorado Legislature to make 'actuarially required contributions' (ARC) payments to our public pension system, that is, to pay the state’s annual public 'pension bill.'

The letter is available at this link:

http://www.boulderweekly.com/article-13611-letters-week-of-november-13.html

As a state legislator charged with management of our pension system, I ask that you request that your staff, or the Office of the State Economist, examine the level of the Colorado PERA pension system ARC that has been paid historically. I wonder what percent of the Colorado PERA pension system ARC has been paid in recent decades and how this percentage compares to other public pension systems across the nation. My understanding is that payment of a public pension system’s “ARC” is critical to the long-term sustainability of a public pension system.

A retiree organization has drawn attention to the following statements of current and former Colorado PERA leaders lamenting the underfunding (failure to pay the ARC) of the PERA pension system.

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.”

Since most Colorado state and local government employees are ineligible to receive Social Security benefits in retirement, they rely on the appropriate financial management of the Colorado PERA pension system to avoid poverty after giving a lifetime of service to the public. I would very much appreciate your help in gathering information regarding the historical Colorado PERA ARC payments.

Sincerely,"

This letter is just seven paragraphs long. It is not difficult to read these seven paragraphs and see that Greg Smith has made a false statement in a JBC budget hearing. The letter makes no mention of PERA employers failing to pay statutory pension contributions. This letter simply points out that the Colorado Legislature is failing to pay the PERA pension system ARC. Greg Smith's red herring is a transparent manipulation of state legislators and the Colorado budgetary process by a state agency head.

As noted above, unfortunately, Colorado legislators forwarded this letter to the staff of the State Legislative Counsel which, rather than conducting the requested ARC statistical research for PERA retirees, acted as a conduit for a Colorado PERA political response.

As evidenced by the letter above, Colorado PERA retirees requested that the Legislative Counsel (or the Office of the State Economist) examine the payment of the PERA pension system ARC historically, and provide a comparison of "ARC funding discipline" among major US public pension systems. Colorado PERA administrators ignored the requested statistics and instead, sent legislators and retirees a political statement.

Below is a link to a PERA retiree response to PERA's refusal to provide the requested statistical information. This response was subsequently sent to all Colorado state legislators:

http://coloradopols.com/diary/65975/the-colorado-legislatures-chronic-underfunding-of-the-colorado-pera-pension-system

Greg Smith at 2/11/40 on the recording of the JBC agency hearing:

"We pride ourselves in our transparency." (My response: Indeed, Colorado PERA administrators "transparently" quashed the JBC's question set #22.)

Greg Smith at 2/21/23:

"We're interested in everybody understanding the facts about PERA."

Greg Smith at 2/21/04:

"GASB is eliminating that provision (the ARC calculation), as a part of the adoption and the effective dates of 67 and 68. The ARC will no longer be a component of GASB's requirements."

(My comment: Of course, the fact that GASB is changing its emphasis from ARC funding discipline to plain statements of pension liabilities on public sector employer balance sheets DOES NOT EXCUSE the failure to pay the PERA pension ARC for the previous twelve years.

This Greg Smith statement also ignores that fact that, as noted earlier, nearly all organizations representing public sector entities in the United States recommend a continuation of public pension calculation of an annual "actuarially determined contribution," with implementation of the new GASB rules.

National Association of State Retirement Administrators:

"Of note, our associations recommend that state and local governments continue to calculate an actuarially determined annual required contribution (ARC). For those who do, GASB’s new standards will require governments to provide supplementary information regarding their actuarially determined pension contribution, the history of their funding commitment in relation to this amount, and underlying assumptions regarding this calculation and other factors that materially affect the trends in financial reporting schedules."

http://www.nasra.org/Files/Letters/Joint%20Letter%20to%20Commissioner%20Gallagher%206-16-14%20%282%29.pdf

Note that, at its 2014 legislative session, the Tennessee Legislature enacted a bill requiring payment of their public pension system ARC each year. (Some states, recently Alaska, have supplemented statutory contribution rates to pay off their public pension liabilities.)

See the articles:

http://coloradopols.com/diary/58527/tennessee-legislature-models-responsible-public-pension-management-for-colorado-pera-and-the-colorado-legislature

http://coloradopols.com/diary/65975/the-colorado-legislatures-chronic-underfunding-of-the-colorado-pera-pension-system

"When government entities fail to pay annual required contributions, not only do they jeopardize the actuarial soundness of the funds, but they also put pension plan trustees in a precarious position. Have plan trustees breached their fiduciary duty when they do not take action to try to collect a contribution underpayment? In other words, does fiduciary duty obligate the plan trustee to take action to try to compel a government entity to pay its required contribution? If the answer to this question is 'yes,' what actions are required? Are they required to bring legal action against the government sponsors to collect the required contributions, or is simply sending a demand letter sufficient to satisfy the obligation? The ultimate answer may be largely determined by state law and whether the obligation to pay the ARC derives from the state constitution, statute or a matter of contract law between the government sponsor and the pension fund. To date, this issue has not been addressed by a court, but it may only be a matter of time."

http://www.bgdlegal.com/news/2011/04/29/articles/are-public-pension-plan-trustees-at-risk-for-fiduciary-liability-when-public-plans-are-underfunded/

"Does Your Pension Board Need Help Meeting Its Fiduciary Liability? – Create a Funding Policy."

http://www.publicpensioninstitute.org/public/10292print.cfm

THE POWER OF COLORADO PERA'S LOBBYISTS.

Historically, Colorado PERA has purchased a substantial lobbying presence at the Colorado Legislature with PERA Trust Fund assets. See the article: "Colorado State Senators Jump for Angry Colorado PERA Attorneys." at this link:

http://coloradopols.com/diary/36778/colorado-state-senators-jump-for-angry-colorado-pera-attorneys

The influence of Colorado PERA's internal and external lobbying force was revealed during Senate floor debate on SB10-001 in 2010. This is the bill that struck Colorado PERA pensioner contractual rights to the statutory "annual benefit increase" (COLA.)

During floor debate of SB10-001, Senator Scott Renfroe: "IF YOU WANT IT TO GO OUT OF HERE (THE SENATE) WITH THE PERA APPROVED DOCUMENT."

The Colorado Senate took up SB10-001 on two occasions; “Second Reading” on January 29, 2010, and “Third Reading” on February 1, 2010.

On “Second Reading,” a member of the Senate, Senator King, tried to amend the bill to provide that Colorado law would permit the breach of its public pension contracts if a financial condition called “actuarial necessity” could be established. The King amendment also stated that the Colorado Legislature could not break the contracts of Colorado PERA members who had already fulfilled all of the conditions of their pension contract and retired. This amendment proposed by Senator King was voted down.

Next up, Senator Renfroe proposed an amendment to SB10-001 on “Second Reading,” stating that if the Legislature intends to break its public pension contracts it must provide notice of the breach to the parties to the contract, i.e., PERA members. The Renfroe amendment also precluded the Colorado Legislature from breaking the contracts of Colorado PERA members who had already fulfilled all of the conditions of their PERA pension contracts and retired. This Renfroe amendment was passed by the full Senate on “Second Reading” and became part of SB10-001.

A few days went by before Colorado PERA officials realized that Senator Renfroe’s “Second Reading” amendment to SB10-001 would prevent their taking of PERA retiree’s contracted pension COLA benefits (which represented 90 percent of the cost-shift in the bill, according to the bill’s prime sponsors, Senator Penry and Senator Shaffer, as well as Colorado PERA.)  Apparently, the fact that some Colorado Senators had failed to march in lock-step with Colorado PERA's orders resulted in raised tempers . . . and a decision to fix the Renfroe “Second Reading” amendment on the Senate floor on February 1, 2010 when the bill was to be heard by the Senate on “Third Reading.”

This effort to “fix” Senator Renfroe’s amendment makes for some of the most interesting action from the Colorado General Assembly’s debate of SB10-001. You can watch the Senate’s “Third Reading” debate on SB10-001 on the Colorado Channel here:

http://www.coloradochannel.net/colorado-senate-2010-legislative-day-20

(Click on “SB10-001” on the right of the screen.)

On “Third Reading,” the members of the Colorado Senate disagreed about whether or not Colorado PERA members should be told of their contractual rights to their pension benefits.  Colorado PERA’s attorneys in the lobby grew angry. The members realized that the presence of the Renfroe amendment in SB10-001was a tacit admission by the Legislature that it could not impair fully-vested, accrued, contracted PERA pension COLA benefits.

Listening to the floor debate of SB10-001 it’s clear to me, that PERA’s attorneys were running the show.

Here are transcribed highlights from the February 1, 2010 Senate “Third Reading” floor debate on Senator Renfroe’s amendment (that was placed in the bill two days earlier on “Second Reading”):

Senator John Morse stated:

“I ask permission for a Third Reading amendment.”

“Members, we put an amendment on the tail end of Second Reading and it turns out that that amendment had the effect of undoing the bill.”

Senator Renfroe stated:

“I think it’s an amendment we still need to keep in there, but modify the language to make the attorneys happy as opposed to just deleting it out.”

“I’m standing before you to tell you that I did not have ulterior motives, with this as has been suggested and that angers me to no end that I would receive phone calls from members and from the press about that.”

“Now, if the attorneys outside don’t like what we did, well then let’s fix it and let’s include it and go down the road.”

“I have another Third Reading amendment that would put my language back in without striking out the language that made the attorney or attorneys, or whoever it is, angry with what it was.”

Senator Harvey stated:

“The only thing we did compromise was on this amendment . . . that we would say that we would notify the (PERA) members of what their rights are.”

“Now we’re coming back two days later and saying ‘no’ we can’t even offer that amendment to tell the (PERA) members what their rights are.”

“If we can’t fix that technical issue and compromise in telling the (PERA) members just what their rights are, then we’ve got a more serious problem in this body than simple technical amendments on Third Reading.”

Senator Mitchell, (admits that Senator Renfroe’s language in the bill precludes the General Assembly from modifying fully-vested PERA retiree pension benefits):

“My understanding then is that Senator Renfroe offered an amendment that provided for notice to all PERA-covered employees of their rights under the changing programs, and that amendment was adopted by this body.” 

“A unanimous vote by this body to give notice to PERA members of their rights . . . that sounds like a worthwhile and good government policy.”

“Now, we learn this morning that there were some unintended consequences, and mistaken overreach in the amendment that would have the effect of gutting the bill. Well, some of us might think that is a good thing.”

Senator Renfroe, (makes it clear that Senator Morse’s amendment to replace the Renfroe language currently in the bill is actually being offered by PERA’s attorneys in the lobby):

“Or, if you want it to go out of here with the PERA-approved document and nothing else then let’s just approve this one and vote mine down.”

Senator Penry, co-prime sponsor of SB10-001, (makes it clear that the Renfroe amendment currently in SB10-001 would preclude the General Assembly’s retroactive taking of PERA COLA benefits):

“And to be clear what we’re talking about it’s the COLA, the COLA reduction which represents $15 billion of the $30 billion shortfall in this proposal is what was stripped out as part of that (Renfroe) amendment.”

The Senate then broke for a “Senatorial Five” in order that continued discussion of the contractual rights of Colorado PERA members not become part of the official Senate record.

After the powwow, Senator Morse has abruptly changed his mind. He now supports the Renfroe amendment.

Senator Morse withdraws his own (PERA-sponsored) amendment and asks for the Senate’s support for the Renfroe amendment that puts into Colorado law the language about “actuarial necessity” that is in the final version of SB10-001, (Floor Amendment #41).

Senator Renfroe’s amendment was adopted.

This Senate “Third Reading” debate on SB10-001 makes it clear that the members of the Senate knew that they were breaking fully-vested Colorado public pension ABI contracts. The “Third Reading” debate on SB10-001 also makes it clear that the members of the Senate have abdicated their public policy-making authority regarding Colorado public pensions to Colorado PERA attorneys in the lobby.

The Senate’s “Second Reading” debate on SB10-001 on January 29, 2010 is also quite interesting. During this SB10-001 “Second Reading” debate we hear members of the Colorado Senate declare that the Colorado General Assembly’s proposed taking of the PERA COLA contracted benefit is unconstitutional.  Now, for some reason, the Senate’s “Second Reading” debate on SB10-001 has disappeared from the Colorado Channel archives.  (If you click on “SB10-001” for Legislative Day 17 [January 29, 2010] in the Colorado Channel archives you get this error message: “Video not found.”)  Does someone not want public access to the SB10-001 “Second Reading” debate on SB 10-001?

Fortunately, I have preserved pertinent comments from the January 29, 2010, Senate “Second Reading” debate on SB10-001. Here are a few:

Senator Harvey, “We have made a commitment. We have a contract with current retirees. That is already in place.” “Reforms should be made for new hires.” “We do not have that commitment to new hires.”

Senator Spence, “The bill places an unfair burden on retirees.”

Senator Scheffel, “We are breaching our promises to existing retirees.”

Senator Lundberg, “This bill is a deal that was cut before this body met.”

It is ironic that, during floor debate of SB10-001, the Colorado Senate debated the concept of "actuarial necessity" which Colorado PERA and the sponsors of SB10-001 believed was necessary for the state to escape the PERA COLA contractual obligation to PERA pensioners. The irony is found in the fact that, later in the litigation of the case Justus v. State, Colorado PERA switched its legal strategy, from arguing that "actuarial necessity" was necessary to break the PERA COLA contract, to arguing that the PERA COLA contract did not exist. [Of course, as noted above, PERA's lawyers had already testified to the JBC in 2009 that the PERA COLA contract did indeed exist.])

During the debate on SB10-001 there was universal guarded speech on the floor of the Senate and much tiptoeing around the subject of Colorado PERA retiree vested pension rights. The Senators were concerned about accidently providing too much evidence for Colorado courts that they were aware of the contractual nature of the PERA COLA benefit. But, it turns out that the Senators' fears were unfounded. The Colorado Supreme Court had no intention of examining evidence in the case, Justus v. State, and did not examine the evidence. Such an examination of  evidence in the case would have interfered with the desired political resolution of the case.

Longstanding Colorado case law has deemed fully-vested public pension contracts inviolate. (An earlier Colorado Supreme Court concluded in McPhail: “ . . .we believe that in a case, such as that before us, involving a contributory system it is the only reasonable conclusion that can be reached (the contract principle.)”  “It would be unjust and contrary to our basic notions concerning the validity of contracts to hold that this provision could be changed by the lawmakers.”  Colorado courts have historically adhered to the "California Rule" of public pension contractual rights.

The final language of the Renfroe “Third Reading” amendment to SB10-001 (that is now part of Colorado law) requires that written notice be provided to Colorado PERA members and inactive members that in the event of "actuarial necessity," the Colorado General Assembly is free to break its public pension contracts.

Colorado PERA's gamesmanship during the 2014 Joint Budget Committee PERA hearings are simply a continuation of its historical manipulation of Colorado state legislators to conceal the underfunding of the PERA pension, and a premeditated breach of Colorado PERA pension ABI statutory contracts. This is all very ugly, and a sad statement about the reality of our Colorado state government.

Colorado, the tenth wealthiest state in the nation, is allegedly forced to break its contracts with public pensioners.

"Gov. John Hickenlooper's economists predict, however, that the state needs to refund $196.8 million (TABOR refund to taxpayers) next year because of revenue increases in the current budget year. Lawmakers weren't expecting refunds until the 2016 tax year, and Hickenlooper's budget request sets aside nearly $137 million for those."

http://www.bnd.com/2014/12/22/3575777_lawmakers-getting-briefing-on.html?sp=/99/102/&rh=1

The fact is that many Colorado state legislators have desired to use state funds (that should be directed to meeting state contractual obligations) for other purposes. These legislators are willing to go to great lengths to achieve that goal. Our Colorado Legislature has lacked statesmen who will speak the truth and inform Colorado voters that the Legislature cannot break its existing contracts to accommodate TABOR. We lack elected officials who will honestly inform Colorado voters that either TABOR must be modified, or state services must be further diminished. We lack leaders who will inform Colorado voters that our Legislature will no longer continue the charade of borrowing from the PERA pension system, and from future generations, to maintain state services in the present.

Support the Rule of Law in Colorado at saveperacola.com.

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The Incredibly Intricate Colorado PERA SB10-001 Political Web.

I find a few interactions in this web of relationships surrounding SB10-001 particularly noteworthy:

Colorado Supreme Court Justice Hood contributed to Democrat Bill Ritter's campaign for Governor, and "hosted campaign events" for Ritter.

Governor Ritter initially appointed Justice Hood to the bench.

Governor Ritter signed SB10-001 into law.

Democratic Governor Hickenlooper appointed Hood to the Colorado Supreme Court.

Justice Hood upheld SB10-001 as a member of the Colorado Supreme Court.

Justice Hood has worked with attorney Mark Grueskin at Isaacson Rosenbaum, P.C.

Attorney Grueskin represented the SB10-001 PERA defendants.

Justice Hood was a shareholder at Isaacson Rosenbaum in 2006.

Isaacson Rosenbaum worked for Colorado PERA during this time period.

Attorney Grueskin has provided legal representation for the Colorado Democratic Party.

Justice Hood has been recused or removed in a separate case due to his past association with Attorney Grueskin.

In 2010, the Colorado Legislature enacted a bill, SB10-001, designed to reduce unfunded pension liabilities of the Colorado PERA pension system by cutting the statutory COLA inflation protection of pensioners (called the "annual benefit increase" [ABI] in Colorado law.) These public pension liabilities had accumulated over time, since "actuarially required contributions" to the pension system have been underpaid since 2002. Ninety percent of the "cost savings" in the bill, SB10-001, are the result of cutting the pensioner's statutory ABI (COLA.)

Naturally, Colorado PERA pensioners challenged the bill in court as a violation of their contractual rights. Lawyers for the defendants in the case (the State of Colorado and the pension system, Colorado PERA) began by arguing that the contract breach and reduction of the PERA ABI (COLA) were "actuarially necessary," but soon abandoned this legal strategy. Later in the litigation the defendants switched their legal strategy, and simply argued that the contract right to the PERA COLA did not exist. (Inconveniently, Colorado PERA's lawyers had already testified to the Legislature that it did exist. 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)

But, the Denver District Court's Judge Robert Hyatt ruled against the plaintiffs (PERA pensioners,) deciding the case (Justus v. State) without citing Colorado's on-point public pension case law (Bills/McPhail.) The Colorado Court of Appeals reversed the Denver District Court finding Colorado case law "dispositive" as to the contractual rights of the PERA pensioners to the COLA benefit. Ultimately, the Colorado Supreme Court reversed the Decision of the Colorado Court of Appeals, embracing the Denver District Court decision that failed to even mention the on-point case law, (Bills/McPhail.)

Thus, Colorado state government acted to eliminate billions of dollars of Colorado state government debt. Colorado taxpayers are pleased, and Colorado politicians have more money to spend on their favorite projects.

The myriad political connections, the legal, lobbying and public relations campaigns that ultimately resulted in the enactment and judicial blessing of the Colorado PERA COLA reduction bill, SB10-001, provide an excellent example of political action at the Colorado Legislature, and the power of Colorado political parties. I am astounded at the intricacy of these political connections. Perhaps you will be too.

The connections include the interaction or collaboration of former Governor Ritter, Attorney Mark Grueskin, Colorado Supreme Court Justice Hood, former Colorado Supreme Court Justice Dubofsky, Governor Hickenlooper, the Colorado Education Association, the Colorado Coalition for Retirement Security, Colorado unions, and Colorado PERA administrators and trustees.

The PERA COLA reduction bill, SB10-001, was supported by a group called the Colorado Coalition for Retirement Security. The Colorado Coalition for Retirement Security and Attorney Mark Grueskin:

Articles of Incorporation for a Nonprofit Corporation for the Colorado Coalition for Retirement Security filed with the Colorado Secretary of State:

http://www.securepera.org/wp-content/uploads/2013/01/Art-of-Incorporation-filed-7.30.12.pdf

"Address: 3087A Tejon Street."

"Registered Agent: Lynea Hansen."

"The true name and mailing address of the incorporator are:"

"Heizer Paul Grueskin LLP."

http://www.securepera.org/wp-content/uploads/2013/01/Art-of-Incorporation-filed-7.30.12.pdf

The true name of the incorporator of the Colorado Coalition for Retirement Security is the firm of Heizer Paul Grueskin LLP?

What is (or was) the relationship between Secure PERA (also known as the Colorado Coalition for Retirement Security,) the Colorado PERA pension system, and this law firm? Has Colorado PERA paid the law firm for services relating to SB10-001?

The Colorado Coalition for Retirement Security and Governor Hickenlooper:

It seems peculiar that the Colorado Coalition for Retirement Security has had the same street address as Colorado Governor Hickenlooper's political campaign:

http://tracer.sos.colorado.gov/PublicSite/SearchPages/CandidateDetail.aspx?SeqID=16370

Political Consultant Lynea Hansen, the Colorado Coalition for Retirement Security, and Governor Hickenlooper, from Mediatrackers.org:

"When liberal communications strategist Lynea Hansen took the over the reins of BlueFlower from Taylor in early 2009, the filing violations continued. What changed was the address on the fund’s place of business. The official mailing address for the BlueFlower Fund changed from 8092 E. 8th Place, which was Taylor’s Denver home, to 3087A Tejon St. in Denver. This address also happened to match that of Gov. John Hickenlooper’s campaign committee, the Colorado ASSET bill advocacy page, the public affairs contact for the Colorado Education Association, the Secure PERA network, and a gaggle of other Democratic campaigns. Many of these groups paid Hansen for consulting or financial reporting services."

http://mediatrackers.org/colorado/2012/07/11/liberal-campaign-group-in-colorado-repeatedly-failed-to-file-required-financial-reports

“Lynea Hansen, executive director of the Colorado Coalition for Retirement Security."

http://www.governing.com/topics/finance/gov-states-search-retirement-security-obama-myra.html

"Lynea Hansen, Senior Vice President at Strategies 360."

http://www.cspera.org/CSPERA-NLAug2014.pdf

"Lynea Hansen, from the Colorado Coalition for Retirement Security (CCRS).  CCRS, also called Secure PERA, was founded in 2006 to work with PERA and the State Legislature. The coalition has 8 member organizations as follows: AFSCME Colorado (American Federation of State, County and Municipal Employees), American Federation of Teachers Colorado, Association of Colorado State Patrol Professionals, Colorado Association of School Executives, Colorado Education Association, CSPERA – Colorado School and Public Employees Retirement Association, Colorado WINS (Workers for Innovative and New Solutions,) and Friends of PERA. As you can see, our parent organization, CSPERA, is a member of the coalition. Lynea Hansen runs the Secure PERA website and works very hard to keep PERA strong. She also makes it very easy for all of us as PERA retirees to keep abreast of issues and news regarding PERA, as well as what is happening in the legislature regarding PERA."

http://ppspera.org/wp-content/uploads/2013/12/14-01PPSPERANewsletter.pdf

Attorney Grueskin and the Colorado Education Association:

“Mark Grueskin, best known in education circles as a lawyer for the Colorado Education Association . . .”

http://www.ednewscolorado.org/news/capitol-news/gaming-bill-debated-delayed

Colorado Education Association and SB10-001, from the Colorado PERA website:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), 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

A former AFSCME Colorado official on SB10-001:

"The entire AFSCME endorsement of screwing public employees out of their pension COLA's in Colorado is unfortunately quite true, however, it should be remembered that AFSCME no longer represents Colorado State Employees, and it hasn't for about 7 years now. It was decided 7 years ago in a backroom deal in Washington that the three state employee unions would become Colorado WINS. The rank and file members of AFSCME Locals in Colorado were not given the right to vote on this, nor were the members of CAPE or the CFPE. The people who espouse 'democratic labor trade unionism' in America, wouldn't allow it to take place in Colorado. Ritter and company granted a an exclusive franchise to Colorado WINS (which is a subsidiary of SEIU) and Colorado State employees do not have the right to belong to any other union, as both Change To Win and the AFL-CIO have prevented other unions (such as the CWA, which has had a consistent record of fighting for public employees' pensions) from organizing. Thanks to their betrayal of Colorado State employees, Colorado AFSCME Council 76 is now a bankrupt shell of an organization that represents some county employees in Pueblo, city employees in Aurora, the remnants of Denver City employees Local 535 and 158 and the maintenance staff at DU. They have one 'assistant Executive Director' and two clerical workers for a staff. All they are is a paper tiger, shell organization that is used as a conduit to 'move money' in state elections."

Attorney Mark Grueskin and the Colorado Judicial Project, from WestWord:

"In the meantime, Grueskin is still in the process of getting the Colorado Judicial Project on its feet; when asked if the CJP would have a web presence, he laughingly admits, 'I don't know. We've chatted about a number of ways to help educate the public — but you've got a roomful of lawyers, for crying out loud. So we have dissenting and concurring opinions, but no decision.'"

http://blogs.westword.com/latestword/2010/05/mark_grueskin_matt_arnold_tang.php

Former Supreme Court Justice Jean Dubofsky and the Colorado Judicial Project:

“ . . . Matt Arnold appeared on the Your Show television program [moderated by Adam Schrager,] debating former Colorado Supreme Court justice Jean Dubofsky [my note, author of the 2009 Colorado PERA "COLA-taking" legal opinion] representing the 'Colorado Judiciary Project' [a legal-establishment special-interest group formed by Democratic state party attorney and Mark Grueskin.]”

http://www.clearthebenchcolorado.org/tag/devils-advocate/

Former Colorado Supreme Court Justice Jean Dubofsky and Colorado PERA:

Jean Dubofsky, at the request of Colorado PERA, provided PERA with a legal opinion arguing that the Colorado Legislature could legally take Colorado PERA retiree pension COLA benefits: “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;”

http://lawweb.colorado.edu/files/vitae/dubofsky%20.pdf

Colorado PERA General Counsel Greg Smith, December 17, 2009 – “We have obtained outside counsel’s opinion on this issue.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

In a deposition Jean Dubofsky submitted to Colorado PUC she notes that she is the author of a legal opinion addressing the legality of reducing the PERA COLA benefit, October 18, 2010:

“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.)

Colorado PERA's Greg Smith on Colorado PERA pension benefits:

“His [Colorado PERA General Counsel Greg Smith's] briefing paper said 'there has never been a finding in Colorado that the state has reserved its power to make changes' in PERA's benefit structure.”

"The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member. That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan."

"Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem."

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/

Greg Smith, Colorado PERA’s former General Counsel told us in a Denver Post article from November 30, 2008: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”

Link: http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)

Colorado Supreme Court Justice Hood and the Colorado Democratic Party:

"Hood's history as a Democrat party contributor – he maxed out to Bill Ritter's 2006 campaign, contributed to the Democrat House Majority Fund, and others – is notable."

"Interesting that the Denver Post failed to uncover and/or report on this salient fact."

http://www.clearthebenchcolorado.org/20 … t-justice/

"The notion of partisan 'pay to play' for judicial appointments is disturbing, irrespective of party. The fact that Hood maxed out to Ritter's campaign before being appointed by Ritter to the bench certainly calls his objectivity into question, wouldn't one think?"

http://neighbors.denverpost.com/viewtopic.php?p=3202155

"Prior to being appointed to the Denver District Court in 2007, Hood was a long-time contributor to Democrat candidates and causes: hosting events for Bill Ritter’s campaign and contributing the maximum amount ($1,000) in 2006, contributing to the State Democratic Party House Campaign Fund, and supporting Steve Bernard’s failed campaign for District Attorney in 2004."

"Hood also has close ties to Democrat Party attorney (and frequent Colorado Supreme Court litigator) Mark Grueskin, dating from their time as colleagues in the politically connected (and politically active) Isaacson Rosenbaum P.C. law firm – associations that may have been related to his removal from the 2011 Congressional redistricting lawsuits, before the case was reassigned to Denver District Court Chief Judge Robert Hyatt . . ."

http://www.clearthebenchcolorado.org/2013/10/26/governor-Hickenlooper-picks-democrat-contributor-hood-as-new-colorado-supreme-court-justice/

Isaacson Rosenbaum's work for Colorado PERA:

"Both the state and PERA filed motions in May asking the court to dismiss six of the eight claims contained in the plaintiffs’ case. The state is represented by the Attorney General’s office; PERA’s lead attorneys are Mark Grueskin and Edward Ramey of Isaacson Rosenbaum, PC."

http://coloradostatesman.com/content/991958-ruling-pera-bill-expected-shortly

Mark Grueskin and Colorado PERA:

"Among those representing PERA are two well-known Denver governmental affairs lawyers, Mark Grueskin and Edward Ramey of the Isaacson Rosenbaum firm."

http://www.ednewscolorado.org/2010/05/13/pera-responds-to-retiree-lawsuit/comment-page-1

Colorado Supreme Court Justice William Hood and Isaacson Rosenbaum:

"Before moving to the bench, Judge Hood was a shareholder at Isaacson Rosenbaum P.C., where he did both civil and criminal trial work."

http://www.law.du.edu/index.php/profile/judge-will-hood

"Venerable 50-year-old Denver law firm Isaacson Rosenbaum will wind up operations and close at the end of June, people familiar with the situation today told Law Week Colorado."

"The firm, which lists 23 shareholders and five associates on its website, was a victim of the 2008 economic downturn, a heavy emphasis in real estate law and an expensive office lease at the recently renovated 1005 17th St."  "It wasn’t immediately known where all of its top attorneys would land."  "Ramey and Lawrence joined Heizer Paul Grueskin, and Corrada is moving to Lapin & Lapin."

http://www.lawweekonline.com/2011/06/breaking-isaacson-rosenbaum-will-close-at-months-end/

"Hood, 50, has been a Denver District Court judge since 2007. Prior to becoming a judge, Hood practiced at the private firm Isaacson Rosenbaum."

http://www.denverpost.com/breakingnews/ci_24389795/hickenlooper-appoints-new-colorado-supreme-court-justice

"Prior to becoming a judge, Hood was in private practice at Isaacson Rosenbaum P.C., where he was a shareholder from 2005-2007 and of counsel in the litigation department from 2003-2005."

http://kdvr.com/2013/10/25/hickenlooper-will-name-william-hood-to-colo-supreme-court/

Law Week online:

"Redistricting Judge, Dem Lawyer Worked At Same Firm."

"Asked about a possible conflict between himself and the judge, Grueskin said, 'Even before you get to the issue that he and I were formerly colleagues, he may have a docket that’s full.'"

"Grueskin explained that the redistricting case must be decided well before the Feb. 7 caucuses, and 'typically there will be some reallocation if necessary because not every judge’s docket would accommodate that.'”

http://www.lawweekonline.com/2011/05/redistricting-judge-dem-lawyer-worked-at-same-firm/

From clearthebenchcolorado:

"However, the case may not remain with Judge Hood, due to his past association (working together at the same law firm) with Democratic attorney Mark Grueskin, as also reported by Law Week online: Denver District Judge William Hood, who was randomly assigned to hear Colorado congressional redistricting lawsuits filed Tuesday by Republicans and Democrats, once was a law-firm colleague of the lead attorney for the Democratic side."

"Before his appointment to the Denver bench in 2007, Hood worked at Isaacson Rosenbaum, the firm that until recently employed Democratic Party lawyer Mark Grueskin."

http://www.clearthebenchcolorado.org/tag/colorado-judiciary-project/page/2/

Apparently, in 2006, Isaacson Rosenbaum was representing Colorado PERA (while Justice Hood was a shareholder):

"Colorado PERA files motion challenging (2006) ballot initiative."

"The motion was filed on behalf of attorneys Mark G. Greuskin and Edward T. Ramey of the Denver Law Firm Isaacson Rosenbaum, P.C."

https://www.copera.org/pdf/NewsReleases/2006/Initiative.pdf

Initiative #93: PERA Reform:

http://www.leg.state.co.us/lcs/0506initrefr.nsf/dac421ef79ad243487256def0067c1de/4b04cbf7d9ce8812872571260077d751?OpenDocument

The "Purposes" of 2006 State Initiative #93. A few of the purposes of the proposed initiative that were addressed at a hearing on the measure:

"In the event of an actuarial necessity, to authorize the general assembly to modify the member and employer contributions and the benefits allowed to members of the defined benefit plan, so long as the benefits of members who are eligible for a service retirement benefit or a reduced service retirement are not modified."

"To specify that PERA shall be subject to administrative direction by the governor's office of budget and management."

"To specify that the general assembly shall appropriate funding for the administrative oversight of PERA."

"To prohibit the attorney general from delegating his or her responsibilities as legal advisor to the PERA board to any legal advisor or in-house counsel hired by the association."

"Memorandum Question 9. "The proposed initiative appears to specify that the benefits allowed to members who are eligible for a service retirement benefit or a reduced service retirement benefit under the defined benefit plan cannot be modified during an actuarial necessity. Can the proponents please explain the purpose of this change from the original proposed initiative #81?"

(My comment: This is interesting, that Justice Hood's law firm, Isaacson Rosenbaum, was grappling with the issue of the taking of vested Colorado PERA benefits through a claim of "actuarial necessity," while Justice Hood was a shareholder at the firm.

As legal representatives of Colorado PERA in 2006, shareholder Hood's firm and colleague Mark Grueskin assisted Colorado PERA in addressing this state-wide ballot initiative providing that "actuarial necessity" could not be used to take "fully-vested" PERA pension benefits. This is particularly ironic since the use of the "actuarial necessity" strategy was the original legal strategy in PERA's attempt to take the PERA COLA benefit, was noted regularly by SB10-001 bill co-prime sponsor Josh Penry as the legal underpinnings for the proposed taking of the COLA, and was likely employed in the legal memorandum supporting a PERA COLA taking that PERA officials solicited from former Colorado Supreme Court Justice Dubofsky.

While he was a shareholder at Isaacson Rosenbaum did Justice Hood discuss the concept of actuarial necessity with colleague Mark Grueskin? While Justice Hood received the compensation of a shareholder at Isaacson Rosenbaum, the firm was paid by the Colorado PERA pension system to provide legal services to Colorado PERA relating to the legal concept of "actuarial necessity."

It appears that this Supreme Court Justice (Hood) recused himself (or was removed) in 2011 in the Colorado redistricting case, Moreno, due to his association with the politically-connected attorney (Grueskin.) The extent of the relationship of Justice William Hood with the Colorado PERA lawyer (until recently) Grueskin should be explored.

Colorado PERA retirees should make a point of discovering the rationale for Justice Hood's recusal (or removal) from the case, Moreno, in 2011. Was Justice Hood indeed recused in the Moreno case due to his association with the defendant's (Colorado PERA) lawyer (Grueskin) in the current case, Justus v. State. What documents exist relating to Justice Hood's removal or recusal in the Moreno case?)

Attorney Grueskin and Colorado Supreme Court Justice Hood, from the CTBC:

"Given Hood’s close associations with Democratic party attorney and frequent Colorado Supreme Court litigant Mark Grueskin, this pick could lead to a number of recusals in some high-profile, politically-charged cases that might come before the Colorado Supreme Court."

http://www.clearthebenchcolorado.org/2013/10/26/governor-Hickenlooper-picks-democrat-contributor-hood-as-new-colorado-supreme-court-justice/

Was attorney Grueskin involved in the selection of Dubofsky to create a legal rationale for the contemplated PERA COLA taking? Has Justice Hood had any association with the Colorado PERA defense team's Grueskin while Colorado PERA was contemplating a taking of the PERA COLA benefit in 2008, 2009, or 2010?  If so, what was communicated between the two?

Governor Hickenlooper and Colorado Supreme Court Justice Hood, Denver Post:

"Gov. John Hickenlooper on Friday announced his appointment of Denver District Court Judge William Hood III as the 103rd Colorado Supreme Court justice."

"Hood will fill the vacancy created next year when Supreme Court Chief Justice Michael Bender retires.  Bender, who will step down Jan. 7, has served on the Supreme Court since 1997 and as chief since 2010."

"'He (Hood) has consistently demonstrated an ability to fairly apply the law while administering justice,' Hickenlooper said. 'His breadth of experience on both sides of the courtroom is invaluable to informed decisions.'"

"Hood, 50, has been a Denver District Court judge since 2007. Prior to becoming a judge, Hood practiced at the private firm Isaacson Rosenbaum. He also served as a prosecutor for the 18th Judicial District Attorney's office."

http://www.denverpost.com/breakingnews/ci_24389795/hickenlooper-appoints-new-colorado-supreme-court-justice

From ColoradoPols.com:

"Hickenlooper was under some natural pressure to appoint a Democrat to replace the liberal Bender with a similar-minded justice — particularly after his last appointment to fill a vacant seat; in 2011, Hickenlooper chose Jefferson County Republican Brian Boatright to replace the retiring Alex Martinez, a decision that did not sit well with Democrats. Martinez had been a liberal voice on the Colorado Supreme Court, and replacing him with the conservative Boatright may have ultimately been the difference in the Lobato education lawsuit. Selecting Hood, a registered Democrat, keeps the court's political affiliations about the same: 3 liberals (Hood, Nancy Rice, Gregory Hobbs), 3 conservatives (Allison Eid, Nathan Coates,and Boatright), and 1 "Unaffiliated" (Monica Marquez).

http://coloradopols.com/diary/51002/hickenlooper-appoints-new-supreme-court-judge

Justice Hood and the University of Denver Law School, CBSLocal.com:

"The 50-year-old Hood has been a Denver District Court judge since 2007.  He’s also an adjunct professor at the University of Denver."

http://denver.cbslocal.com/2013/10/25/william-hood-iii-named-new-colorado-supreme-court-justice/

At these lofty heights of the Colorado legal community many of the most prominent figures are acquainted. Justice Hood has been an adjunct professor at DU. The wife of (now retired) Judge Robert Hyatt, who issued the original decision in the case, Justus v. State, happens to teach at DU:

"Sheila Hyatt teaches in the areas of Civil Procedure, Evidence and Trial Practice."

http://www.law.du.edu/index.php/profile/sheila-hyatt

http://www.law.du.edu/documents/directory/full-time/sheila-k-hyatt.pdf

Attorney Grueskin and Sam Mamet of the Colorado Municipal League:

"Par Sponsors: Litvak Litvak Mehrtens and Epstein, P.C. (by Steve Epstein), Mark Grueskin & Lola Farber Grueskin & Family, Sam Mamet & Judith Cassel-Mamet & Family . . ."

http://www.micahdenver.org/blog/?p=623

(Sam Mamet is Executive Director of the Colorado Municipal League [CML.] Some of CML’s municipal members have benefited from the Colorado General Assembly’s use of approximately $700 million in state revenue to pay off legacy local government pension debts [Old Hire Fire and Police pension obligations] that are not contractual obligations of the State of Colorado. Billions of dollars of Colorado PERA pension debt, contractual obligations owed by Colorado municipalities [many of them members of CML] were erased by the bill SB10-001.)

Governor Hickenlooper and SB10-001:

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

Yet, Hickenlooper aggressively defends 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/

Support the Rule of Law in Colorado at saveperacola.com.

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The Colorado Legislature’s Chronic Underfunding of the Colorado PERA Pension System.

Recently, several Colorado PERA retirees contacted the Legislature and requested: (1) statistics regarding payment of the "actuarially required contribution" (ARC) to the Colorado PERA pension system since 2002, and (2) a comparison of Colorado PERA's ARC "funding discipline" over this period with the ARC funding discipline of other major US public pension systems.

Since Colorado PERA retirees rely entirely on their public pension benefit (Colorado PERA benefits replace Social Security for PERA members) retirees very much appreciate the attention given to the request by members of the Legislature.

Several members of the Legislature forwarded the retiree's request for statistical information to the staff of Colorado PERA. But, rather than providing the requested statistical and financial information to legislators, Colorado PERA staff provided what is in essence a political response from a Colorado state agency.

The requested ARC statistics were not provided, and instead of providing the requested analysis of relative ARC "funding discipline" among major US public pension plans, state legislators and PERA retirees were referred to a website. It is disappointing that the request for information was so casually dismissed.

Note that the credit rating firm, Standard and Poor's, stresses the importance of pension ARC funding discipline. A Standard and Poor's (2013) report on US public pensions, condemns the failure of public pension systems to meet annual ARC payments:

"For some states that decided to achieve budgetary relief by underfunding their pensions during the Great Recession or more chronically, a significant portion of the new revenue would be absorbed by restoring higher contributions to their pension systems, making this decision even more difficult. The decision to underfund the ARC might have turned out to be a very costly one."

"We believe that not fully funding the ARC is a short-term solution that will likely result in a larger unfunded actuarial accrued liability down the line."

"We've observed that persistent underfunding of ARC correlates highly with pension funding contributions that are statutorily or contractually determined."

http://www.nasra.org/Files/Topical%20Reports/Credit%20Effects/A_Bumpy_Road_Lies_Ahead_for_US_Public_Pension_Funded_Levels.pdf\

S&P emphasizes the importance of pension ARC funding discipline. Yet, Colorado PERA staff, in their response, casually dismiss ARC funding discipline, and ignore the fact that (as S&P's analysts have noted) fixed statutory contribution levels, like those set for Colorado PERA, result in pension systems "with the weakest funded ratios."

The State Legislative Counsel provided the following PERA response to a PERA retiree's request for ARC funding statistics:

"I learned that the State of Colorado has always paid PERA the amount that has been owed by statute." "According to PERA staff, PERA has never been shorted on receiving these contributions." "PERA staff also explained that the ARC is just an actuarial calculation and measurement, and it roughly amounts to $3.3 billion for the whole system since 2001."

Members of the Colorado Legislature should know that merely setting PERA pension system contribution rates in statute is not the equivalent of annually meeting the Colorado PERA ARC obligation. Failure to pay the pension ARC is simply borrowing from the future. The failure to pay the PERA ARC is largely responsible for accrued liabilities in the Colorado PERA pension system. Why must Colorado legislators hear these truths from PERA retirees instead of from the PERA pension system's fiduciaries? Why would the pension system's fiduciaries downplay the failure to make the full PERA ARC payment since 2002, and the continuing failure to meet the ARC obligation?

A recent study by the Tennessee Treasurer's Office reveals that the cost of delaying public pension plan actuarially required contributions [with an assumed 7.5 percent return assumption] for a 12-year period [the Colorado Legislature began underfunding the PERA pension system 12 years ago] is a premium of 138.2 percent of the skipped pension contribution.

Link to the Tennessee Treasurer's report:

http://s3.amazonaws.com/s3.documentcloud.org/documents/1012837/pension-report.pdf

From the Tennessee Treasurer's report:

"It costs an additional $435,000 to delay a one million dollar pension payment for five years assuming an earnings rate of 7.5%. This is a 43.6% increase in the amount to be paid. The pension cost more than doubles by delaying a payment by 10 years. A $1 million pension cost becomes $2.06 million if delayed 10 years. See Attachment 2 that illustrates the cost of delaying employer pension contributions."

"GASB noted in its release accompanying Statement No. 68 that pension contribution issues are public policy matters. Indeed, leading finance professional organizations, including the Government Finance Officers Association have adopted positions calling for governments to adopt a funding policy based on an actuarially determined annual funding amount."

"Failure to pay annually when due the full actuarially required contribution is in effect underfunding the pension plan. The amount that is not funded increases the unfunded accrued liabilities of the plan. Further, the pension plan will not have the under-funded amount available to invest, thereby resulting in lost earnings opportunity."

"The funding for a pension plan assumes that 100% of the ARC will be paid annually, and further assumes that those contributions will be invested to earn at least the assumed rate of return for the pension plan. Thus, the failure to pay 100% of the ARC can quickly lead to a serious underfunding of the pension plan. Chronic underfunding of the ARC will eventually make the pension plan financially unstable. Nationwide, multiple severely underfunded pension plans that are now financially unstable are examples of the failure to pay annual funding requirements."

As was noted in the initial PERA retiree request for information, former Colorado PERA General Manager Meredith Williams (on February 23, 2012) testified to the House Finance Committee regarding the cumulative harm that results from a lack of Colorado PERA ARC funding discipline:  “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.”

Morningstar Analyst Rachel Barkley:

"Although Colorado is still absorbing losses from 2009, the main reason its funding gap is yawning is the state's failure to make the contributions recommended each year by its own budget experts, Barkley said."

"Even if public pensions realize their projected investment returns on average over coming years, the failure by many plans 'to pay less than the full ARC . . . will produce less than full funding over the next 30 years,' according to a recent report by the Center for Retirement Research (CRR)."

http://www.reuters.com/article/2014/03/10/us-usa-pensions-rally-analysis-idUSBREA2907320140310

In my opinion, Colorado state legislators and Colorado PERA retirees deserve factual, rather than political responses to their requests for information from taxpayer supported state agencies. The state legislators who submitted the request to Colorado PERA asked for statistical information. They did not ask for a rationalization of the chronic underfunding of the PERA pension system.

Colorado elected officials may be interested to know that the Tennessee Legislature has recently enacted a bill that requires governmental sponsors of public pension plans in the state to pay their pension bills on time. From Chattanoogan.com:

"Governor Bill Haslam has signed into law a bill that officials said is designed to assure Tennessee local government entities fully pay the annual payment to their public employee pension plans in order to protect the financial stability of local governments and to protect workers’ pensions."

"The legislation, called the first of its kind in the nation, was sponsored by Senate Majority Leader Mark Norris (R-Collierville) and Rep. Steve McManus (R-Memphis) and written by state Treasurer David Lillard, Jr."

"The new law, called the Public Employee Defined Benefit Financial Security Act of 2014, will require all local government entities that operate pension plans in Tennessee to pay the payments recommended by their actuaries each year. These payments, formerly known as the Annual Required Contribution or ARC, are the amount of money actuaries determine is needed to annually fund in a financially-sound manner the benefits provided by public pension plans."

"If local government entities fail to pay 100 percent of the ARC after that phase-in period, the state will have the authority to withhold money it provides to those governments and use it to make the required payments."

“'A local government that fails to pay 100 percent of its ARC each year is like a runner with a shorter stride than the people he is racing against,' Treasurer Lillard said.  'With each stride, the runner falls farther and farther behind the competition. For local governments not funding annual pension payments, it is the taxpayers who ultimately lose.'”

“'This legislation is something all states should consider,' said Charles E.F. Millard, managing director, head of pension relations for Citigroup and a former director of the United States Pension Guaranty Corporation. 'The health of public pensions depends upon their investment returns and plan structures, of course. But the key determinant of the health of our public plans is whether the public employer makes its full annual contribution. If everyone did this, public pensions would be far healthier than they are today.”

"The Public Employee Defined Benefit Financial Security Act of 2014 is Public Chapter 990, which may be viewed at http://www.tn.gov/sos/acts/108/pub/pc0990.pdf."

http://www.chattanoogan.com/2014/5/28/277432/Haslam-Signs-Local-Government-Pension.aspx

Colorado PERA retirees offer thanks to those state legislators who attempted to gather the requested Colorado PERA statistical information.

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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)

Discover the true nature of Colorado state government at saveperacola.com.

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Former Governor Bill Owens Shamelessly Offers Colorado PERA Management Advice.

Governor Bill Owens, Pioneer of Colorado PERA Pension Mismanagement, Now Shamelessly Offers PERA Management Advice.

In a recent Denver Post opinion piece, former oil and gas lobbyist and Colorado Governor Bill Owens supports the latest corporate campaign attacking the Colorado PERA public pension system (11/20/2014 Denver Post):

http://www.denverpost.com/opinion/ci_26980300/undefined?source=infinite

As per usual, corporate representatives see evil in the use of taxpayer dollars for deferred public pension compensation, but have no problem with Colorado's diversion of billions of these taxpayer dollars to unearned corporate welfare. Indeed, the elimination of the Colorado PERA public pension system would free up even more taxpayer dollars that could be targeted by corporate lobbyists. (This activity of persuading elected officials to give away public resources can be quite lucrative, see the Colorado Department of Revenue's "Colorado Tax Expenditure Report,"

https://www.colorado.gov/pacific/sites/default/files/2012.pdf.)

In reading the recent Bill Owens Denver Post opinion piece I wondered, is the hypocrisy of Colorado politicians infinite? Do our politicians secretly compete with each other in a clandestine hypocrisy contest? Is reaching the pinnacle of hypocrisy a common life goal among politicians?

An excerpt from the Bill Owens Denver Post opinion piece:

"While PERA highlights its average retiree benefits — $3,068 monthly, according to the latest data — this statistic hides the fact that a few retirees make far more than that and the vast majority make far less. Quite simply, the benefit structure, set by the state legislature, is skewed to benefit a minority of public employees at the expense of the rest."

My reaction: This is rich. Bill Owens laments the fact that some Colorado PERA members receive greater public pension benefits than others. Allow me to explain the hypocrisy I see associated with Bill Owens' "concerns."

While in office more than a decade ago, Bill Owens championed the "Bill Owens Colorado PERA Service Credit Fire Sale" scheme (HB00-1458.) Service credit (years of service) in the Colorado PERA pension system were sold, at his urging, at a fraction of their actuarial cost. This Bill Owens scheme represents perhaps the most consequential pension mismanagement event in the history of the Colorado PERA pension system. This mismanagement increased the Colorado PERA pension system's unfunded liabilities (and thus contractual obligations borne by Colorado taxpayers) by billions of dollars. I do not blame Colorado PERA members for taking advantage of this opportunity made available to them in Colorado law at the time. (Indeed, representatives of the Colorado PERA pension system encouraged PERA members to make purchases of "service credit" in those years.) I blame elected officials and members of the Colorado PERA Board of Trustees for acquiescing to this fiscally irresponsible, political ploy. Under the "service credit purchase" scheme, a number of Colorado state legislators (including Bill's political buddies?) were able to buy years of service credit in the Colorado PERA pension plan on the cheap. They then, conveniently, found themselves moving from low-paying state legislative positions to lucrative appointments in the Administration. Thus, their ultimate Colorado PERA retirement benefit was calculated based on the higher final salaries of jobs in the Administration. Since Bill Owens was the prime mover behind this "Colorado PERA Service Credit Fire Sale," I find it astoundingly hypocritical that Bill Owens now has the temerity to complain about the fair distribution of Colorado PERA retiree benefits.

While Governor, Bill Owens persuaded (pressured?) the Colorado PERA Board of Trustees to endorse his "service credit fire sale" scheme, which they obediently and unanimously supported. Bill Owens' goal, at the time, was to rid Colorado state and local government of "expensive" older employees, encouraging them to buy these cheap years of "service credit" and qualify for early retirement. Thus, public employee labor costs were shifted from state and local governments to the Colorado PERA pension system, raising system unfunded liabilities.

The Colorado Supreme Court recently decided to ignore the evidence of Bill Owens' mismanagement of Colorado PERA (and in fact all evidence in a Colorado PERA pension lawsuit) in order to facilitate a reduction of Colorado PERA's unfunded liabilities through breach of contract. Of course, the Colorado Supreme Court necessarily ignored the Colorado and US Constitutions in the process. This transparent political favor provided by the Colorado Supreme Court (to the Colorado Legislative Branch) has tarnished the Colorado Judiciary, and diminished the careers of Colorado judges who actually believe in the Rule of Law. In reading the Decision in the case, Justus v. State, judges on the Colorado Court of Appeals see the true colors of the politically motivated Colorado Supreme Court. If the Colorado PERA pension system had been responsibly managed by past Colorado state legislators and Governors, the Colorado Supreme Court would never have found itself in a position where it was tempted to abandon constitutional principles, Colorado case law, and its integrity.

Given his history, Bill Owens' recent posturing in the Denver Post as a person even remotely qualified to offer public pension management advice lends insight into his character.

An astute observer has noted that:

"Owens dipped into PERA funds through the back door, moving state employees at the top ends of the pay grades from state paychecks to PERA paychecks. In other words, Owens reduced state costs by shifting them to PERA at the same time he reduced the state's contribution percentage, starting the slide from 107% funded to current levels. Granted the slide was accelerated by the economic downturn, but it began when the state figured out how to supplement the general fund by raiding PERA. Last year's SB-1, if upheld by the court opens the front door to PERA resources. Now, any time legislators decide they need PERA funds, they can pay for reducing further the state's contribution by reducing benefits."

(For the record, we should also note that Colorado's public sector union leaders, in supporting SB-1, held open "the SB-1 front door" for Colorado state legislators. In an unprecedented act, in 2010 these union leaders facilitated the elimination of the contractual public pension rights of their own public employee members.)

It may be that (fair or unfair) media coverage during the Owens Administration diverted attention from the responsible management of the Colorado PERA pension system. But, if media reports and blogger comments from that period of Colorado history reflect reality, the hypocrisy of our GOP "family values" Governor extends well beyond the realm of public pension management.

Ed Quillen:

"Owens moved out of the governor's mansion for a while because he and his wife, Frances, had agreed on a separation. Then they reconciled. After he left office, they divorced. There were all sorts of juicy rumors, among them one about a love child growing up in Texas, but if anyone called for Owens to resign, I missed it."

"This may have stalled Owens's national political career, which had looked promising. One right-thinking publication had touted him as America's best governor and there was serious talk of the vice-presidency or even the Oval Office."

http://edquillen.com/eq2008/20080316p.html

Free Republic:

"Owens, a devout Catholic, has touted family values as a cornerstone of his administration. Some immediately questioned what impact it would have on Owens' political career if the couple were to divorce. Owens has been mentioned by conservative Republicans as a potential presidential candidate, even though he has never publicly said he is interested in running."

Comments on the article published at FreeRepublic.com:

"I have always heard that this guy is ultra career minded. He has a PAC in Washington right now, presumably to set up his 08 bid. He also chaired the GOP Gov's Conference, and was an officer with the National Governor's Association."

"Gang, Governor Owens has had an on-going affair for many, many years. It is well known in Republican circles. You can be sure that no high ranking Republican would encourage Bill to pursue any sort of public office under any circumstances. The Party is reeling from a record number of scandals in the ethics area and is quietly getting rid of the worst offenders. You will begin to see Republicans focusing less on family values and more on fiscal and governing issues. One thing the party has realized is that a large percentage of those who loudly tout family values are the worst offenders. Please pray for Frances and the kids, all of whom spent many years home alone. Believe me, they won’t notice much of a difference after the separation."

http://www.freerepublic.com/focus/f-news/977510/posts

"Hmmm, obviously these Owens fans aren't from Colorado. It's quite well known here that Owens' personal picadillos [sic] make Bill Clinton look like a saint."

http://www.usefulwork.com/shark/archives/002796.html

Conservative Columnist Vince Carroll of the Denver Post Condemns the "Bill Owens PERA Service Credit Fire Sale," July 31, 2013 Denver Post:

"The administration of Gov. Bill Owens, in a major blunder, lobbied for the fire sale as a shortsighted way to encourage early retirement and infuse new blood into the bureaucracy."

"Guessing the answer, I asked (Congressman Mike) Coffman if he had purchased years of service from PERA once upon a time. And, sure enough, he replied, 'I did purchase years of service.'"

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

(Governor Owens, Rep. Coffman has admitted to participating in your PERA "service credit fire sale" by buying years of service credit. You have a chance to be as forthright as Rep. Coffman and answer the question. Did you purchase PERA service credit in the "fire sale" yourself?)

WatchDogWire.com:

"As (Vince) Carroll notes, this problem was known as early as 2005, when David Milstead of the late, lamented Rocky wrote about it: 'But the deal got sweeter. Gov. Bill Owens, then in the early part of his first term, wanted to streamline government and bring new employees into the state work force. In 2000, with his encouragement – some say pressure – PERA cut the already-low price of purchasing extra years by 14 percent, to 15.5 percent of salary.'"

http://watchdogwire.com/colorado/2013/08/01/the-pera-fire-sale-the-gift-that-keeps-on-taking/

"Colorado’s state income tax rate was a flat 5 percent until it was lowered to 4.75 percent in 1999 and to 4.63 percent in 2000, under Gov. Bill Owens."

http://completecolorado.com/pagetwo/2013/06/12/ed-tax-proponents-will-aim-for-two-tiered-increase-in-state-income-tax/

Silver and Gold Record, May 12, 2005:

“Befort also noted that several years ago, the Legislature and Gov. Bill Owens decided to encourage higher-paid employees to retire early. Payroll expenses went down for the state, but PERA’s costs increased, he explained.”

https://www.cu.edu/sg/messages/4405.html

Friends of PERA (an organization that supported SB10-001) in "PERA Quick Facts":

"Laws passed in 1999 and 2000 to reduce the cost to purchase years of service and to provide for earlier retirement were initiated by Governor Owens' office and legislators who wanted to encourage long-term state employees to retire. At the same time that the benefit rules were made better, the employer contribution rates were reduced and the rate employees paid remained the same. These changes were made by the Executive and Legislative branches, not by the PERA board.”

http://www.friendsofpera.com/facts/index.html

CASB:

"(Henry) Sobanet also served under former Gov. Bill Owens and was intimately involved in the crafting of SB10-001, the bill passed in 2010 to shore up PERA."

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

Denver Post:

"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/

Governing article in 2006:

"In Colorado, at least some of Bill Owens' pension problem was self-inflicted, the result of his pressuring PERA to sell discounted 'service credits' to public employees, allowing them to buy more time on the job."  "Owens hoped that state employees would retire early, helping his efforts to streamline government." "Because pensions are, by their nature, a long-term problem, it's difficult to get public officials–classic short-term thinkers–to pay them serious attention even when the bills are coming due."

http://www.governing.com/topics/economic-dev/Plight-Benefits.html

GAO report, the Colorado Legislature Has Increased Colorado PERA Pension Benefits Without Paying for These Benefits:

"This was also the case in California and Colorado where pension benefit increases in the late 1990s and early in the 2000s helped drive liabilities higher."

From Friends of PERA:

"PERA has been fully funded only two years in its 75-year history – in 1999 and 2000. When it was fully funded, Governor Owens immediately pursued cutting the employer contribution rate and unwisely pushed the Board of Trustees very strongly to reduce the cost to purchase service credit. This action resulted in a very large unfunded liability increase to the fund. When PERA tried to pursue legislative changes to remedy the situation, Governor Owens vetoed the legislation because it did not include a 'defined contribution option' for state employees."

http://www.friendsofpera.com/facts/index.html

The complete story can be read here at the Denver Post:

http://www.denverpost.com/opinion/ci_26980300/undefined?source=infinite

Discover the true nature of Colorado government at saveperacola.com.

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Teacher Files Lawsuit Addressing Public Pension Underfunding.

Courier Journal, November 11, 2014:

"A Louisville teacher filed a lawsuit Monday demanding that the Kentucky Teachers Retirement System do more to seek funding from the state and better communicate its financial woes with members."

"Randy Wieck, a U.S. history teacher at DuPont Manual High School who is behind the suit, alleges that KTRS has failed in its fiduciary duty by not aggressively pursuing the state money it needs to remain solvent." "He wants KTRS to support legal action against the Kentucky General Assembly if full funding for teacher pensions is not provided within a year."

(My comment: The Colorado approach to public pension underfunding has been breach of pension contract. Specifically, in 2010, Colorado PERA public pension officials supported legislation to take accrued public pension benefits to reduce pension system underfunding. These Colorado PERA officials argued that the contract for the Colorado PERA COLA benefit indeed existed, but that a one-time breach of the PERA COLA contractual obligation was "actuarially necessary." As litigation of the pension benefit taking progressed, Colorado PERA's lawyers abandoned their initial legal strategy [“actuarial necessity”] and suggested to the Colorado Supreme Court that [after having admitted to the existence of the contractual obligation] the contractual obligation did not exist. Apparently, the “justices” appointed to the Colorado Supreme Court [the five who participated in the case] were willing to don the blinders and grant any political favor requested by their political allies in the Colorado Legislative Branch. Thus, the Colorado Supreme Court ignored "stare decisis," disregarded 60-year old Colorado case law, failed to conduct a "contract analysis," ignored evidence of Colorado PERA's attorneys stating that the pension benefit was indeed a Colorado PERA contractual obligation, ignored the bill (SB10-001) sponsor's testimony that the pension benefit was in fact a Colorado PERA contractual obligation, ignored recorded legislative history of the contractual nature of the public pension benefit, failed to engage in the "heightened scrutiny" of the abandonment of state financial obligations required under federal case law (US Trust) and finally, the court embraced a discredited Denver District Court decision that, conveniently, did not bother to mention Colorado's on-point public pension case law. No trial, no discovery, evidence ignored, state government forgiving state government debt, billions of dollars seized, pensions inflated away. Grand Theft Pension.)

Courier Journal:

"The suit, filed in Jefferson Circuit Court, also demands that KTRS fully communicate its 'severe state of underfunding' to members and amend its protocol with new ethics and investment requirements."

"'The purpose of this is to urge the KTRS to take up this cause,' Wieck said."

"Wieck is seeking class-action status for more than 140,000 active and retired members who participate in teacher retirement plans through the system. Chris Tobe, a former trustee of Kentucky Retirement Systems and author of 'Kentucky Fried Pensions: A Culture of Cover-up and Corruption,' is among his advisers in the suit."

"But Robert Barnes, KTRS general counsel and deputy executive secretary of operations, said Monday that Wieck's argument lacks merit."

"'KTRS has been talking about this funding issue for some time with membership, and it has been requesting that the full funding be provided to the retirement system,' he said. 'It does that every budget request.'"

"According to the 2013 valuation of KTRS, the system faces more than $13.8 billion in unfunded liabilities and has only 52 percent of the money it needs to pay out pension benefits in coming decades."

"Officials say KTRS needs around $400 million a year in additional money from the state to shore up investments and meet its obligations."

"Barnes said the system is working with lawmakers to develop a financing plan that involves low-interest bonds — paid for with existing revenue streams."

"House Speaker Greg Stumbo, D-Prestonsburg, indicated last week that the Democratic-controlled House is interested in considering bonds as a funding option, but Senate President Robert Stivers, R-Manchester, has reserved judgment."

"Wieck also warned that he might file additional lawsuits against the legislature and the governor depending on what happens in the 2015 General Assembly."

"He said shoring up the system is critical considering that teachers do not receive Social Security benefits."

See the article at the Courier Journal here:

http://www.courier-journal.com/story/news/politics/ky-legislature/2014/11/10/jcps-teacher-sues-pension-system/18806717/

Discover the true nature of government in Colorado at saveperacola.com.

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Will Colorado Union Leaders Relinquish Remaining Colorado PERA Pension Contractual Rights?

The Colorado Legislature has underfunded the Colorado PERA pension system for more than a decade, but from Colorado public sector union leaders we hear not a peep (one might expect them to defend their members' financial interests.)

Today (November 13, 2014), a letter was published which illuminates Colorado government's historical mismanagement of the state's public pension system, Colorado PERA. Below, I provide some excerpts from the letter (by Dinah McKay):

"Colorado needs public employee pension protection laws."

"In Colorado, conservative think tanks (backed by Wall Street firms that stand to financially gain) are spreading anti-public-worker propaganda claiming that PERA (Public Employees’ Retirement Association) employees and retirees are greedy parasites and their exorbitant benefits are going to bankrupt the state. They cite billions of dollars of unfunded pension liabilities as debt that taxpayers will have to pay off. Their tactics are to manufacture the perception of a public pension crisis and their only solution to 'save PERA' is to drastically cut benefits and privatize the pension plan. They would like to strip PERA employees and retirees of their rights to their earned pension benefits and allow Wall Street hedge fund managers to raid PERA assets."

(My comment: For the record, it should be noted that Colorado union leaders supported legislation in 2010 [SB10-001] that ultimately resulted in the elimination of their union member's contractual rights to the Colorado PERA statutorily specified "annual benefit increase" [ABI.] Will Colorado unions defend unionists' remaining contractual public pension rights?  Or, will the unions also choose to relinquish the remaining Colorado PERA contractual rights to the benefit of corporate interests, i.e., lower future corporate tax burdens? Too soon to tell.)

"They don’t mention that the Colorado State Legislature has been underfunding its employers’ obligations to PERA for 12 years and that state employers’ unfunded liabilities have accrued into billions of dollars. (Note: These are state employers’ unfunded liabilities. New GASB accounting rules now require state employers to report their unfunded actuarially accrued liabilities owed to PERA in their annual financial statements)."

"Prior to 2003, the Colorado State Legislature had always met its employers’ actuarially required contributions (ARC) to PERA at 100 percent and since PERA began in 1931, it has weathered every recession. Beginning in 2003 (under Governor Owens) to the present, the state legislature has decided not to fund what actuaries have determined is the state employers’ percentage of payroll (ARC) required to keep the PERA trust fund sound. (PERA employees have always met their required employee contributions to PERA from their monthly paychecks without fail)."

"According to statistics from the Center for Retirement Research at Boston College Public Plans database, the ARC percentages the Colorado State Legislature paid to its employers’ State division were: 2003 = 69 percent, 2004 = 51 percent, 2005 = 48 percent, 2006 = 58 percent, 2007 = 56 percent, 2008 = 63 percent, 2009 = 61 percent. From 2003 to 2009, the Colorado State Legislature created a 42 percent funding shortfall in its State division."

"PERA’s underfunding can be directly traced to the Colorado State Legislature’s failure to make its employers’ actuarially required contributions."

"If you ask your state legislator why the state is not meeting its employers’ annual required contributions to PERA, they may not even be aware that the state legislature is underfunding PERA, or even know what an ARC is. They will likely say, 'Oh, PERA was fixed in 2010 with SB 1,' but they won’t answer your question. If you keep asking, some legislators may not want to talk with you because they do know. They know the money is being diverted and they know retirees got fleeced with SB 1."

"In 2010, the Colorado State Legislature passed Senate Bill 10-001 with pension reforms that broke its contractual obligations with 50,000 PERA retirees. SB 1 primarily targeted this elderly group with the burden of making up billions of dollars, or 90 percent of the state’s unfunded employers’ contribution shortfall to the PERA fund since 2003. SB 1 was not a 'shared sacrifice' as PERA administrators purported in order to sell the deal to employees."

"Political alliances between corporate lobbyists, legislators and PERA administrators forged this bait and switch deal that was precut outside normal legislative processes. Primarily retirees (not taxpayers) will make up for the billions of dollars of state employers’ contributions diverted from the PERA trust fund that the state legislature has used instead to fund multimillion-dollar corporate handouts and business tax breaks, subsidies and other popular discretionary programs without raising taxes. It’s immoral and corrupt to take elderly middle-class retirees’ earned pension benefits (deferred wages) by stealthy means and shift their wealth to subsidize very very wealthy corporate and business interests. (Google: David Sirota’s report, “The Plot Against Pensions — The Pew-Arnold campaign to undermine America’s retirement security — and leave taxpayers with the bill.” and Matt Taibbi’s article, “Looting the Pension Funds.”) There is also a double standard in Colorado law (SB12-149) that protects county government retirees’ pensions while PERA retirees’ benefits can be abrogated."

"Since enacting SB 10-001, the Colorado State Legislature has continued to underfund its employers’ contributions to the PERA trust fund, even with a $512 million-dollar budget surplus. The 2013 Colorado PERA Comprehensive Annual Financial Report, page 34, states: 'In 2013, the actual contributions, as set in statute, were $278.0 million less than the ARC as calculated by the actuaries.'”

"For 12 years, why have PERA trustees not taken action on behalf of public employees to compel the state legislature to fully fund their employers’ contributions to PERA instead of conspiring with corporate lobbyists in 2010 to break the contracts of 50,000 retirees to make up the debt. Every year, the state legislature can always find plenty of money to hand out more and more corporate tax breaks and subsidies, yet the State of Colorado continues to be a deadbeat employer."

"A subsidy tracker report published by Good Jobs First, 'Subsidizing the Corporate One Percent,' found that three-quarters of all the economic development dollars awarded by state and local governments in the name of job creation have gone to just 965 large corporations by tracing parent company to subsidiary ties. The New York Times’ report, 'United States of Subsidies,' found Colorado spends at least $995 million per year on incentive programs. CU News Corps’ four part series, 'House of Subsidies,' analyzed this year’s Colorado legislative session and the key corporate tax-credit incentive bills lawmakers passed and found that they don’t always work as lawmakers intend and their effectiveness is being challenged by a variety of experts whose candid remarks are worth the read. CU News Corps reporter, Lars Gesing states, 'According to the latest Enterprise Zone Annual Report, 7,212 jobs have been created through Enterprise Zone program incentives in fiscal year 2013. At the same time, businesses claimed tax credits for $3.89 billion worth of investments, or more than $530,000 per job.' The Denver Post in 2011 ran an investigative series on the Enterprise Zone program and found that Colorado companies claimed more than $75 million worth of tax credits in 2010, but those companies only created a net 564 jobs."

"Colorado PERA employees and retirees deserve a pension plan that is adequately funded on an annual basis. Colorado should pass laws similar those recently passed in Tennessee. On May 28, 2014, Republican Governor Bill Haslam of Tennessee signed into law a bill called Public Employee Defined Benefit Financial Security Act of 2014 that requires all local government entities that operate pension plans in Tennessee to pay the payments recommended by their actuaries each year in order to protect the financial stability of local governments and to protect workers’ pensions. (http://www.tn.gov/sos/ acts/108/pub/pc.0990.pdf ) Dinah McKay/Boulder.)

The complete letter by Dinah McKay can be read here:

http://www.boulderweekly.com/article-13611-letters-week-of-november-13.html

In their propaganda supporting the 2010 breach of pension contracts in our state, Colorado PERA administrators have tried to justify (in part) the abrogation of state and local pension contracts by noting the support of public sector unions for the "COLA-taking" bill, SB10-001. 

As we read on the Colorado PERA website:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), 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 a recent article AFSCME (International) writes:

"The very Wall Street-backed politicians who raided and underfunded the pension systems in the first place are now 'using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America's states and cities,' he writes."

http://www.afscme.org/blog/lawmakers-loot-public-pension-funds-then-blame-retirees-for-underfunding

Here was my response to the AFSCME article:

"AFSCME, if you really believe this post, why did you allow your affiliate, AFSCME Colorado, to support the breach of Colorado PERA pension contracts in 2010, after the Colorado Legislature had underfunded the pension for a decade?  The Colorado Legislature failed to pay its pension bills for a decade, essentially borrowing from the pension fund, now they seek to shift their debt onto the backs of retired public sector workers.  It's sick, but your own people supported this in 2010.  Visit saveperacola.com."

I received a response from a former AFSCME Colorado official:

"Actually Al, that isn't what happened: The rank and file members of Colorado State Employees AFSCME Local 821 had their local dissolved by a unilateral decision of AFSCME International and the Executive Board of Colorado AFSCME Council 76, prior to the sellout, as they were to be 'incorporated' into the Colorado WINS 'partnership' created with Ritter: without their consent or even being given the right to vote on the matter.  The AFSCME 'representatives' who endorsed the PERA plan (i.e. Vivian Stovall and company) weren't even state employees: they were members of Denver City employees AFSCME Local 158, who aren't even covered by PERA. The Colorado State AFSCME retirees (Phyliss Zamaripa, Kathy Bacino, and Guy Santo) opposed the PERA plan put forth by Ritter, Schaffer, and Penry at the public hearing where proponents were allowed to testify first, and at length while opponents had their testimony relegated to the end of the hearing, and had their testimony time truncated. So please don't give the impression that the rank and file members of Colorado State AFSCME Local 821 had anything to do with this sellout, because we didn't. Give the credit to where it is due: Give it to Colorado WINS, and the SEIU."

My response:

"Thanks for this new information. I have noted that Colorado AFSCME supported the PERA pension contract breach since Colorado PERA has made this claim in its propaganda. Al"

And another reply from the former AFSCME official:

"The entire AFSCME endorsement of screwing public employees out of their pension COLA's in Colorado is unfortunately quite true, however, it should be remembered that AFSCME no longer represents Colorado State Employees, and it hasn't for about 7 years now. It was decided 7 years ago in a backroom deal in Washington that the three state employee unions would become Colorado WINS. The rank and file members of AFSCME Locals in Colorado were not given the right to vote on this, nor were the members of CAPE or the CFPE. The people who espouse 'democratic labor trade unionism' in America, wouldn't allow it to take place in Colorado. Ritter and company granted an exclusive franchise to Colorado WINS (which is a subsidiary of SEIU) and Colorado State employees do not have the right to belong to any other union, as both Change To Win and the AFL-CIO have prevented other unions (such as the CWA, which has had a consistent record of fighting for public employees' pensions) from organizing. Thanks to their betrayal of Colorado State employees, Colorado AFSCME Council 76 is now a bankrupt shell of an organization that represents some county employees in Pueblo, city employees in Aurora, the remnants of Denver City employees Local 535 and 158 and the maintenance staff at DU. They have one 'assistant Executive Director' and two clerical workers for a staff. All they are is a paper tiger, shell organization that is used as a conduit to 'move money' in state elections."

My response:

"That seems rather disingenuous on the part of Colorado PERA to attempt to rationalize the COLA-taking by citing the support of AFSCME Colorado, if AFSCME Colorado does not actually represent any employees in PERA."

"Have you ever heard any sort of an explanation from Colorado WINS for breaking PERA contracts? I have always assumed it was to minimize future contributions that might be needed from active Colorado WINS members. To the extent that money can be taken from PERA retirees, the needed pension support from current workers is diminished, not a very good reason to trash the Colorado Constitution."

Former AFSCME official:

"Yes, doesn't it? But then again, let us not forget the first piece of legislation that Colorado WINS supported was the bill written by Democratic Senator Dan Gibbs to do away with state employees having the right to strike or engage in labor stoppages. The 'S' in AFSCME is supposed to stand for 'State' but the International of AFSCME basically gave up on Colorado when Wellington Webb failed to deliver his campaign promise to give Denver City employees collective bargaining. The grand plan was 'First we'll get collective bargaining for Denver, then we'll repeal 8-73-104 (C) of the Colorado Labor Peace Act, and get all public employee's collective bargaining rights.' After they realized that wasn't going to happen, Gerry McEntee, Paul Booth, and Larry Scanlon decided to cut their losses, and 'traded' the Colorado State Employee locals to the SEIU which had acquired CAPE (that had gone into virtual bankruptcy when Bill Owens prohibited employees having their dues deducted from their paychecks.) All in all, it was a rather tawdry affair, and for AFSCME Council 76 to come out in favor of screwing public employees out of their pensions by having members of Local 158 of who were hacks from the Denver Democratic Party and Ritter supporters is just reflective of the fact that AFSCME has always placed the interests of the union and the Democratic Party above that of rank and file employees they profess to represent."

My response:

"As I recall, Miller Hudson, formerly of CAPE also supported SB10-001. This is ironic since Bill Owens eviscerated CAPE financially. Bill Owens is very culpable in the decline of PERA's funded ratio (selling PERA service credit cheap to encourage the departure of the more 'expensive' older employees, i.e., shifting labor costs from Colorado governments to PERA.) Why would Miller Hudson go along with pushing the PERA debt burden onto Colorado PERA retirees when the problem was caused by Bill Owens, and Bill Owens actions harmed CAPE? It doesn't make sense."

Former AFSCME official:

"You'd have to ask Miller about that one. Now as far as Colorado WINS goes, well, you have to understand the way union organizers think: Why should they be concerned about the pensions of state employees who were not members of their union? What WINS wants is current state employees, and most of them who have been hired since 2005 don't have the same pension plan as older state employees, and that is not what they are concerned about: By concentrating on health care costs, and doing away with the inequitable 'pay for performance' plan proposed by Penn Pfifner and signed into law by Romer, Colorado WINS needs to play nice with the legislature and the executive branch so that they can market themselves with a 'victory,' to the majority of state employees who don't belong to their organization, or care about somebody else's pension. So why play the heavy and alienate the incumbent politicians in somebody else's fight?  If you win, well, good. They'll get up there and say they were with you all the way……"

Discover the true nature of government in Colorado at saveperacola.com.

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US Banking “Fraud” Underpins Colorado PERA Pension “Fraud.”

It is ironic that "criminal" US banking fraud contributed to the 2008/2009 market decline that was later used in Colorado as a "window of opportunity" for a $9 billion "fraudulent" government breach of the contracts of elderly Colorado residents.

In sanctioning the 2010 Colorado PERA public pension contract breach, the Colorado Supreme Court recently and conveniently found that Colorado state government is not required to pay accrued Colorado PERA pension debts. (That is, one branch of Colorado government conveniently found that another branch of Colorado government is not required to pay its accrued debts.)

In order to reach this conclusion, the Colorado Supreme Court ignored its own long-standing legal precedent, failed to conduct a "contract analysis," ignored evidence of Colorado PERA's attorneys stating that the pension benefit was indeed a Colorado PERA contractual obligation, ignored the bill (SB10-001) sponsor's testimony that the pension benefit was in fact a Colorado PERA contractual obligation, ignored recorded legislative history of the contractual nature of the public pension benefit, failed to engage in the "heightened scrutiny" of the abandonment of state financial obligations required under federal case law (US Trust) and embraced a discredited Denver District Court decision that did not even mention Colorado's on-point public pension case law. In the United States, political connections can be used to quash legal investigations of banking fraud, and political connections can be used to summarily erase billions of dollars of government debt.

Note that the Colorado PERA public pension taking has several features in common with the federal banking fraud that nearly collapsed the US economy; secret backroom deals; an existing paper trail ignored (more than 1,000 pages at saveperacola.com); evidence ignored; no trial; no discovery; no accountability; and billions of dollars seized.

http://saveperacola.com/

2009

Senator Josh Penry, in a videotaped discussion with Representative Mike May, (videocenter. denverpost.com) said ‘we can’t, can’t miss this window.’ And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . .

“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age. You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return. So that could change the specter of actuarial necessity. We gotta’ do it this year or else these other structural changes won’t be possible.”

http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

Senator Josh Penry, co-prime sponsor, SB10-001 appearing on Your Show, Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on January 10, 2010 at 10:30 a.m.:

“What the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity.”

Discover the true nature of Colorado government at saveperacola.com.

See this video regarding the recent US banking fraud:

http://www.democracynow.org/2014/11/7/matt_taibbi_and_bank_whistleblower_on

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Judge, No “Persuasive Reason” Given that Colorado PERA COLA Benefit is Not a State Contract.

"Joshua Sharf is a fiscal policy analyst for the Independence Institute, a free market think tank in Denver."

From the Greeley Tribune article, October 29, 2014: "Sharf: Good and bad news for PERA in Colorado Supreme Court’s decision:

"The Colorado Supreme Court granted some good news to the state’s troubled public pensions last week by upholding a key part of an important 2010 reform law. In the process, though, the court may have made it more difficult to enact more meaningful reform down the road."

(See: http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out)

"Four years ago the Colorado Legislature adopted Senate Bill 1 to reform the state’s Public Employees Retirement Association. Among other changes, the bill lowered the cap on retirees’ annual cost-of-living adjustments from 3.5 percent to 2 percent. The court upheld this particular provision, which was designed to help reduce PERA’s future financial shortfall."

(Joshua, for the record the current long-term inflation assumption of the Colorado PERA pension system is 3.5%. Also, why is it surprising that when states break governmental contracts, this breach of contract improves a state's financial condition?)

"SB 1’s changes applied to current as well as future retirees. A group of current retirees, unhappy with having their cost of living capped, sued."

(Joshua, the Colorado PERA COLA benefit of the retiree plaintiffs in this case, Justus v. State, was already "capped" prior to the litigation of the case, Justus v. State. The COLA was "capped" in Colorado law at 3.5%. In this case, the Colorado Supreme Court ignored the existing evidence, ignored the findings of the Colorado Court of Appeals, and rendered judgment in the case without trial or discovery. This, in spite of an obligation of US courts to give "heightened scrutiny" to state attempts to escape their own financial obligations under the US Supreme Court case, US Trust.

Joshua, just as your mortgage rate might be "capped" at a fixed rate, perhaps 4%, the PERA COLA is a provision in a contract, here a Colorado statutory contract. As an organization that supports the US Constitution, I find it odd that the Independence Institute is so eager to see Colorado state contracts abrogated. The State of Colorado also contracts with corporations.)

"The plaintiffs had some reason for optimism. While it has long been held that states cannot create contractual obligations through Legislation, the Colorado Supreme Court had carved out an exception for public pensions in two decisions: McPhail (1959) and Bills (1961)."

(Joshua, I am happy that the Independence Institute acknowledges Colorado's long-standing on-point public pension case law. This reveals a level of sophistication that exceeds that of the Denver District Court's Judge Hyatt [recently retired] who conveniently failed to even mention Colorado's on-point public pension case law [Bills and McPhail] in the Denver District Court Decision in this case. For the record, this Denver District Court Decision was embraced by the Colorado Supreme Court in its political decision to take the contracted PERA COLA benefit.)

"The Justices drew a distinction between those cases and the current one, known by its lead plaintiff, Justus. The court decided that cost-of-living adjustments were not part of the core formula for determining benefits. They also recognized that the Legislature had changed the adjustments formula a number of times in the past. As a result, the majority ruled that the retirees had no reasonable expectation that a contract had been created."

(Joshua, you don't seem to be bothered by the fact that, in this Colorado Supreme Court Decision, one branch of Colorado state government has excused the debt of another branch of state government. As was noted in the Colorado Court of Appeals Decision in this case, the plaintiffs contested the diminishment of the value of their contracts, rather than a "change" in the contractual terms. "Changes" to the COLA that improve the benefit do not impair the contract. If your mortgage company unilaterally lowered your mortgage rate, you would suffer no harm.

Did the Colorado Supreme Court justices even bother to read the Decision of the Colorado Court of Appeals? The Colorado Court of Appeals noted in its Decision that “plaintiffs contend that they have a reasonable expectation of an IRREDUCIBLE [not, as defendants asserted, an UNCHANGEABLE] COLA benefit.  Colorado Court of Appeals: “Therefore, we direct the district court to consider whether there has been a substantial impairment with that in mind.”

Instead of acknowledging up front that the plaintiffs in the case Justus v. State were contesting the provisions of SB10-001 that REDUCED the PERA retiree COLA benefit, the defendants in the case, Colorado PERA and the State of Colorado, employed a “red herring,” claiming that the plaintiffs were arguing that the COLA benefit could not be legally “adjusted,” that it was UNCHANGEABLE. Colorado PERA’s deception worked on the lower court, the District Court, but the Colorado Court of Appeals, in their Decision saw through this red herring. Perhaps the Colorado Supreme Court would have also seen through the red herring if the court had carefully read the Court of Appeals Decision, or actually sought the truth in this case.

Does the Independence Institute support the Colorado Judicial Branch's use of a red herring in escaping state contractual obligations?

Joshua, are you aware that even Colorado PERA's lawyers have the "reasonable expectation" that the Colorado PERA COLA benefit is contractual? If Colorado PERA's lawyers have this expectation, why should Colorado PERA retirees not also have this expectation?

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)

"Coates noted that by framing the decision the way it did, the majority bought into the plaintiffs’ logic, and that there were elements of the plan that the Legislature would not be able to change without violating the Contracts Clause."

"Coates also believes the court failed to give a persuasive reason why the adjustments were exempt from the legislative contracting exception. Taken together, these two elements effectively leave areas of the plan concerning current retirees off-limits to the Legislature. Further, the court offers no guidance as to what those areas might be."

(Joshua, thank you for juxtaposing the opinion of Colorado Supreme Court Justice Coats with the opinion of politicians sitting on the Colorado Supreme Court.)

"Without such guidance, future legislatures will be less informed about what reforms will pass constitutional muster. They will be less likely to take on broad reforms unless and until drastic action is needed, and there is little margin for error."

(Joshua, if the Colorado Legislature actually desired information regarding Colorado PERA pension reforms that would pass constitutional muster, the Colorado Legislature would have sent an interrogatory to the Colorado Supreme Court with such queries in 2009. The Colorado PERA Board of Trustees, to their credit, took the position that such an interrogatory should be sent. The Leadership of the Colorado Legislature, inexplicably, opted against sending this interrogatory to the Supreme Court. This decision was, of course, made prior to the defendant's shift in their legal strategy from seeking a one-time breach of the COLA contract through "actuarial necessity," to pursuing elimination of this Colorado PERA contractual obligation in its entirety. The Colorado Legislature did not want guidance from the court in 2009.)

"By failing to lay out clear rules for what is permissible and what isn’t with respect to existing benefits, the Court’s ruling in Justus, celebrated for helping PERA’s finances right now, may end up making such a bleak scenario more likely in the future."

(Joshua, you do not seem so concerned with the "bleak scenario" of Colorado taxpayers paying billions of dollars in corporate welfare each year.  This corporate welfare is provided by the Colorado Legislature. Google "Colorado Tax Expenditure Report." The Colorado Legislature has directed these billions of dollars to corporate welfare in lieu of paying its public pension bills. This has gone on for more than a decade.)

http://www.greeleytribune.com/news/13574970-113/court-legislature-adjustments-pera

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Colorado Unions Contribute to Court Ruling Striking Unionist Contractual Rights.

In 2010, public sector unions in Colorado supported a bill introduced at the Colorado Legislature, SB10-001, that diminished public pension rights previously deemed contractual under Colorado law, (see the cases Bills/McPhail.) The bill was challenged in court. Last week, after a long court battle, the Colorado Supreme Court reversed its long-standing precedent, ignored evidence (including the defendant's previous testimony admitting to the contract) and without trial or discovery ruled that public employees in Colorado have no contractual right to the contested public pension benefit. (That is, one branch of Colorado government conveniently found that another branch of Colorado government does not have to pay its debts.)  Of course, Colorado public employees have supported their Colorado PERA pension COLA benefit with their labor and contributions for many years. Now, thanks in part to many Colorado union officials, the labor and pension contributions of union members will now be used to alleviate the tax burden on wealthy Colorado residents, and provide even more Colorado corporate welfare. Thanks Colorado unions.

As we read on the Colorado PERA website:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), 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

Union Official Condemns Pension Contract Breach (Including the Taking of COLA Benefits) in Rhode Island.

An article published by the group Think Progress today addresses state theft of public pension benefits, including the taking of pension COLA benefits, in Rhode Island.

"The changes 'completely screwed mid- and late-career workers,' said SEIU’s Adler. For someone with 20 years of public service under his belt and a decade to go before hitting retirement age, 'you’re losing 10 years of wage increases and 20-plus percent of whatever that final average salary [used for calculating pension payments] was going to be. So it’s an enormous reduction.'”

(Does is not seem counterintuitive that Colorado public sector unions supported the taking of Colorado PERA public pension benefits, in light of their parent organization's support for public pension contractual rights?)

“'Many folks take public sector jobs because they have good pensions and benefits, and in many cases they’re forgoing better pay in the private sector,' Adler said. 'That got thrown out the window on a dime." ". . . if you’re early in your career you have time to decide if this job is still worth it. But if you’re mid-career, you’re stuck.”

(Mid-career Colorado state and local government employees should take the time to thank their Colorado union leaders for supporting SB10-001.)

"The year before, Baker crunched state-level pension numbers and found that those multi-trillion-dollar shortfalls are 'less than 0.2 percent of projected gross state product over the next 30 years for most states,' and less than 0.5 percent of projected future economic output even in the states with the worst-funded pensions."

(Of course, this evidence was also ignored by the politicians on the Colorado Supreme Court. There never was a Colorado PERA pension "crisis," the actuarial funded ratio of the Colorado PERA pension system, at the time of the contract breach, was 69%. This figure is a few points away from the historical funded ratio of the Colorado PERA pension system.)

"Like basic financial management for any working-class person, maintaining a healthy pension system requires getting into good habits and sticking with them. States that fund their pensions appropriately rather than reneging on the obligations 'generally do it because that has been the practice in the state, but generally not because of state law,' according to SEIU’s Adler."

(As we have seen, the Colorado Legislature has not paid its Colorado PERA public pension bills since 2003. This is documented at saveperacola.com.)

"The weakness in pension funds from decades of underfunding by state governments needs to be addressed and there’s no reason not to start now, he said, but the radical revisions and abandoned retirement promises Raimondo and Arnold support are unnecessary."

"Pew has received 'up to $4,850,000' for its pension work from the Arnolds since 2012 according to the Arnold Foundation’s website."

(Note that a study from Pew was used to justify the taking of the Colorado PERA pension COLA benefit in the bill SB10-001. Also, let's not forget that this Pew study was highlighted in the original legal briefs in the case, Justus v. State.)

“'They depict us as big labor, billions of dollars,' he said, 'and the reality is that we are fighting desperately to maintain the rights of our members under a furious, multifaceted right-wing assault.'”

(I do not consider the many Colorado Democrats and union officials who supported SB10-001 to be "right wing.")

"Elsewhere, the innocuously-named Colorado Pension Project held a panel discussion of how pension rules influence teacher hiring and school performance. Panelists from Bellwether Education Partners, the National Council on Teacher Quality, and the New Teacher Project all argued that traditional pensions hurt school districts’ ability to attract the best teachers." "All three groups are funded by John and Laura Arnold, whose foundation has given them a total of nearly $7 million."

(Will Colorado public sector unions support elimination of the remaining two-thirds of the value of their member's public pensions? Too soon to tell.)

“'If you stiff your bondholders they won’t lend you money. So they have power. Workers, what are they going to do?' Adler asked. 'They’re powerless.'”

(When one recognizes that Colorado PERA retirees are confronted by a pension administrator controlling all of their assets, and spending those assets to eliminate pension member contractual rights, when one sees a Colorado Supreme Court in the pocket of the proponents of pension contract breach, the word "powerless" appears quite apt.)

Greg Smith on Colorado PERA pension benefits:

“His [Colorado PERA General Counsel Greg Smith's] briefing paper said 'there has never been a finding in Colorado that the state has reserved its power to make changes' in PERA's benefit structure.”

"The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member. That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan."

"Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem."

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/

Greg Smith, Colorado PERA’s former General Counsel told us in a Denver Post article from November 30, 2008: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”

Link: http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)

The complete article at Think Progress:

http://thinkprogress.org/economy/2014/10/28/3585128/arnold-pensions-retirement-manufactured-crisis/

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The Colorado Supreme Court . . . “Politicians in Black Robes.” (As it turns out.)

THE COLORADO SUPREME COURT . . . "POLITICIANS IN BLACK ROBES." (AS IT TURNS OUT.)

"Truth is the daughter of time, not of authority," Bacon.

For decades I refused to believe it, but it is now incontrovertibly established. The Colorado Supreme Court is indisputably a political actor. Our Colorado Supreme Court exists to serve Colorado political parties. At present, the Colorado Supreme Court is more rightly considered an adjunct of the Colorado Legislative Branch, than a check on the Colorado Legislative Branch. Rather than "truth-seeking," the Colorado Supreme Court now sees its role as "political-outcome seeking." Litigants successfully use the Colorado Supreme Court to achieve political purposes. In the Ralph Carr Justice Center, rather than meeting impartial guardians of the law, litigants meet their political allies on the bench. The Colorado Supreme Court has accepted its role as a political and partisan tool, and recognizes no constitutional limits on the authority of the Colorado Legislative and Executive branches. We have no "Rule of Law" in Colorado, we simply have shifting political power. That is all.

“I think there are many who think of judges as politicians in robes. In many states, that’s what they are.” “They seem to think judges should be a reflex of the popular will.”

Sandra Day O'Connor

In this article, I provide an example of the political and partisan role of the Colorado Supreme Court. I describe a case in which the Colorado Supreme Court summarily erases billions of dollars of debt owed by Colorado state and local governments. That is, one branch of Colorado state government relieves another branch of Colorado government of its legal debts. The case involves Colorado statutory contracts that create financial obligations on the part of Colorado governments. Over decades, political considerations induced the Colorado Legislature to mismanage the financial obligations. In recent years, the terms of these statutory contracts were deemed politically inconvenient and politically unpopular. The Colorado Legislative Branch asked the Colorado Supreme Court to discard the contracts.

In 2010, the Colorado Legislative Branch requested that the Colorado Supreme Court grant this political favor by ignoring the Contract Clause of the US Constitution, ignoring the history of legislative mismanagement of these state financial obligations, and relieving Colorado governments of their accrued legal debts. No trial, no discovery, billions of dollars seized by the state.

In granting this political favor, sanctioning the breach of Colorado PERA pension contracts, the Colorado Supreme Court was forced to ignore its own long-standing case law precedent, the court failed to conduct a "contract analysis," the court ignored evidence of Colorado PERA's attorneys stating that the pension benefit was indeed a Colorado PERA contractual obligation, the court ignored the bill (SB10-001) sponsor's testimony that the pension benefit was in fact a Colorado PERA contractual obligation, the court ignored recorded legislative history of the contractual nature of the public pension benefit, the court failed to engage in the "heightened scrutiny" of the abandonment of state financial obligations required under federal case law (US Trust) and finally, the court embraced a discredited Denver District Court decision that did not bother to mention Colorado's on-point public pension case law. In the United States, political connections can be used to summarily erase billions of dollars of government debt.

Colorado politicians' premeditated scheme to claw back accrued Colorado PERA pension benefits, from its inception in 2009, was to take Colorado PERA retiree' assets outside of bankruptcy. (State governments cannot declare bankruptcy under federal law.) The only means by which 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 failed to 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? Not likely. 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.

In this article, I address the Colorado Supreme Court's lack of independence, integrity, and impartiality.  I provide a brief history of the efforts of the Colorado Legislature and the Colorado Supreme Court to escape Colorado governmental financial obligations. I comment on the recent (October, 2014) Colorado Supreme Court Decision itself, which summarily erased these billions of dollars of Colorado public sector debt. I highlight some of the numerous factual and logical errors that exist in the Colorado Supreme Court's Decision in the case. I express incredulity at the Colorado Supreme Court's willful ignorance of public pension administration, knowledge that was necessary to any court claiming to "seek truth" in the case.

The Colorado Judiciary had an obligation to ensure that all evidence in the case, Justus v. State, was examined prior to breaking Colorado PERA pension contracts. They ruled in ignorance. This ignorance may have been willful. Rather than honoring their debts, Colorado PERA-affiliated governments will now inflate away that debt courtesy of the Colorado Supreme Court.

My intent in writing this article is to enhance the public record of, and further document, what I consider to be one of the greatest "crimes" in Colorado history.

Verba volant, scripta manent.

On October 20, 2014, the Colorado Supreme Court ruled that Colorado PERA pensioners have no contractual right to their accrued public pension COLA benefits. Yet, here we have documentation of Colorado PERA's own lawyers acknowledging, in legislative testimony, Colorado PERA's contractual obligation to pay the PERA COLA as recently as 2009.

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

The Colorado Supreme Court, having presided over a superficial review of the contractual right to the Colorado PERA "COLA" (ABI) benefit, now claims that Colorado PERA members have no contractual right to their accrued pension COLA benefits.  Yet, here we have documentation of the co-prime sponsor of the legislation that abrogated the Colorado PERA COLA contract admitting to the existence of the contract.

The co-prime sponsor of SB10-001, the bill that violated Colorado PERA retiree contracts, was Senator Josh Penry.  In 2009, Senator Penry acknowledged the existence of the Colorado PERA COLA contractual obligation, and admitted that the COLA contract breach was intentional, by design using recent market volatility to escape contractual obligations and bring about a long-desired retrospective reduction of PERA member pension benefits.

Transcript of remarks by Senator Josh Penry, R-Fruita, (appearing on "Your Show,"  Channel 20 with Channel 9 News (KUSA-TV)  host Adam Schrager on January 10, 2010 at 10:30 a.m.

Senator Josh Penry:  ". . . what the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity . . ." "So what the courts have said from a legal standpoint, as long as there is actuarial necessity, as long as there is a bona fide emergency, it is okay."

Note that "actuarial necessity" was never established by the Defendants in this case. The Colorado Judiciary refused to grant a trial or discovery in the case. The inconvenient voices of the politically weak plaintiffs were silenced by the Colorado Judiciary.

If you read no further, by this point, the stench of Colorado government corruption has certainly reached your nostrils. A mob of Colorado residents wanted this state contract broken, the Colorado Supreme Court ignored constitutional law, and its own precedent, to satisfy that mob. In the minds of Colorado Supreme Court justices, "heightened scrutiny" of state attempts to escape financial obligations means no trial, no discovery and endorsement of a District Court opinion that fails to even mention on-point Colorado case law. Such practices are better suited to countries like Somalia, North Korea, or Libya. (Another government, Argentina, is currently attempting to escape its legal debts.)

In US Trust, the United States Supreme Court determined that state attempts to escape their own financial obligations shall receive heightened scrutiny and very little deference: "Any financial obligation could be regarded in theory as a relinquishment of the State's spending power, since money spent to repay debts is not available for other purposes. Similarly, the taxing power may have to be exercised if debts are to be repaid. Notwithstanding these effects, the Court has regularly held that the States are bound by their debt contracts."

Gradually, my worldview is adjusting to accommodate the reality of government in Colorado. Our "Justices" of the Colorado Supreme Court are quite happy to don their robes, sit in the 400 million dollar Ralph Carr "Justice" Center (courtesy of the Colorado Legislative Branch,) ignore evidence, and ignore precedent . . . all to please the partisans who installed them.

I believe that, if alive today, Ralph Carr would be appalled at the manner in which this century's  Colorado Supreme Court casually discards the constitutional rights of the weak. If alive today, Ralph Carr would be embarrassed to see his name on this building, a monument to deceit, a monument to oligarchy.

The Denver Post: "From its grand glass atrium to the gold leaf in the lettering above the Supreme Court, Colorado's new Ralph L. Carr Justice Center was designed to impress. But visitors will need security clearance or an escort to see the $1,300 wood serving carts with silver trays sitting in Supreme Court Justice Michael Bender's reception room. In the judicial chambers, there are credenzas with antique brass hardware that cost $2,375 each. One octagonal tray table cost more than $7,200." ($2,200 chairs with “scrolling knuckles and fluted legs," $5,000 judicial desks, $4,800 leather sofas, $800 end tables, $1,600 side tables, $5,900 coffee tables.)

As an aside, the 2008 state bill that authorized construction of the Ralph Carr "Justice" Center was sponsored by Colorado Senators Shaffer and Penry, and signed into law by Colorado Governor Ritter. Ironically, the 2010 state bill that authorized the breach of Colorado state and local government contracts with elderly Colorado pensioners was also sponsored by Colorado Senators Shaffer and Penry, and signed into law by Colorado Governor Ritter.

In sanctioning the 2010 breach of Colorado state and local government contracts with the state's elderly public pensioners, the Colorado Supreme Court secures for Colorado corporations the billions of taxpayer dollars that are annually directed to corporate welfare in our state. The Colorado Supreme Court ensures that Colorado politicians will not be forced to ask Colorado's wealthy to pay more in order to honor public sector contracts. Acting in the financial interests of the State of Colorado, the Colorado Supreme Court has erased billions of dollars of the state's legal debts. Surrounded by opulence as they are, the "Justices" of the Colorado Supreme Court act to protect the interests of Colorado's corporations and wealthy. The tenth wealthiest state in the nation is free to break its contracts.

What are the implications of all this for government in Colorado? Perhaps one conclusion that should be drawn is that those interest groups seeking to influence Colorado courts meet with success. It is a worthwhile strategy. Political advocacy groups act prudently in devoting resources to partisan control over the Colorado Supreme Court. Partisans controlling the court may periodically call in favors for high priority litigation. The Colorado Supreme Court has demonstrated a willingness to accommodate, even where the Colorado Constitution must be disregarded, Supreme Court precedent must be ignored, and the force of government must to be used to seize property.

Many readers of this article retain their faith in the independence, integrity, and impartiality of the Colorado Supreme Court. I empathize with such innocence, as I myself held that view for decades. But, I invite such readers to examine the evidence compiled by Colorado's pensioners over the course of a five-year battle to defend their constitutional property rights. The evidence is available at the website saveperacola.com, and is now ubiquitous on the internet.

This evidence, in the case Justus v. State, was brushed aside by the Colorado Supreme Court. I have confidence that, having reviewed the evidence, many readers will, as I have, abandon the myth of an independent Colorado Judiciary.

On October 20, 2014, the Colorado Supreme Court released a Decision granting the State of Colorado the authority to "claw back" accrued, earned, contracted Colorado PERA public pension benefits from pensioners in the state. By enacting the retrospective legislation that broke Colorado PERA pension contractual obligations in 2010, Colorado state legislators forced a relatively small, weak group of Colorado residents to bear the burdens of all Colorado taxpayers. (Politicians do not enjoy asking voters for new revenues. This is not in their self-interest.)  By adopting this legislation, SB10-001, the politicians of the Colorado Legislature were asking the politicians of the Colorado Supreme Court for a political favor.

The comment below was offered in regard to the Denver Post article reporting the Colorado Supreme Court's decision in the case, Justus v. State:

"Of course, courts make political decisions. Why do politicians and interest groups fight so hard to get appointees nominated? Democrats have done very well to pack the CSC (Colorado Supreme Court) with left-leaning judges. Most decisions are not controversial so political leanings do not have an impact. In major cases, however, political leanings of judges have a huge impact. I do not doubt that judges can find some justification for politically based decisions."

"Perhaps in a parallel universe, politics would not influence court decisions on controversial cases. Unfortunately, we do not live in this ideal universe."

Does Colorado government exist, in large part, for the benefit of the wealthy and corporations? In Colorado, moneyed interests and political parties stack the Colorado Supreme Court with judges who support their political or commercial interests. Moneyed interests have hired more than 500 lobbyists who, at the Colorado Legislature, pursue the transfer of public resources to corporate masters. The Colorado Legislature regularly diverts many billions of taxpayer dollars to "moneyed interests" in the form of corporate welfare (Google: "Colorado Tax Expenditure Report.)

Simultaneously, the Colorado Legislature fails to pay its Colorado PERA public pension bills (annual actuarially required contributions, "ARC.")  The Colorado Legislature has failed to pay the PERA pension ARC for a decade. In effect, the Colorado Legislature diverts public funds from meeting state and local government contractual obligations to middle class workers in order to free up resources for discretionary gifts to Colorado corporations.  Rather than ending the giveaway to Colorado corporations, in 2010, the Colorado Legislature opted for outright, unabashed theft from elderly pensioners in the state.

"I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country."

Thomas Jefferson

The idea that the State of Colorado would abrogate a state contract with a corporation is inconceivable. The breach of a Colorado state contract with a retired school teacher or a snowplow driver is, apparently, to be expected.

In any event, the legacy of the Colorado Supreme Court is now fixed.  Rather that serving Justice, or the Rule of Law, the Colorado Supreme Court is unquestionably a political actor serving political ends.  Rather than protecting the weakest in American society, the members of the Colorado Supreme Court congratulate themselves on their service to moneyed interests. The Colorado Supreme Court is emblematic of our Gilded Age 2.0. Ultimately, in retirement, these Colorado judges will slap backs with the moneyed interests on a golf course. A life well-lived.

Below I provide an outline of the historical mismanagement of the Colorado PERA pension system:

In 1992, Colorado voters adopted a statewide constitutional tax and spending limitation measure called "TABOR."  This TABOR amendment has constrained public sector spending in Colorado, slowing the growth of state government. The pressure on state spending from the TABOR amendment contributed to state legislative diversion of resources from contractual public pension obligations to non-contractual discretionary spending. Thus, the 1992 adoption of constitutional fiscal constraints by Colorado voters has contributed to the campaign to violate the Contract Clause of the Colorado Constitution in 2010. In sanctioning the breach of Colorado PERA pension contracts the Colorado Supreme Court has tacitly empowered these 1992 voters to violate the Colorado Constitution's contract provisions. The Colorado Supreme Court has authorized retrospective legislation, and effectively granted the voters of Colorado the power to contravene the Contract Clause of the United States Constitution.

In 2002, the Colorado Legislature began its habit of failing to pay annual Colorado PERA pension system bills (the ARC.)  Rather than legally reducing benefits in the Colorado PERA pension system through PROSPECTIVE benefit reductions (for example, a prospective reduction of the pension multiplier, that is, lowering the rate at which PERA benefits accrue going forward) the Colorado Legislature continued to rack up the Colorado PERA pension debt.

Notably, later, in 2012, the Colorado Legislature did indeed adopt PROSPECTIVE (legal) pension reform legislation for pension systems operated by certain Colorado county governments (arms of the state.)  Thus, we have both prospective pension reform on the books in Colorado for certain public employees, AND retroactive pension "reform" for certain other public employees.

While failing to pay its public pension bills for a decade, as noted above, the Colorado Legislature chose to regularly give away billions of dollars in revenue through corporate and business subsidies, exemptions and grants sought by lobbyists. This river of corporate welfare flows unabated today.

Although they are fiduciaries for the pension system, Colorado PERA officials and trustees historically failed to request that the Colorado Legislature actually pay its public pension bills (ARC.) On the other hand, current and retired workers in the PERA pension system have never failed to make their contributions or supply the labor due under their contractual relationship with PERA employers.

Further, former Colorado Governor Bill Owens persuaded (pressured?) the Colorado PERA Board to sell service credit in the pension system at less than its full actuarial cost. He did this in order to prompt older, more "expensive" state and local government employees to retire and thus reduce public sector labor costs. (This is documented.) This action essentially shifted labor costs from Colorado state and local governments to the PERA pension system. It also increased the eventual unfunded liabilities of the PERA pension system by billions of dollars. Notably, the Colorado PERA Board of Trustees supported this "Bill Owens Fire Sale" unanimously.

Also contributing to the underfunding of the PERA pension system has been a 20-year diversion of state revenue by the Colorado Legislature (a total of $700 million sought by local government lobbyists) to pay off legacy pension debt in pensions that are the responsibility of Colorado local governments (Old Hire Fire and Police pension debt.) This $700 million was allocated for public pension debt that is not the contractual obligation of the State of Colorado. In many of these years, the Colorado Legislature failed to make its own full ARC payment (i.e., pay its PERA bills) for pensions that ARE INDEED the contractual obligation of the State of Colorado.

Since the costs of this history of Colorado PERA and state legislative mismanagement were beginning to accumulate, in 2009, Colorado PERA administrators, trustees, public sector unions, interested lawyers and 27 lobbyists representing financially interested parties colluded to reduce the unfunded liabilities of the PERA pension system by breaking contracts with Colorado PERA retirees (the taking of the COLA benefit represents 90 percent of the "savings" in SB10-001.)

The effort to break Colorado PERA pension contracts was initiated, in part, by Colorado public sector unions trying to free up money for union member salary increases, and the union's Democratic allies seeking greater funding for state and local discretionary programs.
It should be acknowledged that a few Colorado Democrat state legislators, notably Representatives Weissman, Primavera, and Pace refused to go along with the scheme to break Colorado PERA pension contracts. The scheme was supported by a few Republican state legislators, but the bulk of Republican legislators condemned the proposed PERA contract breach during floor debate on SB10-001.

At the outset, Colorado public sector union proponents of SB10-001 sought only to establish "actuarial necessity" for a one-time breach of the COLA contract. Colorado public sector unions did not want the PERA COLA contract right permanently discarded. The proponents of SB10-001 admitted to the existence of the contractual obligation. It is ironic that ultimately, the Colorado Supreme Court decided to scrap the PERA COLA contractual obligation in its entirety. By failing to uniformly defend the contractual rights of their active and retired members, Colorado public sector union officials initiated the drastic devaluation of their member's contracts. Thus, members of Colorado public sector unions will now, in effect, provide years of uncompensated labor to Colorado state and local governments as a result of the decisions of their union leaders. Unions in other states support the contractual pension rights of their members, including retired union members. This in itself is very unusual, for a public sector union to agree to break the contracts of the union's retired members. (Retired union members no longer pay union dues.)

Strangely, the proponents of SB10-001 chose to attempt the Colorado PERA pension contract breach in a year during which PERA's funded ratio was at a 69 percent level, just a few points below its historical average funding ratio. The intentional legislative underfunding of the PERA pension system is largely responsible for the slow decline in PERA's funded ratio. Yet, the proponents of SB10-001 claimed that this actuarial funding ratio was a "crisis" necessitating the breach of contract. Colorado PERA's actuarial funded ratio has been as low as 53 percent in the 1970s, but no "crisis' was observed back then, since there was no political campaign to break pension contracts in those years.

Colorado PERA pensioners, while defending their contractual rights, highlighted the fact that the PERA pension system was in line with its historical average funding ratio during and after the contract breach in SB10-001. The wide recognition of this fact may have induced the shift in legal strategy on the part of Colorado PERA's lawyers from an "actuarial necessity" defense to simple denial of the existence of the PERA COLA contract. But, the record of admissions of the existence of the PERA COLA contract by Colorado PERA's lawyers proved problematic for this new line of defense.

In legal briefs filed in the case, Justus v. State, Colorado PERA's lawyers attempted to deceive Colorado courts by replacing the "actuarial funding ratio" that PERA has used historically (and that is used in SB10-001) with a "market-based" funding ratio that makes PERA's financial condition appear to be worse than it is.

The Colorado PERA pensioner lawsuit filed after SB10-001 was signed by Governor Ritter, Justus v. State, worked its way from the Denver District Court, where a judge decided that PERA pensioners have no contractual right to their PERA COLA benefit (oddly, without mentioning Colorado's on-point public pension case law) to the Colorado Court of Appeals (that read the case law, and reversed the Denver District Court.)  The Court of Appeals found that Colorado's on-point public pension case law was "dispositive," unquestionably establishing the contractual right of PERA pensioners to their COLA benefits.

The Colorado Supreme Court ignored all of this widely available evidence and reversed the decision of the Colorado Court of Appeals. Having sanctioned a breach of Colorado PERA pension contracts, the Colorado Supreme Court has incentivized the Colorado Legislature to continue underfunding of the pension system. I am astounded that governments in the United States will go to such great lengths, and engage in such deception, in order to escape their debts. Sadly, in the United States, corruption remains endemic, and some US governmental entities successfully violate the US Constitution.

Colorado Supreme Court, in Colorado Springs Firefighters v. Colorado Springs, 1989:  "Rights which accrue under a pension plan are contractual obligations . . . entitlement to annual pension payment increases is also statutorily determined. These statutory provisions have established a defined benefit contributory pension system in which most public employees are required to participate . . . . . By making these contributions, employees obtain a limited vesting of pension rights, which ripen into vested pension rights upon attainment of the respective eligibility requirements."

The Colorado Supreme Court, in Denver Police Pension and Relief Board, 1961, agreed that public pension rights are a contractual obligation of plan sponsors:  “When conditions are satisfied for retirement . . . . "at that time retirement pay becomes a vested right of which the person entitled thereto cannot be deprived; it has ripened into a full contractual obligation." "Whether it be in the field of sports or in the halls of the legislature it is not consonant with American traditions of fairness and justice to change the ground rules in the middle of the game."

THE OCTOBER 20, 2014 COLORADO SUPREME COURT DECISION IN JUSTUS v. STATE.

At a minimum, participants in the Colorado PERA public pension system have an "implied-in-fact" contract protecting the retirement benefits that were seized by the State of Colorado in 2010. These Colorado public employees have exchanged their labor and pension contributions over decades for a defined benefit in retirement. Their labor and contributions supported the contracted annual increase in their pension "base benefit."

It should be noted that a member of the court, Colorado Supreme Court Justice Hood, opted against recusal in the case, Justus v. State, in spite of his past professional association with an attorney who worked on the case, and although he was recused or removed in Colorado's Moreno "redistricting" case due to his past association with that attorney (who also worked on the Moreno case.)

“They need to avoid sitting on cases if even a whiff of bias can be detected.”

Sandra Day O'Connor

See the article: "Should Colorado Supreme Court Justice William Hood Recuse Himself in the Colorado PERA Pension COLA Lawsuit."

http://coloradopols.com/diary/58201/should-colorado-supreme-court-justice-william-hood-recuse-himself-in-the-colorado-pera-pension-cola-lawsuit

Note that, in 2009, the Colorado PERA Board of Trustees hired a judicially connected former Colorado Supreme Court Justice (rather than a public pension attorney) to write an opinion justifying the PERA COLA contract breach.

See the article: Jean Dubofsky: One of a “Dwindling Breed of Unabashed Liberals."

http://coloradopols.com/diary/39311/jean-dubofsky-one-of-a-dwindling-breed-of-unabashed-liberals

Note that Colorado Supreme Court Justice Hobbs delivered the opinion of the court in the case, Justus v. State. In oral arguments in the case on June 4, 2014, Justice Hobbs stated his preconceived opinion of the merits of the case:

"To me, you're arguing for a divestment of legislative authority here, there are plenty of people right now who didn't get raises the past ten years because of the economy, that are contracted with by the State of Colorado. Right? When they took those jobs and continue those jobs they would have expected hopefully, a cost-of-living adjustment, there's no guarantee to that, even for present employees, so why should that be with respect to the prospective argument that you're making that the Legislature is somehow divested of the authority to make these decisions, particularly when they have to do with the fiscal integrity of the whole system?"

There are many problems with this statement/question from Colorado Supreme Court Justice Hobbs in oral arguments, including its presumptions, and the lack of understanding it betrays.  First, there is no proposed divestment of legislative authority. The Legislature does not have the authority to violate the constitutional Contract Clause. Second, it is obvious that governmental employees have no contractual right to receive a raise each year. Colorado PERA retirees in accordance with on-point Colorado case law, a Colorado Attorney General's opinion, clear Colorado statutes, legislative intent, the report of the Colorado Treasurer's Commission to Strengthen PERA, Colorado PERA's publications, press accounts of Colorado PERA Executive Director Greg Smith's legal briefs, Greg Smith's statements in the press, and Colorado PERA attorney's testimony to the Colorado Joint Budget Committee, INDEED HAVE a contractual right to their accrued PERA COLA benefits. Third, taking accrued public pension benefits is retroactive and retrospective under the Colorado Constitution, rather than prospective. Fourth, the fiscal integrity of the Colorado PERA pension system was not at issue. At the time of the PERA COLA contract breach in 2010, PERA's [actuarial funded ratio] stood at 69 percent, approximately the funding ratio of major U.S. public pension systems at the time. 

The sponsors of the bill, SB10-001, bragged that 90 percent of the costs of the bill's reforms were to be borne by the elderly. Note that these elderly Colorado residents had little representation at the Colorado Legislature, and were thus an easy mark.  The administrators and trustees of the Colorado PERA pension system control the assets in the PERA trust fund that is the property of the PERA pension system. These administrators and trustees spent PERA trust fund assets that belong, in part, to PERA retirees on a legal, lobbying, and public relations campaign to break the retiree's public pension contracts.

As noted above, in the months prior to the enactment of SB10-001 lawyers for the organization Colorado PERA admitted in testimony before the Legislature that the PERA COLA benefit was a contractual obligation. Even Colorado PERA's own lawyers held the expectation that the PERA "COLA" was a contractual obligation. They argued that "actuarial necessity" would be required before the contract could be broken. In spite of the public record, as the lawsuit progressed, PERA's lawyers changed their legal strategy, and began to deny the existence of the PERA COLA contractual obligation. 

For the record, the Colorado Supreme Court ignored its own "cardinal principle" (Endsley) that any ambiguities in Colorado public pension statutes shall be decided in favor of the public employee.

“As was noted in Endsley v. Public Employees Retirement Association . . . (1974) ambiguities appearing in statutes regulating pension and retirement funds are construed favorably toward the employee.”  Ten years later, this Colorado Supreme Court determination was cited by then-Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the CARDINAL PRINCIPLE (my emphasis) that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee. Link:

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984.)

The Colorado Supreme Court has ruled that the Colorado PERA COLA benefit is a "gratuity," in violation of the anti-gratuity clause of the Colorado Constitution. 

Marcucci [of the National Association of Public Pension Attorneys]: “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.” 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.”  If the PERA COLA is a gratuity, it is unconstitutional.

The Colorado Supreme Court argues against the existence of the PERA COLA contract due to a lack of "durational" language in statute. But, it should be noted that the PERA "base benefit" itself has no such "durational" language. It follows that, according to the Colorado Supreme Court's logic, that the entirety of the Colorado PERA pension is a gratuity, and that Colorado public sector workers have exchanged 30 years of labor and pension contributions for nothing.  Under the October 20, 2014 Decision, Colorado PERA members will now work each day for compensation, a portion of which, their employers will determine after the fact.

The Colorado Supreme Court has decided that Colorado governments are free to deceive their employees, offer a future defined public pension benefit, an annuity, in exchange for a public employee's labor and money in the present, and then renege on the contractual arrangement.

If this Colorado Supreme Court decision is allowed to stand, necessarily, the Rule of Law in Colorado is indeed a myth. If this decision stands, only a fool would choose to accept employment with a Colorado PERA-affiliated employer, that is a Colorado state or local government. This case must be brought before the U.S. Supreme Court.

Here is some of the most damning evidence in this case, evidence ignored by the Colorado Judiciary. At the inception of the "automatic" PERA COLA, a Colorado PERA representative confirms that the COLA is a Colorado PERA "liability," that PERA members may rely on in making the decision to retire. A member of the Colorado Legislature describes the PERA COLA as "guaranteed," "now and in the future."

Rob Gray, a Colorado PERA representative, testifying to the Legislature's House Finance Committee in regard to the "automatic" PERA COLA benefit under consideration [in House Bill 93-1324]: “The PERA Board does support this bill.”  “We felt like it is something that is good pension policy . . . that it makes sense . . . THAT IT IS MAKING PERMANENT CHANGES, and also that it does help employers which is one of the goals of the bill.”  Rob Gray states that the proposed COLA "adds predictability for current and future retirees, people looking at leaving might look at this and say now I know how my future increases are going to be determined . . .” Rob Gray characterizes the "automatic" PERA COLA benefit as a Colorado PERA LIABILITY: “when a change in benefits is added, like this bill, it extends out the period for paying off that unfunded liability.” If you listen to the recording of this meeting, you will also hear a member of the House Finance Committee refer to the Colorado PERA COLA provision under consideration as a pension benefit that is “guaranteed,” “now and in the future.”  [Note that the contracted PERA COLA benefit adopted by the committee was in later years improved by the Colorado General Assembly to flat 3.5 percent level, constitutionally permissible as this "improvement" did not impair PERA pension contracts.])

See the article: "The Top Ten: Damning Evidence in the Colorado PERA Retiree Lawsuit, Justus v. State."

http://coloradopols.com/diary/44622/the-top-ten-damning-evidence-in-the-colorado-pera-retiree-lawsuit-justus-v-state

(Note that the current long-term inflation assumption of the Colorado PERA Board of Trustees is 3.5 percent.)

Below, I provide comments on portions of the Colorado Supreme Court Decision in Justus v. State, a Decision replete with glaring ignorance of public pension administration, factual and logical errors.

It should be noted that the October 20, 2014 Colorado Supreme Court Decision makes no mention of the legal distinction between "ad hoc" and "automatic" public pension COLA benefits.

NASRA:

“The Governmental Accounting Standards Board (GASB) requires public pension plans to disclose assumptions regarding COLAs, including whether the COLA is automatic or ad hoc, and to include the cost of COLAs in projections of pension benefit payments.”

(My comment: Thus, it should be a simple matter to locate a public pension plan’s characterization of its statutory COLA benefit.)

http://www.nasra.org/resources/COLA%20IB%20060512.pdf

August 2, 2010, Ritter Administration Letter to GASB on contractual public pension obligations:

“The criteria suggested as the basis for differentiating these COLAs [automatic] versus ad-hoc COLAs is the statutes that exist as of the date of the employer’s financial statements.”

“The essential difference between an automatic COLA and an ad hoc COLA is the legal requirement; with this core difference there is no way for the two not to be substantively different. The legal difference in this instance is critical to the determination of whether the government is unable to avoid the surrender of resources to meet the obligation.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

The National Institute on Retirement Security on “automatic” and “ad hoc” public pension COLAs: “One key design feature of a COLA is whether it is automatic or ad hoc in nature. An automatic COLA means the retiree’s benefit increases automatically every year by a certain percentage. An ad hoc COLA is granted at the discretion of the plan sponsor, usually when the fund is in a well-funded position and investment gains have exceeded expectation.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

Where in the court's Decision is the court's contract analysis for the exchange transaction that occurs in the Colorado PERA public pension plan?

Colorado Supreme Court Decision, Page 3 – "The stated goal of SB10-001 was to make "modifications to [PERA] necessary to reach a one hundred percent funded ratio within the next thirty years."

It is not the responsibility of Colorado PERA members to relinquish contractual rights in order to compensate for past legislative underfunding of the pension system. It should also be noted that the US credit rating agency: “Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”

Colorado Supreme Court Decision, Page 3 – The court writes: "To address economic conditions and projections demonstrating a severely underfunded plan . . ."

As noted above, the Colorado Legislature has failed to make the actuarially required contribution to the Colorado PERA pension system since 2003. Why does the Colorado Supreme Court expect Colorado PERA pensioners whose contractual rights have fully vested to remedy past legislative mismanagement of the pension fund?

Colorado Supreme Court Decision, Page 5 – The court writes: "Justus specifically argues that the contractual right to an unchangeable COLA first arose with the1994 amendment when the legislature amended the provision making COLA increases “automatic” rather than dependent on the legislature’s approval each year, and that the 2001 amendment guaranteed said “automatic” increase by 3.5% each year. This argument is inherently contradictory as the 2001 amendment would be considered an impermissible alteration if the court were to find that the legislature established a COLA formula contract in 1994."

This statement most clearly demonstrates the abysmal ignorance of the Colorado Supreme Court in this case. The 2001 amendment was constitutionally permissible as it improved the PERA COLA benefit.  Colorado PERA members were not harmed by the change.

Did the Colorado Supreme Court justices even bother to read the Decision of the Colorado Court of Appeals? The Colorado Court of Appeals noted in its Decision that “plaintiffs contend that they have a reasonable expectation of an IRREDUCIBLE (not, as defendants assert, an UNCHANGEABLE) COLA benefit.  Colorado Court of Appeals: “Therefore, we direct the district court to consider whether there has been a substantial impairment with that in mind.”
(Instead of acknowledging up front that the plaintiffs in the case Justus v. State were contesting the provisions of SB10-001 that REDUCED the PERA retiree COLA benefit, the defendants in the case [PERA and the State of Colorado] employed a “red herring,” claiming that the plaintiffs were arguing that the COLA benefit could not be legally “adjusted,” that it was UNCHANGEABLE. Colorado PERA’s deception worked on the lower court, the District Court, but the Colorado Court of Appeals, in their Decision saw through this red herring. Perhaps the Colorado Supreme Court would have seen through the red herring if the court had carefully read the Court of Appeals Decision.)

Colorado Supreme Court Decision, Page 7 – The court writes: "The COLA formulas have been amended numerous times . . ."

Colorado Supreme Court Decision, Page 11 – The court writes: – "We undertook certiorari review to address whether retirees have a contractual right to a particular COLA formula for life, without change . . ."

Again, the legal question is "irreducible," rather than "unchangeable."  The Colorado Supreme Court missed or ignored this distinction.

Colorado Supreme Court Decision, Page 10 – The court writes: "The district court found that retirees had no reasonable expectation of receiving the benefit of a particular COLA for life, given the number of times the legislature has amended the COLA formulas. In doing so, it observed that none of the legislature’s varied COLA formulas have ever contained durational language."

Here the Colorado Supreme Court relies on a Denver District Court Decision that failed to even mention Colorado's on-point public pension case law. A Decision that has been thoroughly discredited by the Colorado Court of Appeals.

As documented above, Colorado PERA's own attorneys have the "reasonable expectation" that the PERA COLA is a contractual obligation. If Colorado PERA's attorneys have this expectation, why should the relatively unsophisticated Colorado PERA retiree not also have this expectation?

Amendments to the PERA COLA formula are constitutionally permissible if they are improvements to the PERA COLA formula and impair no vested pension rights.

Note that the word "SHALL" is used in Colorado law to create both the contractual right to the PERA COLA benefit and the contractual right to the PERA "base benefit."  Yet, the District Court found an unquestionable contractual right to the PERA "base benefit." "Durational" language is absent from both sections of Colorado law.

Colorado Supreme Court Decision, Page 11 – "We hold that the PERA legislation did not establish any contract between PERA and its members entitling them to the specific COLA formula in place on the date each became eligible for retirement or retires."

The PERA COLA benefit is not merely supported by contributions from PERA employers. It is also supported by PERA member contributions. If PERA members have supported the PERA COLA contract with their contributions and labor they are entitled to that benefit, at a minimum, as part of an "implied-in-fact" contract. Colorado PERA's lawyers state the existence of the contract in legislative testimony, a public record unexamined by the Colorado Supreme Court.

Colorado Supreme Court Decision, Page 13 – "To determine whether the legislature intended to bind itself contractually, we examine both the language of the statute itself and the circumstances surrounding its enactment or amendment."

The statute uses identical language to establish the Colorado PERA COLA benefit and the Colorado PERA "base benefit."

The legislative history of the Colorado PERA COLA benefit makes it plain that, as asserted in 2009 by Colorado PERA's lawyers and the sponsor of SB10-001, Senator Josh Penry, that the PERA COLA benefit is a contractual obligation of the State of Colorado and other employers in the PERA pension system.

As noted earlier, Colorado PERA's representative Rob Gray provided testimony at the inception of the automatic PERA COLA that the PERA COLA benefit that the Legislature was placing into Colorado law is a "permanent" pension benefit, that PERA pensioners can rely on the pension benefit in retirement, that the PERA COLA is a "liability" of the Colorado PERA pension system, and that the permanent PERA COLA created "adds to the unfunded liabilities" of the PERA pension system. Indeed, a member of the House Finance Committee at the legislative hearing creating the "automatic" PERA COLA benefit described the PERA COLA as "guaranteed," "now and in the future."

Colorado Supreme Court Decision, Page 15 – "By its very nature a statutory cost of living adjustment is a periodic exercise of legislative discretion that takes account of changing economic conditions in the state and/or nation."

This is a demonstrably false statement. It provides further proof that the Colorado Supreme Court issued its Decision in utter ignorance of public pension administration. Some public pension COLAs are "ad hoc," some are "automatic." The National Institute on Retirement Security on “automatic” and “ad hoc” public pension COLAs: “One key design feature of a COLA is whether it is automatic or ad hoc in nature. An automatic COLA means the retiree’s benefit increases automatically every year by a certain percentage. An ad hoc COLA is granted at the discretion of the plan sponsor, usually when the fund is in a well-funded position and investment gains have exceeded expectation.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

Colorado Supreme Court Decision, Page 16 – "By its very name, adjustments to the formula necessarily imply fluctuation with changes in the cost of living and CPI."

This statement evidences further, mind-boggling ignorance on the part of the Colorado Supreme Court. For the record, the Colorado PERA "COLA" benefit is described in Colorado statute as an "annual benefit increase," rather than as a "cost-of-living increase."

I wonder, with this Decision, has the Colorado Supreme Court authorized Colorado insurance companies that have entered into contracts to provide annuities with COLA provisions to ignore those contracted COLA provisions?

Colorado Supreme Court Decision, Page 17 – " . . . we conclude that there is no contract right to the COLA."

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.”  The sponsor of SB10-001 agreed with Colorado PERA's lawyers.  I find this to be particularly relevant and interesting legislative history.

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

Colorado Supreme Court Decision, Page 18 – " . . . we observe no contractual or durational language stating or suggesting a clear legislative intent to bind itself, in perpetuity, to paying PERA members a specific COLA formula."

"We afford significance to the legislature’s use of durational language in the description of the pension benefit owed to retirees, in contrast to the fluctuating COLA formula which is evidenced by the legislative history.

This question of "durational language" was addressed in oral arguments.  At 31 minutes into the June 4, 2014 oral arguments Attorney Sean Connelly, representing Colorado PERA, stated:

"If you look at the language of the PERA statute, in 801.1, Section 801.1, of the PERA statutes, says that the monthly benefit is payable for the lifetime of the beneficiary."

"COLAs are instated in Part 10 of the PERA statutes, specifically in Sections 1001, 1002, 1003 and those were the parts that were amended in SB10-001 in 2010."

Contrary to Sean Connelly's argument, the statutory language creating the PERA COLA contract and the PERA base benefit is identical . . . both benefits "SHALL" be paid to annuitants.  Colorado PERA's attorneys agree that the PERA statutes create a contract for the PERA base benefit.

Articles of Colorado law are divided into "parts" and "sections."  As plaintiff's attorney Richard Rosenblatt points out in his concluding remarks at the June 4, 2014 oral arguments, Part 8 of the PERA statutes is not the portion of the PERA statutes that creates the contract for the PERA base benefit.  The contract for the base benefit is created in Section 24-51-602, located in Part 6 of the PERA statutes, a Part that is titled "Service Retirement."  Section 602 is titled "Service retirement eligibility," it addresses eligibility for service retirement benefits in the PERA pension plan that are a contractual obligation of PERA and PERA-affiliated employers.  Section 602 provides that: "Members . . . SHALL, upon written application and approval of the board, receive service retirement benefits pursuant to the benefit formula . . ."

This Colorado PERA statutory language creating the PERA "base benefit" contract is identical to the PERA statutory language creating the PERA COLA benefit contract. Colorado PERA's lawyers would have us and the Colorado Supreme Court believe otherwise.

Part 8 of the PERA statutes simply implements Part 6 of the PERA statutes. Part 8 of the PERA statutes addresses "Benefit Options" for payment of the service retirement benefit offered under the PERA pension contract. The Part 8 payment options for this PERA annuity are: single life, joint life with one-half payable to a cobeneficiary at death of the retiree, and joint life with the same benefit payable to a cobeneficiary at death of the retiree.

Under the PERA statutory construction, Part 8 addressing PERA annuity payout options rightly follows Part 6 which addresses eligibility for the PERA retirement benefit itself.  Section 602 provides that the qualified PERA retiree SHALL receive the base benefit. Part 8 provides choices for the payout of the benefit.

Why would PERA's lawyers state or imply that the contract for the PERA base pension benefit is created in the section of PERA law that addresses retiree choices for the method of payout of the total contracted PERA benefit, rather than in the section that addresses PERA member eligibility for the PERA annuity itself?  In my opinion, deception.

The attorney for the plaintiffs, Richard Rosenblatt, responded:

"So, it's 'SHALL RECEIVE' is the language that creates the contract for the base pension, which they (defendant's attorneys) agree is a contract."

"And, the COLA statute says "SHALL," uses the same mandatory language."

"The durational language that they speak of is under a section that sets forth options for payment of lesser amounts if the retiree wants the benefit to cover the life of a spouse."

"The actual creation of the (base benefit) contract is based on the mandatory language 'SHALL RECEIVE" in 24-51-602 and I would submit that the mandatory language is the same as the mandatory language in the COLA."

See the article: "My Opinion: Colorado PERA Pensioners Expose Deception by PERA Lawyers at the Colorado Supreme Court."

http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court

Here is a link to the June 4, 2014 Colorado Supreme Court Oral Arguments in the Colorado PERA retiree lawsuit, Justus v. State:

http://www.courts.state.co.us/Courts/Supreme_Court/Oral_Arguments/Index.cfm

Colorado Supreme Court Decision, Page 19 – "Although sections 24-51-1001(1) and -1002(2) use the word “shall,” that mandatory language is directed at the PERA administrator, not the legislature."
If the Justices of the Colorado Supreme Court actually believe this statement, they are obligated to explain the fact that Colorado PERA's lawyers have testified (on the legislative record) to the existence of the PERA COLA contract.

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

Colorado Supreme Court Decision, Page 20 – "In further examining intent, we accept the district court’s finding that the legislature did not create a contract right to a COLA in the 1994 COLA amendment because the 1993 legislative history indicated that no member of the General Assembly expressed intent to create an unchangeable COLA from that date forward."

The Colorado Supreme Court is also incorrect on this point. In preventing this case from going to trial, and relying on a flawed Denver District Court decision, the Colorado Supreme Court is necessarily ignorant of key evidence in the case. The recording of this 1993 legislative hearing includes a member of the Colorado General Assembly describing the PERA COLA under consideration as "guaranteed," "now and in the future." At this legislative committee hearing a Colorado PERA representative, Rob Gray, confirmed that the PERA COLA being placed in Colorado law was a Colorado PERA "liability," that PERA members may rely on in making the decision to retire."

Professor Amy Monahan: "The (Denver District) court’s ruling is surprising both because the court appeared to break from earlier Colorado decisions that found pension benefits to be contractually protected prior to retirement and because the change could be characterized as a retroactive change to benefits, which is the type of change that invites the most scrutiny under a contract clause analysis." (Professor Amy Monahan is the preeminent legal scholar in the United States on public pension contracts.  "Amy Monahan is a professor and the Solly Robbins Distinguished Research Fellow at the University of Minnesota Law School.")

Colorado Supreme Court Decision, Page 22 – "Retirees therefore could not have reasonably expected that the state’s provision of any given COLA was a statutory contract protected from change by the Contract Clauses of the U.S. and Colorado Constitutions.

Given that Colorado PERA's own lawyers have this expectation, and have provided legislative testimony to that effect, why should Colorado PERA retirees not also have that same expectation?

Colorado Supreme Court Decision, Page 22 – " . . . we have determined that retirees have no property right in a particular COLA."

This outcome is rightly laid at the doorstep of Colorado's public sector unions that supported SB10-001.

October 11, 2012, Colorado Court of Appeals 2012 decision in Justus v. State, “We consider McPhail and Bills dispositive [indisputably bringing to a conclusion a legal controversy] of whether plaintiffs here have a contractual right to a particular COLA.”

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

In its Decision, the Colorado Court of Appeals cited (and reproduced a finding from) the case Hayden v. Hayden: “COLA increases are as much a part of the pension as the amounts initially established by the pension system on retirement,” i.e. the “base benefit.” 

Also, for the record I provide selected statements from the Concurrence in this case by Justice Coats, Page 3 –

"By the same token, however, by merely distinguishing these COLA provisions, it (the Supreme Court Decision) fails to directly address the court of appeals’ rationale or otherwise account for our post-McPhail and Bills characterizations of those cases, as a direct result of which the court of appeals considered itself bound to find a contract."

Page 5 – " . . . I believe some explanation why the court of appeals’ reading was incorrect and some guidance concerning the continued vitality of these cases is called for."

Page 6 – "While it may be true that the statutes in this case, unlike the city charter in McPhail, do not contain language of entitlement or duration, such words are, in any event, not language of contract and would indicate nothing about an intent to contract, even if they had been included."

Page 6 –  ". . . the majority in my view not only fails to rebut the court of appeals’ rationale but actually undercuts the presumption against contracting by legislative bodies as well."

Page 8 – " . . . can be judicially recognized to exist only in the face of an unmistakable indication of legislative intent to contract, which I consider to be wholly absent from the COLA statutes at issue in this case."

If the Colorado Judicial Branch had permitted this case to actually go to trial, the fact that even attorneys for the defendant in the case, Colorado PERA, have found an unmistakable indication of legislative intent to contract in the COLA statutes would have been recognized by one or more Colorado courts.

Colorado PERA retirees and active members, in spite of this political decision on the part of the Colorado Supreme Court, the contract right to accrued Colorado PERA COLA benefits manifestly exists.

Colorado PERA pensioners know the truth. Employees of Colorado's Judicial Branch now know the truth. Judges on the Colorado Court of Appeals know the truth. Colorado lawyers know the truth. It is simply the case that, at this particular time in history, Colorado politicians on and off the Colorado Supreme Court refuse to meet Colorado PERA contractual obligations.

This case should be appealed to the United States Supreme Court, and for the time being, the ridiculous pretense of the law serving justice in Colorado should end.

Discover the true nature of Colorado state government at saveperacola.com.

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State Courts Are Defending Public Pension COLA Contracts, (Including Colorado PERA Pension COLA Contracts.)

(Colorado, Montana, Arizona, New Jersey, Illinois, Rhode Island, Washington, California, Oregon.)

Contrary to the public pension contract breach propaganda du jour, state courts are upholding contractual rights to "automatic" public pension COLA benefits.

Lately, a few proponents of taking accrued pension COLA benefits from pensioners have been trying to plant (in politician's heads) the false meme that courts are just fine with breach of public pension COLA contractual obligations.  Everyone is doing it!  Jump on the bandwagon!

Well, I follow developments in U.S. public pension litigation more closely than most, and this claim struck me as ludicrous.  So, I decided to locate and examine the recent pension COLA decisions myself.

Readers should know that a well-oiled, well-funded, corporate public pension "crisis" noise machine exists in the U.S.  The aim of this machine is to divert attention from the $80 billion in corporate welfare that is given away by state and local governments in the U.S., and try to focus attention on public pension unfunded liabilities (underfunded by approximately $40 billion annually.)  If successful, this effort will help protect U.S. corporate welfare.

One such propaganda piece was recently produced by a university research center (receiving corporate financial support from Goldman Sachs no less.)  The paper's author is "surprised" that courts are "upholding" COLA cuts by state legislatures!  Oh my!  But, this "surprise" is unwarranted, as it is contradicted by reality.

In this article I provide excerpts from recent state court decisions in public pension COLA cases, as well as links to the cases.  A brief examination of recent state court decisions will quickly debunk the "courts are just fine with breach of COLA contracts" meme.  This article concludes by providing background information relating to "automatic" and "ad hoc" public pension COLA benefits in the United States.

In 2010, a number of Colorado politicians, state officials and Colorado union officials decided that they wanted to break the COLA contractual obligation in the Colorado PERA pension plan. Yes, Colorado public sector unions have advocated for a breach of the contracts of their retired union "brothers and sisters."  (Remember that retirees no longer pay union dues.  In my view, Colorado public sector unions have sullied the U.S. Labor Movement and exacerbated income inequality in the U.S.)

The hope of the proponents of breaking Colorado PERA public pension COLA contracts was that Colorado courts would not know the difference between "automatic" and "ad hoc" public pension COLAs.  Their hope was that Colorado courts would fail to discover this difference in types of public pension COLA benefits and sanction the desired Colorado PERA pension contract breach.  (Some of those who participated in this scheme to help Colorado governments escape legal debts were Colorado state employees.)

In 2010, these public sector and union officials colluded to break the contracts of Colorado PERA pensioners and attempted to "claw back" accrued Colorado PERA pension COLA benefits (an annual percentage increase in the PERA base benefit that is specified in Colorado law.)  Colorado PERA pensioners are suing the pension administrator, Colorado PERA, and the State of Colorado for the pension contract breach (Justus v. State.)

Public pension administration and jurisprudence are extremely complex subjects.  The proponents of the Colorado PERA pension contract breach have hoped to use this complexity to their advantage.  Statutory public pension COLA provisions may be "ad hoc" COLA benefits that may be legally adjusted by public pension plan sponsors, or "automatic" public pension COLA benefits that are part of public pension contractual obligations.  Any diminishment or impairment of an "automatic" public pension plan COLA benefit by a public pension plan sponsor (such as the State of Colorado or Colorado PERA) is constitutionally impermissible. 

In legal briefs that the proponents of breaking Colorado PERA COLA contractual obligations have filed in the case, Justus v. State, no mention is made of the existence of "ad hoc" and "automatic" public pension COLAs.  Why is that? 

Since 2010, a number of states have attempted to escape statutory "automatic" public pension COLA contractual obligations.  However, state courts are slowly, but surely, learning the distinction between contractual "auto COLAs" and "ad hoc COLAs."  State courts are discovering that "automatic" public pension COLAs are no less a contractual obligation of public pension plan sponsors than are public pension base benefits.  State courts are upholding the Rule of Law in the United States:

COLORADO

Colorado Court of Appeal's Decision in Justus v. State (October 11, 2012): “We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.”

Colorado PERA officials in written testimony to the Joint Budget Committee (December 16, 2009): “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

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

MONTANA

Montana District Court GABA (COLA) taking injunction (December 27, 2013):

"The legislative reduction of the GABA implicates a fundamental constitutional right and must be evaluated under the strict scrutiny standard, 'whereby the government must show that the law is narrowly tailored to serve a compelling government interest.'" 

"Montana law treats public employee pensions as contractual obligations."

http://www.mea-mft.org/Uploads/files/News%20Issues%20Actions/GABAorderTRS.pdf

ARIZONA

Arizona Supreme Court (February 20, 2014 Decision):

"After such vesting, '[the pension] contract cannot be unilaterally modified nor can one party to a contract alter its terms without the assent of the other party.'”

"Smith is inapposite.  Assuming the case was correctly decided, we note that it reflects the general principle that statutory provisions do not create contractual rights.  But statutorily established retirement benefits are an exception to this rule."

"We affirm the decision of the trial court."

http://www.irtaonline.org/documents/ArizonaPensionRuling.pdf

NEW JERSEY

New Jersey Appellate Court (June 26, 2014):

“'It is not the courts' role to run the pension systems,' Reisner wrote. 'Our responsibility is to interpret and apply the constitution in light of the evidence, and we will do so.'"

"Under settled law, for the state to be able to break the COLA contract, it must show at the trial court that the harm to retirees is not 'substantial,' that the government is breaking its agreement for a 'reasonable public purpose,' and that the freeze is related to 'appropriate governmental objectives.'

https://burypensions.files.wordpress.com/2014/06/berg-decision.pdf

ILLINOIS

Illinois Supreme Court Decision (July 3, 2014) in a recent decision finding that retiree health benefits are constitutionally protected as public pension benefits:

“Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.”

(Colorado Supreme Court: “As was noted in Endsley v. Public Employees Retirement Association . . . (1974) ambiguities appearing in statutes regulating pension and retirement funds are construed favorably toward the employee.” (Colorado Supreme Court in Taylor v. PERA, November 17, 1975.)

From the dissent of one Illinois Justice hearing the case:

“Stated otherwise, by its plain language, the pension protection clause prohibits legislative action that diminishes or impairs pension benefits by altering the terms of the contract governing the pension.”

http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

RHODE ISLAND

Rhode Island Superior Court (April 16, 2014):

"Upon retirement, under Rhode Island law, COLAs and pension benefits are one and the same, providing retirees with a vested interest in the benefits which may not be altered retroactively."

"Because there has been a bargained-for exchange, supported by consideration, this Court finds that there is an enforceable implied-in-fact contract between Plaintiffs and the State."

"Furthermore, our Supreme Court’s jurisprudence supports a finding that Plaintiffs possess protected contractual rights in receiving a pension and a COLA."

"Here, having retired, the Plaintiffs have fully performed.  A valid contract exists between Plaintiffs and the State, entitling Plaintiffs to their pension benefits."

http://www.courts.ri.gov/Courts/SuperiorCourt/DecisionsOrders/decisions/12-3166.pdf

WASHINGTON

Washington Superior Court for Thurston County (November 9, 2012):

"In 2011, the Legislature amended these statutes again and repealed the UCOLA for all active and retired members.  It did not offer a benefit in exchange for terminating the COLA."

"Two cases are dispositive to this Court, Jacoby and Navlet.  In each of those cases, our Supreme Court rejected employers' attempts to reserve the right to unilaterally withdraw vested retirement benefits."

"This Court must follow the binding precedent of Jacoby and Navlet.  Under that precedent, the State is prohibited from reserving the right to unilaterally terminate the UCOLA.  The UCOLA was vested because employees began work based, partially, on the promise of a UCOLA.  Further, the parties agree that the State did not offer any off-setting benefit when it terminated the UCOLA.  The State's actions therefore violated existing law and summary judgment to the employees is warranted as a matter of law."

http://arnoldfoundation.org/sites/default/files/courtDocs/WASHINGTON-WA-Education-Assn-et-al-v-State-Retirement-Systems-et-al-11-09-2012-Opinion.pdf

(My comment: Colorado PERA's former General Counsel and current Executive Director Greg Smith, August 17, 2005, Rocky Mountain News:

“His (Colorado PERA General Counsel Greg Smith) briefing paper said 'there has never been a finding in Colorado that the state has reserved its power to make changes' in PERA's benefit structure.”

"Smith said in his opinion that 'other (non-Colorado) courts have set a high burden to meet the necessity threshold.'"

"The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member.  That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan."

"Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem."

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/)

CALIFORNIA

California Superior Court, County of Santa Clara (San Jose), (December 19, 2013):

(My comment: Note that the City of San Jose, California, in its efforts to escape public pension COLA contractual obligations, did not try do deny that the public pension COLA benefit is a contractual obligation, as have Colorado politicians.  The City of San Jose argued for the right to be able to suspend the COLAs in an "emergency.")

"A public employee's pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment.  Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity (Betts)."

"Section 1510-A (COLAs) provides that, if the Council adopts a resolution declaring 'a fiscal and service level emergency,' the City may, for a period of up to five years, suspend all or part of the COLA payments due to all retirees."

"The City argues that Valdes supports the notion that vested rights can be suspended in an emergency.  There are several difficulties with this argument."

"In authorizing denial of benefits rather than mere deferral, Section 1510-A exceeds the scope of what Valdes contemplates as potentially allowable.  Accordingly, Section 1510-A is unlawful and invalid."

http://www.sanjoseca.gov/DocumentCenter/View/25332

OREGON

The Oregon COLA-taking legislation was enacted last Fall (2013.)  Under a provision of the bill that broke the pension COLA contract the legal challenge was sent directly to the Oregon Supreme Court.  Just nine years ago the Oregon Supreme Court addressed this question, the contractual nature of public pension COLA benefits (in 2005.)

From the Oregon Supreme Court Decision in Strunk v. PERB (March 8, 2005):

"We therefore conclude that the elimination of annual COLAs from the 'fixed' service retirement allowance, as set out in Oregon Laws 2003, chapter 67, section 10(3), is inconsistent with the legislature's promise set out in ORS 238.360(1) (2001)."

" . . . Strunk and Sartain petitioners are correct in their assertion that the provision of the 2003 PERS legislation that directs PERB to not apply annual COLAs to certain retired members' 'fixed' service retirement allowances breaches the contrary obligation of the PERS contract to do so; that provision also is declared void and of no effect."

http://scholar.google.com/scholar_case?case=3500629816084156134&q=strunk+v.+PERB+pension&hl=en&as_sdt=4006

What about the South Dakota and Minnesota COLA decisions?

The South Dakota and Minnesota legislatures both passed bills in recent years that reduced public pension COLA benefits.  The Defendants in the Colorado COLA case, Justus v. State, cited these state bills as examples of successful state legislation reducing pension COLA benefits.  But, in its 2012 Decision in the case Justus v. State, the Colorado Court of Appeals noted that public pension COLA benefits in South Dakota and Minnesota are in essence "ad hoc" COLAs.

Colorado Court of Appeals: "Lastly, defendants point to two decisions by trial courts in other jurisdictions that have rejected contentions that the legislature’s modification of public employee retirees’ COLA violates the Contract Clause.  Those cases, however, are distinguishable.  In Swanson, the court held that the plaintiffs did not have a contractual right to a specific statutory COLA formula.  But in that case the relevant statute required only the use of certain procedures (tied to the level of the pension fund’s investment returns) to calculate “whether an adjustment is payable,” on an annual basis.  It did not set forth a specific rate of increase.  Here (in Colorado), however, the COLA formula was never tied to the level of PERA funding until after sections 19 and 20 of Senate Bill 10-001 took effect.  Rather, the formula in effect immediately before the bill’s enactment provided for a specific rate: “[t]he cumulative increase applied to benefits paid . . . shall be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective after March 1, 2000.”  In Tice, the court considered a COLA statute providing that “‘all benefits except those depending on the member’s contributions shall be annually increased by the improvement factor.’”  The court concluded that the statute mandated only that a contribution must be increased by an unspecified amount, which the legislature was free to change.  Here, as noted, the prior (Colorado) COLA statute established not merely the payment of a COLA, but the payment of a specified percentage."

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

NASRA:

"Minnesota is the sole state that protects pensions on the basis of 'promissory estoppel,' that is, public pensions are protected against reduction or other impairment only where an individual can show that he or she justifiably relied on the state’s promise of benefits and was harmed by the change."

http://www.nasra.org/Files/Articles/Buck1404.pdf

Some background materials on public pension COLAs:

NASRA:

"The Governmental Accounting Standards Board (GASB) requires public pension plans to disclose assumptions regarding COLAs, including whether the COLA is automatic or ad hoc, and to include the cost of COLAs in projections of pension benefit payments."

(My comment: Thus, it should be a simple matter to locate a public pension plan's characterization of its statutory COLA benefit.)

http://www.nasra.org/resources/COLA%20IB%20060512.pdf

NASRA:

"According to the Public Fund Survey, approximately three-fourths of pension plans sponsored by states and local governments provide some form of an automatic cost-of-living-adjustment (COLA), i.e., one that does not require specific approval of or action by the plan sponsor (the legislature or city council)."

http://www.nasra.org/cola

In 2001, the actuarial firm, Buck Consultants provided a report to the Legislative Audit Committee of the Colorado General Assembly.  In agreement with a recent statement of Colorado PERA employee Koren Holden, the 2001 Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic.”  The report also refers to PERA's “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”  The Buck Consultants report identifies the 3.5% PERA COLA as “automatic,” contrasting the PERA COLA with an “ad hoc” COLA “as approved by Legislature.”

http://www.nctr.org/pdf/coloradodcdbstudy.pdf

Koren Holden, Colorado PERA Project Manager, in Colorado PERA's on-line video series:

"This video describes the methods and assumptions used to calculate the net pension liability . . ."  "The projections should be based on the benefit terms and legal agreements existing as of the pension plan's fiscal year end."  "The benefits should also incorporate the effects of projected . . . automatic postemployment benefit increases such as the annual increase provided by Colorado PERA."  "In addition, ad hoc post-employment benefit changes should be included if they are considered to be essentially automatic. "

https://www.copera.org/pera/employer/gasbvideos.htm#CalcNPL

As we have seen, HB93-1324 struck the former “ad hoc” COLA language from Colorado law. The language stricken in the bill: “(2) Cost of living increases in retirement benefits and survivor benefits shall be made only upon approval by the general assembly."

GASB:

"Questions and Answers Governmental Accounting Standards Board."

"The intent of Statement 25, paragraph 36a, in distinguishing between automatic and ad hoc COLAs, is to REQUIRE (my emphasis) that actuaries include in the scope of their projections any COLAs that are CLEARLY AUTOMATIC (my emphasis) — that is, COLAs embedded in the plan for which there is NO DISCRETION (my emphasis) or condition as to timing or amount.  This criterion is intended to be strictly construed, as a basis for a minimum standard."

http://gasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827486295&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs

From the Governmental Accounting Standards Board website:

"New GASB Pension Statements to Bring about Major Improvements in Financial Reporting."

"Measuring the Pension Liability."

"Provisions for automatic cost-of-living adjustments (COLAs) and other automatic benefit changes (which generally are written into the pension benefit terms) will also continue to be included in projections.  On the other hand, ad hoc COLAs and other ad hoc benefit changes—which are made at the discretion of the government—will only be included in projections if they occur with such regularity that they are effectively automatic."

http://gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176160140567

August 2, 2010, (former Colorado Governor) Ritter Administration Letter to GASB on contractual public pension obligations:

“The criteria suggested as the basis for differentiating these COLAs [automatic] versus ad-hoc COLAs is the statutes that exist as of the date of the employer’s financial statements.”

“The essential difference between an automatic COLA and an ad hoc COLA is the legal requirement; with this core difference there is no way for the two not to be substantively different.  The legal difference in this instance is critical to the determination of whether the government is unable to avoid the surrender of resources to meet the obligation.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

The National Institute on Retirement Security on “automatic” and “ad hoc” public pension COLAs: “One key design feature of a COLA is whether it is automatic or ad hoc in nature.  An automatic COLA means the retiree’s benefit increases automatically every year by a certain percentage.  An ad hoc COLA is granted at the discretion of the plan sponsor, usually when the fund is in a well-funded position and investment gains have exceeded expectation.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

August 8, 2012, Douglas Greenfield: “The theory behind that is that a pension that has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.”  Greenfield participated in a panel discussion hosted by the National Conference of State Legislatures. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”

http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx

From the Colorado PERA “History of PERA Legislation” memorandum:

HB 00-1458 – "Established 3.5% compounded annual automatic COLA effective March 2001." "Prior to this date, the annual COLA equaled the lower of the actual inflation rate or annual 3.5% cumulative increases since retirement."

(My comment: Note Colorado PERA’s use of the word “automatic” to describe the COLA.)

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

From the December 31, 2000 PERA CAFR:

“The Board agreed to support legislation designed to encourage earlier retirement and reduce the state’s costs, provided that this legislation would also change PERA’s post-retirement adjustment to an automatic increase of 3.5 percent compounded annually and increase the contribution to PERA’s Health Care Trust Fund once PERA is fully funded.  Since House Bill 00-1458 included these provisions, the Board supported this bill.”

Keith Brainard, Research Director, National Association of State Retirement Administrators testifies before the a subcommittee of the U.S. House of Representatives (February 14, 2011):

“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.”

“Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.” “The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.”

http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf

NASRA COLA Issue Brief:

http://www.nasra.org/files/Issue%20Briefs/NASRACOLA%20Brief.pdf

Support the Rule of Law in Colorado at saveperacola.com.

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Chief Justice (retired) New Hampshire Supreme Court: States Must Honor Public Pension Contracts.

"I grew up in a world where a deal was a deal.  If public retirement benefits are changed or withdrawn for employees already in the system, we will lose our ability to attract new employees to public jobs. Uncertainty is not our friend."

"Other states have addressed this concern by making changes prospectively; that is, only having them apply to employees who join the public work force after changes are adopted into law.  At least that puts people on notice and honors expectations."

"At the end of the day, I don't think it's fair or just to change the rules after the game begins.  New Hampshire is a special place where public commitments have meanings.  We should honor them."

"John Broderick Jr., a former chief justice of the New Hampshire Supreme Court, notes that the views expressed above are his own and not necessarily those of the University of New Hampshire Law School, where he serves as dean."

http://www.seacoastonline.com/articles/20140513-OPINION-405130358

Colorado PERA officials in written testimony to the Joint Budget Committee (December 16, 2009): “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

Colorado Supreme Court, in Denver Police Pension and Relief Board, 1961:  When conditions are satisfied for retirement . . . . "at that time retirement pay becomes a vested right of which the person entitled thereto cannot be deprived; it has ripened into a full contractual obligation." "Whether it be in the field of sports or in the halls of the legislature it is not consonant with American traditions of fairness and justice to change the ground rules in the middle of the game."

Colorado Court of Appeal's Decision in Justus v. State (October 11, 2012): “We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.”

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Illinois Supreme Court Refuses to Let Politicians Gut Pensions. Will the Colorado PERA Contract Breach Survive?

Chicago Sun Times:

"A final note: For all those outraged with the (Illinois) Supreme Court Justices, save your fire.  Their job is to interpret the law and the Constitution."

An Illinois' teacher's response to this Chicago Sun Times editorial:

"The Court made clear that our Constitution still functions as a guide to civic behavior; that it is not merely an irksome obstruction around which to craft clever legislative end runs."

"For decades, we Illinois citizens have enjoyed cut-rate public services at least partially subsidized by the willful, cynical stiffing of pension funds.  Let’s fix our money problems without demonizing and punishing public sector citizens/retirees who have done their part, through many decades of teaching and protecting their neighbors, to make Illinois strong."

(My comment: On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s General Counsel Greg Smith blamed the Colorado General Assembly for the decline in 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.”

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

In 2010, Colorado state legislators passed a bill (SB10-001) breaking Colorado PERA pension contracts.  Since then, politically connected lawyers hired by Colorado PERA have struggled to create legal contrivances designed to support the Colorado Legislature's "end run" around those Colorado public pension contracts.

http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court

http://coloradopols.com/diary/59208/pressing-questions-relating-to-the-colorado-pera-public-pension-lawsuit-justus-v-state

On June 4, 2014, the Colorado Supreme Court heard oral arguments in the case addressing the Colorado PERA pension contract breach, Justus v. State.  A lawyer hired by Colorado PERA, and the Colorado Solicitor General presented their latest legal contrivance supporting the Colorado Legislature's planned "end run" around pension contracts.

The latest Colorado PERA contrivance is that, although the statutory language establishing the Colorado PERA "base benefit" and the Colorado PERA "COLA benefit" is identical, statutory language in another Part of the Colorado PERA statues supports the PERA "base benefit," but not the PERA "COLA benefit."  That Part of the PERA statutes sets forth choices for delivery of the lifetime PERA annuity and states that the PERA annuity is "paid for a lifetime."  Why are Colorado PERA's lawyers surprised that the statute setting forth options for payment of PERA benefits for a lifetime states that Colorado PERA pension benefits are "paid for a lifetime"?  They are lifetime annuities.

Why do Colorado PERA's lawyers believe that this language in the Part of the PERA statutes providing options for payment of the PERA annuity supports the PERA "base benefit," but not the PERA COLA benefit?  There is no basis for this claim.  It is purely a contrivance designed to allow Colorado state and local governments a means of escaping their legal debts.

Since the Colorado Court of Appeals has rejected the prior contrivances of Colorado PERA's lawyers in the case Justus v. State, the creativity of Colorado PERA's lawyers has been taxed.  The arguments of Colorado PERA's lawyers now desperately cling to gossamer threads.  (I am amazed that Colorado PERA pension members are forced to pay for the crafting of such legal contrivances out of their own trust funds.)

During the June 4, 2014 oral arguments Colorado PERA's lawyers presented the latest Colorado PERA legal contrivance:

"If you look at the language of the PERA statute . . . Section 801.1, of the PERA statutes, says that the monthly benefit is payable for the lifetime of the beneficiary."  "COLAs are instated in Part 10 of the PERA statutes . . . "  "The COLA statutes in Part 10 simply don't.  That language is conspicuously absent from the COLA statutes."

Apparently, Colorado PERA's lawyers are not troubled by the fact that this "durational language" is also "conspicuously absent" from the statute creating the PERA base benefit contract (Part 6) which they agree creates a contractual obligation.

Here is the response of the retiree's attorney Rosenblatt during the oral arguments:

"First of all, I want to disagree with my colleagues as to what creates the base contract, the base pension contract, it is 24-51-602, which reads, that members . . . SHALL upon written application and approval of the board, receive service retirement benefits pursuant to a benefit formula . . ."  "So, it's 'SHALL RECEIVE' is the language that creates the contract for the base pension, which they (defendant's attorneys) agree is a contract."  "And, the COLA statute says "SHALL," uses the same mandatory language."  "The durational language that they speak of is under a section that sets forth options for payment of lesser amounts if the retiree wants the benefit to cover the life of a spouse."  "The actual creation of the (base benefit) contract is based on the mandatory language 'SHALL RECEIVE" in 24-51-602 and I would submit that the mandatory language is the same as the mandatory language in the COLA."

It should be noted that the Colorado Supreme Court (like the Illinois Supreme Court) has determined that any ambiguity in public pension statutes shall be liberally construed in favor of the rights of the pension member (Endsley.)  This only makes sense.  What justice would there be in allowing state governments to casually break their contracts with public employees who have given thirty years of service?  Further, the U.S. Supreme Court has deemed that any attempt by a state government to escape its financial obligations shall receive heightened scrutiny.  No discovery or trial has yet occurred in this case, Justus v. State.

Colorado Law – Section 24-51-1002 (1), Colorado Revised Statutes, “ . . .the cumulative increase applied to benefits paid SHALL be recalculated annually as of March 1 and SHALL be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective . . .”

Under Colorado law, members of Colorado PERA who purchase PERA service credit SHALL receive Colorado PERA pension benefits in effect at the time of the purchase:

Colorado Law – Section 24-51-502 (3), Colorado Revised Statutes, “Service credit purchased by members . . . SHALL be subject to the benefit provisions in effect for the existing member contribution account.”)

Colorado Supreme Court (in the case, Bills):

“. . . until an employee has earned his retirement pay, or until the time arrives when he may retire, his retirement pay is but an inchoate right; but when the conditions are satisfied, at that time retirement pay becomes a vested right of which the person entitled thereto cannot be deprived; it is ripened into a full contractual obligation.”

Here is a link to the June 4, 2014 Colorado Supreme Court Oral Arguments in the Colorado PERA retiree lawsuit, Justus v. State:

http://www.courts.state.co.us/Courts/Supreme_Court/Oral_Arguments/Index.cfm

In 2010, when Colorado PERA and Colorado legislators began to plot the SB10-001 COLA taking they admitted that the COLA was a Colorado PERA contractual obligation (See comments of SB10-001 sponsor Senator Josh Penry.)  Their plan, at that time, was to admit to the contract, but argue that it was "actuarially necessary" to break the contract.

Today, their legal strategy is to deny the existence of the PERA COLA contractual obligation.  But, it's too late to change the legal strategy, they have already acknowledged their contractual obligations to pay the PERA COLA benefit.  Just as Colorado PERA administrators cannot retroactively take accrued PERA COLA benefits, they cannot retroactively change their legal strategy to take accrued PERA COLA benefits.

Thus, Colorado PERA's lawyers have a difficult task.  The evidence of the Colorado PERA COLA contract includes admissions of its existence by all parties.  There is no question that the PERA COLA is a contractual obligation.  The Colorado PERA COLA contractual relationship under discussion has been confirmed in written testimony provided by Colorado PERA's lawyers to the JBC in 2009, and by the sponsor of SB10-001, Senator Josh Penry, and by members of the Legislature during floor debate of SB10-001, and by PERA's representative Rob Gray at the inception of the "automatic" PERA COLA benefit (a Colorado PERA "liability,") and by PERA's current Executive Director in a public statement, and by PERA's hired actuaries.  Further, the contractual obligation is clear in Colorado PERA statutes, and it has been confirmed in a Colorado Attorney General's Opinion.  All involved parties agree, on the record, that the PERA COLA is a contractual obligation.  Colorado PERA's lawyers are currently trying to persuade the Colorado Supreme Court to don the blinders and ignore the many acknowledgements of the PERA COLA contract by Colorado PERA and state officials.  Their latest Clintonesque undertaking is to persuade the Colorado Supreme Court that "shall" does not mean "shall."  Colorado PERA's lawyers created this new contrivance to feed to the Colorado Supreme Court judges.  They hope the judges will swallow it whole and allow Colorado governments to engage in what is, in my opinion "theft."

In Colorado, public pension contracts are strongly supported in case law.  Colorado is one of the states in which courts follow the strict "California Rule" of public pension jurisprudence.  For 60 years, the Colorado Supreme Court has recognized the contractual public pension relationship, including the specific right to the pension "escalator" (COLA or ABI.)  This makes sense.  Otherwise, Colorado governments would be free to retroactively take the earnings of their employees.  Colorado governments would be free to include an "automatic" COLA provision in a public pension plan, force their employees to fund that COLA benefit, underfund their pension plan, and then take and use employee consideration supporting the COLA to pay off plan unfunded liabilities.

Newspapers editorialize on the recent Illinois Supreme Court Decision, Chicago Sun Times:

"By ruling that the subsidized health care benefits of retired state employees are protected by the Illinois Constitution, the court raised the unpleasant specter that there may be only one way out of the pension mess facing the state as well as local governments.  That is: come up with the money, no matter how painful."

"At every turn and in the strongest of language, the high court seemed to go out of its way to uphold the ironclad sanctity of the 1970 Illinois Constitution’s 'pension protection' clause for public employees."

Quoting from the Illinois Decision:

“Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.”

"Others noted Thursday’s ruling did not directly deal with the two main legal arguments raised in defense of the state’s pension-reform legislation.  One is that the state faces a financial emergency that allows it to do what it needs to protect the welfare of its citizens.  The other is that state employees are receiving 'consideration' for their reduced benefits in the form of lower contributions."

(My comment: Colorado PERA Board Trustee [and judge] Casebolt assured PERA retirees present at the August 11, 2009 Colorado PERA Denver “Listening Tour” meeting that: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

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

http://www.suntimes.com/news/brown/28462666-452/supreme-court-throws-wet-rag-on-pension-plan.html#.U7rD7WcU8dc

From chicagobusiness.com:

"Cash-strapped government budget makers 'cannot write (the Illinois Constitution) to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve,' said a more restrained but equally decisive Illinois Senate President John Cullerton."

"The court ruled that retiree health insurance benefits for state workers mandated by the Legislature deserve the same level of protection as pensions, which according to the constitution 'cannot be diminished or impaired.'"

"'If the justices can read the pension clause of the constitution to protect health benefits, they certainly would use it to protect pension benefits,' former state Budget Director Steve Schnorf said."

(My comment: Colorado's state budget director, Henry Sobanet 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" that supported the bill, SB10-001, with its hired lobbyists in 2010.  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

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)

Chicagobusiness.com:

"'This bodes very, very ill' for the pension cuts the Legislature approved for state workers, and for a similar set of trims Mayor Rahm Emanuel wants for his workforce, he added."

"Time after time, without finally resolving the issue, the court seemed to go out of its way to knock down any changes not agreed to by workers unions, and perhaps by each individual worker."

(My comment: Why do Colorado PERA administrators cite union support for the SB10-001 PERA pension contract breach?  These unions have no authority to relinquish the contractual rights of any individual Colorado PERA member.  Most PERA members do not belong to these unions.)

Chicagobusiness.com:

"But, said the court, 'In light of the constitutional debates, we have concluded that the (pension) provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.'"

"But, ruled the court, 'Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.'"

"So, the current 3 percent guaranteed annual COLA would appear to be here to stay."

"'Time and again we have urged legislators to respect the constitution they are sworn to uphold and to work together with us to develop fair and constitutional solutions,' AFSCME said in a statement."

"I wouldn't be at all surprised if House Speaker Michael Madigan revives his campaign to force local units of government, particularly school districts, to pick up pension costs that the state now pays."

(An online comment was made on this Chicagobusiness.com article: "The politicians that crafted this legislation knew all along they were going against the constitution.  They proceeded anyway thinking nobody would challenge it.")

http://www.chicagobusiness.com/article/20140704/BLOGS02/140709915

Chicago Tribune:

"The Supreme Court has come close to declaring that whatever retirement benefits were in place on THE FIRST DAY (my emphasis) of a worker's public job can't be reduced for however many decades he or she is alive."

(My comment: Here the Chicago Tribune refers to the "California Rule" of public pension jurisprudence.  Recall that Professor Amy Monahan in the article “Statutes as Contracts? The ‘California Rule’ and Its Impact on Public Pension Reform,” (Iowa Law Review article) expresses her surprise at the Denver District Court's initial decision in the case Justus v. State:

“The court’s ruling is surprising both because the court broke from the previously endorsed [by Colorado courts] California Rule, under which it is clear that detrimental changes to the benefits of current employees are only permissible where they are offset with comparable new advantages, and because the change at issue is one that could be characterized as a retroactive change to benefits, which is the type of change that invites the most scrutiny under a contract clause analysis.”

Public pension Legal Scholar Professor Amy Monahan in yet another law review:

"The (Denver District) court’s ruling is surprising both because the court appeared to break from earlier Colorado decisions that found pension benefits to be contractually protected prior to retirement and because the change could be characterized as a retroactive change to benefits, which is the type of change that invites the most scrutiny under a contract clause analysis.")

The Chicago Tribune cites language from the Illinois Supreme Court Decision:

"(W)e have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them."

http://www.chicagotribune.com/news/opinion/chi-health-care-pension-ruling-edit-20140703,0,2677793.story

On-line responses to the Chicago Tribune editorial:

"There is no public pension crisis.  States have the money to fully fund their pension obligations, but they would rather spend it on corporate subsidies.  U.S. public pensions face a 30-year shortfall of $1.38 trillion, or $46 billion dollars on a annual basis. This is dwarfed by the $80 billion a year states and cities spend on corporate subsidies."

"The war on public pensions is a distraction to prevent citizens from seeing the real cost of entitlement programs for corporations.  The money the states should have been contributing to pensions have been going to subsidize corporate tax breaks.  End the corporate tax breaks, and states will save $80 billion dollars a year.  That is almost double what they need to fulfill their pension obligations."

"The charge against public pensions is being lead by a former Enron trader.  His mission is two-fold.  Protect corporate entitlement programs and change public pensions from Defined Benefit (DB) to Defined Contribution (DC).  If he is successful in changing public pensions from DB to a DC model, Wall Street will rake in trillions in fees while all the risk falls upon public retirees."

"Write to your state representatives.  Let them know that you know the real problem is entitlement programs for corporations, and that these tax breaks have to end.  To read more about this subject, read David Sirota’s article: “The Plot Against Pensions”.

"Exactly, and that's the thing people don't talk about.  You can't compare public to private workers because private sector workers don't just have their 401(k)s, they have Social Security. Public workers have only their pensions to look to for retirement."

"Politicians failed to follow up on the terms of the contract and now the state wants to punish the employees.  I guess the Supreme Court of Illinois is good at interpreting a contract."

"Let's not paint with such a broad brush of blame, levels of government didn't cause this problem.  Elected officials who failed to do their job with integrity are to blame."

"This is progress.  The Court has ruled that it is not its responsibility to bail out the legislators, governors, aldermen, and mayors who got us into this mess.  Anybody waiting for the pension fairy to wave her magic wand is out of luck."

"Finally!  Back to you, lawmakers – see to it that all public pensions are fully funded – do your jobs!"

"It was the State of Illinois that chose not to allow state employees to be in Social Security.  That was because then the State would have been forced to make contributions and could not divert the payments to roads, welfare and other expenditures."

Chicago Sun Times;

"The Illinois Supreme Court on Thursday said loudly, clearly and ominously that public employee pension benefits in the state cannot be cut."

"That can mean only one thing: State and local lawmakers had better get working on a Plan B. Illinois needs alternatives to the state pension-reform law passed in December and to the Chicago pension-reform law passed in May."

"In this case, the justices ruled that subsidized health care for retired state employees is protected under the Illinois Constitution and can’t be cut, just like pension benefits."

"Just like pension benefits."

"No one ever thought a pension-reform law would breeze through the Supreme Court; the Constitution prohibits benefits from being 'diminished or impaired.'  State lawmakers took that into account in drafting the reform bill, looking high and low for ways to inoculate the bill constitutionally.  In the state worker bill, for example, employees will get a state funding guarantee and a reduction in their annual contributions in exchange for reduced benefits."

"A final note: For all those outraged with the Supreme Court justices, save your fire. Their job is to interpret the law and the Constitution."

http://www.suntimes.com/opinions/28456548-474/time-for-pension-reform-20.html#.U7rTUWcU8dc

A Teacher Responds to the Sun Times Editorial. 

Illinois blogger Glen Brown draws attention to a teacher's response to the Sun Times editorial in his blog post today.  Here are a few excerpts:

"Dear Editors:

"As a retired teacher, I resent the relentless and often cavalier attacks on my pension and its relationship with state government."

"Yes, the Illinois Supreme Court reiterated what has been crystal-clear all along.  Our teacher/public worker health benefits are a contractual obligation, freely entered into by all parties, enforceable by Constitutional law, and supported by the time-honored American values of ethics and fairness."

"The Court made clear that our Constitution still functions as a guide to civic behavior; that it is not merely an irksome obstruction around which to craft clever legislative end runs."

"In following your false premise to its (necessarily) illogical conclusions, your editorial staff has failed to struggle with the larger, more germane issue: Illinois has an antiquated and unsustainable tax structure.  Revenues are only remotely correlated with the demand for public services.  Corporations and wealthy individuals are offended by the idea that they should pay more because they have more."

"It’s time for ethics, fairness, and justice to take the floor in Springfield.  For decades, we Illinois citizens have enjoyed cut-rate public services at least partially subsidized by the willful, cynical stiffing of pension funds.  Let’s fix our money problems without demonizing and punishing public sector citizens/retirees who have done their part, through many decades of teaching and protecting their neighbors, to make Illinois strong."

Jane Artabasy

http://teacherpoetmusicianglenbrown.blogspot.com/

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Illinois Supreme Court Affirms the “Cardinal Principle” of Public Pension Legal Rights.

Comments of an Illinois state retiree and former Marine on Illinois' pension contract breach:

"As I did when I volunteered as a United States Marine Corps service member, when I volunteered for state service, I relied on citizens to have my back.  While they seem to support my service in the U.S. Armed Forces, I’m dismayed that my state service is regarded with such enmity.  Had I known, I would have eschewed state employment for the increased immediate benefits of private sector employment.  Instead of relying on our representative democracy to adhere to the rule of law and keep the promises that were made during my 34 years of state employment, I would have obtained a job in the private sector, demanded and received a much larger salary for my educational level and job requirements . . ."

"I will never forget the abandonment that I’ve felt, nor will I forget the foolishness of my naive trust in the ultimate 'I’ve got your back' attitude of every one of us here in the greatest country on Earth."

Illinois Supreme Court, last Thursday:

“Moreover . . . to the extent there is any question as to legislative intent and the clarity of the language of a pension statute, it MUST (my emphasis) be liberally construed in favor of the rights of the pensioner.” (Prazen v. Schoop.)

"Finally, we point out again a fundamental principle noted at the outset of our discussion.  Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner." 

"Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems."

http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

Colorado Supreme Court:

“As was noted in Endsley v. Public Employees Retirement Association . . . (1974) ambiguities appearing in statutes regulating pension and retirement funds are construed favorably toward the employee.” (Colorado Supreme Court in Taylor v. PERA, November 17, 1975.)

http://scholar.google.com/scholar_case?case=11856628789716288634&q=Taylor+v.PERA&hl=en&as_sdt=2,6

Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the cardinal principle that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee." (August 14, 1984)

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984

For some reason, the Colorado Supreme Court's "cardinal principle" of Colorado public pension contractual rights has gone unnoticed in the current litigation of the Colorado public pension contractual rights case, Justus v. State.  (The State of Colorado and its pension-administering arm, Colorado PERA, are currently attempting to escape contractual obligations to pay for accrued COLA benefits in the PERA pension system.  That is, the State of Colorado does not want to pay its debts.)

Has this "cardinal principle" of Colorado public pension jurisprudence been abandoned?  If so, when did Colorado courts abandon this "cardinal principle"?  If a "cardinal principle" exists in an area of Colorado jurisprudence, should that "cardinal principle" not be a factor in court decisions in that area of jurisprudence? 

What is the typical lifespan of a Colorado Supreme Court "cardinal principle"?

(Keynes has noted, "There is nothing a government hates more than to be well-informed; for it makes the process of arriving at decisions much more complicated and difficult.")

On Thursday, the Illinois Supreme Court (in a case relating to retiree health benefits) confirmed that contractual public pension benefits in Illinois cannot be retroactively diminished or impaired.

The State of Illinois has some of the worst funded public pension systems in the nation.  Nevertheless, the Illinois Supreme Court will not let Illinois politicians off the hook for their past pension system mismanagement.  (If they allowed this, moral hazard would certainly be introduced into legislative pension management.)

The Illinois Legislature, like the Colorado Legislature, has not paid its full public pension bills (ARC) for many years, and like Colorado, Illinois has racked up its public pension debt.  Also, like many Colorado state legislators, a majority of Illinois state legislators want to escape state debts through breach of public pension contracts.

This recent Illinois Supreme Court decision was surprising to many in Illinois who were under the impression that Illinois' Speaker of the House Madigan, through political influence, had four of the members of the Illinois Supreme Court in his back pocket. 

MADIGAN: "Madigan sounds confident it (the Illinois pension contract breach) will work.  'I think that there will be at least four members of the Illinois Supreme Court that will approve the bill,' he said."

http://wuisnews.wordpress.com/2013/05/24/justice-no-pension-cuts-for-illinois-judges/
http://www.suntimes.com/19841734-418/analysis-madigan-pushes-pension-plan-unions-balk-senate-vote-uncertain.html#.U7cJ-2cU-14
https://will.illinois.edu/news/story/no-pension-cuts-for-illinois-judges

Part of the legal strategy in Illinois was exclusion of judges from the enacted pension contract breach.  (I don't know if Colorado legislators considered, and rejected, this tactic when plotting Colorado's attempt at a Colorado PERA pension contract breach in 2010.)

A few on-line comments on the Illinois Supreme Court Decision:

"If federal funds were used to pay part of any state employee’s salary and benefits, (this) might be grounds for a federal appeal case on impairment of contracts even if ISC were to rule in favor of SB1."

"I think we had to go through this exercise too, and I have to say that I’m gratified that the judiciary has proven itself independent of Madigan’s chilling statement of claiming to be able to get 4 on his side.  The fat lady is tuning up on SB1."

"Finally, it looks like the ISC decided they didn’t want to be made the scapegoat for the pension problems and decided to be clear about the General Assembly’s fault in the whole mess."

(My response: August 16, 2010, “Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. ‘The belief is that if the employer [the state] prevails, it will have been worth the political risk,’ Klausner says.  ‘And if they lose, they will be no worse off than before.’  Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the ‘bad guy’ if they overturn the law.”

http://www.governing.com/news/state/States-Test-Whether-Public-Pension-Benefits-Given-Can-Be-Taken-Away.html)

Illinois pension rights blogger Fred Klonskey:

"Yesterday’s Illinois Supreme Court decision is cause for celebration.  Six of the seven judges agreed that the pension protection clause of the state’s constitution meant what it said. Contractual pension benefits between the state and all government bodies in the state cannot be diminished or impaired."

"Legal opinions suggest that (Illinois gubernatorial candidate) Rauner’s plan would not pass constitutional muster based on yesterday’s 6-1 ruling."

"But it’s bad news for (Governor) Quinn as well.  Aside from his friend Justice Ann Burke (wife of Democratic Machine boss and alderman, Fast Eddie Burke), no member of the court agrees with his plan for pension theft."

http://preaprez.wordpress.com/

From ChicagoBusiness.com:

"Pension reform dealt blow by Illinois Supreme Court."

"Pension reform, RIP?"

"In a case with ominous implications for the state's pension reform law, the Illinois Supreme Court ruled today that the state constitution prevents any diminishment of health care benefits for retired state employees."

"According to the 6-1 decision, the pension protection clause — which says that retirement benefits are a contractual agreement that 'cannot be diminished or impaired' — applies to other retirement benefits, not just pensions.  That overrode the state's argument that its emergency powers, in dealing with its budget crisis, justified an increase in what retirees must pay for their health benefits."

“'This is a major victory for members of state retirement systems,' said John Fitzgerald, a partner at Chicago law firm Tabet DiVito & Rothstein LLC who represents retired state teachers and school administrators.  'I expect it will have a very significant effect on pending litigation' over the state's pension reform law.  'It means that the Illinois Supreme Court is giving the pension protection clause the broad and liberal interpretation that the drafters intended.'”

"In an opinion written Justice Charles Freeman, a Chicago Democrat, the court indicated that it would not take a deferential approach.  The court said any changes to a pension statute 'must be liberally construed in favor of the rights of the pensioner,' quoting one of its own opinions, written in 2013, that involved a dispute over early retirement between an electrical department supervisor and the downstate city of Peru."

(My comment: An earlier observation by Gino L. DiVito comes to mind: “ . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”)

"In one key paragraph, the court rejected the idea that the state's budget crisis could justify a change in retiree benefits."

"'In the challenges to the overhaul of pensions for state workers and schoolteachers outside Chicago, the state has argued that changes in the cost of living allowance are not protected by the pension clause because they are not a core retirement benefit."

“'This definitely shuts down the argument that the COLA isn't part of the benefit,' said Amanda Kass, budget director and pension specialist at the Center for Tax and Budget Accountability, a nonprofit advocacy group in Chicago."

http://www.chicagobusiness.com/article/20140703/NEWS02/140709930/pension-reform-dealt-blow-by-illinois-supreme-court#

Illinois State Senator Chapin Rose:

"Again, I stress that this ruling related to the trial court’s decision to dismiss the healthcare case and the Supreme Court was ordering it to be reinstated.  Nonetheless that the fact that Court’s opinion was issued by a 6-1 majority of the Justices with such strong language protecting both healthcare and pension benefits gives us a very direct insight into how they view the core issue of statutorily diminished benefits itself.."

http://pension-vocabulary.blogspot.com/2014/07/supreme-court-of-illinois-backs-pension.html

From the Chicago Tribune:

"Supreme Court ruling signals trouble for state, Chicago."

"The Illinois Supreme Court ruled today that subsidized health care premiums for retired state employees are protected under the Illinois Constitution, signaling potential trouble for an overhaul of pension benefits that’s also being challenged in court."

"Retired workers sued, arguing the changes violated a provision in the state constitution that declares pension benefits 'shall not be diminished or impaired.'  Attorneys for the state argued the constitution did not specifically declare health care benefits were protected."

"In Thursday’s ruling, the justices argued 'there is nothing in the text of the Constitution that warrants such a limitation.'”

“'We conclude that the state’s provision of health insurance premium subsidies for retirees is a benefit of membership in a pension or retirement system within the meaning (of the Constitution) and therefore the General Assembly was precluded from diminishing or impairing that benefit,' justices wrote in their opinion."

"The same constitutional clause protecting pension benefits is at the heart of several lawsuits challenging broader pension changes lawmakers passed in December.  That measure reduces costs-of-living increases and raises retirement ages, among other changes."

"The high court did not settle that debate in the healthcare case today, but the language in the majority opinion seemed to support the contention that pension benefits cannot be reduced."

http://www.chicagotribune.com/news/local/breaking/chi-court-state-cant-cut-subsidies-for-retirees-health-care-premiums-20140703,0,6383829.story

From Forbes:

"Illinois Supreme Court Delivers Huge Fiscal Blow To Taxpayers."
(My comment: I would not describe a requirement that one pay one's debts as a "fiscal blow.")

"The Illinois Supreme Court issued an opinion this morning that is a godsend to retired public employees, but a huge blow to the state’s taxpayers and creditors.  The ruling concludes that retiree health insurance falls under the protection of the state’s constitutional non-impairment clause.  In addition to overturning the attempt to save state taxpayers money on retiree health insurance for public employees, the even bigger implication is what this may say about the constitutionality of the state’s recent pension overhaul."

"In December 2013, the state passed a controversial pension overhaul bill that was set to take effect earlier this week, but the implementation of which was delayed by a judicial stay, pending various constitutional challenges."

"Notably the court said today that: 'we have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.'”

"This is as clear of a statement as I have seen on the subject.  Essentially, it says to the state that 'we do not care whether or not you have the money to pay for pensions and health care – you are required to pay them.'  Now it is up to our elected officials to figure out if and how we can afford to do this."

http://www.forbes.com/sites/jeffreybrown/2014/07/03/illinois-supreme-court-delivers-huge-fiscal-blow-to-taxpayers/

From Reuters:

"Christopher Mooney, director of the Illinois Institute of Government & Public Affairs at the University of Illinois, said before the ruling that a reversal of Nardulli's decision would indicate the pension reform law could be ruled unconstitutional."

"'If you can't do health insurance, you can't do pensions either,' Mooney said."

"The preamble to Illinois' pension reform law concludes that the state's fiscal problems cannot be solved without changes to the retirement system.  But Mooney said the argument is 'not going to fly' because the state could raise revenue rather than cut benefits."

(My comment: As we have seen, Colorado state and local governments currently give away thirteen percent of their revenue in the form of corporate welfare.)

"Judge John Belz, who is hearing the consolidated lawsuits, in May stopped the pension law from taking effect on June 1 until the challenges were resolved."

"Illinois has had the worst-funded pension system among all U.S. states after decades of skipping or skimping on pension payments."

http://www.reuters.com/article/2014/07/03/usa-illinois-retiree-healthcare-idUSL2N0PE10720140703

From Bloomberg:

"The Illinois Supreme Court, in a 6-1 decision today, ruled the health-insurance premium subsidies are pension benefits protected by the state’s constitution that can’t be diminished or impaired, as Illinois lawmakers tried to do with a 2012 law that let an administrator determine the level of contributions."

"Protection of pension benefits is the same provision in the Illinois constitution retirees are relying on in challenging Quinn’s plan to cut the pension shortfall with reductions in cost-of-living adjustments and increasing the retirement age for workers who are now 45 or younger."

"The ruling supports the argument that 'retirement security, including affordable health care and a modest pension, cannot be revoked by politicians,' Henry Bayer, executive director of the Illinois chapter of the American Federation of State, County and Municipal Employees, said in a statement."

http://www.bloomberg.com/news/2014-07-03/illinois-pension-reform-in-question-on-insurance-ruling.html

From Illinois Issues Blog:

"Kent Redfield, an emeritus professor at the University of Illinois Springfield, said that while the ruling pertains to a different case, the language used is clear. 'You could find some way to parse some of it, but it’s really, really difficult.  There’s no logical way to get to upholding Senate Bill 1 (the pension reform legislation) based on the clear content of this ruling and the way they’ve construed the pensions clause.'”

"Republican candidate for governor Bruce Rauner has advocated for moving employees’ future benefits to a system that looks more like a 401-K.  That plan would go even further than SB1, so it is unlikely that it would be upheld if SB 1 were rejected.  But it is possible that the court’s ruling might strengthen his case for offering a defined contribution plan to newly-hired employees."

http://illinoisissuesblog.blogspot.com/2014/07/options-for-pension-reform-plan-b-may.html

Excerpts from the July 3, 2014 Illinois Supreme Court Decision:

"Each of the complaints alleged that Public Act 97-695 violates the pension protection clause of the Illinois Constitution of 1970 (Ill. Const. 1970, art. XIII, § 5).  Two of the complaints alleged a violation of the contracts clause (Ill. Const. 1970, art. I, § 16), and one complaint alleged a violation of the separation of powers clause (Ill. Const. 1970, art. II, § 1)."

"The Kanerva v. Weems plaintiffs further claim that Public Act 97-695 violates the contracts clause of the Illinois Constitution (Ill. Const. 1970, art. I, § 16), which provides that '[n]o ex post facto law, or law impairing the obligation of contracts *** shall be passed.'”

"As to that subset of now-retired employees, they allege that the State promised participants in that program that they would receive free health insurance if they established at least 20 years of creditable service and that the subset of plaintiffs who took early retirement reasonably and detrimentally relied on the State’s promise by, among other things, retiring from state service AND MAKING CASH PAYMENTS TO OBTAIN ADDITIONAL SERVICE CREDITS (my emphasis).  That subset of plaintiffs claim that, under these circumstances, the State should not be permitted to renege on its promise and should be enjoined from withholding health insurance premiums from the annuity payments owed to the early retirees."

(My comment: Many Colorado PERA retirees have purchased service credit in the PERA pension system.  I believe that these separate public pension contracts have also been violated under SB10-001.  The Colorado PERA service credit statute requires that the benefits in place at the time of purchase of the service credit must be provided.)

"The complaint in the Bauer v. Weems case also challenges Public Act 97-695 on the ground that it constitutes an impermissible impairment of contract in violation of the contracts clause (Ill. Const. 1970, art. I, § 16)."

“Moreover . . . to the extent there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.” (Prazen v. Schoop.)

" . . . it is clear that if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired."

"Delegates were also mindful that in the past, appropriations to cover state pension obligations had 'been made a political football' and 'the party in power would just use the amount of the state contribution to help balance budgets,' jeopardizing the resources available to meet the State’s obligations to participants in its pension systems in the future."

"It does so, he explained, in order to protect 'public employees who are beginning to lose faith in the ability of the state and its political subdivisions to meet these benefit payments' and to address the 'insecurity on the part of the public employees [which] is really defeating the very purpose for which the retirement system was established."

"In light of the constitutional debates, we have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them."

"Defendants observe that health care costs and benefits are governed by a different set of calculations than retirement annuities.  While that is unquestionably true, it is also legally irrelevant."

"Finally, we point out again a fundamental principle noted at the outset of our discussion.  Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.  This rule of construction applies with equal force to our interpretation of the pension protection provisions set forth in article XIII, section 5.  Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems."

From the dissent of one Justice hearing the case:

"Stated otherwise, by its plain language, the pension protection clause prohibits legislative action that diminishes or impairs pension benefits by altering the terms of the contract governing the pension."

"The pension protection clause protects pensions, not subsidized health care premiums."

http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

Statement of Illinois Senate President John Cullerton on the Illinois Supreme Court Decision:

"Today, the Illinois Supreme Court made it very clear that the Pension Clause means what it says."

"The Court cannot rewrite the Pension Clause to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve."

"The Clause was aimed at protecting the right of public employees and retirees to receive their promised benefits and insulate those benefits from diminishment or impairment by the General Assembly."

"If the Court’s decision is predictive, the challenge of reforming our pension systems will remain."

Statement from AFSCME:

“'The Supreme Court ruled today that men and women who work to provide essential public services — protecting children from abuse, keeping criminals locked up, caring for the most vulnerable and more — can count on the Illinois Constitution to mean what it says,' AFSCME Council 31 executive director Henry Bayer said. 'Retirement security, including affordable health care and a modest pension, cannot be revoked by politicians."

“'Unions representing public employees and retirees have stood virtually alone against political and corporate-funded attacks on retirement security,' Bayer added.  'Time and again we have urged legislators to respect the constitution they are sworn to uphold, and to work together with us to develop fair and constitutional solutions to the state’s very real fiscal challenges.  We remain ready to work in good faith with anyone to do so.'”

Here are a few selected comments, from the many, that have been posted about the Supreme Court Decision at the Illinois political news site, Capitol Fax:

"Even though (Senate President) Cullerton’s plan was agreed to by a lot of people, it wasn’t in compliance with the contract clause or the pension clause.  It would have been found unconstitutional also, maybe just not with as many votes."

"Sounds like the Supreme Court decision for SB1 is embedded within this ruling. 'Finally, we point out again a fundamental principle noted at the outset of our discussion.  Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.  This rule of construction applies with equal force to our interpretation of the pension protection provisions set forth in article XIII, section 5.  Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems."

"Keep in mind the Pension system does not need to be funded 90% like the legislature and Quinn have pushed for.  In fact most Pension Systems are not even close to that number."

(My comment: The proponents of SB10-001 in Colorado propose that their contract breach achieve an unnecessary standard of 100 percent PERA pension funding.  This level of funding has been achieved only twice in PERA's history.)

"This really shouldn’t be a surprise to anyone.  Don’t make promises you don’t intend on keeping."

Comments of an Illinois state retiree and former Marine:

"As I did when I volunteered as a United States Marine Corps service member, when I volunteered for state service, I relied on citizens to have my back.  While they seem to support my service in the U.S. Armed Forces, I’m dismayed that my state service is regarded with such enmity.  Had I known, I would have eschewed state employment for the increased immediate benefits of private sector employment.  Instead of relying on our representative democracy to adhere to the rule of law and keep the promises that were made during my 34 years of state employment, I would have obtained a job in the private sector, demanded and received a much larger salary for my educational level and job requirements . . ."

"I’m a veteran of the USMC, and I appreciate all the gratitude that I get for that service.  Is state service comparable?  Absolutely not.  I risked my life in service of my country as a Marine.  I never expected to be accorded the same level of appreciation for my service to the state, but I did expect our representatives, and by proxy of your vote for them, to keep their promises, whether they were constitutionally protected, or not."

"Instead, now I have been relegated to being one of 'them.'  Abandoned by many who feel that they have no stake in the malfeasance of their representatives, and who expect me, alone, to shoulder the burden of their incompetence."

"I’m a United States Marine.  I don’t give up.  And while I will always support the United States, I will never again support those who feel that any minor impairment of their financial condition takes precedence over the slow financial death of my family and I."

"I will never forget the abandonment that I’ve felt, nor will I forget the foolishness of my naive trust in the ultimate 'I’ve got your back' attitude of every one of us here in the greatest country on Earth."

"I’ll pass that on to my friends and family.  I’ll also recommend that anyone working for the state, get everything up front in wages and salary because, ultimately, you cannot trust that anyone 'has your back.'”

The following comment called to mind the fact that Colorado's public sector unions (our "union bosses") supported the 2010 Colorado PERA pension contract breach in SB10-001.  Pensioners no longer pay union dues:

"The problems of the state fiscal are not the problems of the pensioners.  Any 'Union Boss' negotiating any retreat or surrender is clueless at this point moving forward."

"'Where are Madigan’s 4 votes?': 'I’m sorry, but this is flat-out offensive to me.  Madigan owns no one on this court.  Anyone who knows any of these justices or follows the Court is fully aware of that."

"I’m not sure if state employees/retirees will ever be out of the spotlight that we never wanted to be in."

"Completely agree with you . . . We as retirees or current state employees never asked for all of this negative attention or to be blamed for the state’s fiscal problems when we in fact have never been the cause of the problem.  I have been a lifelong IL resident and also worry greatly about our state’s future, but please lay the blame for our current problems where it deserves to be and not on us retirees."

"Once the conditions of the contract are fulfilled, you can’t unilaterally change the contract terms retroactively."

"There are ways to legally change a contract retroactively, but it normally requires the agreement of BOTH parties to the contract, and it usually also requires a payment (or other valuable consideration) by one of the parties to the other party."

"Think of it like a fixed rate car loan or fixed rate mortgage, where the bank wants to change the terms of the deal after you’ve been paying on the loan for years.  Law says you can’t do it unless you have violated the terms of the loan (contract) that you signed."

"For those that are upset and make claims of unfairness to other citizens of the state, know that this a legal decision, and in my view the decision was proper.  If the state makes commitments, it needs to keep them.  If the constitution has plain-language protections, that’s how you read them. The pols have for too long pandered for votes and power with taxpayer money.  Now, maybe some of the pandering will be stopped."

"Thanks to AFSCME, IFT, and IEA for continuing to fight for public employees and retirees while other unions and many liberal Democratic legislators failed to do so."

(My comment: Again, in Colorado, public sector unions tossed their retired members under the bus and supported the breach of Colorado PERA pensioner contracts in 2010.  This act sullied the U.S. Labor Movement.)

"The terms going forward were already changed in 2011 … it’s called 'Tier 2'″.

"We may still be a land of laws… a big win for every citizen of Illinois."

"The court ruled that Healthcare is definitely a benefit of membership in the pension system. Certainly, current annuitants relied on that in making an irrevocable decision to retire.  I see no reason to assume that the AAI, which is much more related to the pension itself than is healthcare premiums, will not be ruled a pension benefit too."

"This is the correct decision.  It is also the Supreme Court declining to give the General Assembly a pass for years of mismanagement and the lack of political will to raise taxes."

(My comment: The historical mismanagement of the Colorado PERA pension system by Colorado state legislators and Colorado PERA trustees has been documented at the website, saveperacola.com and at ColoradoPols.com.)

"After reading Burke’s dissent, I think she would also vote against SB1, which would make a decision against it unanimous."

"The constitution can be changed, but the changes cannot be applied retroactively."

"Cullerton's deal is off the table.  The unions won’t budge after this ruling.  Woulda shoulda coulda."

"The contract is between the state and me, and the state and you, and the state and thousands of other individuals.  Cullerton, nor any other politician can negotiate with 'the unions' about the contract between the state and me.  I think the decision today clearly upholds those thousands of individual commitments.  None of which involves a union."

"It’s hard as a beneficiary to not cheer this ruling, but it’s equally hard as a citizen and taxpayer to not grieve for lost opportunity, or at least lost time."

"Now generally I am against tax increases of any kind regardless of income level.  But I am also a state employee and I didn’t start this fight.  The millionaires of the Chicago Civic Club started it.  So, a graduated tax on people like Rauner who want to buy the Governor’s office?  I would be happy to vote for that."

"I totally agree, but the supporters of SB1 used going through this exercise in futility as an excuse for passing these onerous bills in the first place.  They’ve received the ISC’s answer. They threw everything, including the kitchen sink, at the Supremes to see what would stick, and I would argue that very little, and most likely none of it will ultimately stick."

"Throughout all this, I’ve been an Illinois citizen and taxpayer.  As a member of that unfortunate club, it's time to get down to the business of properly funding the state’s priorities going forward. We’re in for some hurt brought to us by 60 years of political incompetence on both sides of the aisle.  But, as we were when this started, we’re all in this together, and equally so.  We better all get back to solving the state’s big problems in a constitutional way, and the sooner the better.  I’ll vote for any candidate that lays out an equitable plan to do so, and stops with the political hedging that both side’s politicians think they can get away with."

"These 'new tier' programs are the only ones that seem to constitutionally survive."

"All the State workers reading Cap Fax instead of doing their job… REJOICE!!!"

"SB1 is road kill that just got run over by a steamroller: 'Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it MUST be liberally construed in favor of the rights of the pensioner.' (again, emphasis in caps.)"

"Haven’t prior S Ct cases indicated that one becomes a member of a pension system upon being hired (not just upon retirement) and that the terms of the system upon the date of hire can’t be diminished?  I thought so, and that this was why the Tier 2 class was structured as applying to those hired on or after that certain date."

"The bill is due, it’s not about how we can screw retirees and current workers anymore–it’s how do we pay them what they were promised and the Court has guaranteed."

"You become a member of a retirement system when you start paying into it."

"We’re going to have to have a sales tax on as many services as Indiana does.  What is it currently?  17 vs. 51 services?  We’re also going to have to pass the Fair graduated income tax."

"I was drawing a parallel with the various arguments Madiar presented in his pension analysis with what the ISC came down with here.  Yes, Eric (Madiar) never really addressed the issue of health care being protected, but he touched on all the relevant cases that the ISC touched on in this opinion.  To me, there is something like an 85% – 90% parallel."

(My comment: Senator Cullerton's legal aid Eric Madiar believes that Colorado's recent theft of fully-vested, accrued public pension COLA benefits is likely unconstitutional.  So, why did Cullerton going down that path in Illinois?  From “Public Pension Benefits Under Siege”:

“The adoption of the contractual approach by Colorado . . . however, make(s) it more likely that pension reform efforts (the COLA provisions of SB 10-001) will be found unconstitutional.”

A PDF of the Madiar paper is available on the website of the National Conference of State Legislatures at the following link:

http://www.ncsl.org/home/search-results.aspx?zoom_query=madiar%20public%20pensions)

"One could argue that Illinois, as a large progressive state, has had lower than expected taxes for its spending levels, since some of its 'revenue' (since 1939) was 'borrowed' from mandated (but unpaid) state pension fund contributions."

"It can’t be fixed by a constitutional amendment not due to ex post facto law limits (technically, that only applies to criminal laws), but due to the analogous 'impairment of contract' and due process considerations.  Same basic concept, but different legal doctrine categories."

"I’m glad the rule of law and plain language was upheld, but I expected more wiggle room; guess the ISC wanted to put this issue to bed once and not have to revisit it any time soon."

Link to Illinois Supreme Court Decision:
http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

Support the Rule of Law in Colorado at saveperacola.com.

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