The Colorado Judicial Branch is Not a Political Tool of the Colorado Legislative Branch.

The State of Colorado is currently attempting to escape its financial obligations through breach of contract.  The U.S. Supreme Court has directed appellate courts to give heightened scrutiny to attempts by state governments to escape their financial obligations.  Has this heightened scrutiny of the State of Colorado's attempt to break its contracts occurred?  To date, no trial, no discovery has occurred relating to the State of Colorado's attempt to escape its contractual obligations.

The sponsor of the 2010 bill that seeks to break Colorado state contracts admits the existence of the contract.  In 2009, lawyers for the Colorado state agency administering the contract admitted (in writing) the existence of the contract.  Indeed, the Colorado Court of Appeals, in 2012, confirmed the existence of the contract.  Yet, today, lawyers for the State of Colorado persist in arguing that the contract does not exist.

From the website of the Colorado Judicial Branch:

"The principle of judicial independence is central to a functioning democracy.  Essentially, this means that the courts are shielded from politics or any other force that could compromise its independence and institutional independence."

http://www.courts.state.co.us/Courts/Education/Independence.cfm

American Bar Association Standing Committee on Judicial Independence:

"Our time tested adherence to the Rule of Law and our system of justice is the envy of the world.  Maintaining this system as envisioned requires that we have a fair, impartial, and independent judiciary that enforces the Constitution and settles all disputes according to the rules.  All citizens, regardless of who they are or what they represent, have the right to a fair and impartial hearing.  And it is often the role of our courts to protect the unpopular or the minority.  Public trust and confidence in our courts will only be preserved for so long as we stay this course."

http://www.americanbar.org/content/dam/aba/administrative/judicial_independence/scji_chairs_message.authcheckdam.pdf

Statement of U.S. Supreme Court Justice Stephen G. Breyer, July 15, 2002:

"Independent judges, as my colleague Justice Ginsburg recently put it, do not act on behalf of particular persons, parties, or communities.  They serve no faction or constituency, and they must strive to do what is right in each individual case, even if the case in question should find the least popular person in America opposed by the most powerful government in the world."

http://www.supremecourt.gov/publicinfo/speeches/ncps_project.pdf

Senator Josh Penry, co-prime sponsor of the 2010 Colorado legislation breaking Colorado PERA pension contracts (SB10-001) acknowledges the existence of the Colorado PERA pension COLA contract, and states that the Colorado Legislature (the 61 member majority voting for the bill in 2010) seeks to break the contract.  Senator Josh Penry stated, during the legislative effort to break PERA pension contracts, that the Colorado Legislature was taking advantage of a "window of opportunity" to persuade Colorado courts to permit the PERA contract breach.  The SB10-001 bill sponsor has admitted (on videotape) that the proponents of the bill intended to expedite passage of the bill to ensure that it would become law before the release of pending investment performance figures for the Colorado PERA portfolio later in 2010.

Thus, the sponsor of SB10-001 admitted the intent of state legislative sponsors to manipulate Colorado courts through the timing of the legislation, SB10-001.  Senator Josh Penry knew that improved investment performance figures would be released by Colorado PERA administrators four months after the bill, SB10-001, was signed into law by Governor Bill Ritter.  Given the performance of equity markets in 2009, it was evident to all involved that Colorado PERA (and all other equity investors) would report significant portfolio gains for calendar year 2009 undermining any argument for the "actuarial necessity" of the legislative COLA taking.

In short, the sponsor of the Colorado public pension bill that is the subject of litigation, stated on videotape, that the Colorado PERA COLA benefit is a contractual obligation, and that short-term market volatility should be used to persuade Colorado courts to sanction the breach of state contracts.  However, Colorado PERA pensioners do not bear any market-risk under their contracts.  U.S. equity markets have risen approximately 140 percent from their 2009 low point.

In a videotaped discussion with Representative Mike May, (videocenter. denverpost.com) Senator Josh Penry, 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

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.
Adam Schrader: " . . . can (it) be cut, because it’s part of the contract, but has it been reviewed by the Attorney General?  Can you do this legally?  Can you take 3.5% guaranteed and move it down to what is it, 2%?  Can you do it?"

Senator Josh Penry:  "2%, yah, yah, we can.  I mean, 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 in this interview even the sponsor of the bill admits that the Colorado PERA COLA benefit is a contractual obligation of Colorado PERA-affiliated employers.)

Have Colorado courts given the required "heightened scrutiny" to the Colorado Legislature's 2010 attempt to escape state financial obligations?  Certainly the fact that the sponsor of SB10-001 acknowledges the Colorado PERA COLA contractual obligation would be observed by a Colorado court at trial.

Since 2009, Colorado politicians and pension administrators have employed many political tools in their attempt to break contracts to which the State of Colorado is a party.  They have used the assets of Colorado PERA pensioners in political, legal, and public relations campaigns to break the pensioner's contracts.  Apparently, many Colorado politicians would be happy to usurp the authority of Colorado courts, and render the Colorado Judicial Branch a mere political actor for the Colorado Legislative Branch.

This sentiment, using courts for political purposes, is at the heart of Colorado's 2010 bill that seeks to break Colorado PERA pension contracts.  As noted above, the co-prime sponsor of the SB10-001 State Senator Josh Penry, has stated the desire of the proponents of SB10-001 to use 2008 market volatility as "a window of opportunity" for the Colorado Legislature to claim "actuarial necessity" and escape state contractual obligations.  The co-prime sponsor of SB10-001 did not try to conceal the desire of the proponents of the bill to manipulate Colorado courts to achieve a legislative political goal, breach of state contracts.

But, it is not the role of state appellate courts to unquestioningly embrace constitutionally impermissible political objectives of state legislatures.  An appellate court in New Jersey made this clear in a decision just last week.

’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.”  “’But to a very great extent, the strength of the pension systems rests on policy choices made by the other two branches of government, and on their political will to preserve the systems and satisfy prior commitments made to public employees and retirees.’”  “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.’”

In 2010, the Colorado Legislature enacted a bill (SB10-001) that took contracted public pension COLA benefits from pensioners who possess "fully-vested" contractual rights in the Colorado PERA pension system.  The U.S. Supreme Court has directed appellate courts to give heightened scrutiny to attempts by state governments to escape their own financial obligations.
The defendants in this lawsuit, Justus v. State, were granted summary judgment by Judge Hyatt of the Denver District Court in 2011 (prior to his retirement) in a Decision that failed to even mention Colorado case law that is clearly relevant to the case (Bills and McPhail.)  This Colorado case law was referenced in a Colorado Attorney General's Opinion addressing contractual public pension rights in Colorado.  This undeniably on-point Colorado case law was cited even by laymen, by persons with no legal training, as the Colorado Legislature began contemplating breach of state contracts in 2009.  Later, this Colorado case law was confirmed as dispositive in the case, Justus v. State, by the Colorado Court of Appeals.  Since the Denver District Court granted the defendants in the case summary judgment in 2011, there was no opportunity for the process of discovery in the case.

Where even a routine process of legal discovery has not yet occurred in litigation involving a state's attempt to escape financial obligations, can heightened scrutiny be said to have occurred? Can heightened scrutiny be claimed where summary judgment was granted in a decision with no mention of a state's on-point Colorado Supreme Court case law?  Can heightened scrutiny be said to have occurred where the complete recorded legislative history of a contractual obligation has received no judicial scrutiny?  As summary judgment was granted by the Denver District Court in this case in 2011, facts that are critical to supporting the constitutional rights of Colorado PERA pensioners have not been discovered or reviewed by Colorado courts.

There is no question that the Colorado PERA COLA benefit is a contractual obligation of Colorado PERA-affiliated employers.  Colorado PERA administrators and PERA's lawyers should end the charade.  The evidence of this contractual obligation is plain and conclusive to any person who can read and who spends a few minutes looking for it.

The statutory language creating the Colorado PERA COLA benefit is clear, and identical to the statutory language creating the Colorado PERA pension base benefit.  The legislative history establishing the Colorado PERA COLA benefit is clear.  Colorado PERA's lawyers have confirmed the "automatic" COLA contract (in written testimony to the Legislature.)  The bill sponsor has confirmed the existence of the PERA COLA contractual obligation.  The Colorado Court of Appeals has confirmed the PERA COLA contractual obligation.

The United States Supreme Court has determined that state attempts to escape their own financial obligations shall receive very little deference.  In 1977, the United States Supreme Court accepted an appeal of a decision of the New Jersey Supreme Court in the case, United States Trust Company of New York v New Jersey (U.S. Trust.)  From the U.S. Supreme Court decision in U.S. Trust:

"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."

(My comment: If one accepts the premise that additional Colorado state and local government resources are required to meet Colorado PERA contractual obligations, although these PERA obligations consume less than three percent of all Colorado state and local government revenues, it should be noted that the Colorado Legislature has not yet exercised its constitutional powers to refer a measure to Colorado voters seeking sufficient revenue to meet these Colorado PERA contractual obligations.)

U.S. Trust:

" . . . complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.  A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  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."

" . . . a State cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors."

"But a State is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives.  Similarly, a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well."

http://scholar.google.com/scholar_case?case=15238053046927037053&q=U.S.+Trust&hl=en&as_sdt=4006

It is simply the case that Colorado politicians want to break the Colorado PERA statutory contract, and they want the Colorado Judicial Branch as their partner in the Colorado PERA pension contract breach.  Colorado politicians are asking that the Colorado Supreme Court ignore the Colorado Constitution, on-point Colorado case law, a Colorado Attorney General's Opinion, and U.S. Supreme Court precedent, all to help the politicians achieve a desired political outcome.

The question remains whether the Colorado Supreme Court, leading an independent branch of Colorado government, can possibly ignore clear, copious, widely available evidence establishing the PERA COLA benefit as a contractual obligation.  The Colorado Judicial Branch is not simply another political tool of the Colorado Legislative Branch.

For the Colorado Supreme Court to give heightened scrutiny to the State of Colorado's 2010 attempt to escape its financial obligations the court must, at a minimum, examine the complete legislative history of the Colorado PERA COLA benefit.  The legislative history of the PERA COLA benefit establishes, at the inception of the "automatic" PERA COLA benefit, that the COLA benefit is a contractual obligation of PERA-affiliated employers.

The legislative history of the Colorado PERA COLA benefit includes legislative testimony by Colorado PERA's representative Rob Gray that the PERA COLA benefit that the Legislature places 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."

The legislative history of the Colorado PERA COLA benefit makes it plain that, as confirmed in 2009 by Colorado PERA's lawyers and the sponsor of SB10-001, the PERA COLA benefit is a contractual obligation of the State of Colorado and other employers in the PERA pension system.

Rob Gray, 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.])

The plaintiffs in the case, Justus v. State, have informed the Colorado Supreme Court that the Colorado Legislature has failed to pay its public pension bills (actuarially required contributions,) that the PERA COLA is an "automatic" pension COLA benefit as opposed to an "ad hoc" pension COLA benefit, that discovery has not occurred in the case, and that the attempt by the State of Colorado to escape its financial obligations must receive heightened judicial scrutiny.

The Plaintiffs Amended Opening Brief (page 7) in the case Justus v. State, informs the Colorado Supreme Court that the Colorado Legislature has failed to pay actuarially required contributions to the Colorado PERA pension plan:

"However, the Legislature has continually kept contribution rates below the annual required contribution as determined by PERA’s actuaries.  In a March 2010 Report, the Pew Center on the States reported that Colorado contributed only 68.3% of its full actuarial required contribution over the past 10 years, and flagged it as one of ten 'lagging' states."

The Plaintiffs Amended Opening Brief (page 8) informs the Colorado Supreme Court that the Colorado PERA COLA is an "automatic" public pension COLA benefit, as opposed to an "ad hoc" public pension COLA benefit:

"In 1993, the Legislature amended this provision to make annual COLA increases granted on or after March 1, 1994 AUTOMATIC (my emphasis) and no longer dependent each year on approval by the legislature."

The Plaintiffs Amended Opening Brief (page 29) informs the Colorado Supreme Court of the U.S. Supreme Court's determination that state attempts to escape state contractual obligations shall receive heightened scrutiny, quoting U.S. Trust:

"A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  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 Contracts Clause would provide no protection at all."

From the Plaintiffs Opening Brief (page 31): “Requiring the petitioners to protect the future solvency of the pension system is an unconstitutional shifting of the state’s own burden.”

http://saveperacola.files.wordpress.com/2013/10/2013-10-24-plaintiff-petitioners_-amended-opening-brief1.pdf

From the Plaintiffs Reply Brief in the case, Justus v. State:

"As this case was decided on summary judgment, Defendants, as the moving parties, had the burden of establishing the non-existence of a genuine issue of material fact."

Page 9, "However, the current record is not the full record since discovery has not been completed."

Page 12, "Especially given that Defendants have the burden of proof, Retirees should at the very least be provided the opportunity to conduct full discovery and present evidence to the District Court that a 'more moderate course would serve [the Defendants’] purposes equally well.'"

Page 21, "In addition, Retirees should at the very least be entitled to conduct discovery on the State’s culpability in contributing to the funding deficits, and have a court determine whether it is reasonable for Retirees to now pay for the State’s conscious choice to fail to adequately fund PERA by keeping employer rates artificially low."

http://saveperacola.files.wordpress.com/2014/02/2014-01-10-petitioners-plaintiffs_-replybrief.pdf

The Colorado Judicial Branch exists to maintain rule of law in Colorado.  I do not believe that the Colorado Supreme Court might willfully ignore, or allow to be ignored, clear evidence of the contractual nature of the PERA COLA benefit (including the testimony of Colorado PERA's own lawyers) when that evidence is so readily and widely available.

For the Colorado Judicial Branch to allow the Colorado Legislative Branch to ignore Colorado public sector financial obligations based on a contrivance that the word "SHALL" means one thing in Part 6 of the PERA statutes, and another thing 23 pages later, in Part 10 of the PERA statutes would be a travesty of justice, rendering the Contract Clause meaningless.

Colorado PERA retirees insist that the Rule of Law in Colorado will not be abandoned at the whim of Colorado politicians.

New Jersey Appeals Court: Public Pension COLA Benefits Are Contractual Obligations.

From NJ.com:

"NJ court: Retired public workers have a contract right to cost-of-living adjustments."

"A state appeals court ruled today that New Jersey’s nearly 300,000 retired public workers have a contract right to yearly increases in their pension benefits, and those cost-of-living adjustments are part of the state’s benefits package."

"Today's ruling, Ouslander said, means 'those benefits cannot be withheld or denied unless the state establishes a basis to impair, i.e., break, the contract between it and pension members.'"

NJ.com citing the Appellate Court Decision:

“'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."

“'But to a very great extent, the strength of the pension systems rests on policy choices made by the other two branches of government, and on their political will to preserve the systems and satisfy prior commitments made to public employees and retirees.'”

"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.'"

http://www.nj.com/politics/index.ssf/2014/06/nj_court_retired_public_workers_have_a_contract_right_to_cost-of-living_adjustments.html

From an earlier NewJerseySpotlight.com article:

“'It’s one thing to change the rules in the middle of the game, it’s another to change the score after the game’s over, and that’s what the state did when it eliminated the COLAs,' said Charles Ouslander, one of the plaintiffs in the Berg case."

"'A reversal of Judge Hurd's decision by the appellate court would not only protect pensioners' contractual rights to receive their full pension benefits, but would also insure that the state keeps its contractual obligation to properly fund the pension system, based on the 2011 law signed by Governor Christie,' Ouslander added."

http://www.njspotlight.com/stories/14/05/12/74-billion-in-future-pension-payments-at-stake-in-lawsuit/?p=all

From NorthNewJersey.com:

"The court decided these payments constituted a contractual right, making it far more difficult for the Christie administration to argue that they can be suspended.  The case, which was brought by the unions, will now be heard again.  A lower court will decide whether the state’s decision to break the contract and stop paying the cost of living amounts was 'reasonable and necessary to serve an important public purpose.'  Over time, pension increases from cost of living increases can make up a substantial portion of a pension fund’s overall responsibility.  John Bury, an accountant who blogs about pensions, said that over the last two years, COLA payouts would have increased New Jersey's obligations by about $500 million."

http://www.northjersey.com/news/court-cost-of-living-increases-are-a-contractual-right-for-retired-nj-public-employees-on-pensions-1.1042085

An earlier article from the public pension blog of actuary John Bury:

“Now fast forward to Colorado 2010 where the state cut back COLAs and brought on this morass of litigation.  Would the Knicks be able to do the same thing to (the private sector contract of) Tom Riker . . .?  What if they wanted to spend that money for other purposes that they considered more significant and legitimate and it was reasonable and necessary to reduce his payments?  Could the Knicks get away with that?  And if they did would anyone ever sign another contract with them?  Then why should Colorado?”

http://burypensions.wordpress.com/2012/10/14/defining-whats-legal-for-colorado-retirees-and-tom-riker/#comment-4718

Link to New Jersey Appellate Court Decision:

https://burypensions.files.wordpress.com/2014/06/berg-decision.pdf

Excerpts from the New Jersey Appellate Court Decision:

"We reverse the grant of summary judgment in Berg and New Jersey Education Association v. Christie . . . and we remand Berg to the trial court for further proceedings required to address plaintiffs' Contract Clause claims under the New Jersey Constitution."

Cited by the Appellate Court:

"Beginning in the mid-1990's, a series of Executive and Legislative policy decisions — which the State later characterized as short-sighted — resulted in underfunding of the pension systems."

(My comment: The Colorado Legislature has not paid its full Colorado PERA pension system actuarially required contribution for the last twelve years.  Former Colorado PERA Executive Director Meredith Williams, February 23, 2012:

"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.")

New Jersey Appellate Court Decision:

"In 2011, however, the Legislature made significant changes to public employee pension and health care benefits, including the suspension of automatic COLAs for current and future retirees."

"In a press release accompanying the bill, the Governor stated that 'pension funds are considered to be adequately funded if their AVA funded ratio is at or above 80% [the federal standard for ‘at-risk’ funds.]"

(My comment: Note that in the 2010 Colorado bill taking the PERA pension COLA benefits of Colorado PERA pensioners, SB10-001, the Colorado Legislature proposes to take Colorado PERA pension benefits until a 100 percent actuarial funded ratio is achieved.  This lofty and unnecessary level of funding has occurred in only two fiscal years during Colorado PERA's 83 years of existence.

From: PERA Shareholders Meeting Fall 2006 document:

“Note that PERA was over 100% funded in only two years of our 75 year history.”

http://www.copera.org/pdf/Shareholder/ShareholderPresentation06.pdf.

The ratings firm Fitch Ratings deems public pension systems "adequately funded" at an 80 percent funded ratio.  Thus, the Colorado Legislature's bill, SB10-001, constitutes not simply a taking of contracted public pension benefits, but an outrageous taking of public pension benefits.

From, Meredith Williams, CAFR Summary to Members, 2002, December 5/21 (REV 6/03):

“PERA directs its efforts at keeping the funding ratio, [AFR, the ratio of actuarial assets to accrued liabilities] for the three divisional retirement funds at a minimum of 80 percent.  A funding ratio over 80 percent is considered good.”

http://www.copera.org/pdf/5/5-21-02.pdf

From, PERA Shareholders Meeting Presentation, Fall, 2005 document:

“Note that PERA’s funded status was lower 30 years ago than it is now.  You may recall that there was no perceived 'crisis' in PERA’s funded status in 1975.”

“What the PERA Board and staff would like is for the funded status curve to be flat or stable at around 80 percent.  Why?  Because not all benefits are due and payable today or tomorrow . . . PERA can weather the ups and downs in the markets.”

http://www.copera.org/pdf/Shareholder/ShareholderPresentation05.pdf)

New Jersey Appellate Court Decision:

"Plaintiffs alleged the suspension constituted a breach of express and implied contract (counts one and two), violated the Contract and Due Process Clauses of the Federal and State Constitutions (counts three, four, and six), and violated their state civil rights (count five)."

(My comment: Public pension legal scholar Professor Amy Monahan notes that the Denver District Court's initial decision in the case, Justus v. State, was surprising in light of Colorado public pension case precedent:

"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 Monahan on the public pension legal doctrine, the "California Rule" (embraced by Colorado courts):

“The (Denver District) court’s ruling is surprising both because the court broke from the previously endorsed 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.”

https://www.dropbox.com/s/cvzed3lmwt8t8v2/Understanding%20Pension%20Reform.pdf

Meredith Williams, Colorado PERA Executive Director: “The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”)

New Jersey Appellate Court Decision:

"There is no dispute that, at the current time, there are sufficient funds in the pension systems to pay COLAs to current retirees.  Moreover, pensions are neither funded by appropriations on a pay-as-you-go basis, in the way that COLAs used to be, nor is their payment contingent on the making of a current appropriation."

(My comment: Note that the Colorado Legislature struck the "ad hoc" PERA COLA language from Colorado law in 1993.  Since that time, the Colorado PERA pension statutes have provided an "automatic" pension COLA benefit that may not be diminished by the Legislature for pensioners who have fully-vested contracts.)

New Jersey Appellate Court Decision:

"During the years that the State skipped making its pension contributions, the pension systems continued paying COLAs to retirees.  In fact, in 2010, the State assured this court that the pension systems were capable of paying out benefits for the next thirty years, despite the State's failure to make its contributions to the funds."

(My comment: August 11, 2009, Colorado PERA Board Trustee Casebolt assures PERA retirees present at Colorado PERA Denver meeting of the PERA “Listening Tour”: “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.”

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

New Jersey Appellate Court Decision:

"Because pension legislation is remedial in nature, it should generally be liberally construed in favor of the employee."

(My comment: November 17, 1975, Colorado Supreme Court in Taylor v. PERA: “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.”

http://scholar.google.com/scholar_case?case=11856628789716288634&q=Taylor+v.PERA&hl=en&as_sdt=2,6

August 14, 1984 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"

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984)

New Jersey Appellate Court Decision:

"During the May 20, 1996 hearing, a union-retained actuary explained the employees' concern that, as a result of skipping pension payments, the State would eventually find itself facing a need to make a much larger contribution in the future, would balk at such a large expenditure, and would instead try to cut benefits."

"Senator Inverso responded: I feel strongly that the same protections and rights that are accorded . . . under an ERISA [Employee Retirement Income Security Act] standard to people in the private sector, should be accorded to people in the public sector, the governmental sector; that once they have their pensions established as at a point in time with regard to vesting it, that you cannot go back retroactively and change what has been earned, what has been accrued, what has been vested in."

"In a recent case, the State conceded that retirees have a contractual right to the basic pension benefit they began receiving upon retirement."

(My comment: 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)

New Jersey Appellate Court Decision:

"As previously discussed, both opinions advised that N.J.S.A. 43:3B-9.5 created a contractual right to pension benefits, and hence the State could not diminish vested pension benefits unless it could satisfy the constitutional standards under which the State may impair the obligation of a contract."

(My comment: "Indeed, the National Association of State Retirement Administrators issued a recent study that showed that, on average, pension costs represent only about 3 percent of total state and local government expenditures. In Colorado, state and local government expenditures to fund retirement benefits totaled only 2.16 percent.”

http://www.copera.org/pera/about/issues.htm#42611.)

New Jersey Appellate Court Decision:

"As previously discussed, while COLAs were originally funded by annual appropriations, and could be denied if the Legislature failed to make an appropriation, N.J.S.A. 43:3B-5, that system was abandoned decades ago."

"Instead, through amendments adopted in the late 1980's and early 1990's, COLAs are funded in the same way that the regular pension benefits are funded, and COLAs are payable from each of the applicable pension funds."

(My comment: As we have seen, HB 93-1324 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.”  This fact was recognized by the Colorado Court of Appeals.

The Ritter Administration on Colorado's "automatic" PERA COLA:

“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)

New Jersey Appellate Court Decision:

"We conclude that the laws governing COLAs are part of the laws governing the retirement systems or funds."

"Clearly the Legislature was well aware that COLAs were part of the various pension benefit plans.  In fact, in discussing the various actuarial assumptions, Robert Baus, the State's actuarial consultant, observed that the inclusion of COLAs as a pre-funded part of the pension system, instead of as a separate pay-as-you-go item, was a critical issue: 'The methodology is not driving the funding of this system.  What is driving the funding of this system is the phasing in of the COLA.'"

(My comment: Recall that in 2001, Buck Consultants provided an actuarial report to the Legislative Audit Committee of the Colorado General Assembly.  The 2001 Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “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)

Cited by the New Jersey Appellate Court:

"'In contrast [to health benefits] the COLA [is] inseparably tied to the monthly retirement benefit as a means for maintaining the real value of that benefit.  It [cannot], therefore, be said to be ancillary to the benefit . . ."

"However, consistent with constitutional principles and common sense, we cannot blindly defer to the State's own evaluation of a law's reasonableness and necessity, lest political expediency replace objective fiscal evaluation."

The New Jersey Appellate Court cites the seminal case U.S. Trust:

"In applying this standard, however, complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.  A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  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."

"On the other hand, plaintiffs contend that the State was partially responsible for the pension shortfall by skipping its pension contributions in prior years, and it should not be permitted to thus precipitate a pension crisis and then solve it at the expense of retirees.  Plaintiffs also argue that the State has taken contradictory positions about the health of the pension systems, assuring this court in N.J. Educ. Ass'n that the systems were sound enough to meet their obligations for the next thirty years despite the State's failure to make its contributions, and now telling us that 'the pension system is teetering on the brink of collapse.'"

(My comment: Colorado PERA Executive Director Greg Smith, August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” blames 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)

New Jersey Appellate Court Decision:

" . . . because a contract-impairment claim presents 'a mixed question of fact and law,' N.J. Educ. Ass'n, supra, 412 N.J. Super. at 206 n.10, a remand is required to allow all sides to create a complete evidentiary record."

"In remanding, we end with these observations.  It is not the courts' role to run the pension systems.  Our responsibility is to interpret and apply the Constitution in light of the evidence, and we will do so.  But to a very great extent, the strength of the pension systems rests on policy choices made by the other two branches of government, and on their political will to preserve the systems and satisfy prior commitments made to public employees and retirees."

(My comment: “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

Link to New Jersey Appellate Court Decision:

https://burypensions.files.wordpress.com/2014/06/berg-decision.pdf

Support the rule of law in Colorado at saveperacola.com.

Alaska Legislature Pays Off $3 Billion in Public Pension Debt. Colorado Legislature Prefers Theft.

Think that the word "theft" is too strong to describe Colorado's public pension taking in 2010?

Here's a definition from Law.com:

"Theft: the generic term for all crimes in which a person intentionally and fraudulently takes personal property of another without permission or consent and with the intent to convert it to the taker's use."

Let's see if the term "theft" appropriately describes the Colorado Legislature's attempt to "claw back" public pension benefits.

Colorado's public pension theft in 2010 was a taking of "property," (accrued Colorado PERA public pension COLA benefits,) and it was "intentional," (premeditated, beginning in early 2009.)  Colorado PERA pensioners did not "consent" to the taking of their property (they told the legislators in testimony on the "COLA-theft bill" in 2010 that they would sue to recover their property.)  And, the property taken was "converted" to the "use" of the State of Colorado (money was freed up for the politician's favorite discretionary programs, and to add to Colorado's billions of dollars in corporate welfare payments.)  In my view, the word "theft" fits the bill perfectly.

Colorado residents, do you hold your home state in high esteem?  Consider it to be exceptional?  While the State of Colorado engages in theft, the State of Alaska honors its debts.

The Alaska Legislature has unanimously adopted a bill to pay down the state's public pension contractual obligations.  Alaska Governor Parnell recently signed the bill.  (Colorado state legislators see theft as the more politically appropriate means of addressing their accumulated Colorado PERA pension debt.)

Lawyers for the State of Colorado and its pension-administering arm, Colorado PERA, are currently trying to persuade the Colorado Supreme Court to support legislative theft of accrued, earned, contracted Colorado PERA public pension benefits in our state.

See this article:
http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court

My guess is that the Colorado Supreme Court will render a decision in Colorado's public pension COLA lawsuit, Justus v. State, within the next three months.  Then, we will know if unabashed, premeditated governmental theft is constitutionally permissible in our state (and under the U.S. Constitution.)

The State of Colorado is attempting to escape its contractual obligations in the Colorado PERA pension system.  Colorado PERA pensions are a substitute for Social Security.  Under federal (IRC) law, public pension systems must have "definitely determinable" benefits in order to remain "qualified" public pension plans.  If a state legislature can take back public pension benefits that have already been earned in a public pension system, how is it possible that the public pension system has "definitely determinable" benefits?

The Colorado PERA pension COLA benefit is a statutory "automatic" public pension COLA benefit that cannot legally be reduced for pensioners who have fully-vested contracts.  The COLA benefits of PERA pensioners have already been earned under their PERA statutory contracts.  Statutory "ad hoc" public pension COLAs can be reduced for current retirees.  (The Colorado Legislature struck the "ad hoc" statutory pension COLA language from Colorado law in 1993.)

In 2010, a group of 27 lobbyists hired by self-interested parties persuaded a slim majority of Colorado legislators to vote for their PERA pension theft scheme.  In 2010, the Colorado  Legislature passed the bill, SB10-001, retroactively taking contracted Colorado PERA pension COLA benefits from PERA pensioners.  The PERA pensioners sued the state and the resultant lawsuit, Justus v. State, is now before the Colorado Supreme Court.

Colorado PERA's lawyers have testified to the Colorado Legislature that the PERA COLA is a Colorado PERA contractual obligation.  The Colorado Court of Appeals has confirmed the PERA COLA benefit as a Colorado PERA contractual obligation.  Yet, Colorado PERA's Executive Director Greg Smith continues to argue that the PERA "COLA-theft" bill, SB10-001, is a "model" for other states.  Theft to escape public pension contracts, theft to inflate away state public pension debts, theft taking earned compensation from elderly pensioners to minimize future state taxes . . . this is a "model" for other states.  Welcome to Colorado.

From Alaska's KTUU:

"Parnell Signs Pension Funding Bill."

"'It takes $3 billion out of our budget reserves and moves it to the pension trust funds, $2 billion to the teacher retirement system and $1 billion going to the public employees retirement system,' Parnell said at a press conference."

"The governor said by paying a large sum of money up front, it will drop the yearly payments into the system, saving taxpayers more money in the long run."

(My comment: As we have seen, the Colorado Legislature has not paid its full Colorado PERA pension bills for the last twelve years [ARC] and, accordingly, has racked up its PERA pension debt.  It now seeks to escape that debt through breach of contract.)

KTUU:

"'Today, we're helping approximately 120,000 retirees. Those are Alaskans, they are beneficiaries, and dependents, teachers, firefighters, state employees and municipal employees,' said Representative Cathy Munoz (R-Juneau)."

"It takes the burden off of our kids and grandkids to pay this debt that is owed.  It is a burden that we will make good on, but it takes that obligation off of future generations of Alaskans."

(My comment: In Colorado, many politicians prefer to remove burdens from future taxpayers through simple theft.)

http://www.ktuu.com/news/news/parnell-signs-pension-funding-bill/26624530

From Alaska station KTOO:

"Surrounded by dozens of public employees in the atrium of Juneau’s State Office Building, Gov. Sean Parnell on Monday signed legislation transferring $3 billion from state savings into Alaska’s public employee pension systems."

"Like many state and local governments across the country, Alaska’s pension shortfall is the result of years of neglect and bad financial advice.  Even as the estimated amount of future payments to retired public employees has grown, state and municipal officials opted to put minimal amounts into retirement systems."

"The cash infusion cuts the long-term projected deficit for the Alaska Public Employee Retirement System and Teachers’ Retirement System to an estimated $9 billion.  It also reduces the amount of future annual payments into the systems, which Parnell said is the single biggest cost driver of the state’s operating budget."

(My comment: Public pension debts are paid off over up to 70 years.  Public pension systems never have to pay off all of their accrued debts as they exist in perpetuity.  Public pension systems are well-funded at 80 percent funded ratios according to rating agencies.  Over the last nine decades, the Colorado PERA pension system has had all of its debts paid off in only two fiscal years.  Colorado PERA's pension obligations consume less than 3 percent of all Colorado state and local government revenues.  Is this "burden" worth scrapping the Colorado Constitution?  Is it worth all of the deceit we have seen from Colorado PERA officials?)

KTOO:

"Alaska communities backed the pension infusion plan.  Juneau Assemblywoman Karen Crane is president of the Alaska Municipal League, a group that lobbies the state and federal governments on behalf of cities and boroughs."

http://www.ktoo.org/2014/06/23/gov-parnell-signs-3-billion-perstrs-infusion-bill/

(My comment: In Colorado, our association of cities, [the Colorado Municipal League, CML] sat back and watched as Colorado state legislators passed a bill to break Colorado PERA public pension contracts in 2010.  Why wouldn't they?  If Colorado state legislators are successful in breaking Colorado PERA public pension contracts, then Colorado municipalities [CML members] in the PERA pension system escape billions of dollars of debt.  If successful, the SB10-001 scheme will free up even more Colorado taxpayer resources that these communities can give away to corporations, or use to further lower taxes.)

Note that Colorado governments currently give away thirteen percent of Colorado's public sector resources to corporations, yet simultaneously plead poverty before the Colorado Supreme Court. Colorado governments have given away billions of dollars to corporations, yet have the temerity to argue that they are unable to meet their contractual PERA pension obligations.  Thirteen percent of Colorado's public sector resources are given away to corporations:

http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html#CO

http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html

Huffington Post:

"State and local subsidies to corporations: An excellent New York Times study by Louise Story calculated that state and local government provide at least $80 billion in subsidies to corporations."

"Amazon, Microsoft, Prudential, Boeing and casino companies in Colorado and New Jersey received well over $200 million each."

http://www.huffingtonpost.com/bill-quigley/ten-examples-of-welfare-for-the-rich-and-corporations_b_4589188.html)

Support the rule of law in Colorado at saveperacola.com.

Colorado PERA’s Koren Holden Admits PERA Pension COLA Benefit (Subject of Lawsuit) is “Automatic.”

Colorado PERA's Koren Holden has identified the Colorado PERA pension COLA benefit as an "automatic" public pension COLA benefit in an on-line Colorado PERA video.  Koren Holden: "This video describes the methods and assumptions used to calculate the net (PERA) pension liability . . ."  "The benefits should also incorporate the effects of projected . . . AUTOMATIC (my emphasis) postemployment benefit increases such as the annual increase provided by Colorado PERA."

http://www.copera.org/pera/employer/gasbvideos.htm#CalcNPL

Koren Holden, is a "Colorado PERA Project Manager."  She is also PERA's "Manager, DPS Benefit Plan Services," and a member of the Colorado PERA "GASB Work Group" charged with educating Colorado PERA-affiliated employers regarding new GASB reporting requirements.  She is a member of the "Conference of Consulting Actuaries," and a former consulting actuary for Buck Consultants (1986 to 2007.)

(Recall that in 2001, Buck Consultants provided an actuarial report to the Legislative Audit Committee of the Colorado General Assembly.  In agreement with Koren Holden's statement, the 2001 Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “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)

First, we should congratulate Koren Holden for speaking openly and honestly.  There must certainly be considerable pressure within the state agency Colorado PERA to conform with state legislative and Colorado PERA Board goals regarding the PERA COLA's legal status and the implementation of SB10-001.  There must certainly be pressure to protect highly compensated pension administration positions through silence.  I expect that Colorado PERA's history of mismanagement has unfortunately required years of guarded speech by Colorado PERA pension administrators (e.g., the Bill Owens service credit "fire sale," twelve years of failing to pay PERA's pension bills [ARC], portfolio losses resulting from past alternative investment allocation, legislative allocation of $700 million to pay off local government pension debt while ignoring its own contracted PERA debt, legislative provision of billions of dollars of corporate welfare, "tax expenditures," in lieu of meeting state and local contractual PERA obligations, etc.)

Koren Holden's statement might be problematic for Colorado PERA's lawyers since Colorado PERA is currently attempting to persuade Colorado courts that the PERA COLA benefit is an "ad hoc" pension COLA benefit.  (Of course, the Colorado PERA COLA benefit is a documented "automatic" public pension COLA.)  However, if Colorado PERA's lawyers successfully deceive Colorado courts regarding the legal status of the PERA COLA, then the State of Colorado and many Colorado local governments will escape their legal debts.  In that case, Colorado PERA pensioners will pay off Colorado governmental debts and relinquish their retirement security.  (In this new millennium, governmental officials in the United States are apparently confronted by no ethical or moral constraints regarding the abrogation of their contractual obligations.)

So, what precisely is Koren Holden communicating when she describes the Colorado PERA COLA benefit (postemployment benefit increase) as "automatic" in this on-line Colorado PERA video?  I see three possible interpretations of Koren Holden's position, all of which conflict with recent arguments of Colorado PERA's attorneys before the Colorado Supreme Court.

First, it may be the case that Koren Holden is communicating that the Colorado PERA pension COLA benefit was an "automatic" PERA COLA benefit prior to the enactment of SB10-001, and that the PERA COLA remains an "automatic" PERA COLA benefit after enactment of the bill.  If this is her intent, then her position conflicts with the position of Colorado PERA's lawyers who are currently attempting to persuade the Colorado Supreme Court that the PERA COLA has always been an "ad hoc" public pension COLA benefit (in spite of conflicting opinions of past Colorado PERA administrators and PERA's actuaries.)   A fully-vested automatic public pension COLA benefit cannot be diminished under the Contract Clause.  An automatic public pension COLA benefit has the identical legal status as a public pension "base benefit," regardless of the contrivances of lawyers paid to help governmental clients escape their debts.

The second possibility is that Koren Holden (a GASB regulation expert) is communicating that the PERA COLA was an "ad hoc" public pension COLA prior to the enactment of SB10-001, but is now an "automatic" public pension COLA benefit.  If this is her intent, then her position conflicts with the position of Colorado PERA's lawyers, since Colorado PERA's lawyers want the Colorado Supreme Court to erroneously believe that the PERA COLA has always been an "ad hoc" COLA benefit.

A third possibility is that the 2010 Colorado bill taking the contracted Colorado PERA COLA benefit (SB10-001) does not even enter the equation for Koren Holden.  It may be that, as a public pension administrator with extensive actuarial experience she has always known that, since 1993 when the Colorado Legislature removed the "ad hoc" PERA pension COLA language from Colorado law, the PERA COLA has manifestly been an "automatic" pension COLA benefit.  (Accordingly, the automatic PERA COLA has been used in calculations of PERA liabilities.)

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."

Readers should note that Colorado PERA official Koren Holden's identification of the "automatic" Colorado PERA pension COLA benefit agrees with the statements of Colorado PERA's Executive Director Greg Smith:  "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

Koren Holden's statement regarding the "automatic" Colorado PERA pension COLA benefit also agrees with the testimony of Colorado PERA administrators to the Colorado Legislature's Joint Budget Committee.  Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “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.”
Link:
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf 

Koren Holden's statement regarding the "automatic" Colorado PERA pension COLA benefit also agrees with the legislative history of the PERA COLA benefit and the characterization of the "automatic" PERA COLA benefit at its inception by former Colorado PERA Director of Government Relations Rob Gray (March 24, 1993.)

Rob Gray, 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.])

The federal public pension regulatory agency (GASB) requires that "automatic" public pension COLA benefits be incorporated into actuarial reports for public pension systems that provide "automatic" public pension COLA benefits.  Indeed, actuarial reports relating to the Colorado PERA pension system (and Colorado PERA's CAFRs) have incorporated the "automatic" Colorado PERA COLA benefit as an actuarial assumption for the Colorado PERA pension plan.

From the Governmental Accounting Standards Board website:

"Guide to Implementation of GASB Statements 25, 26, and 27 on Pension Reporting and Disclosure by State and Local Government Plans and Employers."

"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

Colorado PERA retirees are suing the State of Colorado and Colorado PERA over the breach of their pension "COLA" contracts in 2010.  The Colorado Legislature would like to have the power to eliminate the contracted inflation protection in the PERA pension in order to inflate away the debts of Colorado state and local governments.  In effect, these politicians want elderly Colorado pensioners to pay off pension debts that the Colorado Legislature has accumulated due to their failure to pay the complete PERA pension bill for the last twelve years (ARC.)

Colorado PERA and the State of Colorado seek to retroactively alter contractual terms outside of bankruptcy.  (Note that state governments cannot petition a court for bankruptcy under federal law.)  Colorado PERA's lawyers ask that the Colorado Supreme Court excuse the historical mismanagement of the PERA pension system by Colorado politicians and PERA trustees.  In an attempt to defend the taking of this contracted pension benefit, Colorado PERA's lawyers are trying to persuade the Colorado Supreme Court that the PERA COLA benefit is an "ad hoc" pension benefit that can be retroactively diminished by employers in the Colorado PERA pension system.

Of course, such retroactive reduction of a contractual pension obligation is unconstitutional on its face.  As we have seen, the Colorado PERA COLA benefit is a documented "automatic" pension COLA benefit that cannot be retroactively taken under the Contract Clause.  The fact that the PERA COLA benefit is an "automatic" pension COLA has been confirmed in writing by Colorado PERA pension administrators and by Colorado PERA's own actuaries.

Recall that, in 2010, Governor Bill Ritter signed the bill taking the PERA COLA into law (SB10-001.)  The Ritter Administration (in a letter to the federal pension regulator GASB) wrote:

“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.”

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

Colorado PERA pensioners, who have fully-vested public pension contracts, have completed their obligations under their PERA contracts.  Their labor and contributions have been exchanged for defined Colorado PERA pension benefits including a "base benefit" and a contracted annual benefit increase, "COLA."

In 2009 and 2010, when Colorado state legislators and Colorado PERA trustees decided to attempt to break the pension contracts of Colorado PERA pensioners, absolutely no consideration was given to the position in which the attempted contract breach would place Colorado PERA's professional administrators.

I am confident that, in 2009, as the various lobbyists for Colorado PERA employers contemplated a PERA pension COLA taking, as they began to shop for a legal memorandum to support the planned PERA COLA taking (i.e., the Dubofsky product), as they designed the political and legal campaigns for the COLA taking with the Leadership of the Colorado Legislature, the fact that Colorado PERA's professional pension administrators would, in future, be placed in a rather uncomfortable position never crossed their minds. 

The Colorado PERA pension system has more than 200 employees.  These employees are bound by codes of ethics.  They understand public pension administration and contractual rights.  I am sure that many of these employees regret the fact that the institution of Colorado PERA has been further tarnished by the actions of trustees and politicians in 2009 and 2010.  Surely, it was difficult for many Colorado PERA employees to remain silent.  But, speaking the truth might have cost them their careers.

Historically (prior to the ongoing attempt for a PERA COLA contract breach) many Colorado PERA officials defended public pension contractual rights.  The comments of Colorado PERA's Dennis Gatlin on October 28, 2004 in the Silver and Gold Record come to mind.  At the time, Dennis Gatlin noted that Colorado state legislators had, in earlier years, argued that the Colorado PERA pension system was "too well-funded" when the funded ratio of the pension system was at an 87 percent funded ratio (AFR.)  Colorado PERA Field Education Services Division Director Dennis Gatlin stated: “PERA’s funding ratio was at 87 percent (in 1985) and legislators claimed that the association was ‘too well-funded.’  In 1970, the ratio was 54 percent, he added.  According to Gatlin, PERA has been overfunded, when its assets equaled more than its liabilities, only twice in its 73-year history, in 1999 and 2000."  It should be noted that the Colorado Legislature and Colorado PERA Trustees broke PERA pension contracts when the pension system was at a 69 percent funded ratio (AFR) and that they seek to breach Colorado PERA pension COLA contractual obligations (through SB10-001) until a 100 percent PERA system funded ratio (AFR) is achieved.  In 2009, if they were going to attempt a PERA contract breach, they wanted to "go big."

Lawyers for Colorado PERA and the State of Colorado are currently attempting to persuade the Colorado Supreme Court that the Colorado PERA pension COLA benefit is an "ad hoc" pension COLA that can legally be reduced for PERA retirees who have fully-vested public pension contracts.  The fact that a Colorado PERA official exposes, openly and on the record, that the PERA COLA benefit is an "automatic" COLA benefit must not be welcome. 

Colorado PERACOLA BCOLA Benefits.

In 1987, the Colorado General Assembly enacted a statute providing that pension COLA increases shall be awarded by the General Assembly on an “ad hoc” basis.  In 1993, the General Assembly repealed that explicit language in the Colorado PERA statutes, rendering PERA pension COLA benefits “automatic” COLA benefits.  Only a dozen or so states in the country retain public pension COLA benefits that are awarded on an “ad hoc” basis.

The past adoption of an “automatic” PERA pension COLA benefit by the Colorado General Assembly was recognized in the recent Decision of the Colorado Court of Appeals in the case, Justus v. State.  The 1987 statutory provision (that was removed from Colorado law), stated that COLA benefit increases “shall be made only upon approval by the General Assembly.”  On page 28 of the Colorado Court of Appeals Decision the court notes that the repeal of the “ad hoc” language in the PERA statutes evinces the General Assembly’s intent to commit to providing the pension COLA benefits called for in PERA statutes.  Naturally, the "automatic" PERA COLA has been subsequently included in actuarial calculations for the PERA pension plan.

It is clear that Colorado PERA COLA benefits are contractual and “automatic.”  Colorado PERA COLA benefits are benefits that have been earned by PERA retirees, in an identical fashion to the PERA “base benefit,” and they are to be paid by the pension plan Colorado PERA without the need for “approval” by any governmental entity.  The COLA is part of the contract.  The Colorado Court of Appeals recognized the definition of the term “automatic” in its decision as “not subject to the General Assembly’s approval each year.”

I imagine that few Colorado PERA pension administrators are happy to now work for one of the few pension systems in the United States that are attempting a pension contract breach.  Many of these Colorado PERA employees have worked in public pension administration for decades and were forced to witness (up close) deception, immorality, and violation of professional pension administration ethics during the 2009/2010 campaign to abrogate Colorado PERA COLA contractual obligations.

The statement of Colorado PERA administrator Koren Holden addressed above is from educational materials produced by Colorado PERA for Colorado PERA-affiliated employers regarding new GASB public pension regulations.  Colorado PERA has provided, on its website, videos and slides explaining the new GASB regulations.

Colorado PERA's Information for Colorado PERA-affiliated Employers on the New GASB Reporting Requirements.

"New GASB Rules Will Impact Colorado PERA and Colorado PERA Employers."

Colorado PERA:

"The new Statements relate to accounting and financial reporting issues and how pension costs and obligations are measured and reported in audited external financial reports."

"GASB has adopted a formal definition of a liability for purposes of governmental financial reporting, known as the Net Pension Liability, which now will show on participating employers’ balance sheets."

"It is important to note that these new reporting requirements will not necessarily reflect the financial condition of a governmental entity because a pension liability cannot be made immediately due and payable.  In an instance where there might be a surplus attributable to the pension plan, the assets belong to the employees, not to the governmental employer and cannot be used for any purpose other than to pay retirement distributions to employees once they are eligible to receive them."

Karl Greve, Chief Financial Officer, Colorado PERA makes available a slide presentation on PERA's website providing an "Overview of GASB Pension Statements" for Colorado PERA employers.  From the slides:

"Pensions are part of the employee/employer exchange."  "Pension plans are part of total compensation."  "Employer incurs a pension obligation as a result of employment exchange."  "Pension expense should be recognized in period services are provided."

"Employer is primarily responsible for the unfunded pension obligation."

"Report the net pension liability based on PERA's actuarial assumptions."

The slides include a chart of PERA's historical funding status that has been recalculated (from earlier versions) to present only "market-based" funded ratios, that is, the chart considers simply the market value of Colorado PERA pension assets, rather than their actuarial value (as employed in SB10-001.)  Colorado PERA has historically (prior to the 2010 PERA COLA contract breach attempt) assessed the financial condition of the pension plan based on the plan's "actuarial funded ratio."

Link to slides:
https://www.copera.org/pdf/Misc/GASBOverviewSlides.pdf

Colorado PERA's website also includes two videos of Karl Greve, Chief Financial Officer, Colorado PERA addressing the change in GASB regulations.  Karl Greve in Video #1:

"Anything that has not yet been fully funded is the employer's liability."  "So, if you look at Colorado PERA, we have a large liability."

(The PERA unfunded liability): "is what GASB has said is the primary responsibility of the employer."

"PERA is really five different defined benefit pension plans."

"Essentially, the total pension liability is the present value of future benefit payments to PERA members for service accrued through the measurement date."

"GASB 68 requires extensive note disclosures. . ."

"The disclosures will have to include a description of benefits."

"GASB 68 requires additional disclosures of the actuarial assumptions and the source of those assumptions used to calculate the total pension liability."

"Employers will also have to disclose . . .  a description of  any changes in assumptions or benefit changes."

"You can also contact the GASB work team . . . "

https://www.copera.org/pera/employer/gasbvideos.htm#Overview

Karl Greve in the Colorado PERA Video #2:

"The key here is that all participating employers in a cost-sharing plan share the total benefit obligation of the pension plan."

https://www.copera.org/pera/employer/gasbvideos.htm#PensionPlanTypes

(My comment: The purpose of these Colorado PERA on-line materials is to ensure that Colorado PERA-affiliated employers are well-informed.  Thus, it struck me as odd that Karl Greve fails to mention in the videos that the legal status of Colorado PERA pension benefits, and thus the pension liability of PERA-affiliated employers is subject to ongoing litigation.  Should PERA employers be ignorant of litigation impacting system liabilities?)

More slides from Colorado PERA's website:

"Calculating the Collective Net Pension Liability, GASB Statement #68, Employer Educational Video Series."

"Projections of benefit payments required to be based on the benefit terms and legal agreements existing at the pension plan's fiscal year end."

"Incorporate the effects of projected . . . automatic post-employment benefit changes."

"Ad hoc post-employment benefit changes if they are considered to be substantively automatic."

https://www.copera.org/pdf/Misc/GASBCalculatingNPL.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 post-employment 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

From the Colorado PERA website:

GASB Q&A: "GASB is an independent, non-profit, non-governmental regulatory body charged with setting authoritative standards of accounting and financial reporting for state and local governments."

"GASB now will require, for purposes of governmental financial reporting, that a proportionate share of the total net pension liability (unfunded liability) of the pension trust fund at PERA be shown on the face of each employer’s financial statements."

"Is this liability due and payable immediately?"

"A. No, the net pension liability is unlike any of the other liabilities reported on an employer’s balance sheet, in that it is not immediately due, nor can it be paid off under any accelerated schedule.  Contribution rates are set in statute.  As a result, an employer would not be able to remit payment, in addition to their statutory contribution amount, for their proportionate share of the net pension liability in order to remove this liability from their financial statements."

"Employer contribution rates are set by the Colorado Legislature through the statutes that govern PERA."

(My comment: Of course, to be completely above board, Colorado PERA's administrators should inform Colorado PERA-affiliated employers that, for the last twelve years, these statutorily set Colorado PERA contribution rates have been insufficient to meet the actuarially determined obligations of the PERA pension plan.  The Legislature has underfunded the plan for many years.  Colorado PERA-affiliated employers should know that the Colorado Legislature has failed to pay the PERA pension system ARC for the last twelve years and now seeks to shift that governmental debt onto PERA pensioners.

Even Colorado state legislators must be informed that paying a contribution rate set in statute as a result of political considerations is not the equivalent of making the actuarially required contribution for the pension system.  Many have no idea.  Colorado PERA administrators, stop the manipulation.)

Colorado PERA's website:

"The financial crisis of 2008 resulted in a 26 percent reduction in PERA’s investment portfolio, which brought into question the sustainability of the system."

(My comment: Since that time equity markets have more than doubled.  Also, the DJIA fell 23 percent in one day [on Black Monday in 1987] and there was no talk of breaking PERA pension contracts.  Breach of Colorado PERA pension contracts was not a political goal at the time, in 1987.  Colorado PERA pensioners, in any event, bear no market risk under their pension contracts.  Note that in the 1970s many U.S. public pension systems operated on a "pay-as-you-go" basis.  They met their contractual obligations out of current revenues.  Also note that the funded ratio [AFR] at the time of the PERA COLA taking was 69 percent, not far from the historical average funded ratio of the PERA pension plan.)

Colorado PERA's website:

"In response, the PERA Board of Trustees engaged stakeholders throughout Colorado to gather input in the development of a comprehensive set of pension reforms."

(My comment: What Colorado PERA means by "engaging stakeholders" is that the scheme to take contracted PERA COLA benefits was developed with lobbyists for entities acting in their own financial interests, specifically, lobbyists for Colorado state and local governments, and for public sector unions that no longer represent retirees.)

Colorado PERA's website:

"The General Assembly, with bipartisan support, enacted Senate Bill 10-001, which was the first such public pension reform enacted in the nation in response to the financial crisis of 2008 and has been a model used by other systems."

(My comment: Ninety-five percent of all legislation enacted by the Colorado Legislature has "bi-partisan support."  Unconstitutional legislation is no less unconstitutional because legislators belonging to separate political parties voted for that unconstitutional legislation.  Where has this Colorado PERA pension benefit theft model been adopted?  Cases cited by PERA's lawyers have been found to be distinguishable by Colorado courts.  Public pension COLA-takings in the U.S. have been struck down [e.g., Arizona, San Jose, Florida] or are subject to injunctions [e.g., Illinois, Montana.]

PERA's website:

"Ninety percent of the cost of these changes is borne by PERA members and retirees."

(My comment: Compare this statement on PERA's website with the earlier comment of PERA's administrators above emphasizing that PERA's unfunded liability is the responsibility of PERA employers, not employees.  Colorado PERA administrators, which is it?) 

Support the rule of law in Colorado at saveperacola.com.  Colorado is better than breach of contract.

Pressing Questions in the Colorado PERA Public Pension Lawsuit, Justus v. State.

Colorado law: The Colorado PERA base benefit "shall" be paid, the Colorado PERA COLA benefit "shall" be paid.  The challenge for Colorado PERA's lawyers?  Make that plain statutory language appear to be ambiguous.  If Colorado PERA's lawyers are successful, the State of Colorado can pay off state debts using money forcibly taken from elderly Colorado pensioners.  Coloradans, this is your state government in action.  (Some of your state employees are thick into this scheme.)

If the State of Colorado Can Successfully "Claw Back" PERA Pension COLA Benefits, Does the Colorado PERA Pension Remain a Qualified Plan Under Federal Law?

Have Colorado PERA pension administrators reported to federal IRS regulators that the Colorado PERA pension COLA benefit is an "automatic" pension COLA benefit?  Colorado PERA, as a federally qualified pension plan, must have "definitely determinable" benefits under federal law.  If Colorado PERA administrators have reported an "automatic" PERA COLA benefit to federal regulators, how can they now claim that the PERA COLA is an "ad hoc" pension COLA that they can legally diminish?  Colorado PERA members and retirees want the truth.

Note that the U.S. military pension system currently has a ZERO percent funding ratio.  Military pension benefits in the United States are paid from current revenues.  Why do we see no attempts to break military pension contracts?  If we believe the arguments of Colorado PERA officials, military pensions should now be in a state of complete chaos and collapse.  Recall that Colorado PERA officials sought to break PERA pension contracts when the actuarial funding ratio of the pension system was at 69 percent.

Colorado law is clear that the Colorado PERA pension COLA benefit constitutes state debt.  Colorado PERA's lawyers, in past legislative testimony, have confirmed the fact.  But, for the moment let's entertain the possibility that the statutes creating Colorado PERA pension benefits are, as Colorado PERA's lawyers contrive, "ambiguous."

In that event, Colorado PERA's campaign to take earned, contracted, accrued pension benefits from old people must overcome yet another hurdle, namely the Colorado Supreme Court's "cardinal principle" that any ambiguities in Colorado public pension statutes are to be construed in favor of the employee.

This long-standing "cardinal principle" of the Colorado Supreme Court makes sense.  After all, Colorado PERA pensioners have relied on their PERA contracts and planned their lives around those contracts.  They have given decades of labor and pension contributions in exchange for their contracted retirement annuities.  Colorado law should (rightly) give the benefit of any doubt to workers who have given their lives in public service.  Has the Colorado Supreme Court abandoned this "cardinal principle"?  If so, when did this happen?

“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.)

My hope is that, in the coming decades, Colorado elected officials will honor state debts, and responsibly manage public pensions in our state.  Toward that end, I believe that Colorado courts should require that public pension management decisions by pension plan sponsors and elected officials in Colorado conform with the contractual obligations of those plan sponsors.  A relaxation of constitutional strictures on Colorado state legislators will not contribute to responsible management of the Colorado PERA pension system in the future.  In this article, I present a number of questions relating to the Colorado public pension lawsuit, Justus v. State, that I believe, if answered, will contribute to the responsible, professional management of Colorado public pension systems.

I encourage Colorado public pension trustees, active and retired public pension members, pension plan sponsors, pension administrators, Colorado elected officials, public pension plan attorneys, and Colorado courts to consider these questions. 

(Readers unfamiliar with the legal issues addressed in the public pension case, Justus v. State, should first visit the website, saveperacola.com for background, and also read the recent article at this link:
http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court)

Last week, Colorado PERA's lawyers, in oral arguments before the Colorado Supreme Court, tried to persuade the Court that Colorado law is ambiguous relating to the state's contractual obligation to pay the PERA pension COLA benefit.  Let's take a closer look at their argument.  First, note that Part 6 of the Colorado PERA statutes creates the PERA "base benefit" contract (Defendants in the case agree that this Part creates a contractual obligation.)  Part 8 of the PERA statutes sets forth options for payment of the contracted PERA annuity.  Part 10 of the PERA statutes creates the PERA (annual benefit increase) COLA contract.

During the recent oral arguments in this case, Justus v. State, Colorado PERA's lawyers argued that language in Part 8 of the PERA statutes supports Part 6, but does not support Part 10.  Their argument seems quite arbitrary and contrived to me.  All of these Parts fall under the "PERA Article," Article 51 of the Colorado statutes.

Are PERA's lawyers surprised that Part 8 which provides options for payment of the contracted life-time PERA annuity includes the language "payable for life"?  Why is this surprising?  The PERA annuity contract is a life-time annuity.

Why has the testimony of Colorado PERA's lawyers to the Colorado Legislature's Joint Budget Committee (JBC) confirming the PERA COLA benefit as a PERA contractual obligation that cannot be diminished not come up in this case?  This testimony would surely be recognized if PERA pensioners were granted the right to make their case at trial.  Thus, PERA's lawyers argue in their legal briefs that PERA retirees (the plaintiffs) should be denied their right to a trial.

In effect, Colorado PERA officials argue that the Colorado Constitution's Contract Clause should be violated because Colorado politicians want to break it.  Plaintiffs should be denied a trial because a trial would hamper the ability of Colorado politicians to use retiree assets to pay state debts and state and local government labor costs.  I ask, why should Colorado PERA retirees not have an opportunity to plead their case before a jury?

The testimony by Colorado PERA's lawyers to the JBC makes it clear that the PERA COLA is an "automatic" public pension COLA benefit.  When PERA's lawyers gave this testimony in 2009, they did NOT testify to the JBC that the PERA COLA is a contractual obligation that can be reduced to ZERO as PERA's lawyers contend, they testified that the PERA COLA "cannot be decreased."

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

Again, Part 8 of the Colorado PERA statutes sets forth options for payment of the contracted annuity.  At retirement, under Part 8, a PERA member who has met all of the statutory requirements to receive the PERA pension may choose to have that pension paid for just her life, or she may choose to receive a smaller pension payment for herself and a beneficiary.  Is it the expectation of PERA's lawyers that this Part 8 should have been drafted in a way such that the options for payment of the life-time PERA annuity income stream makes no mention of payment of that income stream for the life-time of the PERA retiree?

In my view, Colorado PERA's lawyers will go to great lengths and employ every imaginable contrivance that might help Colorado PERA-affiliated employers escape their legal debts.  In my view, Colorado PERA officials and Colorado politicians will stop at nothing to deceive the courts and the public, to force Colorado PERA retirees to relinquish their contractual rights and pay off the legal debts of Colorado PERA employers.  In effect, Colorado politicians seek to force elderly pensioners to pay labor costs for the State of Colorado and Colorado local governments.  In my view, Colorado state employees at the state agency, Colorado PERA, and Colorado politicians are engaging in immoral and unconstitutional acts.

Part 8 of the Colorado PERA statutes necessarily includes the language "payable for life," because it sets forth PERA annuity payment options that are "payable for life," for either the retiree, or a reduced amount for the retiree and one-half for a beneficiary at retiree death, or a further reduced amount for the retiree and an equal annuity income stream at the retiree's death.

The Colorado PERA COLA benefit is simply a contracted annual increase for which retirees have provided consideration (years of labor and contributions.)  If the PERA COLA is not supported by consideration provided by Colorado PERA members and retirees, then how is the COLA benefit supported?  By PERA-affiliated employers exclusively?  If this is true, why do the PERA statutes not set forth a mechanism for PERA employers' exclusive support of the PERA COLA benefit?

I ask, if Colorado PERA retirees have supported their PERA COLA benefit with consideration, and fulfilled their obligations under their contracts, why should they not receive their PERA COLA benefit?  Just to free up more Colorado public resources to add to the billions of dollars that Colorado politicians already give to corporations?  (For more on that, see Colorado's "tax expenditure" reports.) 

Under Colorado statutes, the PERA COLA benefit "shall" be paid, and the PERA base benefit "shall" be paid.  But, apart from the statutes, I believe that the PERA COLA benefit is a contractual obligation under an "implied contract."  All of the conditions of an implied contract have been met.  If I am correct, what relevance does the question of whether the Part 6 PERA base benefit contract language "SHALL" is supported by Part 8 language and whether this Part 8 language also supports the Part 10 PERA COLA contract?  Under an implied pension contract the exchange transaction has been completed, consideration has been exchanged for a benefit, deferred compensation.

More Questions Regarding the Colorado State Government Campaign to Escape its Legal Debts.

I ask, why did the Colorado Legislature and Governor Ritter fail to submit an interrogatory to the Colorado Supreme Court in 2009 seeking guidance on constitutionally permissible pension reforms?  Why did they choose this court battle?  As we have seen, to their credit, the Colorado PERA Board of Trustees encouraged the Legislature and the Governor to submit an interrogatory to the Colorado Supreme Court in 2009.  Indeed, even the press (the Denver Post) in an editorial, implored the Colorado Legislature and Governor Ritter to submit an interrogatory.  Why have Colorado politicians forced many elderly people in the state to unnecessarily suffer through years of hell in their retirements simply because Colorado state legislators did not feel inclined to ask the Colorado Supreme Court for legal guidance in 2009?  Answer: Because they are "politicians" who were pushed by lobbyists.

Regarding "Automatic" Public Pension COLAs versus "Ad Hoc" Public Pension COLAs.

Have the Justices of the Colorado Supreme Court noticed that the question of "automatic" Colorado PERA pension COLA benefits versus "ad hoc" PERA pension COLAs has remained unmentioned by the Defendants in this case?  Why has this matter received so little attention in the case?  "Automatic" and "ad hoc" pension COLA benefits are basic structural elements of public pension systems in the United States.  The Colorado PERA pension COLA benefit is a documented "automatic" pension COLA benefit.

In my opinion, Colorado PERA's lawyers have taken their argumentation relating to the PERA COLA benefit to the farthest reaches of plausibility . . . without naming it, it now appears that Colorado PERA's lawyers seek to somehow retroactively transform the existing "automatic" PERA COLA benefit into an "ad hoc" PERA COLA benefit.  Colorado PERA's lawyers seek this PERA COLA metamorphosis in order that Colorado PERA-affiliated employers might (incredibly) meet their future "PERA COLA contractual obligations" by paying a ZERO COLA.

But, as PERA officials have confirmed many times, the PERA COLA is indeed an "automatic" public pension COLA, as opposed to an "ad hoc" pension COLA.

Colorado PERA's lawyers have apparently forgotten that the "ad hoc" PERA COLA statutory language previously existing in Colorado law was removed from the Colorado PERA statutes some years ago.  However, this fact did not escape the attention of the Colorado Court of Appeals.

As we have seen, HB 93-1324 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."

The legal status of the Colorado PERA COLA benefit as an "automatic" pension COLA benefit has been confirmed in writing by Colorado PERA officials and Colorado PERA's actuaries many times.  I have published the references, by PERA officials and PERA's hired actuaries, to the "automatic" PERA COLA over the years, and I will reproduce a complete list of these references upon request.  A few particularly notable references to the Colorado PERA "automatic" pension COLA are found in the 2001 PERA Buck Consultants actuarial report, and in PERA's publication "History of Colorado PERA Legislation."

If Colorado PERA officials and lawyers want the PERA COLA to be an "ad hoc" COLA they should accept that the PERA COLA can only be (legally) transformed into an "ad hoc" COLA on a PROSPECTIVE basis, for PERA benefits that have not yet been accrued. 

Colorado PERA's administrators are quite familiar with the concept of "tiers" of public pension benefits, and the fact that tiers of public pension benefits are created to avoid unconstitutional, retroactive legislation and takings of accrued pension benefits.  Accrued PERA COLA benefits cannot be taken by the Colorado Legislature under the Contract Clause.  Indeed, Colorado PERA trustees supported the creation of a new tier of PERA COLA benefits in 2004 for just that reason.

Here are a few examples of documentation of the Colorado PERA "automatic" pension COLA:

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 (my emphasis) 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.”

Note that the November 20, 2001, Buck Consultants study commissioned by the Colorado State Auditor, pursuant to SB 01-149, clearly identifies the Colorado PERA 3.5 percent COLA as an “automatic” public pension COLA, refers to “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”  Significantly, the Buck report identifies the 3.5% PERA COLA as “automatic” and contrasts it with an “ad hoc” COLA “as approved by Legislature.”  Why would Colorado PERA administrators argue that the PERA COLA benefit, identified as "automatic" by PERA's own actuaries, is now an "ad hoc" COLA?  Answer: To escape their contractual obligations.

The Buck report is available here:

http://www.nctr.org/pdf/coloradodcdbstudy.pdf

Colorado PERA administrators clearly know the difference between an "ad hoc" pension COLA and an "automatic" pension COLA.  Here are a few examples from Colorado PERA's publication "History of Colorado PERA Legislation":

HB 75-1364 – Improved AD HOC (my emphasis) post-retirement benefit increases.

SB 69-144, SB 69-311, HB 69-1230, and HB 69-1247 – New annual post-retirement increase (COLA) adopted provided maximum 1.5% per year, in addition to AD HOC (my emphasis) COLA increases that were based on the year in which the retirement benefit had begun.  Link:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

Why did the Denver District Court Grant Summary Judgment in a Case Regarding the State of Colorado's Contractual Obligations?

In the Denver District Court Decision, Judge Hyatt noted that: "Summary judgment is a drastic remedy and should not be granted unless it is apparent that no genuine issue of material fact exists."  The Colorado Court of Appeals identified issues of material fact when sending the case to trial.  The Colorado Court of Appeals, in its Decision in this case, found that no determination has been made on several factual matters, for example, whether the SB10-001 impairment was "substantial" or "served a significant and legitimate public purpose (actuarial and funding considerations.")  If the law and the facts are clear in this case, Justus v. State, and the Denver District Court was correct in taking the extreme action of granting summary judgment, why has the case proceeded to the Court of Appeals (reversing the District Court) and now arrived at the Colorado Supreme Court?  Note that the U.S. Supreme Court has ruled that state governments shall receive very little deference in attempts to escape state contractual obligations.

Colorado's Statutory Double Standard on Public Pension Contracts – SB12-149.

The Colorado Legislature has demonstrated that it is capable of adopting prospective pension reforms.  As we have seen, the Colorado Legislature created a new tier of PERA COLA benefits in 2004 (a prospective, legal, pension reform.)  In 2012, the Colorado Legislature enacted prospective pension reform for Colorado county governments ("arms" of Colorado state government.)  The 2012 bill, SB12-149, honored existing retiree pension contracts and accrued benefits in those Colorado pension systems.  Why should a statutory double standard on public pension contractual rights exist in Colorado law?  Why should Colorado law honor accrued pension benefits in some pension plans, but permit retroactive takings of accrued benefits in other pension plans?

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.”

State Legislatures Across the Country Have Adopted Legal, Prospective Pension Reforms.

Colorado is a wealthy state, with low state debt, a vibrant economy, and low taxes.  I ask, why should Colorado be among the handful of states that are attempting retroactive pension "reform" when the Colorado Legislature has not yet exhausted all prospective pension reform options?  For example, a prospective reduction of the PERA pension "multiplier" for PERA benefits not yet accrued?

Was this reform (prospective multiplier reduction) "priced" by Colorado PERA's actuaries in 2009?  We don't know.  We do not have this information because Colorado PERA's hired lobbyists (in a bill at the end of the 2009 legislative session) arranged that the entire PERA public pension reform debate (unlike other state legislatures) be conducted behind closed doors.  (Perhaps the self-interested parties pushing the SB10-001 taking did not want this particular pension reform option to be priced.)

Why should Colorado PERA retirees relinquish their contractual rights and property before the Colorado Legislature has even acted to refer a measure to Colorado voters seeking sufficient revenue to meet state contractual obligations?

To what extent could the PERA trust funds be bolstered with purely prospective pension reforms?  Should public sector contractual rights and property be relinquished before this question is answered at trial?  Were all potential prospective PERA pension reforms considered during the private lobbyist discussion of "reform" options prior to the adoption of SB10-001?

Why is it that all public pension systems in the United States have managed their pension systems with purely prospective legislation (with the exception of a handful of legislative contract breach attempts) but the Colorado PERA pension system purportedly must be managed with legislation that is retrospective under the Colorado Constitution?

Colorado PERA, a Qualified Plan for Tax Purposes Under Federal Law?

According to Colorado PERA officials, the PERA pension plan is a “qualified plan” under federal IRS regulations: “Colorado PERA is a qualified retirement plan that can substitute for Social Security, as required by law.”

https://www.copera.org/PDF/8/8-324.pdf

“PERA is a qualified retirement plan under the Internal Revenue Code Section 401(a).  As a defined benefit plan, PERA benefits are guaranteed based on a benefit formula that is set by law.”

https://www.copera.org/pdf/5/5-115.pdf

“In 1951, public employers could join Social Security; the Colorado Legislature decided to continue the PERA program instead of joining Social Security.”

http://class.ccaurora.edu/fiscal/PERA_Choice.pdf

Yet, under IRS regulations, a public pension plan must have “definitely determinable benefits” in order to pass muster as an IRS “qualified plan.”

Denver attorney Cindy Birley (a person I consider to be a champion of prospective public pension reform in Colorado) addressed this requirement for qualification of public pension plans at the Legislature’s Senate Finance Committee hearing on the bill SB12-149, on March 13, 2012:

Cindy Birley:

“Generally, you would not change people who have already retired . . .”.

“There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.”

“The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . .  ‘definitely determinable’.”

“So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.”

“Because, it may not qualify as a defined benefit plan.’

“We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.”

“It still has to pass muster as a DB plan.”

Since the Colorado General Assembly has clawed back “definitely determinable” Colorado PERA pension COLA benefits from PERA retirees in 2010, and retrospectively altered this pension COLA benefit, how can the “automatic” PERA COLA benefit still be characterized as a “definitely determinable” public pension benefit?

IRS attorneys write that a qualified “governmental plan” must have “definitely determinable benefits”:

“Definitely Determinable Benefits/Written Plan Document Section 401(a)(25) provides that the actuarial assumptions used to calculate participants’ benefits must be specified in the plan.”

“A pension plan within the meaning of section 401(a) is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement. (§1.401-1(b)(1)(i)).”

The Colorado Legislature Gives Away Billions of Taxpayer Dollars to Corporations, But Pleads Poverty Before the Colorado Supreme Court.

Why should funding of the Colorado Legislature's enacted non-contractual "tax expenditures" take precedence over the contractual rights of Colorado public sector workers?  (The Colorado Legislature relinquishes literally billions of dollars in Colorado taxpayer resources to corporations [See Colorado Department of Revenue “Tax Expenditure” reports.])  Why should retired Colorado public workers be asked to surrender their compensation and contractual rights before the Legislature (or Colorado voters via a referred measure) are asked to reign in Colorado's corporate tax exemptions and subsidies?

Colorado's Tax Expenditure Report:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251847897557&ssbinary=true

More pressing questions regarding the breach of Colorado PERA pension contracts:

Why should Colorado PERA retirees relinquish their property and contractual rights to cover state debts created as a result of Governor Bill Owens' PERA "service credit fire sale"?  Or, Colorado PERA Board of Trustees investment errors (particularly costly alternative investment allocation errors)?  Colorado PERA retirees are part of a DEFINED benefit plan and bear no market risk under their contracts.  Why should Colorado PERA retirees bear the cost of Executive and Legislative Branch mismanagement that has cost the PERA trust funds billions of dollars, and reduced PERA's funding ratio over the years?

Why should elderly Colorado residents give up their security in retirement to pay for past mismanagement of the Colorado PERA pension system by politicians, PERA trustees, and PERA administrators?  Because, in the words of former Colorado PERA Executive Director Meredith Williams, "it just makes things easier.”  It isn't so easy for pensioners watching the State of Colorado break their contracts.

Here’s the link to Meredith's comment:
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

Why should Colorado PERA retirees relinquish their property and contractual rights to cover state pension debts that have accumulated due to the Legislature's failure to pay the full PERA pension actuarially required contributions?  Or, state pension debts that have accumulated due to the acquiescence of Colorado state legislators to proposals from local government lobbyists to pay off $700 million in Colorado local government pension debt?  (That is, local government debt that is NOT the contractual obligation of the State of Colorado, as confirmed by the Dan Slack of the FPPA.) 

Why should the Colorado Supreme Court place its blessing on such irresponsible legislative action?

If past legislative mismanagement (as documented at saveperacola.com) of the PERA pension system is excused by Colorado courts, what incentive will future elected state legislators have to set aside their political aspirations and responsibly meet the public pension contractual obligations of PERA employers?

Colorado PERA's Use of Beneficiary Assets to Pay the Legal Costs of an Attempt to Take More Beneficiary Assets.

Is it appropriate for a Colorado public pension system to use the property (trust funds) that belong to vested members of the pension system for lobbying, public relations and legal services in attempts to take even more property from those same vested members?  This activity may fall within the letter of the law, but it is, without question, immoral as hell.

What Obligation Do Colorado Elected Officials Have to Uphold the Colorado Constitution?

Where is the bar set for Legislative breach of contracts to which the State of Colorado is a party? Should a Colorado legislator's oath of office to uphold the Colorado Constitution be devoid of meaning?  To what extent are Colorado governments actually restrained by the Colorado Constitution's contract provisions?  Rather than requiring a higher level of scrutiny for Colorado governments seeking to escape their own contracts, should the Colorado Supreme Court lower the bar for breach of contract by Colorado governments?

Are the contractual rights of Colorado public sector workers afforded a respect under Colorado law that is equivalent to the respect afforded to private or corporate contractual rights under Colorado law?

Why did Colorado PERA's lobbyists take the 2009 PERA pension reform debate outside of the normal, open legislative process through an amendment to legislation at the end of the 2009 legislative session?

Colorado's TABOR Amendment recognizes public pension obligations as district debt.  Should the Colorado Legislature be allowed to freely abandon district debt?  Has the TABOR Amendment relaxed any of the constraints of the Contract Clause on the actions of Colorado governments?

What would be the impact of converting any Colorado PERA pension benefit from a contractual obligation to a gratuity?  What incentive would Colorado state legislators (who have failed to responsibly fund the Colorado PERA pension system for the last twelve years) have to responsibly manage their contractual obligations going forward?

What impact would conversion of PERA benefits to gratuities have on the ability of Colorado governmental employers to attract workers in the future?  What worker will agree to provide labor to her employer for compensation to be determined after the fact by her employer?

What role has political influence played in the legislative decision to attempt a taking of the PERA COLA benefit and in litigation of the case, Justus v. State?

What percentage of future Colorado public sector revenues will be required to meet Colorado PERA contractual obligations?  Under current law, what percentage of future Colorado public sector revenues will Colorado governments give away in the form of "tax expenditures"?  (We don't know because there has been no fact-finding in this case.)

Was the State of Colorado, tenth wealthiest in the nation (by a recent assessment) insolvent at the time of the taking of the PERA COLA benefit?  Pursuant to Colorado PERA Executive Director Greg Smith's description of his own legal research in the Rocky Mountain News, Colorado PERA public pension benefits MAY only potentially be impaired in cases where public pension systems are devoid of assets.  Has Greg Smith changed his legal analysis?  If so, why? At the time of the Colorado PERA COLA contract breach the PERA pension system had a funding ratio (AFR) of 69 percent.

Support the rule of law in Colorado at saveperacola.com.  Colorado is better than breach of contract.

My Opinion: Colorado PERA Pensioners Expose Deception by PERA Lawyers at the Colorado Supreme Court.

(Note: This is a corrected version of an earlier version of this article in which I mistakenly attributed a comment by Justice Hobbs to Justice Hood.)

For five years now, truly shameless Colorado PERA officials have employed deception in their attempt to take money from elderly pensioners in our state.  In my opinion, the deception continued this week in the chambers of the Colorado Supreme Court.

Why do Colorado PERA administrators, trustees and lawyers feel that they must deceive in order to make their case in Justus v. State?  (A case, it should be noted, that has never gone before a jury for fact-finding.)  Is this a normal and expected appellate strategy?  As a layman, I find it extremely disturbing.

Is it appropriate that Colorado state employees engage in deception in the course of their official duties?  Do we really want Colorado state government to rest on a foundation of deception? 
If Colorado politicians and PERA administrators are successful in their efforts to force Colorado PERA pensioners to payoff accrued state debts will honest Colorado taxpayers be satisfied with the result?  How many Coloradans actually want the State of Colorado to break its contracts?

Whether or not the 2010 Colorado PERA contract breach is ultimately successful, a record of Colorado PERA's attempts at deception must be readily available to the public for posterity.  Colorado voters and future elected officials must have easy access to the record of the SB10-001 taking.  In my opinion, the moral underpinnings of Colorado state government are being written in this bill, SB10-001.  If the State of Colorado can freely abrogate its contracts, all parties contracting with Colorado state government in the future should be fully informed of the fact.

I write this article to set the record straight, and to expose the deception of Colorado PERA officials and certain Colorado politicians.  In the article, I highlight statements made during the June 4, 2014 oral arguments before the Colorado Supreme Court in the Colorado PERA retiree COLA lawsuit, Justus v. State.

If the State of Colorado (one of the wealthiest states in the nation) is indeed facing a financial "crisis" that would justify breach of state contracts, why would the Colorado Supreme Court allow the Executive and Legislative branches of Colorado state government to redress that financial "crisis" by asking retired public sector workers to relinquish their earned benefits, their deferred compensation?  Earned benefits, I might add, that replace Social Security for these retirees.

Why would the Colorado Supreme Court agree to take money from retired workers, yet fail to ask corporations to relinquish any of the billions of dollars worth of unearned, non-contracted tax exemptions and subsidies they regularly receive from the Colorado Legislature?

Why would the Colorado Supreme Court allow the state agency Colorado PERA to avoid paying its contracted annuity COLA payments, but require private sector insurance companies to continue to pay contracted annuity COLA payments?

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

An earlier article addressing Colorado PERA's attempts to deceive the Colorado Supreme Court:

http://coloradopols.com/diary/18952/colorado-pera-attempts-to-decieve-the-colorado-supreme-court

Three attorneys who participated in the Colorado Supreme Court oral arguments on June 4, 2014:

Richard Rosenblatt, represented Colorado PERA retirees.  Sean Connelly, represented Colorado PERA, and Colorado Solicitor General Dan Domenico, represented the State of Colorado.  Rosenblatt was up first at the one-hour hearing, followed by Connelly and Domenico.  Richard Rosenblatt concluded the oral arguments with a brief rebuttal.

MY VIEW: COLORADO PERA'S DECEPTION AT THE COLORADO SUPREME COURT ORAL ARGUMENTS . . . A RED HERRING.

At 31 minutes into the June 4, 2014 oral arguments Attorney Sean Connelly, representing Colorado PERA, throws what I see as a new PERA deception at the wall to see if it will stick, Sean Connelly's comments:

"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."

(My comment: 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 (which PERA's lawyers would have the Supreme Court believe creates the PERA base benefit contract) 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 provision in Colorado PERA law providing the contracted Colorado PERA 3.5 percent COLA benefit [prior to its retroactive alteration by SB10-001] read:

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.”)

In oral arguments, PERA's lawyers imply that the PERA base benefit contract is formed in Part 8 of the PERA statutes, a Part that addresses options for payment of the PERA base benefit, rather than in Part 6 that establishes the base benefit itself.  I see this as a weak attempt to persuade the Justices that the language creating the PERA base benefit somehow differs from the language creating the COLA contract.  It doesn't, both "shall" be paid under the PERA statutes.

Note that the Defendants in this case agree with Judge Hyatt's ruling (before his retirement) at the District Court.  Note also that Judge Hyatt found that the PERA base benefit contract was formed in Sections 602 and 603 of the PERA statutes rather than in Part 8 as the Defendants now choose to argue before the Supreme Court.  Note that Judge Hyatt made no mention of Part 8 of the PERA statutes relating to annuity payment options when he identified the PERA base benefit as a contractual obligation in his Decision.

Judge Hyatt found that the PERA base benefit contract exists based on the identical language, "shall," that creates the PERA COLA benefit.  Judge Hyatt's position conflicts with the Defendant's latest claim. 

From Judge Hyatt's Decision, June 29, 2011, page 2:

"When a member retires, their monthly base benefit is calculated using the member’s age at retirement, years of service, and their highest average salary (which also has its own calculation). C.R.S. § 24-51-602-603 (2010)."

At approximately 46 minutes into the June 4, 2014 oral arguments, Colorado Solicitor General Dan Domenico repeats what I see as Sean Connelly's earlier attempt to mislead the Colorado Supreme Court to believe that the statutory language creating the PERA base benefit contract differs from the statutory language creating the PERA COLA benefit, Dan Domenico:

"If you compare the language of the base benefit . . . in Parts 6, 7, ad 8 of the PERA statutes, that includes language of entitlement, durational language, this is what you get for life."

"The COLA statutes in Part 10 simply don't.  That language is conspicuously absent from the COLA statutes."

(My comment: Apparently Domenico is not troubled by the fact that this durational language is also "conspicuously absent" from the statute creating the PERA base benefit contract.)

Dan Domenico:

"So, as a matter of statutory interpretation it's simply a different treatment by the Legislature of the cost-of-living benefit versus the base benefit."

(My comment: In my opinion, this statement is glaring, shameless deception of the Colorado Supreme Court. The language is identical.)

Dan Domenico:

"The base benefit is an individualized assessment . . . it's about you and what you have put in, you should get it back."  "The cost-of-living formula is not about you, it's about external economic factors, including inflation and the health of PERA."

(My comment: This Domenico statement is, in my opinion, manufactured from whole cloth.  PERA member contributions support the PERA COLA benefit AND the base benefit.  Colorado PERA's actuaries have incorporated the 3.5 percent COLA into actuarial reporting on the plan.  PERA-affiliated employers do not make a separate contribution to support the PERA COLA benefit.)

DOMENICO GETS IT WRONG ON THE EXISTENCE OF "TIERS" OF THE PERA COLA.

Next Dan Domenico makes a statement that betrays either ignorance of PERA's legislative history or more deception in my opinion:

"It would be a very strange system if we had a system that said, well this group of people's cost-of-living should be adjusted differently than this other." 

(My comment: As I listened to this Domenico statement my first thought was that he is ignorant of the legislative history of Colorado PERA pension benefits.  The "very strange system" he objects to is indeed present reality.  It is in current Colorado PERA law. 

Thankfully, the PERA retiree's attorney recognized the lack of knowledge of PERA's legislative history [or deception] and corrected it at the end of the June 4, 2014 oral arguments.

From the Colorado PERA Publication "History of Colorado PERA Legislation":

"2004

SB04-132 – new members hired effective 7/1/05, eligible for early retirement [not unreduced retirement] at age 50 with 30 years of service, and the COLA would equal the lesser of 3% annually, or the actual CPI change."

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

For new PERA members, SB04-132 created a new PERA COLA of the lesser of 3% or inflation, from the 2004 Digest of Bills:

“For any person who becomes a member of the association on or after July 1, 2005, specifies: . . . That the annual increase applied to benefits shall be the lesser of 3% or the increase in the consumer price index.”

From Section 9 of SB 04-132:

24-51-1002. Annual percentages to be used. (1) (a.5) (I) NOTWITHSTANDING SUBSECTION (1) OF THIS SECTION, THE INCREASE APPLIED TO BENEFITS OF PERSONS WHO BECOME MEMBERS ON OR AFTER JULY 1, 2005, AND WERE NOT MEMBERS, INACTIVE MEMBERS, OR RETIREES ON JULY 1, 2005, SHALL BE THE LESSER OF THREE PERCENT OR THE ACTUAL INCREASE, AS CALCULATED BY THE UNITED STATES DEPARTMENT OF LABOR, IN THE NATIONAL CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS DURING THE CALENDAR YEAR PRECEDING THE INCREASE IN THE BENEFIT.

[Note that the language “THE INCREASE SHALL BE” is used in the bill by the bill’s drafter to indicate an “automatic” COLA.  Some years ago the Legislature struck the “ad hoc” language relating to the PERA COLA from Colorado law.]

From the SB04-132 Fiscal Note:

“for any person, except a state trooper, who becomes a PERA member after July 1, 2005 . . . specifies that the annual increase in benefits shall be the lesser of 3.0% or the actual increase in the National Consumer Index for Urban Wage Earners and Clerical Workers during the calendar year preceding the benefit increase.”

Discussion of SB04-132 [from the Minutes of the PERA Board of Trustees, March 19, 2004]:

https://www.copera.org/pdf/Board/Minutes/2004/Minutes3-04.pdf

"Mr. Gray then updated the Board regarding SB04-132.  Mr. Gray stated that Senator Ken Arnold would like to get SB04-132 moving again to ensure that it is can be [sic] considered in a timely enough manner by the full Senate and the House of Representatives.  Mr. Gray then requested direction from the Board regarding their view on including additional legislative proposals approved by the Board including, for members hired on or after July 1, 2005, no full retirement benefits at age 50 with 30 years of service, and annual post-retirement benefits of 3 percent or the actual change in the consumer price index, whichever is lower, as well as the reallocation of 0.08 percent of salary of future employer contributions to the PERA pension trust fund rather than to the PERA Health Care Trust Fund.  Board discussion ensued regarding the consequences of including these elements in SB04-132. 

At the conclusion of the discussion, James Casebolt, Board Chair, expressed that consensus among the Board was for staff to continue negotiations with the Governor's Office regarding the defined contribution legislation.  Mr. Casebolt also stated that the Board would provide staff with the latitude to include the three aforementioned provisions in SB04-132, if necessary.")

Back to excerpts from the oral arguments, Dan Domenico:

"I think the plaintiffs concede that saving PERA, trying to get it back to being actuarially sound, is in fact a legitimate public purpose."

(My comment: Note that the funding ratio [AFR] of the Colorado PERA pension system was 69 percent at the time of the PERA COLA taking.  The PERA system was actuarially sound at the time of the taking.  In the 1970s, many public pension systems in the United State operated on a "pay-as-you-go" basis, that is, the systems had zero percent funded ratios, yet they continued to meet their contractual obligations.  Further, it is not the responsibility of Colorado PERA members and retirees to bail out Colorado state government, to pay for the state's decade-long failure to meet its ARC obligations, and its past mismanagement of the PERA pension system, such as the Bill Owens "service credit fire sale.")

Question from a Colorado Supreme Court Justice at 56 minutes into the oral arguments:

"Mr. Domenico, tell me, just very quickly again why you think, what the principal difference is between why the PERA benefits themselves are contractual, and the COLA is not contractual."

Dan Domenico:

"The key difference is the statutory construction difference.  Part 10 does not include the durational language that says you're entitled to this for life."

"It simply says, while this statute is in effect, here's how we calculate the benefit."

"The base in Part 8, especially 801, says you're entitled to this benefit for life."

(My comment: Of course, I see this as further deception of the Colorado Supreme Court.  The language creating the base benefit contract and the COLA contract is the same, "SHALL."  I cannot believe that Colorado PERA's lawyers have embraced such a transparent deception.)

PERA retiree attorney Rosenblatt comments in rebuttal at the conclusion of the oral arguments (57 minutes into 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 . . ."

Richard Rosenblatt:

"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."

Attorney Rosenblatt continues:

"As far as Justice Boatright's question concerning . . . have there been any changes to the detriment, since 1994, which is when the class that we have begins, there's been no change to the detriment of any current retiree."

"In 2005, contrary to what the Solicitor General said, they decided to change treating everyone identically with the COLA."

"In 2005, and it was based on a recommendation from the (Treasurer's PERA) Commission, and in our belief, based on the McPhail/Bills analysis that Attorney General Salazar had followed, they said in 2005, for future retirees, not for current retirees, but for future retirees, it's going to be a different COLA formula."

"So, already they had created a different COLA formula, for post-2005, people fully-vested after 2005, than for people fully-vested before."

"So, the idea that it was identical is just not correct."

"We believe that this court should continue as it did in Peterson to follow McPhail and Bills and apply the fully-vested COLA right."

On June 4, the periodical Chalkbeat covered the Colorado Supreme Court oral arguments in Justus v. State:

http://co.chalkbeat.org/2014/06/04/supreme-court-hears-both-sides-on-pension-fight/#.U5CSWWcU-15

From Chalkbeat:

"The size of future checks for thousands of retired teachers and other civil servants is now in the hands of five Colorado Supreme Court justices."

"The court heard an hour of oral arguments Wednesday morning in the case of Justus v. State, a lawsuit that challenges reductions in retiree cost-of-living payments by the Public Employees’ Retirement Association (PERA)."

"A 2010 law (Senate Bill 10-001), eliminated payments associated with cost of living that year and cut retirees’ annual benefit increases from 3.5 percent to 2 percent starting in 2011.  Future increases could drop below 2 percent under certain conditions.  (While the increases are commonly referred to as cost of living raises, they aren’t pegged to inflation or consumer prices.)"

"When the lawsuit was filed, plaintiffs estimated the COLA reduction could cost the typical retiree more than $165,000 over 20 years."

"The legal issue before the supreme court is whether retirees have a contractual right to the 3.5 percent COLA."

"Lawyers for each side presented starkly opposing views to the high court on Wednesday."

"The COLA 'is part and parcel of the pension,' said Richard Rosenblatt, who represents the retirees who filed the original suit.  A retiree’s main pension benefit together with the COLA 'clearly is a contract.'”

"But Sean Connelly, representing PERA, argued, 'There is no contractual right to a COLA fixed at a certain point.'  He urged the justices to overturn the Court of Appeals and accept the trial court’s dismissal of the case."

"Both Connelly and Solicitor General Dan Domenico, representing the state, noted that COLA payments have fluctuated several times over the last few decades, and that those changes have applied to retirees."

(My comment: "fluctuation" is not the issue, impairment is the issue.  An improvement of the PERA contract does not breach the contract, only a retroactive reduction of the COLA impairs the contract.)

Chalkbeat:

"Four of the five justices asked questions during the arguments, but their queries didn’t hint at any clear leanings on the case."

"The case originally was filed within days of SB10-001 becoming law.  A district court judge ruled in 2011 that the state and PERA could reduce the payments.  But the Colorado Court of Appeals ruled in 2012 that pensioners do have a contractual right to the COLA in effect at the time of retirement but gave the state a possible out.  The appeals court concluded the courts 'must still determine whether any impairment of the right is substantial and, if so, whether the reduction was reasonable and necessary to serve a significant and legitimate public purpose.'”

"There are no set deadlines for the court to rule on a case after oral arguments.  In a recent big public policy case, the Lobato v. State school funding suit, the court ruled a little less than three months after arguments were held."

"Chief Justice Nancy Rice announced that Justices Allison Eid and Monica Marquez would not be participating in Justus v. State. Justices typically don’t announce why they’re not participating."

(My comment: Justice Hood did not recuse himself in this case, Justus v. State, in spite of his past association with an attorney who worked on the case [Mark Gruseskin,] and although he was recused or removed in Colorado's Moreno "redistricting" case due to his past association with the attorney Grueskin who worked on the Moreno case.)

The Code of Judicial Conduct:

“A judge should disclose on the record information that the judge believes the parties or their lawyers might reasonably consider relevant to a possible motion for disqualification, even if the judge believes there is no basis for disqualification.”

Is the rationale for Justice Hood’s recusal or removal in the Moreno case public information?  Why would Justice Hood recuse himself in one case due a former association with case attorney Mark Grueskin, but not in another case due to a former association with case attorney Mark Grueskin?

MORE EXCERPTS FROM THE ORAL ARGUMENTS IN JUSTUS v. STATE:

Attorney Richard Rosenblatt began the oral arguments by noting that the taking of the contracted PERA COLA benefit was "per se" unreasonable.  He commented extensively on Colorado's primary on-point public pension case law, Bills, McPhail and Peterson.  He said that the Bills case dealt with a "limited vested" pension right and applied a "reasonable and necessary defense."  He said that the State of Colorado cannot impair a fully-vested public pension contractual right under the Contract Clause.  Rosenblatt stated that the Defendants believe that another case, DeWitt, changed the legal test for acceptable contract breach set forth in Bills and McPhail.  He commented on an important U.S. Supreme Court contract case, U.S. Trust (decided in 1977) and he noted that eleven years later, in 1988, the Colorado Supreme Court held that a fully vested public pension contractual right could not be impaired in its own Peterson case.

PERA retiree attorney Rosenblatt said that the State of Colorado must fulfill its end of the PERA pension bargain.  He noted that current workers in the Colorado PERA pension system have the right to leave that employment, and that they are not forced to live under the terms of their contracts with PERA.  Colorado PERA retirees on the other hand have completed the contribution of money and labor, constituting their consideration under the PERA pension contract. 

Richard Rosenblatt noted that an opinion of the Colorado Attorney General, supporting contractual public pension rights, agrees with the analysis in McPhail, Bills and Peterson.  He commented on the work of the Colorado Treasurer's Commission, that studied Colorado PERA public pension benefits a decade ago, and that found that the benefits of current PERA retirees could not be impaired.

(For the record, an August 17, 2005, press report of the Colorado Treasurer's Commission to Strengthen and Secure PERA:

Colorado Assistant Attorney General Heidi Dineen, Rocky Mountain News [in a four part series]: "'Everyone agrees you certainly can make changes for people you haven’t even hired yet,' said Heidi Dineen, a state assistant attorney general retained to explore the issue for the Commission to Strengthen and Secure PERA. 'On the other side of the spectrum is pensioners, getting their pension checks, you cannot take that away.'"

"[Colorado PERA General Counsel Greg] Smith said in his opinion that ‘other [non-Colorado] courts have set a high burden to meet the necessity threshold.'"

“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 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)

Back to coverage of the Colorado Supreme Court oral arguments:

Attorney Rosenblatt also noted that Colorado PERA, in a 2008 publication, stated its agreement that the fully-vested pension benefits of PERA retirees could not be legally impaired.  Attorney Rosenblatt informed the Colorado Supreme Court that the PERA COLA "is not a free-standing benefit."  He said that the COLA is part of the pension benefit, "it's intertwined."

He noted that the COLA is simply a method by which the pension benefit retains its value over time.  He said that Colorado PERA retirees have relied on their accrued COLA benefits in planning their retirements and the remainder of their lives.

Transcribed excerpts from the oral arguments;

A question from Colorado Supreme Court Justice (Hobbs):

"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?"

(My comment: There are many problems with this statement/ question from Justice Hobbs, 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, obviously, 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, 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 is not at issue here.  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 taking of the Colorado PERA COLA benefit in perspective: [54.5% to 105.2%] – 40-year range of the Colorado PERA actuarial funding ratio [AFR], [source, Colorado PERA.]; 78% – average PERA AFR over the 40-year period; 68.9% – PERA AFR at time of the taking of the contracted 3.5 % COLA benefit; 9.1% – difference between the PERA AFR at time of COLA taking and the 40-year average PERA AFR; 11.1% – difference between PERA AFR at the time of the COLA taking and an 80% AFR level considered “well-funded” by Fitch Ratings; 72% – average AFR at the end of 2009 for 57 state retirement systems reporting to Wilshire Associates; 3.1% – difference between the Colorado PERA AFR and Wilshire Associates average AFR for 57 state retirement systems at time of PERA COLA taking; 2.16 – percent of Colorado state and local government spending dedicated to public pension support in 2008 [Census Bureau, NASRA]; 2.89 – average percent of state and local government spending dedicated to public pension support among the states in 2008; 5.55 – highest percent of state and local government spending dedicated to public pension support among the states in 2008 [Nevada]; #32 – Colorado 2008 rank among the states in taxpayer support for public pensions; [For the entire decade of the 1970s the PERA AFR was lower than it was at the time of the taking of the contracted COLA, yet there was no campaign to breach retiree pension contracts.]

It is the responsibility of the Colorado Supreme Court to determine if payment of the PERA COLA benefit is a contractual obligation of Colorado PERA, not to use other people's money to pay the labor costs of Colorado state and local governments.

I was surprised at Justice Hobbs' statement in the oral arguments:

"To me, you're arguing for a divestment of legislative authority here . . ."  I ask, is it appropriate for an appellate judge to state a position in a case prior to deliberations in the case?  [Particularly, in a case where the plaintiffs have had no opportunity to present the facts of the case to a jury?  The facts of the case have not yet been discovered.]

From his comments, it sounds like Justice Hobbs has already made up his mind that there is no contract for the PERA COLA benefit.  It sounds this way because, if the PERA COLA is a contractual obligation, there is no such claimed "divestment of legislative authority."  The Legislature has no authority to violate the Contract Clause.)

Attorney Rosenblatt's response to this question posed by Colorado Supreme Court Justice Hobbs:

"Because, for this particular right, just like the base pension, there is a contract that provides that they will continue it, that they were promised this."

"We're talking about people who have fulfilled their end of the bargain, have left, they're gone, they're retired.  They have now completed their career.  They did everything they were asked to do under their contract with the state."

"There's nothing in the Legislature that guarantees anyone a pay raise every year during the term of their employment, not even these retirees when they were employed."  "But, there is something there that guarantees them a base pension under a certain formula, and a COLA."

(My comment: 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 on 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)

Question from a Supreme Court Justice:

"A number of times you've talked about promises, and then sometimes you've talked about fulfilling a bargain."  "Do you think for purposes of the Contract Clause, there is a difference between something that in normal contract terms we would distinguish as promissory estoppel, or relying to your detriment on a promise, from actually being a contract in which there is an exchange of promises?  And the reason I ask that is because the argument pegs the COLA to the point at which retirement occurs, is that more implicitly an argument that the COLA should not be allowed to be changed after that point, because the employee has relied to his detriment in choosing to retire at that level, rather than promising to give something up in exchange for the promise?"

Attorney Rosenblatt's response:

"Well, we hadn't made the promissory estoppel argument, as a detrimental reliance argument, but I will say that in McPhail and Bills they . . . talked about, as fully-vested, you have fulfilled all of the conditions of the promise, they then found it contractual because of the mandatory language . . . they found a contract, the contract is 'you shall receive this escalator clause.'  'You shall be entitled to it' is the exact language."

(My comment: Colorado has traditionally followed the contractual "California Rule" of public pension jurisprudence.)

Question from a Colorado Supreme Court Justice:

"So, can the worker, the employee, be said to have given something in exchange to the state, in order to receive that retirement benefit?"

Richard Rosenblatt:

"Every contract has consideration, and the consideration that the employee gave was X number of years . . . of service, and X amount of contributions toward the plan, that's their consideration."

(My comment: August 2, 2010, Ritter Administration Letter to GASB on contractual public pension obligations:

“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”

“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits [such as COLAs], or an increase in required employee contributions both serve to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”

“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)

Question from a Colorado Supreme Court Justice:

"You haven't talked much about the DeWitt case, and your opponents take the position that DeWitt really is the case that controls.  What's your position with respect to that?"

Richard Rosenblatt:

"Let's be clear, DeWitt involved an insurance contract, it wasn't (a case) where the state is a contracting party."

"DeWitt didn't enunciate a new test on the overarching issue, it simply articulated for the first time in this court, what the three parts of determining . . . that applying U.S. Trust."

"DeWitt is not new law.  DeWitt is just applying what's been the long-term law of the state and of the United States Supreme Court."

At 27 minutes into the oral arguments Sean Connelly representing Colorado PERA began his commentary.  He started with the second question (of three issues) facing the court, whether plaintiffs have their claimed contractual right to the PERA COLA benefit.

Sean Connelly said that the defendants support the finding of a contractual right to the COLA in the Bills and McPhail cases.

Sean Connelly:

"In evaluating whether the contract right exists, the court is to begin with the presumption that Legislatures, in Justice Hobbs words, do not divest themselves of the power to respond to changed circumstances in the future."

(My comment: This statement by Sean Connelly, regarding divesting legislative authority calls to mind a recent Florida court decision in a public pension case:  “This court cannot set aside its constitutional obligations because a budget crisis exists in the state of Florida.  To do so would be in direct contravention of this court’s oath to follow the law.”  “To find otherwise would mean that a contract with our state government has no meaning.”  “Courts, though, 'sit to determine questions on stormy as well as calm days,' and the Constitution was upheld during the Great Depression.”)

Sean Connelly:

"Based on the language and surrounding circumstances (in Bills and McPhail) the court properly held that the pension and the right to the escalation there, was a vested right that could not be impaired, absent sufficient justification."

"The vested benefit under PERA is the right to the initial monthly benefit, and not, we submit, the right to the annual increases under a specific formula."

(My comment: 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)

Question from a Colorado Supreme Court Justice at 30 minutes into the oral arguments:

"Is DeWitt consistent or inconsistent with Bills and McPhail?"

Sean Connelly:

"I think that it's consistent with the result.  It's consistent with the result of everything else.  In our view, under Bills and McPhail the result would be exactly the same that there was a protected benefit and there was no overriding justification that could have justified that impairment."

"Where there might be some tension with it, is when can that right be impaired?"

(My comment: Sean Connelly notes that the position of the City of Denver in Bills/McPhail was that the pension was a mere "gratuity."  The Colorado Constitution includes an anti-gratuity clause, therefore the PERA COLA cannot be a gratuity.)

Question from a Colorado Supreme Court Justice:

"Do you think that tension exists or has to be resolved in this case?"

Sean Connelly:

"I don't think it has to be resolved."  "I think the dispositive issue here can be 'is there a contract right to a COLA fixed in formula.'"

"I'd like to argue further why there is no contract right."

Sean Connelly at 34 minutes into the oral arguments:

"DeWitt, as Mr. Rosenblatt points out, was a private contract, but it cited U.S. Trust which was a public contract, and the Supreme Court and this court historically have not distinguished between private and public contracts."

(My comment: In 1977, the U.S. Supreme Court [in U.S. Trust Co, 431 U.S.] clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE'S SELF-INTEREST IS AT STAKE.  As the court bluntly stated:
“A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  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 . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors.")

Sean Connelly:

"This is economic legislation and there is no basis . . . for straightjacketing the Legislature from changing to, changed circumstances."

"These are specifically the kinds of decisions that must be left to a Legislature if they can make the showing of reasonableness and necessity as to the need for impairing any contract."

(My comment: The Legislature, the state, and PERA have not made any showing of reasonableness and necessity due to the fact that this case has never gone to trial.  I hasten to add that Colorado PERA's attorneys have expressed their desire that the case not go to trial.)

Question from a Colorado Supreme Court Justice to Sean Connelly:

"So your position is that it's the rate increase that is not a contract, not whether the COLA is a contract?"

Sean Connelly:

"Yes, that is my position, that's my position if that's the only question presented here."

(My comment: Pause for a moment and consider just how ludicrous this statement is.  Sean Connelly argues that the PERA COLA benefit is a contractual obligation, yet it may legally be reduced to ZERO.  In accordance with his view of contractual obligations Connelly should have no problem with Colorado PERA paying him one dollar for his legal services under his employment contract.  If Connelly's contract requires that he be paid $50,000 for his legal services, the fact that the contract specifies this amount of compensation is apparently of no relevance to Sean Connelly.  He would be happy with one dollar, and consider himself to have been provided "compensation" under his contract.)

Question from a Colorado Supreme Court Justice at 40 minutes:

"The contract here includes an adjustable COLA that the Legislature sets, it can go down or up, but when that is done for that particular increment of a monthly paycheck then it becomes part of a contract."

Sean Connelly:

"Certainly current workers are contributing more, working longer, and retiring ultimately with less than any of these current plaintiffs."

"Even when there is a state contract being impaired, this is still economic legislation."

"In this case, the state was acting to respond to a crisis and at the end of the day the PERA fund is more healthy now because more money is being put into it."

(My comment: Sean Connelly's statement that current workers are working longer for their PERA benefits, in my opinion, misleads the Supreme Court.  In 2010, SB10-001 did not increase the years of service needed by current workers to qualify for a PERA pension benefit.  How can he possibly not know this?

Also, we have seen that the Colorado Legislature is the author of the downturn in Colorado PERA's financial condition, due to a failure to pay the pension system's ARC for a decade, and the preference of politicians to use state resources for discretionary purposes such as corporate welfare.  Finally, it is obvious that when the State of Colorado escapes its contractual financial obligations, it has more money.) 

Colorado Solicitor General Dan Domenico representing Governor Hickenlooper and the State of Colorado began his comments at 44 minutes into the oral arguments:

"The plaintiff's case is wrong . . . as a matter of the purposes and functions of a COLA, a cost-of-living adjustment."

(My comment: Dan Domenico apparently lacks an understanding of the history of the PERA COLA benefit.  When the PERA COLA benefit was created, PERA officials took the position that the 3.5 percent COLA rate would approximate PERA's long-term expectations of inflation.

March 24, 1993 (1:32 PM – 2:28 PM)

Rob Gray, Director of Government Relations, Colorado PERA:

“The (CPI up to) 3.5 percent increase is a reasonable level.”  “It will probably come close to what the long-term inflation rate is.”

Rob Gray, 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.])

Support the rule of law in Colorado at saveperacola.com.

Anticipating Colorado PERA’s Next Deception: ADC Supersedes the ARC.

Task Force of Local and State Government National Associations in 2013:

"The most important step for local and state governments to take is to base their pension funding policy on an actuarially determined contribution (ADC)."

http://icma.org/en/icma/knowledge_network/documents/kn/Document/305118/Pension_Funding_Guide_Brief

Public pension retirees in most states can rely on the trustees of their pension plan, or the administrators of their plan to defend their contractual pension rights.  Since Colorado PERA trustees and administrators are thick into the attempt to take the property of Colorado PERA retirees through the 2010 Colorado bill, SB10-001, Colorado PERA retirees must defend their own rights and property in the courts.

Given the track record of attempted deception by Colorado PERA officials (deception of PERA annuitants and Colorado courts) during PERA's political and legal campaigns to escape PERA contractual pension obligations we can expect that Colorado PERA officials will also attempt to use coming changes in federal public pension accounting standards to obfuscate and mislead.

Colorado PERA's lawyers and administrators are grasping at straws in developing arguments to support the breach of PERA pension COLA contractual obligations desired by their client, accordingly it is only prudent that we expect Colorado PERA officials to use the ongoing change in federal public pension accounting emphasis as a vehicle for further deception.  That is, another "straw" Colorado PERA's lawyers will reach for.

The federal public pension regulatory agency, GASB, has changed its accounting standards relating to the reporting of public pension liabilities.  This rule change is currently being implemented by pension plans in the United States.  Rather than employing its traditional emphasis on pension funding (i.e., the ARC, "actuarially required contribution") the federal public pension regulatory agency, GASB, has issued new rules that will emphasize the reporting of "net public pension liabilities" by public pension systems such as Colorado PERA.

Over the last few decades the public pension ARC metric has served as the primary means of measuring public pension plan funding discipline, i.e., the extent to which a pension system's plan sponsors are responsibly contributing to pension trust funds in amounts sufficient to meet the plan's contractual obligations over time.  As we have seen, the Colorado PERA pension system has skipped out on paying its full public pension bills (ARC) for the last twelve years.

To "fill the gap" in the development of public pension funding plans that will be created by GASB's new rules, a group of state and local government national associations has recommended that the metric ADC ("Actuarially Determined Contribution") replace the former pension funding metric ARC ("Actuarially Required Contribution.")

In 2013, the Task Force recommended that the "ADC" Supersede the "ARC" in public pension plan funding:

ADC: "Actuarially Determined Contribution."
ARC: "Actuarially Required Contribution."

In light of the level of deceit that we have seen from Colorado PERA officials in the last five years, I fully expect Colorado PERA's lawyers to attempt to use GASB's change of funding discipline emphasis as a cover for the failure of PERA plan sponsors to meet their pension obligations over the last twelve years.

Their argument may be along the lines of "Well, GASB has apparently found that the ARC is not important, so it doesn't matter that the Colorado PERA pension system has not paid the PERA system ARC (bills) for twelve years."  As we have seen, both Colorado PERA Executive Director Greg Smith and former Executive Director Meredith Williams have (when caught off-script) condemned the Colorado Legislature's failure to pay its pension bills over the last decade.

In this article I highlight some of Colorado PERA's previous deceit, explain my rationale for expecting Colorado PERA officials to embrace this new line of deception, and later in the article provide background information regarding the GASB rule change and the Task Force recommendation of the ADC.

COLORADO PERA'S ONGOING ATTEMPTS TO DECEIVE:

Why should we expect Colorado PERA administrators and lawyers to also use the GASB rule change in yet another attempt to deceive?  In the next few pages I will provide examples of deception from the PERA political campaign to take the PERA COLA benefit, and examples of PERA deception in a PERA Supreme Court brief.  Rest assured that where Colorado PERA officials see a chance to deceive, they will seize upon it.

Here are a few examples of Colorado PERA deception that occurred during PERA's political campaign to break PERA pension contracts in 2009/2010: PERA's deceptive "2/2/2" marketing campaign (under this marketing scheme PERA employers relinquish only a fraction of a percent of future revenues, while PERA retirees relinquish a third or more of the value of their pension contracts); the failure of PERA officials to note that the PERA COLA is an "automatic" public pension COLA benefit, as opposed to an "ad hoc" benefit; and attempts by PERA officials to exaggerate the decline in the funding ratio of the Colorado PERA pension system by replacing the "actuarial funding ratio" that Colorado PERA officials have used historically (this is the funding ratio in SB10-001) with a "market-based" funding ratio.

I also see deception in Colorado Legislative Leadership's failure to submit an interrogatory to the Colorado Supreme Court in 2009, in Legislative Leadership's acquiescence to the scheme to "outsource" legislative debate of public pension policy in 2009, and in the subsequent failure of Legislative Leadership to appoint an interim study committee to examine PROSPECTIVE, legal pension reform options in 2009.  I see deception in the lack of public and PERA annuitant access to the consideration, recommendation and pricing of PERA "reform" options in 2009.

I see deception in the list of 28 reform options that was distributed by PERA officials during their "Listening Tour."  Only two of the options listed required those who actually owe the PERA pension debt to pay their debts.

I believe that PERA's intent to deceive resulted in an initial decision of the Denver District Court that failed to even mention Colorado's long-standing public pension case law, Bills and McPhail.

In 2012, I wrote an article that exposes many of the deceptions of Colorado PERA administrators and lawyers in a PERA Supreme Court brief including: deceptions relating to: the "reasonable expectations" of Colorado PERA retirees; the false claim that the taking of the COLA was "the last option," while the taking was certainly premeditated; the false claim that PERA retirees have a contractual right to the PERA "base benefit (but, not to the PERA COLA benefit) while both are set forth in identical language in Colorado statutes; Colorado PERA's attempts to mislead regarding Colorado public pension case precedent; attempts to mislead regarding "irreducible" versus "unchangeable" pension COLAs; the deference courts give to state governments seeking to escape their own contractual obligations; claimed support of retirees for the breach of their own pension contracts; the need for a 100 percent funded ratio in SB10-001 when an 80 percent funding ratio for public pensions is considered to be "well-funded"; the implication in PERA publications that current employees must work longer under SB10-001 (they don't); the implication that when courts uphold the law in Colorado and protect the Constitution, the courts threaten public pension funding status; the fear mongering that Colorado PERA could "run out of money," while many public pension systems have operated on a "pay-as-you-go" basis as recently as the 1970s (a 2006 Federal Reserve paper, by Ronald A Wirtz, notes that public pension funded ratios in the 50 to 60 percent range were typical in the 1970s); the many "market-based" versus "actuarial funding ratio" deceptions; and finally the ridiculous assertion of Colorado PERA's attorneys that this case is "not about the right to COLAs."

Recall that in their publications Colorado PERA officials note that "actuarial funded ratios” in the 60's do not constitute a "crisis":

Colorado PERA Update – [Spring 2006 – page 4]: “See that PERA’s [actuarial] funded status was lower [61.5 percent] 30 years ago than what it is now. You may recall that there was no perceived “crisis” in PERA’s funded status in 1975.”

Colorado PERA News Archive for 2004: PERA's [actuarial] funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health.”

A more complete analysis of deception in the Colorado Supreme Court PERA brief is available here:

http://coloradopols.com/diary/18952/colorado-pera-attempts-to-decieve-the-colorado-supreme-court

Here are a few examples of how Colorado PERA attempts to mislead in their Colorado PERA Supreme Court Brief, an excerpt from the Colorado PERA brief:

“Plaintiffs could have no reasonable expectation that ever-changing COLA formulas would freeze, for the first time, when they retired.”

(My comment: PERA attorneys, EVEN YOUR CLIENT HAS THESE EXPECTATIONS . . . THAT THE COLA BENEFIT IS AN ENFORCEABLE PUBLIC CONTRACT!  If Colorado PERA, your client, has these expectations, why should PERA pensioners not also have these expectations?  Colorado PERA attorneys, please take a minute to read the words of your client provided in testimony to the General Assembly’s Joint Budget Committee.  Your client put it in writing that PERA pensioners have a contractual right to their COLA benefits.  Colorado PERA administrators believe that PERA pensioners have such a contractual right . . . that belief goes beyond a “reasonable expectation.”

Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “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.”

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

From the Colorado PERA Supreme Court Brief:

“But this mandatory language bound the PERA administrator while the statutes were in effect-not future legislatures.”

(My comment: Colorado PERA attorneys, your client doesn’t believe your argument that the statutes only bind the “pension administrator.”  Your client has testified that the General Assembly cannot decrease the contracted COLA . . . THAT THE GENERAL ASSEMBLY IS BOUND, not the "pension administrator."  Did this not come up in your meetings with your client?  Your client’s testimony is on the record, it has been recorded at the Legislature.  It is not going to simply disappear.)

From the Colorado PERA Supreme Court Brief:

“The General Assembly considered readjusting the COLA for retirees as the last option, only after it became evident that no other viable contribution and benefit changes could prevent the pension fund from running out of money.”

(My comment: First we should note that: "In the 1970s, it was not uncommon for state and local governments to fund their pensions on a pay-as-you-go basis."  [Pension Funding: A Guide for Elected Officials, Report from the Pension Funding Task Force 2013.]

http://www.nasact.org/washington/downloads/announcements/03_13_Pension_Funding_Guide.pdf

In the 1970's it was not uncommon for U.S. public pension systems to be as PERA's lawyers write "out of money," and yet still meeting their contractual obligations out of current revenues.  Greg Smith has been quoted stating that, in accordance with his legal briefs, actuarial necessity [which in any event applies only to pension benefits that are partially vested] only occurs when pension plans have no assets.  Further, state governments cannot petition a court for bankruptcy under federal law.

Colorado PERA attorneys, if the taking of the PERA COLA benefit was the "last option," why was the Colorado PERA Board of Trustees shopping for a legal opinion (Dubofsky) to justify the COLA taking in early 2009, before the purported consideration of PERA "reform" options even began?  As you know, I believe that the General Assembly reduced the contracted PERA COLA benefit from retirees [thus breaking pensioner contracts] as a FIRST OPTION.  I believe that the General Assembly created a façade of deliberation to mask a predetermined attempt to break the PERA pension COLA contractual obligation.  Dozens of viable “less drastic” alternatives to pension contract breach, that were ignored by Colorado PERA administrators, have been documented.)

From the Colorado PERA Supreme Court Brief:

“The (District) court held: ‘While Plaintiffs unarguably have a contractual right to their PERA pension itself . . .’

(My comment: As I have noted previously, I am curious as to how the Denver District Court arrived at this conclusion that “plaintiffs unarguably have a contractual right to their PERA pension itself” without citing either the McPhail or Bills cases in its decision?  On what authority did the Denver District Court base this determination?  Was it pulled out of thin air?)

In the Colorado PERA Supreme Court Brief, PERA’s attorneys write in regard to the pension cases McPhail and Bills: “Those dated cases are distinguishable.”

(My comment:  Let’s get this straight for the record: Colorado PERA’s attorneys believe that the Colorado Supreme Court decisions in McPhail and Bills that address the contractual nature [under the COLORADO constitution’s Contract Clause] of post-retirement benefit increases for retired public employees who have vested rights in Colorado public pensions are “distinguishable,” and that the Supreme Court should not rely on their own authority.

Instead, Colorado PERA’s attorneys argue that the Colorado Supreme Court should rely on a case [DeWitt] that addressed a “statutory revocation of a testator’s former wife’s interest in a life insurance policy” based on FEDERAL Contract Clause authority, a case in no manner involving “vested rights to employee benefits,” a case concerning the “retroactive application of a Uniform Probate Code provision which automatically revoked the designation of a divorced spouse as a life insurance beneficiary.”  Got it?)

THE RECOMMENDED "ACTUARIALLY DETERMINED CONTRIBUTION" (ADC):

The Pension Funding Task Force recommends that the ADC "fill the gap" in funding guidance left by GASB's latest rule change.

On its website, the International City/County Managers Association (ICMA) has a page relating to public pension funding.

http://icma.org/en/icma/priorities/public_policy/policy_priorities/pension_funding

This page includes a link to the publication: Pension Funding: A Guide for Elected Officials published by a Task Force of local and state government national associations.

A few excerpts from the ICMA page:

"The Task Force also released, Pension Funding: A Guide for Elected Officials, with its recommendations for pension funding policies.  The Pension Funding Task Force recommends that governments retain an actuarially determined annual required contribution (ARC) for budgeting, policy, and planning purposes.  The new GASB accounting standards no longer address pension funding and require local governments to report Net Pension Liability."

"Members of the task force include: ICMA, the National Governors Association, National Conference of State Legislatures, The Council of State Governments, National Association of Counties, National League of Cities, U.S. Conference of Mayors, National Association of State Auditors, Comptrollers and Treasurers; Government Finance Officers Association; National Association of State Retirement Administrators and the National Council on Teacher Retirement."

(Note that former Colorado PERA Executive Director Meredith Williams is now leading the National Council on Teacher Retirement.)

"ICMA and the Pension Funding Task Force recommend that state and local governments adopt a pension  funding policy that is based on an actuarially determined annual required contribution.  The policy should address three core elements: (1) actuarial cost method; (2) asset smoothing; and (3) amortization policy."
The ICMA highlights a few well-run public pension systems:  "Some pension plans have remained better funded than others in the aftermath of the economic downturn.  Here are three well-funded pension plans and their characteristics: City of Kalamazoo, Michigan Employees’ Retirement System, Illinois Municipal Retirement Fund, Denver Employees Retirement Plan."

http://icma.org/en/icma/priorities/public_policy/policy_priorities/pension_funding

Chicago Tribune on the Illinois Municipal Retirement Fund:

"'It's not rocket science,' said IMRF executive director Louis Kosiba in an interview Friday. 'We've done it the old-fashioned way, with sound actuarial principles applied consistently.  Each year our board of trustees calculates what the units of government need to contribute, and 99.9 percent of them comply."

"'We know that winter comes every year, and we have to plan for downturns.  We always remember that we're in this for the long term.'"

"IMRF went through the same economic downturn that the rest of us did. 'Our assets dropped from $24 billion down to $18 billion,' said Kosiba.  'But now we're at $33 billion.  Because slow and steady wins the race.'"

http://articles.chicagotribune.com/2014-05-18/opinion/ct-oped-zorn-0518-20140517_1_pension-crisis-state-pension-pension-changes

THE PUBLIC PENSION FUNDING GUIDE:

Below, I provide a few excerpts from the public pension funding guide:

"In the 1970s, it was not uncommon for state and local governments to fund their pensions on a pay-as-you-go basis."
(Pension Funding: A Guide for Elected Officials, Report from the Pension Funding Task Force 2013.)

http://www.nasact.org/washington/downloads/announcements/03_13_Pension_Funding_Guide.pdf

"This guide provides key facts about public pension plans, why it is essential to have a pension funding policy, a brief overview of the new GASB standards, and which issues state and local officials need to address.  The guide also offers guidance for policy makers to use when developing their pension plan’s funding policy."

"Paying the full ARC has been an important measure of whether or not a pension plan is on track to fund its pension promises."

"This is a significant change for government employers because the ARC historically served as a guide for policy mak¬ers, employees, bond rating agencies and the public to determine whether pension obligations were being appropriately funded."

"Because the GASB’s new standards focus entirely on how state and local governments should account for pension liabilities and no longer focus on how employers fund the costs of benefits or calculate their ARC, a new source of guidance is needed."

Filling the Gap in Funding Guidance:

"To help fill that gap, the national associations representing local and state governments established a Pension Funding Task Force (Task Force) to develop policy guidelines."

"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 has monitored the work of the actuarial community and the rating agencies, as well as considered recommendations from their own organizations to develop guidelines for funding standards and practices and to identify methods for voluntary compliance with these standards and practices."

"A sound pension funding policy should address at least the following three core elements of pension funding in a manner consistent with the policy objectives: Actuarial cost method; Asset smoothing method; and Amortization policy."

"The actuarially determined ARC, the parameters for determining the ARC, and the percentage of the ARC the employer actually paid should be disclosed and reassessed periodically to be sure that they remain effective."

"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://icma.org/en/icma/knowledge_network/documents/kn/Document/305118/Pension_Funding_Guide_Brief

Support public pension contractual rights at saveperacola.com.

Tennessee Legislature Models Responsible Public Pension Management for Colorado PERA and the Colorado Legislature.

In Colorado, the reward for a lifetime of public sector service is a retirement spent in litigation to force your former employer to meet its contractual obligations, and in countering that employer's deception.  Welcome to Corruptible Colorado.

Although residents of the State of Tennessee lack the wealth and high incomes of Colorado residents, they have confidence that their state government will act responsibly and honor its contracted debts.

The table at the link below reveals that the State of Colorado had the 13th highest per capita income in the nation in 2012 (I have seen reports of Colorado ranking tenth in the nation in per capita income) while the State of Tennessee ranks 34th in the nation in per capita income.

http://bber.unm.edu/econ/us-pci.htm

Thus, we have this situation in which one of the poorer states in the nation is demonstrating for one of the richer states in the nation how to pay state bills, honor state debts, and responsibly manage a public pension system.

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.  As we have seen, the Colorado Legislature has failed to pay its full public pension bills ("actuarially required contributions," ARC) for the last twelve years and has accordingly racked up an impressive public debt.  Under the terms of its new legislation, the Tennessee Legislature will now insist on payment of public pension ARCs by pension plan sponsors in Tennessee, while the Colorado Legislature continues in its attempt to break Colorado PERA public pension contracts and "clawback" compensation that has already been earned by Colorado PERA pensioners.

It is apparent that something is rotten in the State of Colorado, and that a backroom "deal" was "cut" by Colorado politicians, Colorado PERA officials, and lobbyists in 2009 to pay off state debts with money taken from elderly pensioners.

In 2009, a group of Colorado PERA officials, some Colorado politicians, special interest groups acting in their own financial interest, and lobbyists all sat in a backroom and plotted to break Colorado PERA pension contracts through deception.  They accomplished this by taking the pension reform debate outside of the normal, open legislative process (having their lobbyists place this language into a bill at the end of the 2009 session) by running a statewide campaign to break Colorado PERA pension contracts (that was intended to demonstrate the support of Colorado PERA pensioners for the breach of their own pension contracts) and by assembling a team of 27 lobbyists to push the contract breach proposal on sitting state legislators.  Like it or not Coloradans, this is your state government in action.

The bill breaking Colorado PERA pensioner contracts was signed into law by Governor Ritter in 2010.  Naturally, Colorado PERA retirees sued to prevent the use of their property to keep taxes low in Colorado, and to free up public funds for politician's favorite programs (including annual gifts of billions of dollars in corporate welfare.)

Since current Colorado PERA pension administrators are complicit in underfunding the PERA pension plan, mismanagement of the pension plan, and in the attempted breach of Colorado PERA plan sponsors' contractual obligations, the burden of defending contractual public pension rights in Colorado falls on the shoulders of Colorado PERA pensioners.

Now that the Colorado PERA retiree lawsuit, Justus v. State, has arrived at the Colorado Supreme Court, the Colorado Legislature and its pension administration arm, Colorado PERA ask the court to bless their breach of pension contracts.  Further, the State and PERA ask that the Colorado Supreme Court go so far as to deny Colorado PERA retirees their right to a jury trial, since a trial would expose Colorado PERA's legacy of pension mismanagement.

In the past, Colorado PERA pension administrators have made numerous statements (and have written and cited legal briefs supporting Colorado public pension contracts.)  Prior to agreeing to the "deal" to break PERA pension contracts, PERA officials admitted to pension mismanagement:

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

Even after agreeing to the deal to attempt the PERA COLA contract breach, Colorado PERA officials admitted that the PERA COLA was their contractual obligation:

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

Over the course of the last twelve years, Colorado PERA pension administrators like former Executive Director Meredith Williams and current Executive Director Greg Smith could have acted responsibly by regularly and emphatically insisting that the Colorado Legislature pay its public pension bills to meet state contractual obligations.  Instead, Greg Smith and Meredith Williams held their tongues.  They allowed members of the Colorado Legislature to labor under the delusion that simply establishing insufficient Colorado PERA contribution rates in statute was the equivalent of actually meeting the pension system's obligations under existing PERA pension contracts.

Greg Smith and Meredith Williams sat back and said nothing as Colorado state legislators systematically underfunded the PERA pension system, driving the pension system's funding ratio down from 105 percent in 2001 to 69 percent in 2009.

Only on rare occasions have we heard Greg Smith or Meredith Williams mention the public pension "ARC" in public, Meredith Williams' comments on February 23, 2012 to the Colorado House Finance Committee (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):

"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."

In 2009, in an unusual off-script moment, Colorado PERA's former General Counsel (and current Executive Director) Greg Smith condemned the Colorado General Assembly's failure to meet PERA pension system ARC obligations.  Greg Smith's moment of candor occurred prior to legislative enactment of the 2010 PERA COLA contract breach in SB10-001.  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 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

Having failed to lead, having failed to take responsibility, having participated in the mismanagement of the Colorado PERA pension system, these Colorado PERA officials now seek to cover their tracks through breach of public pension contracts.  In 2010, rather than acting as professional public pension administrators, they endorsed a scheme advocated by self-interested groups and lobbyists to rectify a tradition of pension mismanagement by the Colorado Legislature and the Colorado PERA Board of Trustees.  They suggested that other U.S. pension systems follow their example of contract breach.

Having shirked their duty, Greg Smith and Meredith Williams decided to compound their errors by agreeing to go along with this scheme to take money (fully-vested PERA pension benefits) from elderly Colorado pensioners.  Going forward, Colorado residents, voters, judges, and elected officials should know the character of the state we live in.  Colorado state employees will shirk responsibility for their past mismanagement, they will misrepresent, and they will hire attorneys to attempt to deceive courts in legal briefs.  They will deceive in order to maintain Colorado's political status quo through which billions of dollars in state and local government resources are sent to corporations via tax exemptions and subsidies.

Shortly after SB10-001 (the bill breaking Colorado PERA pension contracts) was signed into law by Governor Ritter, Meredith Williams began a search for a new job.  He failed to land a position for which he was a finalist in Texas, and ultimately escaped the mess he helped create in Colorado when he found work in California.  Apparently, he wanted no part of the aftermath of this Colorado PERA self-inflicted legal fiasco.

The Tennessee Legislation, (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."

"Under the new law, local government entities that have not been paying 100 percent of their ARC will have six years to gradually ramp up their yearly payments.  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."

"Previously-existing law had long required that the approximately 500 local government entities in the Tennessee Consolidated Retirement System, or TCRS, pay 100 percent of the yearly ARC. Local government entities in TCRS have also long been subject to possible state intercept of funds if they failed to pay 100 percent on the ARC.  As a result, TCRS is ranked by various organizations as having one of the best funded pension plans in the nation.  This legislation simply applies these best practices to local government pension plans that are not already in TCRS."

“'Each year that a local government doesn’t fully fund its ARC, it creates a liability that will eventually have to be paid,' said Representative McManus, the bill’s House sponsor.  'Those liabilities add up over time.  And when the costs of providing those pensions come due, it can create a tremendous burden for future generations of taxpayers if the pension plans have been underfunded for years.'”

“'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.”

“'From a credit standpoint, we have always viewed full funding of the ARC as a positive and important element of a government’s liability management,' said John Sugden, a senior director at Standard & Poor’s Ratings Services."

John Sugden quoted in the Gazette Telegraph:

"You're capturing at a potentially low point.  We're going to see the market strengthen.  We've seen these numbers fluctuate over time.  Back in 1975, it was 51 percent, and with the market boom in the '90s, it was 100 percent or close to that."

http://gazette.com/future-of-colorado-retirement-plan-in-doubt/article/1504970

Back to Chattanoogan.com:

“'Tennessee has a well-deserved reputation as one of the best financially managed states in the nation,' Treasurer Lillard said.  'This landmark legislation continues that proud tradition by applying a common sense approach to local government pension funding.'”

"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

A few excerpts from the Tennessee legislation:

"For the purposes of this section, 'Actuarially determined contribution (ADC), formerly known as the 'actuarially required contribution' means the actuarially determined annual required contribution that incorporates both the normal cost of benefits and the amortization of the pension plan's unfunded accrued liability."

"Each political subdivision shall develop a funding policy for financing the obligations under the pension plan.  Such funding policy shall be legally adopted and approved through a resolution by the political subdivision's chief legislative body or governing body."

"For political subdivision employees hired on or after the effective date of this act, the political subdivision may freeze, suspend or modify benefits, employee contributions, plan terms and design on a prospective basis.  The provision in the foregoing sentence does not affect any judicial precedents or statutory law as they apply to employees who were employed prior to the effective date of this act."

(My comment: Note that the Tennessee Legislature intends to permit PROSPECTIVE changes to the accrual of public pension benefits in their state.  Oddly, after having adopted retrospective legislation, taking accrued benefits from retirees in the Colorado PERA pension system in 2010, two years later the Colorado Legislature adopted SB12-149 honoring the accrued pension benefits of retirees in Colorado county government pension systems.  So, if you happen to be a retiree in certain county government pensions in Colorado, your pension contract is honored.  On the other hand, if you are a Colorado PERA retiree in Colorado, your pension contract has been abrogated.  A constitutional double standard on public pension contracts is now enshrined in Colorado law.)

Back to the Tennessee legislation:

"The accrued benefits earned prior to any adjustment pursuant to subsection (a)(1) above shall remain an enforceable right and may not be reduced without the written consent of the political subdivision employee . . ."

From Bloomberg.com:

"Keith Brainard, director of research in Georgetown, Texas, at the National Association of State Retirement Administrators, said he hadn’t heard of a measure like the Tennessee proposal that includes a provision for the state to intercept tax dollars to support pension funds outside of its control."

"The bill was championed by Treasurer David Lillard, a former county commissioner who said he understands the pressure on local governments to use pension contributions to patch budget holes."

"The hallmark of just about every distressed pension plan in the country is that they at one time or another reduced their annual payments,' Lillard said."

"The combined funding ratio for those plans was 65 percent, where an 80 percent level is considered optimal for funds to be able to pay future claims.  In comparison, the 18 systems that paid their full amount were 80 percent funded, and the three state plans were 89 percent to 96 percent funded."

"'We always believe in local control in our cities,' said (Tennessee Municipal League) Executive Director Margaret Mahery. 'But I guess, just like all of us, sometimes we maybe needed a little push.'”

(My comment: Note that officials of the Colorado Municipal League [CML] did nothing to prevent the Colorado Legislature from abrogating the pension contracts to which CML member Colorado municipalities were parties.  Colorado municipalities believed that they had the opportunity to erase billions of dollars of their debts in 2010.)

An on-line comment posted on the Bloomberg article:

"A pension plan is not largesse, but deferred compensation, thus the failure to pay an agreed pension, where the employee has contributed their agreed share, is constructively a theft of wages.  Operationally, failure to make scheduled contributions to a pension plan is extorting a zero interest rate loan from the plan.  Almost all of the loudly trumpeted municipal/state pension shortfalls are due to the failure of the trustee to compel the employer to contribute their agreed funding."

http://www.bloomberg.com/news/2014-04-14/memphis-pension-blues-foretold-with-tennessee-bill-muni-credit.html

(My comment: Colorado PERA Board trustees and PERA administrators your culpability in creating this legal fiasco is widely recognized.)

From commercialappeal.com:

"Norris’ bill gives governments like Memphis that haven’t been paying their ARC five years to steadily increase their funding until they do so.  Because the five-year clock starts after June 30, 2015, they would actually have six years."

"Lillard, the treasurer, said he and his staff drafted the bill that Norris is introducing.  Last month the treasurer’s office produced a report that reviewed 31 public pension plans statewide that are not part of the Tennessee Consolidated Retirement System.  Of those 31, only 13 paid less than their ARC in 2012."

(My comment: Colorado Treasurer Walker Stapleton seems happy to go along with the Colorado "COLA-theft" plan [SB10-001] to address Colorado PERA unfunded pension liabilities.)

"Norris said he would ask a joint House and Senate group called the Council on Pensions and Insurance to make a recommendation on his proposed bill on Feb. 10."

(My comment: Note again, the Tennessee Legislature debated public pension policy out in the sunlight, while Colorado PERA's lobbyists pushed this 2009/2010 Colorado PERA pension policy "debate" into the shadows.)

http://www.commercialappeal.com/news/2014/feb/03/proposed-tennessee-law-would-mandate-full-of/

Excerpts from the Tennessee State Treasurer's pension report, "Treasury Department State of Tennessee Report to the Legislative Council on Pensions and Insurance," January 27, 2014:

"The Governmental Accounting Standards Board in 2012 acted to abolish the concept of the ARC, and effective for fiscal years beginning after June 15,2014, no longer requires governmental employers to report an actuarially determined annual required contribution in their financial reports.  The new GASB standards will no longer set the parameters within which an employer's ARC must be calculated.  The Government Finance Officers Association (GFOA) and other professional finance organizations have adopted positions calling for governments to adopt a funding policy based on an actuarially determined annual funding amount."

"Thus, the TCRS and also each Tennessee local government with a defined benefit pension plan should adopt a written pension funding policy based on an actuarially determined annual contribution."

"The GASB also required inclusion of a liability entry in financial statements for the net pension liability.  For governments who underfund the annual contribution, a blended discount rate must be used to determine net pension liability, resulting in a significantly higher liability entry and pension expense."

"Accordingly, Senate Bill 2079 and House Bill 2037 have been introduced and will be heard by the Legislative Council on Pensions and Insurance on Monday, February 3, 2014, at 1:00 PM CST in Legislative Plaza Hearing Room LP 29, when a presentation will be made by the Tennessee Treasury Department.  These proceedings will be webcast and may be viewed at
http://wapp.capitol.tn.gov/apps/livevideo/. and will be archived for subsequent viewing."

"The chief legislative body of a local government or other participating local government entity must pass a resolution to participate in TCRS.  The resolution provides the terms of participation (prior service, COLA, formula, etc.).  The resolution also provides that the local government is financially responsible for the pension cost, including administrative cost and investment cost, associated with their employees and retirees."

"Under the law governing the participation of local governments in TCRS, if a local government does not pay its annual ARC payment, the Commissioner of Finance and Administration has the right to intercept any state-shared taxes that are otherwise apportioned to the local government. These intercepted funds are utilized to pay the required ARC payment."

"Current Tennessee law requires annual payment of the ARC for state employees, inclusion in the budget by the Department of Education and appropriation by the General Assembly of the state portion of funding for the Basic Education Program allotted for contributions to the retirement system for the benefit of teachers."

"GASB statements 25 and 27 formerly provided a direct linkage between 'pension funding' and 'pension expense' within certain parameters.  These two statements provided the foundation for the concept of the Annual Required Contribution (ARC), also often referred to as actuarially required contributions.  Six different actuarial methodologies were permitted which an employer may utilize in calculating the ARC."

"In June 2012, GASB statements 67 (pension plan financial statement) and 68 (employer financial statement) were finalized that superseded statements 25 and 27 as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements."

"Pension plans must begin reporting under the new standards for fiscal years beginning after June 15, 2013.  For all government pension plans, the fiscal year 2013-14 financial statements must be produced in accordance with the new GASB 67 statement.  Employers must begin reporting information on their financial statements under the new standards for fiscal years beginning after June 15, 2014."

"Now, there will be a separation of 'accounting for pension expense' from 'pension funding.' There will no longer be an ARC defined by GASB.  Pension plans that have been using the ARC under parameters prescribed by GASB as their funding policy will now need to establish a pension funding policy.  The result of these changes in accounting standards means the amount recorded as pension expense for a fiscal year will be different than how a pension plan is funded. There will probably be significant volatility from year to year in the amount recorded as pension expense under the new standards."

"The plan must calculate 'Net Pension Liability' (i.e., which strongly correlates to unfunded pension liabilities) based on market value of assets.  Previously, it was permitted to use an asset smoothing method."

"Net Pension Liability will be recorded as a long term debt (liability) on the employer's financial statement.  Previously, these liabilities were not an entry on the balance sheet but were depicted in the notes to the financial statement."

"In 2013 Fitch Ratings issued a report comparing the debt obligations, including pension debt, among the 50 states.  Tennessee has the high distinction of having the lowest overall state general obligation debt and unfunded state pension liabilities as a percentage of personal income."

"Standard and Poor's issued a report in 2013 titled A Bumpy Road Lies Ahead for U.S. Public Pension Funded Levels.  This report reviews the funding levels of pensions for the 50 states."

"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."

"Under GASB Statements 67 and 68, the governmental entity is required to include on its balance sheet a liability entry that reflects the net pension liability of the pension plan.  The net pension liability correlates strongly to the unfunded accrued liabilities of the plan.  When the ARC is funded at less than 100%, the unfunded portion will increase the unfunded accrued liabilities and also the net pension liabilities of the pension plan.  This underfunding along with the requirement that a lower blended discount rate be used by pension plans that fail to fully fund the annual contribution will substantially increase the liability entry for net pension liability on the balance sheet of the governmental entity."

"Delaying pension funding by underfunding the ARC will likely be very expensive to the local government entity.  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."

(My comment: The Tennessee Treasurer's Report [Attachment 2] 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."  The Colorado Legislature has racked up billions of dollars in debt due to this 138.2 percent cost of PERA pension contribution deferment.  The Colorado Legislature and Colorado PERA officials now seek to push this debt onto PERA pensioner's shoulders.)

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

Support public pension contractual rights and the rule of law in Colorado at saveperacola.com.

Colorado PERA Executive Director Greg Smith’s “Shared Sacrifice” Sham.

Using the force of government to take a person's property, and then attempting to justify the taking with an empty slogan is immoral.

In a recent article, Peter Marcus, a journalist for the weekly political periodical, The Colorado Statesman, propagates the enduring delusions of Colorado PERA Executive Director Greg Smith concerning "shared sacrifice" and the ability of Colorado PERA to escape its contractual obligations.

For the last five years, as Colorado PERA and the Colorado Legislature have waged their political and legal battle to "clawback" accrued public pension benefits, Greg Smith has routinely employed the shibboleth "shared sacrifice" in Colorado PERA propaganda.

The author: "Peter Marcus, 32, and a New York City transplant of nine years, follows the twists and turns of Colorado politics for the Denver-based Statesman (circulation about 4,000) . . ."

The Colorado Statesman article is titled: "Shared sacrifice and managing expectations, Colorado’s pension fund still has a long way to go," May 23, 2014, by Peter Marcus.

http://coloradostatesman.com/content/994886-shared-sacrifice-and-managing-expectations

In my opinion, the Colorado Statesman typically conducts thorough investigative journalism, but in this article covering Colorado PERA pension "reform," Peter Marcus disappoints.  In this most recent Statesman article on PERA, Peter Marcus credulously parrots Greg Smith's scare tactics used to frighten Colorado PERA pensioners, Greg Smith's self-serving rationalization of pension contract breach, and Greg Smith's propaganda concerning the 2009 Colorado PERA campaign to break public pension contacts.  Peter Marcus goes so far as to place Greg Smith's disingenuous mantra "shared sacrifice" in the title of the article.

Peter Marcus' words: "But economists agree that in the end the issue still comes back to shared sacrifice." 

(My comment: Peter, some economists equate this idea of public pension "shared sacrifice" resulting in breach of contract with "unabashed theft.")

However, I'm willing to cut Peter Marcus some slack.  Public pension administration and public pension jurisprudence are extremely complex policy areas.  Journalism is not supported financially in the United States, and journalists cannot be expected to master all public policy areas they cover.

Peter is unaware that tens of millions of corporate dollars are currently spent annually in the United States to promote the false narrative that public pension systems are in a "crisis," in spite of the fact that funding ratios for these pension systems were much lower in the 1970s and no "crisis" was observed at the time.  This critical information is suppressed or ignored in the modern discussion of public pension funding. 

Silver and Gold Record October 26, 2006: “One attendee asked if there was any similar controversy in the 1970s, when PERA's unfunded liability went as low as 54.7 percent.  Williams said former Gov. Richard Lamm, who co-chaired the PERA commission, made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level.  Williams compared the unfunded liability to having a mortgage, and asked how many people have enough money on hand at any one time to pay off all or even half of their mortgages.”

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

Peter Marcus may be unaware that state and local governments voluntarily forgo the receipt of tens of billions of taxpayer dollars each year in corporate subsidies, and exemptions, but a few are pleading "poverty" before the courts.  For balance Peter, let's have a Colorado Statesman article addressing Colorado's corporate welfare "crisis"!  (Hint: Take a look at our $2.7 Billion in annual "tax expenditures.")

Peter, for your edification, I will describe Colorado PERA's idea of "shared sacrifice."  According to the provisions of SB10-001, (the bill that broke Colorado PERA pension contracts) those who ACTUALLY OWE the accrued PERA pension debt (Colorado state and local governments) "sacrifice" a fraction of a percent of future revenue streams; while those who DO NOT OWE the PERA pension debt (Colorado PERA retirees) "sacrifice" one-third or more of their contracted, earned deferred pension compensation.  Colorado PERA pension officials consider this arrangement to be a "shared sacrifice."  In what universe is such outrageous deception considered to be "reasonable"?

Obviously, the "shared sacrifice" that was the object of SB10-001 is not achievable without retroactive application of the bill's COLA provisions to existing PERA COLA contractual rights.

I also find that the "2/2/2" descriptor that was used in Colorado PERA's original contract breach propaganda nicely illustrates the deception that is the foundation of SB10-001.  Colorado PERA's idea of "shared sacrifice" under their "2/2/2" plan was that pension plan contributions be increased by two percent, while PERA retiree contracted COLA benefits be diminished by one-third or more.  Pension contributions raised by two percent, contracted pension COLA benefits slashed by a third.  Greg Smith, PERA retirees are old, but they are not stupid.

Further Greg Smith, you are an attorney . . . you know quite well that a sophomoric argument for "shared sacrifice" will not support a breach of contract.  Should all existing U.S. contracts be scrapped when one party expresses a desire to retroactively change contractual terms for a "shared sacrifice."  Again, it's a crock.  If I walked into a bank and asked for a shared sacrifice from the vaults, they would lock me up.

Here are a few perspectives on "Shared Sacrifice" and public pension contracts:

SB10-001 Co-prime Sponsor Senator Shaffer, Denver Post, April 17, 2011:

“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

Hank Kim, NCPERS:

"Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, said he's tired of pension reform advocates claiming that state and local municipalities can only overcome their fiscal problems on the backs of public workers."

"'If it's really about 'shared sacrifice,' which is the terminology folks have been using since the Great Recession, it occurs to us that the groups that aren't sharing the sacrifice are the wealthy and the corporations because they're still getting the tax breaks,' he said.  'You can't be crying poverty when you are still giving away the shop to corporations.'"

http://www.truth-out.org/news/item/23401-koch-brothers-major-corporations-sponsor-pension-reform-seminar-for-judges

Dean Baker, American macroeconomist and co-founder of the Center for Economic and Policy Research:

"Even more striking than this push to impose even more sacrifice on a middle class that has already paid an enormous cost for the economic policies of the last three decades is the fact that Wall Street is not expecting to share in these future sacrifices.  This is peculiar since reckless Wall Street greed played a central role in inflating the housing bubble whose collapse gave us the current economic crisis."

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/where-is-wall-streets-share

"Mr. Corbett’s definition of shared sacrifice involved some people sacrificing a whole lot, and others, not sacrificing at all, and in fact, gaining, which is to sacrificing what…say…”NOT flying” is to “flying” . . ."

http://www.daylinsights.com/shared-sacrifice/

"The Gov of Michigan has pulled this same type of BS with a speech about 'shared sacrifice' that made retirees, teachers, and public employees sacrifice while businesses got money funneled to them."

http://dianeravitch.net/2014/04/05/david-sirota-rahms-secret-slush-fund-rewards-friends-while-he-cries-deficits/

Daily Kos:

"Shared sacrifice, it sounds like the sound-bite of the season." "It's a word-picture 'meme', designed to evoke individual patriotism, and a sense of Teamwork — while those who can afford it least, will end up forking over the most . . ."  "It's enough to make one ask …  where's Wall Street's share?"  "Why is it that those who can afford it least have to sacrifice the most?"

http://www.dailykos.com/story/2011/01/04/933269/-Time-to-coin-a-phrase-It-s-time-for-Shared-Sacrifice#

Glen Brown of Illinois:

"These onslaughts are also related to the oppressive stripping of collective bargaining and due process rights, the despotic destruction of public employees’ unions, the propagandized demonization of teachers, and the disparate distribution of wealth through so-called 'shared sacrifice.'”

http://teacherpoetmusicianglenbrown.blogspot.com/2013/04/liars-and-thieves.html

For the record, it should be noted that Colorado PERA's lawyers have no aversion to the use of the "shared sacrifice" ruse (in legal briefs) to persuade Colorado courts to bless breach of contracts.

From the May 16, 2012, PERA Defendant's Answer Brief:

"Faced with a multibillion dollar shortfall in PERA’s pension funds, the General Assembly passed a bipartisan bill that required shared sacrifice . . ."

"The facts of those cases also are materially different from the unprecedented 2008 economic crisis here that resulted in the shared sacrifice . . ."

http://saveperacola.files.wordpress.com/2012/05/2012-05-16-pera-defendants-answer-brief.pdf

From the PERA Defendant's Opening Answer Brief, December 20, 2013:

"SB 10-1 required shared sacrifices by all PERA stakeholders to ensure the pension fund’s long-term viability."

http://saveperacola.files.wordpress.com/2010/01/2013-12-19-pera-defendants-opening-answer-brief.pdf

PERA and State Defendant's Reply Brief, February 21, 2014:

"Giving due deference to the General Assembly’s legislative judgments, the balanced reforms—requiring shared sacrifices by state employers, current employees, and retirees . . ."

http://saveperacola.files.wordpress.com/2014/02/2014-02-21-pera-and-state-defendants_-reply-brief.pdf

I have noticed that we can count on Colorado journalists to aggressively defend corporate contracts, but they tend to be a bit squishier when it comes to public worker contracts.

Denver Post Editorial Board, March 18, 2009: "Let AIG execs keep bonuses.  While it was immoral to accept the money, breaking contracts would be wrong."

Denver Post Editorial Board, July 19, 2009: "Shared sacrifice needed for PERA."

Excerpts from the Denver Post editorial "Let AIG execs keep bonuses."

"Who isn't angry about the $165 million in bonuses paid to executives at insurance giant American International Group?"  "The company, on its fourth round of government bailout money, recently paid millions to executives who created the risky derivatives at the epicenter of the financial meltdown."  "We agree the bonuses are morally indefensible.  But the payments should stand for several reasons."  "The bonus contracts were in place long before the insurance giant took the first federal bailout money in September."

(My comment to the Denver Post Editorial Board: Colorado PERA pension contracts have been in place for many decades.  The Colorado General Assembly has known for more than 60 years [since Bills/McPhail] that the payment of fully-vested Colorado PERA pension benefits is a contractual obligation of PERA-affiliated employers.  If the members of the Colorado Legislature held the belief (during these six decades) that meeting PERA contractual obligations is a burden on governments in Colorado, they had ample opportunity to adopt PROSPECTIVE, LEGAL pension reforms for the PERA pension system.  Colorado legislators have had six decades to enact PERA pension reforms that lessen any burden on Colorado governments without abrogating existing public pension contracts.  Having enacted policies that reduced Colorado PERA's funded ratio [cutting PERA pension contributions, selling service credit for less than its full actuarial cost in order to reduce state labor costs, failing to pay the full PERA pension bill, funding pensions that are not the State's responsibility, slashing state revenues beyond that required by TABOR] these politicians now seek to push their problem off onto old people.  That is sick.)

Denver Post:

"If the government begins unilaterally ignoring contracts, it will create more turmoil in an economic atmosphere that can't sustain any more uncertainty."

(My comment: Denver Post Editorial Board, please tell us why the breach of the contracts of AIG executives in March, 2009 would create unsustainable "uncertainty," yet the breach of the contracts of Colorado PERA pensioners ten months later does not result in such damaging "uncertainty."  Do corporations have greater rights under the U.S. Constitution than public sector workers?  Denver Post Editorial Board, if the truth is that those with power and money have greater rights under the United States Constitution, then tell us so.  Let's get it out in the open.)

http://www.denverpost.com/opinion/ci_11935720

Excerpts from the Denver Post editorial: "Shared sacrifice needed for PERA."

"Colorado has an obligation, both legal and moral, to some 434,000 office workers, law enforcement officers and school teachers." 

"Any changes will have to take place within the parameters of complicated legal and fiscal constraints.  Already there are legal questions surrounding exactly what can be done to reduce such benefits, and those questions need to be fully explored.  That may include asking Colorado's Supreme Court, via what's called an interrogatory from the legislature, about what changes can be done legally.  It will complicate the situation, but given how disruptive such a change could be — imagine the accounting nightmare of changing benefits only to see the court strike it down some years later — it would be helpful if the court could answer such a question in advance of legislation."

http://www.denverpost.com/opinion/ci_12856631

(My comment: As we have seen, Colorado PERA trustees asked Colorado Legislative Leadership to seek an opinion on the proposed PERA pension contract breach through an interrogatory in 2009 and Legislative Leadership ignored the PERA Board request.  Governor Ritter was asked, in writing, to submit an interrogatory to the Colorado Supreme Court and ignored the request.)

Back to Peter Marcus' article in the Colorado Statesman:

"The state faces at least $23 billion in unfunded pension responsibilities, much of which was exacerbated by an economic downturn that began in 2008, sinking investments and causing pension managers to scramble for a solution."

(My comment: Peter, "unfunded pension responsibilities" are benefits due to individuals under their contracts for labor that has already been provided to employers, and from which Colorado taxpayers have already benefited.

Peter, the members of the Colorado Legislature have had an opportunity to "scramble for a solution" for the last 60 years.  There would be no need for any "scrambling" at all if the Colorado General Assembly had actually paid its public pension bills for the last 12 years.)

Peter, some background information for you:

"According to the Census Bureau, pension expenditures account for just 3 percent of all state and local government spending.  If you want to find wasteful spending, look at corporate welfare. According to The New York Times, 'states, counties and cities are giving up more than $80 billion each year to companies in the form of subsidies and tax expenditures.'”

http://www.boulderweekly.com/article-11853-limit-corporate-welfare.html

Colorado Statesman's Peter Marcus quoting Greg Smith:

“'I can tell you that our peers around the country were horrified because we went around the state and said, We’re going to run out of money, you’d better join with us in coming up with a solution because otherwise you’re going to wind up with nothing, said Smith."

(My comment: In this statement, Colorado PERA Executive Director Greg Smith makes clear his intent to deceive active and retired members of the Colorado PERA pension system and the public.

Greg Smith states "otherwise you're going to end up with nothing."  As an attorney who has worked for a public pension system for many years, Greg Smith is fully aware that state governments cannot petition a court for bankruptcy under federal law.  Colorado PERA is a state agency.  Is it the job of Colorado state employees such as Greg Smith to make such outrageous political statements, to use scare tactics, or to run state agency campaigns to break state contracts?

Of course Colorado PERA's peer public pension systems were "horrified."  Officials at these peer public pension systems likely found Greg Smith's comments callous, and unprofessional.  Like me, I'm sure they found Colorado PERA's 2009 political campaign to break public pension contracts completely inappropriate for a public agency.)

Colorado Statesman's Peter Marcus quoting Greg Smith:

"Smith believes PERA is a model to other states because in 2009, leaders traveled the state to have an open and honest conversation about the crisis facing the state’s pension system, including acknowledging the gap in funding."

(My comment: Here is what Colorado PERA heard from a PERA member during this 2009 political campaign to break PERA contracts, David Holme at the Denver PERA "Listening Tour" meeting:

“My decision to join the state was based on the PERA program.”  “Any sort of a reduction in benefits today would be a violation of that contract, and bait and switch advertising . . . and so fraud.”

“State employees have never failed to provide their contributions  . . . and in fact we’ve paid more into the system than the employers have over the total of the years, according to PERA reports.”

“The employers, starting in 2002, the last year of 100 percent funding, began providing less than the annual contribution requirement, setting contribution rates for the state of less than required.”

“Today, the State of Colorado PERA employer is past due to the tune of $6.5 billion into the trust fund contributions, not counting any interest — if  you do it at the three percent PERA interest, it would be another $1.1 billion past due over the last 9 years.”

“PERA’s overall funds at the end of last year were about $30 billion, this bad debt constitutes about 25 percent of the PERA assets.  If they were paid with interest to the PERA investment fund it would be at 94 percent funded on the actuarial basis or 76 percent on the market basis.  Most experts believe that a fund at 80 percent is a healthy fund.  We’d be above that.”

“The survey today, that we just talked about, is a good example of this.  If you look at that, 28 of the options on there cost the employees money, and only two cost the employers money.”

“As a state employee, I’m ready to sit down and work on whatever fixes are needed once the deadbeat employer has made arrangements to fully fund its share.”

http://coloradopols.com/diary/19048/colorado-pera-listens-to-pera-retirees-label-pera-employers-deadbeats)

The Colorado Statesman's Peter Marcus quoting Greg Smith:

"The compromise that was reached included workers taking a hit on their annual cost of living adjustment, while employers increased contributions."

(My comment: The "compromise" that Greg Smith refers to was, according to a Colorado State Senator participating in the floor debate on SB10-001, "a deal that was cut before this body met."
Under this "deal," the taking of contracted COLA benefits represents 90 percent of the "savings," i.e., reduction of employer debts contained in the bill, SB10-001.  Under this "deal," the State of Colorado takes a third or more of the contracted benefits of Colorado PERA pensioners.  The dollar amount of the state's taking varies by individual contract.

Governor Ritter signed SB10-001 into law, taking the contracted PERA COLA benefit.  It was the belief of the Ritter Administration that the taking of the COLA benefit in SB10-001 cost the average PERA retiree with fully-vested PERA benefits $165,000.  This amount is “substantial” for nearly every resident of the planet.  The letter from the Ritter Administration to the federal public pension regulatory agency GASB in 2010 clearly addresses Colorado PERA’s pension obligations.

You can read the entirety of the letter on the GASB site here:

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791

A few excerpts from the Ritter Administration's GASB letter:

“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”

(My comment: It was the belief of the Ritter Administration that PERA pension obligations are contractual, that PERA benefits owed by the pension plan have been earned, and are legally enforceable for vested PERA members.)

“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.”

The Colorado Statesman's Peter Marcus quoting Greg Smith:

"Greg Smith, executive director of the Colorado Public Employees’ Retirement Association, said Colorado coined the term 'shared sacrifice' when it began its push for PERA reform in 2009."

(My comment: February 25, 2009:

"'Shared sacrifice' should be the catch phrase, Mr. Obama told the National Governors Association in late February."

http://opinion.foxnews.mobi/quickPage.html?page=34606&content=50158976&pageNum=-1

I am quite confident that constitutional law professor Barak Obama does not consider breach of contract an appropriate "shared sacrifice."

1993: Shared sacrifice: the Right Message for America, D Davidson – Is President Clinton naive to ask Americans to buy into" shared sacrifice"?  Actually, shared sacrifice seems the right message for America in the 1990s, writes Dick Davidson, president of the AHA.

http://scholar.google.com/scholar?start=30&q=shared+sacrifice&hl=en&as_sdt=0,6

1994: United States Health Care System Reform: An Era of Shared Sacrifice and Responsibility Begins, George D. Lundberg, MD,

http://jama.jamanetwork.com/article.aspx?articleid=372497

2003: Shared Sacrifice: A Vital Part of the War on Terrorism, Charles B. Rangel, Mediterranean Quarterly, Volume 14, Number 3, Summer 2003,

http://muse.jhu.edu/journals/med/summary/v014/14.3rangel.html

2008: Shared Sacrifice: Don't Ask Don't Tell & the Global War on Terror, G. Barkely,

http://books.google.com/books?hl=en&lr=&id=TDHL9FF2-W8C&oi=fnd&pg=PP1&dq=shared+sacrifice&ots=KZ4nTbGbFj&sig=m4MXgjYGioP4ME3zKGcwSkzN0Cw#v=onepage&q=shared%20sacrifice&f=false

I suggest that Greg Smith demonstrate his commitment to "shared sacrifice" by contributing one-third of his 401K account to the Colorado General Fund.  This would approximate the "shared sacrifice" that he is requesting of Colorado PERA pensioners.

A phrase that I coined this morning comes to mind: "What's good for the goose is good for the gander."

Support public pension contractual rights at saveperacola.com.

AFSCME Colorado’s Unholy Alliance with Colorado PERA.

Steve Kreisberg, AFSCME (International) on Public Pension Contractual Rights.

A few important statements from a former AFSCME Colorado Official:

"AFSCME's endorsement of screwing public employees out of their pension COLAs in Colorado is unfortunately quite true."

"AFSCME has always placed the interests of the union and the Democratic Party above that of rank and file employees they profess to represent."

"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 . . ."  "So why play the heavy and alienate the incumbent politicians in somebody else's fight?"

In 2009/2010, Colorado PERA officials campaigned for the taking of contracted PERA COLA benefits and claimed the support of AFSCME Colorado.  Here we have a former AFSCME Colorado official explaining his organization's endorsement of the 2010 PERA COLA taking.

In my mind, AFSCME Colorado's support for the PERA COLA taking was shortsighted.  If the support of AFSCME Colorado for the bill breaking PERA COLA pension contractual obligations (a finding of the Colorado Court of Appeals) is successful, what is to prevent the Colorado Legislature from using this successful breach of PERA public pension contracts of AFSCME members, to break the pension contracts of AFSCME members, at will, in the future?

If the Colorado Legislature is allowed to determine the compensation of AFSCME members after these employees have already provided their labor, then AFSCME Colorado's members are inescapably doing volunteer work for their employers.  In that event, these AFSCME members should at least know that they are doing volunteer work.  AFSCME union members assume that they work for defined compensation in the form of a salary.  They also trade their labor and contributions for deferred compensation (defined public pension benefits) in a contractual relationship.

In 2010, Colorado PERA officials claimed the support of many Colorado public sector unions for their proposed breach of PERA pension contracts, including AFSCME Colorado.  See this link:

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

This article explores: AFSCME Colorado's involvement in the 2010 Colorado PERA pension contract breach; the positions of AFSCME (International) officials on breach of public pension contracts and contractual public pension COLA obligations; the failure of state legislatures in the U.S. to fund their pension systems on an actuarially sound basis; the habit of these legislatures to give away billions of dollars of government resources in corporate welfare; and the objections of certain AFSCME Colorado officials to public pension contract breach.  (Colorado PERA has published on-line PERA pension contract breach propaganda that fails to mention any dissension in the AFSCME union ranks in regard to the breach of public pension contracts.)

When an AFSCME member's governmental employer breaks the employee's pension contract the AFSCME member loses compensation that they have already earned.  Colorado governmental employers of AFSCME members affiliated with the Colorado PERA public pension system are seeking the legal right (in SB10-001) to decide what compensation a worker will receive after the employer and the public have already benefited from the services provided by the worker.  This desired legislative arrangement is without question immoral and unconstitutional.

Legislative bodies in the United States currently give away tens of billions of dollars each year to corporations.  When a legislative body successfully breaks a public worker's pension contract, this contract breach makes available even more resources that legislatures may then give away to corporations.  Thus, money is inescapably taken from the pocket of the public worker (many are AFSCME members) and placed into the pockets of wealthy corporate shareholders.  This practice is (surprisingly) supported by many Democrats in the United States, that is, Democrats who are purportedly concerned about the growing problem of "income inequality" in the United States.

How do legislative bodies in the United States arrive at this point, where elected officials are willing to violate their oaths of office, ignore their state constitutions, and enact bills that break worker contracts?  (They don't get there of their own accord.)  They need some help from lobbyists for the governmental entities whose debt will be wiped off the books by a pension contract  breach.  They also need some help from corporate lobbyists who are happy to see public sector debts diminished.  Low public sector debts may very well result in lower corporate taxes in the future, and even more taxpayer resources directed to corporate welfare.

A few links on corporate welfare:

http://coloradopols.com/diary/57890/colorado-legislature-ratchets-up-the-corporate-welfare-in-2014-continues-to-ignore-contractual-colorado-pera-pension-obligations
http://billmoyers.com/2013/09/24/average-american-family-pays-6k-a-year-in-subsidies-to-big-business/
http://coloradopols.com/diary/57319/colorado-pera-pension-contracts-versus-colorado-corporate-welfare

In 2010, a total of 27 lobbyists for corporations, lobbyists hired by the Colorado agency that administers the PERA pension, and lobbyists for employers affiliated with the pension system "helped" Colorado legislators reach the conclusion that compensation owed to Colorado public sector workers, including many current and former AFSCME members, should be retroactively taken by the State of Colorado.

According to Colorado Secretary of State records, lobbyists for the business group, Colorado Concern, helped Colorado legislators along in 2010 by supporting SB10-001, the bill that broke PERA pension contracts.  A former consultant for the business group Colorado Concern, Henry Sobanet (now the state's Budget Director) was "intimately involved" in crafting the bill, SB10-001.

Again, in 2010, AFSCME Colorado supported the bill, SB10-001, that the Colorado Court of Appeals has confirmed as a breach of Colorado PERA pension contracts.  Yet, AFSCME Colorado's parent organization (International) vigorously defends the contractual rights of its 1.6 million AFSCME union members.

Earlier this year, AFSCME's Director of Research and Collective Bargaining, Steve Kreisberg, presented to an audience at a meeting of the National Conference on Public Employee Retirement Systems (NCPERS) of which Colorado PERA is a member.

In my opinion, the message that was delivered by Steve Kreisberg during this 30 minute talk could not be more dissimilar from the message that was sent by AFSCME Colorado in the 2010 Colorado PERA pension COLA taking discussion.

Here is what Steve Kreisberg of AFSCME thinks about those who break public pension contracts:

"They've demonstrated that they're not trustworthy.  They've demonstrated a willingness to violate their oath of office, which is to uphold the state's Constitution.  So, they have no credibility . . . with our union."

So, how was the leadership of AFSCME Colorado persuaded to be part of this Colorado "deal" that was "cut" in 2010?  Who approached Colorado's public sector unions with this offer to "cut a deal"?  That is, the "deal" that violated the trust of Colorado PERA active and retired members, and sullied the U.S. Labor Movement?

In my opinion, Colorado's public sector unions made a myopic and self-serving business and financial decision to support the unconstitutional SB10-001 in 2010.  Retired union members (for the most part) do not contribute to union coffers.  To the extent that retiree's pension contracts can be broken, contributions needed from active union members in the future might be reduced.

Link to video of AFSCME official Steve Kreisberg's January 27, 2014, NCPERS Conference presentation in Washington, D.C.:

http://www.youtube.com/watch?v=-ZlGBk-gbBc&feature=youtu.be

(Note that in his presentation, Steve Kreisberg, graciously, did not mention AFSCME Colorado's support for the 2010 Colorado PERA pension contract breach.)

Kreisberg on the Targeting of COLA Benefits for Breach of Contract:

"The COLAs become the target for the same reason that Willy Sutton robbed banks, because that's where the money is."

(My comment: February 10, 2010, Joel Judd, Chairman, House Finance Committee, during the hearing on Senate Bill 10-001 Chairman Judd stated (near the end of the hearing) that SB 10-001 [the “COLA theft bill”] must be supported "because that's where the money is.")

Kreisberg on Pension Plan Sponsor Bankruptcy:

"A state cannot petition for bankruptcy."

Kreisberg on Off-balance Sheet Legislative Borrowing from Public Pension Funds:

"The politicians have decided that they would borrow money from the pensions."  "You borrow money by simply not making the contributions."

Kreisberg, "Unfunded Public Pension Liabilities" are Simply Benefits that Someone has Earned:

"The way that I look at (public pension) liabilities, is that a liability is nothing more than a benefit that someone has earned."  "So, a liability is a name, and its sounds very negative, but as we know . . . a liability is an earned benefit . . . somebody has already performed the service, and the promise has been made, I will compensate you for that service."

Kreisberg on the Provision of Corporate Welfare in Lieu of Meeting Contractual Pension Obligations:

"They create loophole after loophole."  "We have a environment across the country . . . where there is kind of this competition to get corporations to move to your state by saying well if you come here you don't have to pay taxes."

"You've got a Legislature that has an insatiable appetite for spending money, on all sorts of things."  "Somewhere along the line, the pensions became the lowest priority."

"It was looked at as though, revenues are fixed and we can't address corporate loopholes . . . that are ineffective, inefficient, don't create jobs, but give breaks to the wealthiest corporations in the United States, well the wealthiest corporations in the world, since almost all of them are multi-nationals."  "And, it doesn't help the residents of the state in any way, but it does help the shareholders of the corporations."

"They're spending money on all sorts of things, including inadvisable economic development subsidies."

Kreisberg on the Use of Political Influence to Break Public Pension Contracts:

"It's really about politics.  It's not about law, and it's about how in the 21st century we're seeing a challenge to our basic legal underpinnings of our Democracy."  "Because the Constitution is our foundational document, but now it's being interpreted in a political way that's very different from what we've seen throughout the nation's history."

"I think that's a function of the consolidation of economic power."  "The same people who have obtained that economic power, now want to consolidate political power."

The State of Illinois "has never funded its pensions on an actuarial basis.  Their pensions have been funded on a political basis."

(My comment: Likewise, Colorado PERA public pensions have been funded only "on a political basis" for the last 12 years.  Why have the fiduciaries on the Colorado PERA Board failed to insist that the Colorado Legislature pay its public pension bills?  Has the staff of the Colorado Joint Budget Committee ever pointed out to JBC members that they were failing to pay the PERA pension system actuarially required contributions?)

Kreisberg:

"I believe they exempted the judges though, they don't want to get the judges pissed off at them."  "In Illinois the Supreme Court judges are elected, and the Speaker is known to have some political influence, and . . . there are seven judges . . . he only needs four people to agree with him."

"We'll leave it to the Attorney General who is the daughter of the Speaker of the House to figure how to make those arguments."

(My comment: A quotation from Senator Lundberg during floor debate on SB10-001:  "This is a deal that was cut before this body met.")

Kreisberg on Anti-worker Corporate Democrats:

"As you know, we tend to support Democrats because we think Republicans are anti-worker, I think the Democrats in Illinois are anti-worker."

"Our union has a history of progressive activism, but we very much resent how the expenses for pensions are portrayed."  "We have Democrats who call themselves progressives, or 'pro-worker Democrats', who would come to us and say 'yes, but these pension expenses are squeezing out social spending, and we can't have that."

"We have no reason to trust the State of Illinois' Legislature.  They've demonstrated that they're not trustworthy.  They've demonstrated a willingness to violate their oath of office, which is to uphold the state's Constitution.  So, they have no credibility . . . with our union."

Note that state legislatures that actually pay their public pension bills have well-funded public pensions, even in the State of Illinois.  Kreisberg on the well-funded Illinois Municipal Retirement Fund:

"The Illinois Municipal Retirement Fund (IMRF) is 100 percent funded."  "The states make in almost all cases the municipalities pay the normal cost and the ARC."

Kreisberg:

"Which demonstrates that there's nothing wrong with pensions.  It's not the pension system that leads to these types of things.  It's determinations and decisions made by politicians to do other things with the money."

(My comment: Instead of requiring payment of contributions that are determined as actuarially necessary by Colorado PERA's actuaries each year, the Colorado Legislature places insufficient contribution rates into Colorado statutes and "calls it good."  This frees up money for discretionary spending on the part of the politicians, pleasing their constituents [who vote.])

The Illinois Municipal Retirement Fund Models Responsible Public Pension Management for Colorado PERA Trustees, Instead of Supporting Pension Theft, the PERA Board Should Support Payment of the ARC, (from the Chicago Tribune):

"Those who have followed the detailed coverage in our pages of Illinois' staggering, worst-in-the-nation pension crisis know that the problem is largely the result of irresponsible leadership — pension holidays and sweeteners, unreasonable projections and the exhibition by lawmakers of a blithe willingness to spend tomorrow's money on today's programs and projects."

"But I'm also no fan of phony, piteous arguments to justify breaking a promise and flouting the constitution."  "We know the arguments are phony because the Illinois Municipal Retirement Fund, which serves some 400,000 current and former employees of local governments and is not covered under the disputed law, reports being 97 percent funded."

"'It's not rocket science,' said IMRF executive director Louis Kosiba in an interview Friday."

"We've done it the old-fashioned way, with sound actuarial principles applied consistently.  Each year our board of trustees calculates what the units of government need to contribute, and 99.9 percent of them comply."

"IMRF went through the same economic downturn that the rest of us did. 'Our assets dropped from $24 billion down to $18 billion,' said Kosiba.  'But now we're at $33 billion.  Because slow and steady wins the race.'"

http://articles.chicagotribune.com/2014-05-18/opinion/ct-oped-zorn-0518-20140517_1_pension-crisis-state-pension-pension-changes

Kreisberg on Removing Legislative Discretion from Paying Actuarial Public Pension Costs, Comment from the NCPERS audience:

"Illinois does have one good retirement system that is well-funded, and the reason why it is well-funded is that the politicians cannot mess with the system."  "So, we have a system that works in our state when you take the discretion out of funding."  "If politicians have the right to have discretion in funding they won't fund it."

Kreisberg: "We see the same thing in New York State, it's based on actuarial requirements and you fund it."

A final quotation of AFSCME's Steve Kreisberg:

"'It's essentially similar to salary – you just don't reach inside somebody's savings account and take their pay back, nor should you reach inside their pension and deny them their pension benefits,' said Steve Kreisberg, director of collective bargaining and pensions for the American Federation of State, County and Municipal Employees."

http://m.apnews.mobi/ap/db_6776/contentdetail.htm?contentguid=ujtMI3hk

FORMER AFSCME COLORADO OFFICIALS CONDEMN PENSION CONTRACT BREACH:

Former AFSCME Colorado and Colorado WINS Official Dave Anderson:

"Anderson is a PERA retiree and was an activist with the American Federation of State, County and Municipal Employees and Colorado WINS (Workers for Innovative and New Solutions.)"

http://www.zoominfo.com/p/Dave-Anderson/1494952642

"Dave Anderson was a librarian at the University of Colorado Boulder for 30 years and retired in 2009.  He has been a free lance writer since 1970.  He was the president of CU Boulder's Local 3592 of AFSCME (American Federation of State, County and Municipal Employees) and in the state leadership of AFSCME."

http://www.boulderblueline.org/author/dave-anderson/

Dave Anderson Quoting Ross Eisenbrey of the Economic Policy Institute:

"When you cut someone’s wages, at least that person can say, ‘I’m not working for you.’ By cutting retiree pensions, this is literally reaching into their bank account and stealing from them after the fact.”

http://www.boulderweekly.com/article-12076-pension-cuts-serve-the-rich.html

Dave Anderson in the Boulder Weekly:

"They like to pretend that the modest retirement benefits of public workers caused the shortfalls in pension plans. That’s nonsense."
"In 2010, a law was passed that reduced the cost-of-living increase PERA retirees receive.  A lawsuit was filed charging that the law is an unconstitutional breach of contract.  It is now before the Colorado Supreme Court."

"When people in the general public hear about a PERA pension, many think that it’s an add-on to Social Security.  But it is a substitute.  PERA members do not earn Social Security."

(My comment: Most PERA pensioners who were AFSCME members do not receive Social Security benefits.  Unlike Colorado PERA pension benefits, Social Security benefits receive full inflation protection.  By seizing the inflation protection due under Colorado PERA pension contracts, the Colorado Legislature disrupts the lives of pensioners who are parties to those contracts, and may ultimately force many of the pensioners into poverty.)

Former AFSCME Official Dave Anderson:

"According to the Census Bureau, pension expenditures account for just 3 percent of all state and local government spending."

"If you want to find wasteful spending, look at corporate welfare.  According to The New York Times, 'states, counties and cities are giving up more than $80 billion each year to companies in the form of subsidies and tax expenditures.'  How about some austerity in that department?'"

http://www.boulderweekly.com/article-11853-limit-corporate-welfare.html

https://groups.google.com/forum/#!topic/trueblueboulder/AxvNR9LE6jc

Former AFSCME Official Dave Anderson:

"Pension cuts serve the rich: Pension and health care benefits of retired public employees are under attack"

"The money is there. We just need a government serving the people, not the rich."

http://www.boulderweekly.com/article-12076-pension-cuts-serve-the-rich.html

Former AFSCME Official Dave Anderson in the Colorado Daily:

"A study by the Bell Policy Center found that the creation of 'enterprise zones' (economically distressed areas where tax credits and incentives are offered) produced few significant benefits.  The Colorado Fiscal Policy Institute estimates we could save $400 million if corporations paid their fair share (eliminating tax exemptions, credits and loopholes)."  "Corporate welfare has got to end."

http://www.coloradodaily.com/ci_13428594

My response (on Facebook) to an AFSCME article:

FORMER AFSCME COLORADO OFFICIAL: "AFSCME'S ENDORSEMENT OF SCREWING PUBLIC EMPLOYEES OUT OF THEIR PENSION COLA'S IN COLORADO IS UNFORTUNATELY QUITE TRUE."

Below I present an on-line conversation (Facebook) that I had with a former AFSCME Colorado official regarding an AFSCME (International) article addressing public pension contractual rights:

My comment:

"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."

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"

(My comments: Vivian Stovall is identified as having supporting the PERA COLA pension contract breach in 2010.  She represents the interests of Colorado's elderly on the Colorado Commission on Aging [appointed by Governor Ritter] and has worked for the Alliance for Retired Americans Colorado.  She has also served on the State Central Committee of the Colorado Democratic Party.

"Vivian Stovall, Chairperson of the Colorado Commission on Aging, was appointed to represent the aging population."

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251781965452&ssbinary=true

I find it odd that a person who represents the interests of Colorado's elderly would support legislation breaking the fully-vested pension contracts of the elderly.)

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 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."

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."

(My comment, Recall Alan Greenblatt's 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)

Former AFSCME Colorado 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:

"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 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 2010 COLA-taking bill, SB10-001:

"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/

AFSCME has published materials claiming that Colorado PERA did not face a “financial crisis” in 2009.  If this is true, then why was it necessary for the General Assembly to attempt a breach of PERA retiree pension contracts?

Here is a link to an AFSCME Fact Sheet addressing Colorado PERA’s finances:

http://www.afscme.org/issues/pension-security/resources/state-pension-fact-sheets/document/Colorado_Public_Employees_Retirement_Association.pdf

Here are a few excerpts from this AFSCME Fact Sheet:

"PERA is Financially Sound.”

“There have been some recent claims that retirement systems covering public employees are facing a financial crisis.  These claims are rarely true, and they are not true of PERA.  As of December 31, 2009, the combined pension plans held assets with an actuarial value of $52.8 billion and had accrued liabilities of $75.3 billion.  In other words, the fund had 70.1 percent of the money it will need to pay accrued benefits in upcoming years.  (Recent surveys show that the average funding level for large public sector plans is in the range of 70 to 75 percent).”

“This ratio of assets to liabilities is simply a snapshot that captures a plan sponsor’s ongoing effort at one point in time to fund its pension obligation; any unfunded liabilities can be made up over many years.  If the plan sponsor is consistently making its annual required contribution, its pension plan can have a funded ratio below 100 percent yet still be on track toward full actuarial funding.”

“A recent National Association of State Retirement Administrators report points out that Colorado governments spent just 2.16 percent of their budgets on pension contributions in FY 2008, while the national average was 2.96 percent. (Issue Brief: State and Local Government Spending on Public Employee Retirement Systems, National Association of State Retirement Administrators, January 2011).”

(My comment: According to this AFSCME Fact Sheet, it appears to me that AFSCME or AFSCME Colorado believes that since Colorado PERA had “70.1 percent of the money it will need to pay accrued benefits,” at the time of the taking of the contracted retiree COLA benefit, Colorado PERA did not face a “financial crisis” at that time.

According to this Fact Sheet, it appears to be the opinion of AFSCME [or AFSCME Colorado] that a pension plan may have “a funded ratio below 100 percent yet still be on track toward full actuarial funding.”  If this is the position of AFSCME, then why did AFSCME support a bill that attempts a clear overreach . . . a taking of PERA retiree contracted COLA benefits until the PERA actuarial funded ratio achieves a 100 percent funded level?  This PERA actuarial funded ratio has occurred only twice in Colorado PERA’s 81-year history.)

Another AFSCME Fact Sheet addressing public pensions, “The Truth About Public Service Workers’ Pensions” is available at the following link:

http://www.afscme.org/issues/pension-security/resources/document/AFSCME-FactSheet_Pensions.pdf

Here are a few excerpts from this Fact Sheet that I find relevant to the taking of the Colorado PERA retiree contracted COLA benefit:

“Employee contributions and investment returns fund the overwhelming majority of the cost of pensions.  Taxpayers shouldered only 14.3 percent of all pension funding in the 11-year period ending in 2007.”

“Public service workers often are not covered by Social Security, so their employer (state or local government) does not pay into Social Security as other employers do.  Since the worker does not qualify for Social Security benefits, his/her pension is the only source of retirement security.”

“While politicians who run state and local governments have often failed to faithfully contribute to their employees’ plans, public workers have contributed year in and year out.”

“The deep financial downturn of 2008 and 2009, spurred by recklessness on Wall Street, caused significant problems in many pension funds.  Until the recent market crash, public pensions were well funded and not a problem – they had on average 86 percent of the assets they needed to pay for accrued benefits (anything over 80 percent is considered healthy.)”

(My comment:  If AFSCME believes that a pension actuarial funded ratio exceeding 80 percent is “considered healthy,” again, why did AFSCME Colorado support a bill that proposes to confiscate the contracted PERA retiree COLA benefit until the Colorado PERA pension’s actuarial funded ratio reaches a 100 percent level?)
“Pension funds are not at imminent risk of default, and they have years to recover investment loses.  The history of public pension fund management demonstrates that pensions have not been a long-term burden to governments.”

“Where the problems with pension funds are substantial, the cause is the failure of employers to consistently fund pension plans and recent investment losses.  In the past, too many politicians ignored pension contributions in favor of wasteful programs or special-interest tax breaks.”

“The unfunded pension liabilities may be paid during a period of 30 years under generally accepted accounting.  During this 30-year period, state and local government revenues will be approximately $40 to $50 trillion, so the unfunded liabilities are approximately 2 percent of governmental revenues during the payback period.”

(My comment: This statistic, provided by AFSCME, does an excellent job of placing public defined benefit pension plan obligations in their proper perspective.)

“Because of the recession, a substantial majority of state and local governments have lost between 10 percent and 20 percent of their revenues during the past two to three years.  As revenues recover, governments will be able to set aside appropriate money to cover their pension obligations.”

(My comment: Instead of waiting for a turn in the volatile Colorado economic cycle, the sponsors of SB 10-001 considered the recent downturn a “window of opportunity” during which they could attempt a breach of PERA retiree COLA contractual obligations.)

“The reason costs are increasing for public pension plans is because employers are now paying for past service that the employer did not properly fund.”

(My comment: This AFSCME perspective describes the accumulation of Colorado PERA unfunded pension obligations perfectly.)

Also worth considering in view of the taking of the Colorado PERA contracted COLA benefit is a letter that AFSCME sent to the Governmental Accounting Standards Board (GASB) on September 17, 2010.  The letter addresses proposed changes to state and local public pension accounting and financial reporting.

The AFSCME comment letter that was sent to GASB is available here:

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157431851

Here are a few excerpts from the letter that I find particularly pertinent to the Colorado General Assembly’s attempted taking of the contracted PERA retiree “automatic” COLA benefit:

“AFSCME agrees with the GASB view expressed in Chapter 2: ‘that for accounting and financial reporting purposes, an employer has an obligation to its employees for pension benefits by virtue of the employment exchange, and this obligation is not satisfied until the defined pension benefits have been paid to the employees or their beneficiaries when due.’”

“Our disagreement arises where GASB intends to project the cost of ad hoc COLAs.  The reason pension plans utilize ad hoc COLAs, as opposed to automatic COLAs, is so that they can make a decision about whether or not the COLA can be funded on a regular basis.” 

(My comment: Here AFSCME recognizes the distinction that is made in public defined benefit pension administration between “ad hoc,” i.e., “discretionary” COLA benefits and “automatic” pension COLAs, i.e., COLA benefits that are a contractual obligation of public pension plans and their employer-affiliates.  As we have seen, Colorado PERA officials, and PERA's actuaries have identified the Colorado PERA COLA benefit as an "automatic" pension COLA benefit, in writing, on dozens of occasions.)

AFSCME's GASB Letter:

“We also have concerns with the added subjectivity that arises when determining whether facts and circumstances exist to conclude that ad hoc COLAs are not substantively different from automatic COLAs.  Actuaries and accountants should not be required to guess at future employer decisions.”

(My comment: If one skims through all of the comment letters that have been sent to GASB on this subject of state and local public pension accounting and financial reporting it is interesting to note that there is NO DEBATE AT ALL regarding the contractual obligations of public pension plans and their employer-affiliates to pay “automatic” pension COLA benefits.  The debate in these GASB comment letters surrounds the degree to which public pension plan sponsors are contractually obligated to meet long-standing “ad hoc” pension COLA promises and expectations.)

This GASB comment letter was submitted by:

“Steven Kreisberg, Director of Collective Bargaining and Health Care Policy, AFSCME.”

Support public pension contractual rights at saveperacola.com.

Should Colorado Supreme Court Justice William Hood Recuse Himself in the Colorado PERA Pension COLA Lawsuit?

The State of Colorado and many Colorado local governments are currently attempting to escape their contractual Colorado PERA public pension obligations.  These Colorado PERA "plan sponsors" have failed to pay their public pension bills for a decade and now seek to push the accumulated debt off onto certain elderly Colorado residents.  The Colorado residents whose contracts are targeted (Colorado PERA pensioners) have filed a lawsuit to prevent the taking of their PERA pension COLA benefits.  Oral arguments in this case, Justus v. State, will be heard by the Colorado Supreme Court in a few weeks.

This article addresses important questions relating to the independence, integrity, and impartiality of Colorado's courts.  The failure to ask these questions would certainly be irresponsible.  The questions: Should Colorado Supreme Court Justice William Hood opt to recuse himself from this case, Justus v. State?  Can the impartiality of Colorado Supreme Court Justice William Hood be REASONABLY questioned in the Colorado PERA public pension lawsuit, Justus v. State?

Here is one example of a relationship that raises concerns in my mind: While Colorado Supreme Court Justice William Hood was a shareholder at the firm Isaacson Rosenbaum in 2006, Justice Hood's colleague at the firm (Mark Grueskin) provided legal representation to the defendant in the current PERA litigation, Justus v. State (Colorado PERA) relating to a proposed initiative that sought to grant the Colorado General Assembly authority to retroactively take accrued Colorado PERA pension benefits in the event of "actuarial necessity."

Thus, 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."

As we have seen, this concept of "actuarial necessity" is a factor in the current Colorado PERA public pension lawsuit, Justus v. State, and was cited as a legal rationale for the bill taking the Colorado PERA COLA benefit, SB10-001, by the bill's co-prime sponsor Senator Josh Penry.

The Colorado Code of Judicial Conduct requires a judge to recuse himself in a case if the judge "was associated with a lawyer who participated substantially as a lawyer in the matter during such association."

Isaacson Rosenbaum's Mark Grueskin (Justice Hood's colleague at the law firm in 2006) provided legal services to Colorado PERA relating to this 2006 ballot measure addressing the authority of Colorado PERA plan sponsors to take accrued PERA pension benefits through "actuarial necessity."  Colorado PERA's ability to employ "actuarial necessity" to take accrued pension benefits is a central question in the case, Justus v. State.

In 2009 and 2010, the Defendant, Colorado PERA, embraced this concept of "actuarial necessity" as a means to claw back accrued Colorado PERA pension benefits.  SB10-001 Co-Prime Sponsor Senator Penry on "actuarial necessity":

On January 10, 2010, Senator Penry (who was Senate Minority Leader at the time) was a guest on the 9 News “Your Show” program with Adam Schrager.  About 9 minutes into this show a caller (Julian Graham) asks: “How can this occur when there is an AG opinion currently in effect that states PERA rules and regulations are considered to be a contract?” 

Adam Schrager then asks Senator Penry: “Can you do this legally?”

Senator Penry responded: “We can.  What the courts have said, what the case law and the opinions have said is you can’t.  It is a contract, unless there is actuarial necessity.”  “What the courts have said from a legal standpoint, as long as there is actuarial necessity, as long as there’s a bona fide emergency it’s OK.”

A Colorado PERA document provided to the JBC on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “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.”

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

Colorado PERA’s General Counsel Greg Smith provided his perspectives on “actuarial necessity” during the August 11, 2009 Colorado PERA Denver “Listening Tour” meeting.  Greg Smith’s words:

“Also important is that there are constitutional limitations . . . on what the General Assembly can do with regard to benefits.” 

“There’s always a big question in everybody’s mind . . . Well, what is actuarial necessity?  I wish I could answer that question for you, it’s not that I haven’t tried, not that we haven’t researched it.”  “In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” 

“And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.”

Recall that, at a December 17, 2009 meeting of the Joint Budget Committee, Representative Jack 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?”

In my mind, Justice Hood is certainly fit for judicial office.  However, I am uncertain, given his  professional relationship with a member of the legal defense team in the case Justus v. State, the legal representation his former law firm has provided to a defendant in the case, Colorado PERA, relating to a central aspect of the case, "actuarial necessity," past compensation provided by the Colorado PERA Defendant in the case, and Justice Hood's prior political activities, that a decision to hear the case, Justice v. State, will contribute to the preservation of public confidence in Colorado courts.

What information did Justice Hood provide to State of Colorado Governor Hickenlooper's office, as a Supreme Court judicial candidate, regarding his past employment at a law firm that provided legal representation to a defendant in what is arguably the most significant lawsuit facing the State of Colorado in decades?  Where is this information recorded?  Was the matter raised during the judicial selection process?  Which members of the Governor's staff were involved in this selection process?

Was Governor Hickenlooper aware of Justice Hood's association with a lawyer for a defendant in one of the most significant lawsuits facing the State of Colorado in its history when the Governor chose to appoint Justice Hood to the Colorado Supreme Court?  When Governor Hickenlooper made this appointment, the case Justus v. State was an impending matter before the Colorado Supreme Court.  Years ago, Colorado PERA officials told us that they expected this case to reach the Colorado Supreme Court.

An unusual number of current or former members of the Colorado Supreme Court have represented, or are associated with lawyers who have represented the defendants in the Colorado PERA public pension case, Justus v. State, currently pending before the Colorado Supreme Court.

Recall that one Colorado Supreme Court Justice (Marquez) has represented a defendant in the case, Justus v. State.  Recall that we have a former Colorado Supreme Court Justice (Dubofsky) who has represented a defendant in the case, Justus v. State and drafted a legal memorandum for the defendant relating to the COLA taking.  Now we have a third Colorado Supreme Court Justice (Hood) who has been a colleague of an attorney representing a defendant in the case (Grueskin.)  It appears that this Supreme Court Justice (Hood) has recused himself (or was removed) in 2011 in the Colorado redistricting case, Moreno, due to his association with this politically-connected attorney (Grueskin.)  The extent of the relationship of Justice William Hood with the Colorado PERA lawyer (until recently) Grueskin should be explored.

It may very well be, that certain attorneys have been hired by a defendant in the case, in part, due to political, or judicial influence that an attorney offers.  In all likelihood Justice Hood has knowledge of the political activities of attorneys who have represented the Colorado PERA defendant, and he may be able to provide testimony germane to the case.  Due to his employment as a shareholder at the firm Isaacson Rosenbaum, while the firm provided legal representation to Colorado PERA, Justice Hood may likely provide a jury with some insight into the relationship of attorney Grueskin and the defendant in the case, Colorado PERA.

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?

While his former law firm represented a defendant in the case, did Justice Hood obtain any information that bears on the current case, Justus v. State?  Did Justice Hood, during his own period of  political activity (and while employed at the firm Isaacson Rosenbaum with the politically active attorney who has represented a defendant in the case, Justus v. State) obtain any information relating to the political activities of the defendant?  During his employment at Isaacson Rosenbaum did Justice Hood make any statements relevant to the case before the court, Justice v. State?

To what extent did political influence on the PERA Board result in the Board's recommendation to pursue a taking of PERA pensioner contracted COLA benefits?  This factual matter may very well be in dispute if the case, Justus v. State, goes to trial.  Having worked, as a shareholder, at a law firm representing Colorado PERA, what light might Justice Hood shed on Colorado PERA's historical political relationships and activities?

If discovery is allowed to proceed in the case, Justus v. State, the extent to which political influence on the Colorado PERA Board of Trustees contributed to the PERA Board's decision to pursue a taking of contracted PERA pensioner COLA benefits must certainly be brought to light and thoroughly scrutinized.

Is the fact that Justice Hood has received compensation from a defendant in the case (as a shareholder while Colorado PERA was a firm client) relevant in a decision to recuse?  If I'm not mistaken, Justice Eid has recused herself in the case, Justus v. State, due to that fact that she is a recipient of an annuity from a defendant in the case, Colorado PERA.

Below I provide a few excerpts from the Colorado Code of Judicial Conduct relating to the recusal of judges.

Canon 2, Colorado Code of Judicial Conduct, "A Judge Shall Perform the Duties of Judicial Office Impartially, Competently, and Diligently."

Rule 1.1: Compliance with the Law. "A judge shall comply with the law, including the Code of Judicial Conduct."

Rule 1.2: Promoting Confidence in the Judiciary.

 "A judge shall act at all times in a manner that promotes public confidence in the independence, integrity, and impartiality of the judiciary, and shall avoid impropriety and the APPEARANCE (my emphasis) of impropriety."

"A judge should expect to be the subject of public scrutiny that might be viewed as burdensome if applied to other citizens, and must accept the restrictions imposed by the code."

"Conduct that compromises or appears to compromise the independence, integrity and impartiality of a judge undermines public confidence in the judiciary.  Because it is not practicable to list all such conduct, the Rule is necessarily cast in general terms."

"The test for appearance of impropriety is whether the conduct would create in reasonable minds a perception that the judge violated this Code . . .".

From the Annotation:

"Courts must meticulously avoid any appearance of partiality, not merely to secure the confidence of the litigants immediately involved, but to retain public respect and secure willing and ready obedience to their judgments."

Rule 2.4:

"(B) A judge shall not permit . . . political . . . relationships to influence the judge's judicial conduct or judgment."

"Confidence in the judiciary is eroded if judicial decision making is perceived to be subject to inappropriate outside influences."

(My comment: Trustees of the Colorado PERA Board would be well-advised to take this bit of advice, concerning inappropriate outside influences, to heart.)

Rule 2.11: Disqualification.

"(A) A judge shall disqualify himself or herself in any proceeding in which the judge's impartiality MIGHT REASONABLY BE QUESTIONED . . . (my emphasis.)

(A)(2)(d): The judge knows that the judge "is likely to be a material witness in the proceeding."

(A)(5): The judge . . . was associated with a lawyer who participated substantially as a lawyer in the matter during such association."

(My comment: Was attorney Grueskin involved in the selection of Dubofsky to create a legal rationale for the contemplated PERA COLA taking?  Was the taking of the COLA contemplated even while Hood and Grueskin were colleagues at Isaacson Rosenbaum?  Has Justice Hood ever had conversations with Grueskin regarding the PERA COLA benefit or "actuarial necessity"?  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?

As we have seen, Colorado PERA's legal strategy in the case, Justus v. State, has employed the concept of "actuarial necessity."  Justice Hood's law firm, Isaacson Rosenbaum grappled with this legal concept in 2006 while addressing state ballot measure #93.  (It would be interesting to listen to the tapes of initiative hearings on this 2006 ballot measure #93.)

Language relating to "actuarial necessity" was placed into SB10-001 itself, over the objections of Colorado PERA's attorneys and lobbyists:

"One amendment was modified before passage.  It says PERA will provide written notice to all members that an actuarial necessity, a legal term that means the future fund is in peril, could occur and the General Assembly could modify the benefits allowed by the plan.  In earlier debate, several witnesses had testified that changing cost-of-living adjustment benefits amounted to a breach of contract."

https://www.cusys.edu/newsletter/2010/02-03/pera-open-forum.html

http://www.leg.state.co.us/clics/clics2010a/csl.nsf/fsbillcont2/DD3F57C1B220E34A872576A80029E75E/$FILE/001_01.pdf

Code of Judicial Conduct:

"Under this Rule, a judge is disqualified, whenever the judge's impartiality might reasonably be questioned  . . ."

(My comment: Did Justice Hood disclose any facts pertinent to his potential disqualification due to an association with Mark Grueskin in the Moreno case?)

"A judge's obligation not to hear or decide matters in which disqualification is required applies regardless of whether a motion to disqualify is filed."

"A judge should disclose on the record information that the judge believes the parties or their lawyers might reasonably consider relevant to a possible motion for disqualification, even if the judge believes there is no basis for disqualification."

From the Annotation:  "Appearance of impropriety, not actual prejudice, is sufficient to warrant recusal."

(My comment: Has Justice Hood made any such disclosures in the case Justus v. State?  Did Justice Hood make any such disclosures in the Moreno redistricting case?  If so, what disclosures were made?)

“Hood also has close ties to Democrat [sic] 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/

THE JUSTICE WILLIAM HOOD/MARK GRUESKIN CONNECTION:

Justice William Hood’s work at 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

“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

Colorado Statesman on 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\

“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

From Law Week online:

“Redistricting Judge, Dem Lawyer Worked At Same Firm.”

“Asked about a possible conflict between himself and the judge (Hood), 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/

Attorney 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

December 17, 2009

Colorado PERA General Counsel Greg Smith – “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.)

Isaacson Rosenbaum's work for Colorado PERA while Justice Hood was a shareholder at the firm:

Initiative #93: PERA Reform,

“Colorado PERA files motion challenging (2006) ballot initiative.”

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

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

Link to Initiative #93:

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?

Greg Smith, Colorado PERA’s 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)

Support public pension contractual rights at saveperacola.com.

Lessons for Colorado PERA Trustees from the Illinois Pension “COLA-theft” Injunction.

The State of Colorado and a state agency (Colorado PERA) are currently attempting to escape obligations to which the state and many Colorado local governments are contractually bound. Oral arguments in the resultant lawsuit, Justus v. State, will be heard by the Colorado Supreme Court in approximately two weeks.  The State of Illinois, having adopted similar legislation abrogating contractual public pension rights, was recently enjoined from enforcing its own constitutionally suspect legislation.

As I have read court documents in the Illinois public pension lawsuit (the Complaint, and the Memorandum in Support of an Injunction) a number of recommendations for the Colorado PERA Board of Trustees have come to mind.

I provide my list of recommendations to the Colorado PERA Board below, as well as excerpts from the Illinois' pension case Complaint (and the Illinois Memorandum in Support of an Injunction) that I find pertinent to Colorado's public pension litigation in the case, Justus v. State.

My recommendations to the Colorado PERA Board of Trustees:

Do not ask Colorado's Judicial Branch to sully Colorado's foundational document in order to conceal Colorado Executive Branch and Colorado Legislative Branch pension mismanagement.

Take responsibility for the past mistakes of the Colorado PERA Board and PERA administrators.  Do not ask Colorado's Judicial Branch to endorse breach of contract, or to ignore precedent and on-point Colorado public pension case law in order to conceal PERA's skeletons.

(Public pension attorney Robert Klausner: ‘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 . . . 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)

Allow legislation impacting the Colorado PERA pension system to be initiated by state legislators who oversee the pension system after extensive interim study.  Do not use PERA's lobbyists (internal or external) to place language into statute "outsourcing" this oversight function to the PERA Board.

Stay out of politics.  Do not allow the PERA trust funds to be used for political purposes such as business loan programs.  Do not strive to develop political and judicial relationships.  Eliminate the advocacy of public policy positions from Colorado PERA publications.  Eschew all outside influence from special interest groups and attorneys with connections to those special interests. As trustees overseeing Colorado PERA administrators, refuse to authorize any political activities of these administrators while acting in an official capacity.

Adopt the posture of educating the members of the Colorado Legislature regarding public pension administration and contractual obligations rather than one of lobbying the Legislature for specific outcomes.  Many U.S. public pension systems function perfectly well without paying hundreds of thousands of dollars each year to lobbyists.  Consider eliminating the lobbying function of Colorado PERA in its entirety, and simply responding to legislative requests for information through a liaison.

Do not ask Colorado state legislators to violate their oaths of office in order to compensate for, or conceal, past PERA Board mistakes or legislative mismanagement.

When hiring outside attorneys to investigate the constitutionality of contemplated PERA system legislation, favor attorneys who have spent a lifetime in public pension jurisprudence, rather than attorneys who may have limited experience in the legal subject, but offer political or judicial influence.

Develop a sound legal strategy prior to Board action that will result in expected litigation, and stick with that strategy throughout the course of the litigation.  This will allow for consistent legal representation during the litigation.  Ask PERA's legal representatives if they have previously written legal briefs contravening legally questionable legislative proposals that the board has under consideration.

I give credit to the Colorado PERA Board of Trustees for their 2009 attempts to initiate submission of interrogatories to the Colorado Supreme Court regarding the constitutionality of the contemplated PERA pension system "reform" legislation.  For some reason, the politicians in control at the time refused this PERA Board request.  However, the PERA Board could have, in turn, refused to participate in the continued marketing, political and  lobbying effort for SB10-001 unless Legislative Leadership requested that such interrogatories be submitted to the Colorado Supreme Court.  Apparently, political considerations induced the board to drop its insistence on the submission of interrogatories in 2009.  Why did Colorado's Legislative Leadership have no desire for direction from the Supreme Court on the constitutionality of the proposal?

Be skeptical when outside stakeholders with obvious financial interests in legislation encourage the Board to endorse constitutionally suspect legislation.  Further, be skeptical regarding recommendations that come from PERA's own legal department.

Recognize the historical failures of the PERA Board of Trustees.  The Board has failed to insist that the Colorado General Assembly meet its obligation to pay each year's actuarially required PERA pension system contributions.  The Board's assumption that the placement of PERA employer and employee contribution rates in statute was sufficient, and that annual supplemental appropriations to meet PERA contractual obligations were unneeded was folly.  The Board should endeavor to remedy this situation through regular reports to legislative oversight committees regarding the General Assembly's current PERA pension ARC obligations.

(The federal public pension regulatory agency, GASB, has adopted new public pension reporting requirements that will place the focus of pension plan sponsors on total pension liabilities of affiliated employers.  Do not use this pending change of emphasis on the part of GASB as an excuse for historical PERA pension system underfunding.  The argument is weak.  The PERA pension system has not paid its bills for a decade, ensure that PERA actuarially required contributions are made each year in the future.)

Do not attempt to shift market risk onto vested PERA members who bear no market risk under their pension contracts.

When PERA-affiliated employers claim an inability to meet their contractual obligations perform due diligence.  For example, with little effort Board members might have discovered in 2009 that the PERA-affiliated employer, the State of Colorado, has given away many billions of dollars in potential tax revenue in the last two decades in the form of business subsidies, and has voluntarily cut its revenue stream.  This knowledge might have induced the board to give little credence to any claims of "poverty," or an inability to meet state contractual pension obligations over the coming three to five decades.

Do not attempt to remedy past PERA Board asset allocation errors (i.e., alternative investment errors) and consequent losses to the PERA trust funds through constitutionally suspect legislation.  Identify and take responsibility for past Board investment errors.

Do not attempt to remedy past board policy errors that have cost the system billions of dollars (e.g., the unanimous PERA Board endorsement of former Colorado Governor Bill Owen's "service credit fire sale" proposal) through constitutionally suspect legislation.

As fiduciaries, act to protect the contractual rights of PERA annuitants.

Excerpts from the Illinois Plaintiff's Memorandum in Support of Their Motion for a Temporary Restraining Order and Preliminary Injunction:

Plaintiff's Memorandum, Page 7:

"In contravention of that constitutional promise, welching on pension obligations is precisely what the State seeks to accomplish through the Act."

(My comment: November 18, 2004, Colorado Attorney General Ken Salazar's Opinion [post-DeWitt]: "Once a PERA member fulfills all the statutory requirements for a pension benefit and retires, the member’s fully vested pension right cannot be reduced by the General Assembly."

http://saveperacola.files.wordpress.com/2010/01/changes_to_pera.pdf

Plaintiff's Memorandum, Page 8:

"Presently, the Pension Code provides that retired members of SERS, SURS and TRS receive each year a 3% automatic annuity increase, compounded annually."

(My comment: Note that both the pension COLA benefits taken by the Illinois Legislature and those taken by the Colorado Legislature are "automatic" pension COLA benefits, i.e., non-discretionary pension COLAs.  Discretionary public pension COLA benefits, known as "ad hoc" COLA benefits may be paid each year at the discretion of the pension plan sponsor.  Colorado PERA officials have identified the Colorado PERA COLA benefit as an "automatic" COLA benefit on numerous documented occasions.

Note the position of the Ritter Administration in a letter to the federal pension regulatory agency GASB relating to 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.”

“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

Memorandum (continued):

"At this juncture, there is no practical way to ascertain with precision the number of employees who already have retired and who are considering retiring in an effort to avoid at least some of the Act's unlawful diminishments and impairments, or because of confusion as to how those diminishments and impairments will impact them."

Plaintiff's Memorandum, Page 12:

"This legal uncertainty will irreparably harm certain longtime employees who would prefer not to retire this year but who, as a practical matter, will be forced to do so.  If the courts eventually determine that the new pension law is unconstitutional, all of the nonvoluntary retirements from the university will have been unnecessary."

(My comment: No such injunction was granted in Colorado.  Irreparable harm from the enactment of SB10-001 has already occurred.  This sustained harm is now part of the legacy of Colorado state government.  In 2010, Colorado PERA trustees allowed self-interested groups to disrupt the lives of thousands, irresponsibly inflicting enormous harm.)

Plaintiff's Memorandum, Page 15:

"Illinois courts uniformly hold that a public pension system member has a vested right to receive the pension benefits that existed when she or he entered the system, plus any enhancements subsequently provided under the pension code."

(My comment: 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)

Plaintiff's Memorandum, Page 16:

"As a result, if an action is taken because of the impairments and diminishments for which the Act provides, only to learn subsequently that the Act is held unconstitutional, that action will have irreparable consequences.  No person should have to make important life choices regarding employment, retirement and retirement security under that cloud of uncertainty.  That is the very essence of irreparable harm."

Plaintiff's Memorandum, Page 19:

"State employees and teachers have held up their end of the constitutionally-protected pension promise and relied on that promise for retirement security.  The State seeks to renege on that promise through the Act."

(My comment: August 14, 1984, 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"

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984

Plaintiff's Memorandum, Page 28:

" . . . the Act imposes changes to the pension systems that diminish and impair pension benefits in many ways, including reduction of automatic annuity increases; automatic annuity increase
skips . . ."

"Each of those changes to the pension code standing alone, let alone in concert, renders the Act unconstitutional and void."

Plaintiff's Memorandum, Page 29:

"Senator Hutchinson noted for her colleagues that a General Assembly member's vote in favor of the Act would abdicate the oath to uphold the Constitution that each member took . . ."

"Jorgensen v. Blagojevich: '[n]o principle of law permits us to suspend constitutional requirements for economic reasons, no matter how compelling those reasons may seem,' and holding that the Illinois Constitution prohibited the State from diminishing COLAs that Illinois judges were entitled to receive as part of their compensation . . ."

"People ex rel. Lyle v. City of Chicago . . . stating that '[n]either the Legislature nor any executive or judicial officer may disregard the provisions of the Constitution even in case of a great emergency,' and holding that even during the Great Depression, the City of Chicago had to pay municipal judges' salaries during their terms of office . . ."

"Ross v. Nlay Co.  . . . noting that valid modification of a contract requires mutual assent and consideration, and holding that new benefits an employer unilaterally extended to employee were not sufficient consideration for modification of employment agreement because 'there was no bargained-for exchange, and no promises were made where [the employee] agreed to relinquish his contractual rights in exchange for the new benefits . . .'"

(My comment: March 5, 2011, Eric Madiar: "Is Welching on Public Pension Promises an Option for Illinois?"  “In sum, welching is not a legal option available to the State.”  “Courts, though, “sit to determine questions on stormy as well as calm days,” and the Constitution was upheld during the Great Depression.”

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1774163)

Plaintiff's Memorandum, Page 32:

"The public interest favors constitutional rights remaining inviolate at all times, good and difficult.  See People ex rel. Lyle Legislative acts that violate an express Constitutional limitation are an affront to Illinois citizens, undermine the rule of law and damage confidence in the State government."

Plaintiff's Memorandum, Page 51:

Illinois Senator Hutchinson (from legislative hearing transcript):

"And if we don't respect the basic modicum of contract law, then we have a whole lot of other problems that we have to solve.  Like maybe we could just rewrite all those underwater mortgages.  Those are contracts.  Last time I checked banks and chambers didn't want us to do that . . . "

(My comment: Note that lobbyists for the Colorado business association, Colorado Concern, lobbied for enactment of SB10-001, according to the records of the Colorado Secretary of State.

Note that the state's Budget Director, Henry Sobanet, formerly consulted for Colorado Concern, and was according to CASB, "intimately involved" in developing SB10-001.  Note that John Ikard, President and CEO, FirstBank at the time, was a member of the Colorado Concern Board.

As a member of the Colorado Concern Board, did Ikard vote to authorize Colorado Concern lobbyists to lobby for the enactment of SB10-001 at the Colorado Legislature?  The entire business of banking in the United States rests on the sanctity of contracts.)

Link to Memorandum:

http://www.weareoneillinois.org/news/coalition-seeks-injunction

Illinois We Are One Complaint, Page 2:

"Plaintiffs bring this action to correct the abdication by the Governor and General Assembly of the State of Illinois . . . of their most fundamental duty, to uphold the Illinois Constitution.  In failing to fulfill that duty, the Governor and General Assembly unlawfully harm hundreds of thousands of current and retired State employees and teachers and breach the trust that all Illinois citizens place in them."

"The State chose to forgo funding its pension systems in amounts the State now claims were needed to fully meet the State's annuity obligations.  Now, the State expects the members of those systems to carry on their backs the burden of curing the State's longstanding misconduct.  Specifically, Public Act 98-0599 unlawfully strips from public servants pension amounts to which they otherwise are entitled as a matter of law, let alone fundamental fairness."

(My comment: 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)

Complaint, Page 5:

"Both retired and current State employees rely for retirement security on the full pension payments the State has promised.  Personal financial commitments and planning based on the State's promise —often years in the making —now are in jeopardy."

(My comment: PERA Retiree Sue Ellen Quam at the Colorado PERA Denver "Listening Tour" in 2009: "I was a legislative liaison for many, many years.  I sat in the Joint Budget Committee for many, many years, and I remember legislators saying ‘You know, you don’t get very good salary increases and your benefits really stink, but you’re gonna get a really good retirement and so just hang in there.”  “So, I find it to be discouraging that the Legislature may be considering saying, ‘We got you on your salary, we got you on your benefits, and now we’re going to get you on your retirement.”  “I’ve heard rumors that the 3.5 percent increase may be reduced or eliminated and that it’s OK with PERA members. It’s not OK with this PERA member.”)

Complaint, Page 19:

"At base, this litigation concerns an ethical and moral promise to provide a certain level of retirement security for the women and men who chose to serve Illinois and its citizens."

"The majority of Illinois' public employees in State retirement systems are not eligible to receive Social Security, including all employees who are members of TRS and SIJRS and many' SERS members.  For many individuals, their State pension is their life savings and is all that that stands between them and poverty."

(My comment, May 29, 2011, Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain:

“Most PERA beneficiaries don’t qualify for Social Security so their modest PERA benefit may be the only steady retirement payment they’ll ever receive.  After careers in public service, this is a reasonable reward.  They have earned it.”

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

Complaint, Page 21:

"The pensions that Illinois' public servants receive are not mere gratuities.  In addition to the work each pension system member performs while serving Illinois and its residents, members contribute a substantial portion of their paychecks to their pensions."

(My comment: Note that the nationally recognized public pension attorney, Joseph Marcucci, uses Colorado's on-point public pension case law to illustrate a "clear demarcation" of public pension gratuity theory and contract theory.  The Colorado Constitution prohibits the payment of "gratuities," thus the statutory PERA COLA benefit cannot be a gratuity.

June 23, 2010, Nicholas Joseph Marcucci, Emeritus Board Member at the National Association of Public Pension Attorneys, “Constitutional Issues When Altering Public Pension Benefits”: “In most states there is a fairly clear demarcation between the gratuity theory and the contract theory and a seminal case or two where the courts make the change.  Police Pension and Relief Board of the City and County of Denver, et al. v. McPhail, 39 Colo. 330, 338 P.2d 694 (1959); and, Police Pension and Relief Board of City and County of Denver, et al., v. Bills, et al.”  [To access this Word document, paste "Constitutional Issues When Altering Public Pension Benefits Marccuci" into Google.])

Complaint, Page 26:

" . . . the State added the compound component in an effort to stave off some of inflation's impact diminishing the value of a member's pension and to create for members with lesser pension amounts at least some hedge against poverty that inflation may cause."

"Moreover, the compounded automatic annuity increase is a benefit for which most members have paid."

"Now, however, those contributions are for naught.  Through its enactment of Public Act 98-OS99, the State is set to undermine the retirement security it constitutionally promised and for which Plaintiffs and the class they represent paid through work and salary contributions."

(My comment, March 24, 1993 [1:32 PM – 2:28 PM], Rob Gray, Director of Government Relations, Colorado PERA, 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.])

Complaint, Page 27:

" . . . Public Act 98-0599 diminishes and impairs the annual automatic annuity increase to which each SERS, SUBS and TRS member is entitled, whether the member already is retired or hereafter retires."

Complaint, Page 29:

"Stated otherwise, the degree of diminishment and impairment caused by the change in the pension formula will increase with each passing year."

Complaint, Page 30:

"As with the change in the formula used to calculate the automatic annual increase itself; the degree of diminishment and impairment to a pension system member's benefits caused by skipping one or more automatic annual increases will increase. with each passing year."

(My comment: August 2, 2010, Ritter Administration Letter to GASB on contractual public pension obligations:

“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

Complaint, Page 33:

"Illinois history is replete with the successive failures of the Illinois General Assembly and Governor to make payments to the State pensions systems for which Illinois law called.  For years, led by successive Governors and members of the General Assembly, including many currently in office, the State has failed to pay an actuarially-sufficient amount to fund its pension systems.  All along, the State and its elected officials did so knowing that they were shortchanging the pension systems, cheating Illinois' public servants and violating the public trust."

(My comment: Colorado PERA Executive Director Meredith Williams, February 23, 2012, testimony to the Colorado House Finance Committee 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):

“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.”)

Complaint, Page 46:

"The State's unilateral diminishment of its contractual obligations and impairment of the pension benefits and rights of the Representative Plaintiffs and the members of the Class . . . is an illegal exercise of its sovereign powers."

"Each Representative Plaintiff and each Class Member has satisfied her or his obligations under her or his respective pension system contract.  The same cannot be said for the State."

Complaint, Page 48:

"The State, in contrast, has not complied with its contractual obligations under those contracts."

"That diminishment and impairment violates the Contracts Clause of the Illinois Constitution. Specifically, the Contracts Clause instructs that the State shall pass no law that impairs the State's contractual obligations: 'No ex post facto law, or law impairing the obligation of contracts or making an irrevocable grant of special privileges or immunities, shall be passed."

"But Public Act 96-0599 materially, substantially and unilaterally diminishes and otherwise impairs the pension amount and other retirement benefits to which each Representative Plaintiff and each Class Member contractually is entitled."

"The State's impairment of its contractual obligations to the Representative Plaintiffs and the Class Members is neither reasonable nor necessary to advance a legitimate public purpose.  The State's longstanding, deliberate and willful failure to fund each of SERS, SUBS and TRS with an actuarially-sufficient amount has caused the purported problem it now tries to remedy through Public Act 98-0599.  And, the State has other options by which it could remedy the situation it purports to address through enactment of Public Act 98-0599 – options that do not impair its contracts with the Representative Plaintiffs and the Class Members."

(My comment: August 13, 2005, Colorado PERA Executive Director Meredith Williams, "The liabilities of the system, frankly, will be paid out over multiple decades, and we're talking 70 or 80 years.  We're kind of designed for the long haul and we know we're going to experience ups and downs in the marketplace."

http://www.chieftain.com/metro/slow-stock-market-retiree-boom-hurts-pension-system/article_da58863b-1799-50b4-8ff3-0548d16be68c.html)

Complaint, Page 50:

"The Takings Clause of the Illinois Constitution instructs: Private property shall not be taken or damaged for public use without just compensation as provided by law."

"The State has not offered the Representative Plaintiffs or Class Members consideration that would justly compensate them for the impairment and diminishment of their pension benefits."

(My comment: From McPhail, “Here the contract was set forth in the basic law and the rights were acquired following 25 years of faithful service during which time the plaintiffs paid an actual and regular consideration.”)

Complaint, Page 52:

"Each Representative Plaintiff and Class Member has a private, vested contractual right to, and a legitimate expectation that she or he would receive, upon retirement the pension amount and other retirement benefits for which the Pension Code provided when she or he first became a member of her or his  respective State retirement system as well as any increase in or other improvements to those benefits.  The Representative Plaintiffs and the Class Members rely on those benefits as security in retirement."

"Of course, the State has had the power, authority and ability to adequately fund each of SERS, SUBS and TRSand it still does.  By voluntarily choosing not to, and now claiming that it will not adequately fund those State pension systems absent implementation of (the public act)and other retirement benefits she or he would otherwise receive . . ."

(My comment: June 3, 2003, Colorado PERA Executive Director Meredith Williams, CAFR Summary to Members, 2002, 5/21 [REV 6/03]: “PERA directs its efforts at keeping the funding ratio, [the ratio of assets to accrued liabilities] for the three divisional retirement funds at a minimum of 80 percent.  A funding ratio over 80 percent is considered good.”

http://www.copera.org/pdf/5/5-21-02.pdf)

Complaint, Page 53:

"The State cannot avoid its unconstitutional taking of the private property of each Representative Plaintiff and Class Member by further breaking the law.  In other words; the State cannot avoid the ramifications of its unlawful conduct through enactment and application of the Public Act 98-0599, which itself is unconstitutional."

Complaint, Page 55:

"PLAINTIFFS DEMAND A TRIAL BY JURY ON ANY ISSUES WHICH ARE, OR MAY BECOME, TRIABLE BY JURY."

Link to the original Illinois We Are One Complaint:
http://www.weareoneillinois.org/WeAreOneIllinois_Complaint.pdf

Finally, in regard to the Illinois Legislature's attempted breach of public pension contracts:

“ . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”

Gino L. DiVito, Tabet DiVito & Rothstein LLC, Chicago, ILL

Support public pension contractual rights at saveperacola.com.

Illinois Judge Issues Injunction Halting Public Pension “COLA-theft,” Similar to Colorado PERA’s SB10-001.

Public pension contractual rights advocate Fred Klonsky in Illinois, on May 15, 2014:

"Belz has sent the message to the Legislature, Governor and Mayors that the courts will not likely approve pension theft."

"On a personal level . . . all this ignores the pain and fear that retirees across the state must endure while politicians, judges, lawyers and lobbyists play this terrible game."

http://preaprez.wordpress.com/

Coloradopols readers, note that public sector unions in Illinois defend their member's contracts.  Why were Colorado's public sector unions able to be co-opted in supporting the breach of Colorado union member's public pension contracts in 2010?  How did this happen?

Yesterday, the efforts of Illinois' public sector unions to defend the contractual rights of their members resulted in the issuance of an injunction that will halt the taking of accrued public pension benefits in that state while recent Illinois state legislation (which I believe clearly abrogates existing contractual relationships) progresses through the courts.

In some states unions defend the contractual rights of their public worker members, in other states unions may be co-opted into "cutting deals" in backrooms, (as noted by a Colorado state legislator during the 2010 PERA pension "reform" floor debate.)

Unfortunately, Colorado's public sector "unions" are so ineffectual that, in 2009 and 2010, they could indeed be co-opted into supporting the breach of the public pension contracts of their union members.  I would like to see the leadership of Colorado's public sector unions strengthened in the future.  I would like to see Colorado's public sector unions sufficiently empowered that they will, at a minimum, testify in opposition when the Colorado Legislature entertains the breach of public worker contracts to which the state is a party.

As the sponsors of the 2010 Colorado "COLA-theft" legislation (SB10-001), and Colorado PERA's administrators have told us many times, ninety percent of the taking in SB10-001 falls on the shoulders of Colorado PERA pensioners who are parties to "fully-vested" PERA pension contracts.

I believe that Colorado's public sector unions failed to defend the contractual rights of their retired union "brothers and sisters" in 2009 and 2010, since these retired union "brothers and sisters" no longer pay union dues.  Colorado PERA pensioners (for the most part) no longer contribute to union coffers.  When a public sector union member retires, union leaders no longer have a financial incentive to defend the retired union member's contracts before the Colorado General Assembly.

In 2009, certain Colorado state employees lead the political campaign to break Colorado PERA pension contracts (i.e., Colorado PERA's administrators.)  These Colorado PERA administrators disseminated propaganda across the state claiming the "support" of Colorado's public sector unions for the PERA contract breach scheme.  However, as we have seen, a number of individual members of the public sector unions involved have refused to quietly acquiesce to their leadership's support for the breach of their fellow union member's pension contracts (more on that later.)

From the Illinois' We Are One Coalition:

"BREAKING: Court Grants Union Coalition's Request to Stay Implementation of Pension Changes."

"Today, the Sangamon County Circuit Court granted a temporary restraining order (TRO) and a preliminary injunction, as requested by the We Are One Illinois coalition and its plaintiffs, halting the implementation of Senate Bill 1 (Public Act 98-599)."

"This stays the legislation in its entirety so that the pension systems and other defendants are enjoined from implementing or administering any provisions of the act until further order of the court or the court issues a final ruling on the merits of the act’s constitutionality."

"The court found that plaintiffs have shown a likelihood of success on their contention that Public Act 98-599 violates the Pension Protection Clause of the Illinois Constitution."

http://www.weareoneillinois.org/news/breaking-court-grants-union-coalitions-request-to-stay-implementation-of-pension-changes

Reuters:

"An Illinois judge on Wednesday suspended the June 1 implementation date for the state's new pension reform law, according to a labor union coalition spokesman."

http://www.reuters.com/article/2014/05/14/usa-illinois-pensions-idUSL1N0O01VH20140514

Chicago Tribune:

"Retiree groups and a union coalition called We Are One Illinois won a temporary restraining order and preliminary injunction in Sangamon County Circuit Court that will put the law on hold and prevent it from taking effect on June 1."

"The groups argued the law is unconstitutional because it scales back benefits and raises retirement ages.  Under the Illinois Constitution, public employee pensions are a 'contractual relationship' with benefits that cannot be 'diminished or impaired.'”

“'This is an important first step in our efforts to overturn this unfair, unconstitutional law and to protect retirement security for working and retired Illinois families,' said Michael T. Carrigan, president of the Illinois AFL-CIO, the point man for the union coalition."

"Judge John Belz recognized the retirees and others in the pension systems could suffer 'irreparable harm' if the law is allowed to go forward while the constitutionality issues is still being fought out in the courts, according to his order.  The case is expected to wind up in the Illinois Supreme Court."

http://www.chicagotribune.com/news/politics/clout/chi-judge-halts-illinois-pension-reform-law-20140514,0,4599846.story

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

During Colorado PERA's 2009 political campaign to escape its contractual obligations many Colorado PERA members and retirees objected to the proposed breach of their PERA contracts (some filed a lawsuit addressing the taking.)  The objections of Colorado PERA member David Holme at the 2009 Colorado PERA Denver "Listening Tour" are a memorable example of objection to the contract breach:

“My decision to join the state was based on the PERA program.”

“Any sort of a reduction in benefits today would be a violation of that contract, and bait and switch advertising . . . and so fraud.” 

“State employees have never failed to provide their contributions  . . . and in fact we’ve paid more into the system than the employers have over the total of the years, according to PERA reports.”

“The employers, starting in 2002, the last year of 100 percent funding, began providing less than the annual contribution requirement, setting contribution rates for the state of less than required.” 

“Today, the State of Colorado PERA employer is past due to the tune of $6.5 billion into the trust fund contributions, not counting any interest — if  you do it at the three percent PERA interest, it would be another $1.1 billion past due over the last 9 years.”

“PERA’s overall funds at the end of last year were about $30 billion, this bad debt constitutes about 25 percent of the PERA assets.  If they were paid with interest to the PERA investment fund it would be at 94 percent funded on the actuarial basis or 76 percent on the market basis.  Most experts believe that a fund at 80 percent is a healthy fund.  We’d be above that.”

“The survey today, that we just talked about, is a good example of this.  If you look at that, 28 of the options on there cost the employees money, and only two cost the employers money.”

“As a state employee, I’m ready to sit down and work on whatever fixes are needed once the deadbeat employer has made arrangements to fully fund its share.”

http://coloradopols.com/diary/19048/colorado-pera-listens-to-pera-retirees-label-pera-employers-deadbeats

In 2010, the American Federation of Teachers Colorado joined in the effort to enact SB10-001.  In Illinois, the Illinois Federation of Teachers labels similar legislation "Pension Theft."

Illinois Federation of Teachers (on May 12, 2014):

"We Are One Illinois Seeks Injunction to Halt Implementation of Pension Theft Legislation."

"Today, the We Are One Illinois union coalition and plaintiffs filed a motion for a temporary restraining order and preliminary injunction in Sangamon County Circuit Court to seek a full stay of the implementation of Senate Bill 1 (Public Act 98-599), pending a resolution on the act’s merits."

"SB 1 slashes cost-of-living adjustments, reducing the value of pension benefits by one-third or more after twenty years in retirement.  It also hikes retirement ages by up to five years and makes other unfair, unconstitutional cuts to the pensions of working and retired members of the Teachers' Retirement System, State Employees' Retirement System, and State Universities Retirement System."

https://www.ift-aft.org/pensions/pension-watch-blog/2014/05/12/we-are-one-illinois-coalition-statement-on-injunction-filing

From news-gazette.com:

"The law and the constitution are not situational constructs to be applied as is convenient to political purposes."

http://www.news-gazette.com/opinion/guest-commentary/2013-12-08/illinois-pension-reform-constitutional.html

Public pension rights advocate Glen Brown in Illinois, on May 15, 2014:

"What is at stake right now is an adjudication of claims that public employees have against policymakers who have coerced changes to public employees’ benefits and rights and who are breaking public employees’ contractual and constitutional promises.  These are legitimate rights and moral concerns not only for public employees, but for every citizen in Illinois: for any unwarranted acts of stealing a person’s guaranteed rights and compensation will violate interests in morality and ethics and the basic principles of both the State and United States Constitutions that protect every one of us."

" . . . there is no justice in granting tax breaks for wealthy corporations and, at the same time, legislating cuts to public employees’ constitutionally-promised compensation."

http://preaprez.wordpress.com/

In light of the legal analysis of his own legal advisor (Eric Madiar), why did Illinois' state Senate President Cullerton support legislation breaking public pension contracts?

"IS WELCHING ON PUBLIC PENSION PROMISES AN OPTION FOR ILLINOIS?"

http://www.ilretirementsecurity.org/admin/reports/files/Pension-Clause-Article-Final.pdf

We should also recall that President Cullerton's legal aide, Eric Madiar, has written that the Colorado Legislature's taking of fully-vested, accrued public pension COLA benefits is likely unconstitutional.  So, why did Cullerton go down that path in Illinois?

From Madiar's “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

Support the public pension contractual rights of Colorado workers at saveperacola.com.

Colorado PERA Crosses Paths with Supreme Court Justice Hood, Sobanet and Dubofsky.

While working for the most politically active agency in Colorado state government, Colorado PERA administrators must balance scores of political relationships, and divide hundreds of thousands of Colorado PERA trust fund dollars each year among hired Colorado PERA lobbyists.  These PERA lobbyists seek to effect the political goals of the Colorado PERA Board of Trustees, and they pursue amendments to Colorado PERA governing statutes desired by the Board.

In recent years, as I have monitored the activities of Colorado PERA officials, and conducted research to support Colorado PERA contractual public pension rights, I have been continually astounded at the intricacy of PERA's web of political, legal, judicial, public relations, and lobbying relationships.  The network of PERA agency relationships surrounding the machination, marketing, enactment, legal defense, and appellate strategy supporting the 2010 Colorado PERA "COLA-taking" legislation (SB10-001) was particularly extensive.

In my opinion, Colorado PERA retirees (who are currently defending their contractual public pension rights in court) should make a point to learn the total expenditure of PERA trust funds, or other PERA system assets, that the PERA Board has directed to lobbyists in the last two decades. These lobbyists should be identified, and the direction given to the lobbyists by PERA trustees and administrators examined.  I would be interested to learn how Colorado PERA's lobbying expenditures compare to such expenditures by all other Colorado state agencies, and peer U.S. public pension systems.  I know that many public pension systems in the United States do not lobby the elected officials who oversee their systems.  Colorado PERA's lobbying program raises obvious ethical and public policy questions.

In 2009, Colorado's Legislative Leadership (likely at the prompting of PERA officials and self-interested parties) decided to "outsource" the entire PERA pension "reform" discussion to the PERA Board.  I suspect the involvement of Colorado PERA's lobbyists in placing this "outsourcing" language into (an unrelated) bill at the conclusion of the 2009 legislative session.  Is the Colorado Legislature unique among state legislatures in having delegated its public pension policy-making authority to an external agency, and consequently the various stakeholders with influence over that agency?  How many state legislatures have abdicated their public pension policy-making authority to a state pension agency?  In 2009, a list of dozens of PERA pension "reform" options was prepared by PERA officials and self-interested parties.  This list of "reform" options was ostensibly given fair consideration by the Colorado PERA Board.  However, it appears that the bulk of the "consideration" was conducted behind closed doors, and notably, only a few of the dozens of "reform" options considered entailed payment of accrued debts by the parties legally obligated to pay the debts.

In 2009, Colorado's Legislative Leadership outsourced one of the decade's most important and consequential public policy debates facing the Colorado General Assembly.  Legislative Leadership outsourced this public policy decision to Colorado's politically active state agency, Colorado PERA.  Having announced their preconceived policy outcome at the General Assembly, Colorado PERA's hired lobbyists resisted any alteration of their introduced legislation.

Allowing legislative policy to be dictated from outside was a colossal mistake on the part of Colorado's Legislative Leadership.  By outsourcing the debate, Colorado's Legislative Leadership ensured that the members of the Legislature would cast votes with limited knowledge of public pension contractual rights, and that prospective pension reform options under consideration in other state legislatures (including the prospective reduction of the pension multiplier) would receive no serious consideration.  The objective was to take the assets of pensioners.

Outsourcing the PERA "reform" debate ensured that past PERA Board investment mistakes that harmed the trust funds would remain hidden, that past PERA Board policies to "cap" the PERA pension system's funded level at a 90 percent funding ratio would never come to light, and that the state's history of PERA pension underfunding (failure to pay the pension ARC) would receive no scrutiny.

Recall that during the Colorado Senate's debate of SB10-001, Senator Lundberg described this outsourcing of legislative authority as "a deal cut before this body met."  The development of PERA-related legislation by those elected officials who are statutorily charged to oversee the Colorado PERA pension system (rather than through a process shrouded in secrecy) would have resulted in a better policy outcome in 2010.

Below, I present a portion of the most significant relationships surrounding the enactment of SB10-001 that have come to light in recent years.  My hope is that shining a light on these relationships and the process that resulted in the enactment of SB10-001 will ultimately benefit public policy-making at the Colorado Legislature.

THE SOBANET/SB10-001 CONNECTION:

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)

From: "The PERA Fire Sale, the Gift that Keeps on Taking."

"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."

"Owens said he doesn’t recall the specifics of what was said to PERA, but 'I thought it was valuable to have the flexibility to get new employees into some of the positions in the state bureaucracy.'”

" . . . we’ll be living with the cost of selling long-term debts cheaply for a long time to come.  At this point, it’s almost impossible to tell how much of PERA’s long-term debt obligation comes from this sale; I can’t find aggregate numbers in the CAFR, and the charts above show only the price paid, not the goods sold, but it certainly warrants further investigation."

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

(My comment: Undeniably, it would be unjust to force Colorado PERA pensioners, who have met the statutory requirements to receive their pension COLA benefits, to pay for this egregious public policy error championed by former Governor Bill Owens.)

THE HICKENLOOPER/JUSTICE HOOD CONNECTION (appointed to the Colorado Supreme Court):

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."

"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

THE JUSTICE WILLIAM HOOD/GOVERNOR BILL RITTER CONNECTION (appointed to the 2nd Judicial District Court):

"Ritter Appoints William W. Hood to Denver District Court Bench" Thursday, April 19, 2007.

"Gov. Bill Ritter today announced the appointment of William W. Hood of Denver to the 2nd Judicial District in Denver."

http://www.coadvocatesforum.org/news/article.139986-RITTER_APPOINTS_WILLIAM_W_HOOD_TO_DENVER_DISTRICT_COURT_BENCH

From CTBC:

"Hood's history as a Democrat [sic] 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/

From CTBC:

"Prior to being appointed to the Denver District Court in 2007, Hood was a long-time contributor to Democrat [sic] 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 [sic] 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/

Denver Post:

"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

February 23, 2010, Governor Bill Ritter signs SB10-001, the "COLA-taking" legislation currently pending before the Colorado Supreme Court.  Link to SB10-001:

http://www.leg.state.co.us/clics/clics2010a/csl.nsf/fsbillcont3/DD3F57C1B220E34A872576A80029E75E?Open&file=001_enr.pdf

THE JUSTICE WILLIAM HOOD/MARK GRUESKIN CONNECTION:

Justice William Hood's work at 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

"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

Colorado Statesman on 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

"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 Statesman:

Mark Grueskin served as "local counsel to the 2008 Democratic National Convention Committee."
 

Grueskin:

" . . . for a dozen years of political litigation that I can think of and I can’t imagine that we would want to do it any other way."

"I walked my first precinct when I was 10 years old.  Wally Stealey sent me in Colorado Springs."

"So I was active in politics, literally, I mean for years before my bar mitzvah, and then after college I managed Frank’s primary campaign down in Pueblo."

"Took it and worked there and it was Akin Gump, Bob Strauss’ law office. [Strauss served as the chairman of the Democratic National Committee between 1972 and 1977 . . ."

"And you know, I worked at Akin, Gump for three years and then came back to Colorado and worked on [Gov. Richard] Lamm’s re-election campaign and was his lobbyist and did the Carlos Lucero campaign in ‘84, because I still had this campaign management thing."

Westfall:

"But subject matter expertise in election law, Mark has no peer."

http://www.coloradostatesman.com/content/994377-grueskin-westfall-colorado%3Fs-top-election-attorneys

Justice William Hood:

"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/

(My comment: Apparently, in 2006, Isaacson Rosenbaum represented 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

From Law Week online:

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

"Asked about a possible conflict between himself and the judge (Hood), 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/
 

Isaacson Rosenbaum's (2011) closure:

"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/

THE MARK GRUESKIN/SB10-001 CONNECTION:

We see that Mark Grueskin has represented the State of Colorado in the public pension lawsuit, Justus v. State.  From page 7 of the "STATE DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ FIRST AMENDED CLASS ACTION COMPLAINT."

"Mark G. Grueskin
Ed Ramey
Isaacson Rosenbaum P.C.
1001 17th Street, # 1800
Denver, CO 80202"

Link:
http://saveperacola.files.wordpress.com/2011/04/2010-05-10-state-defendants_-motion-to-dismiss-plaintiffs_-first-amended-class-action-complaint.pdf

THE MARK GRUESKIN/JEAN DUBOFSKY/SB10-001 CONNECTION:

“ . . . 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 Dubofsky and Democratic state party attorney Mark Grueskin.)

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

Attorney 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

December 17, 2009

Colorado PERA General Counsel Greg Smith – “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.)

From page 6 of the "STATE DEFENDANTS’ REPLY IN SUPPORT OF MOTION TO DISMISS FIRST AMENDED CLASS ACTION COMPLAINT," in the case, Justus v. State:

"Jean E. Dubofsky, Esq.
Jean E. Dubofsky, P.C.
1000 Rosehill Drive
Boulder, CO 80303"

"Mark G. Grueskin
Ed Ramey
Isaacson Rosenbaum P.C.
1001 17th Street, # 1800
Denver, CO 80202"

http://saveperacola.files.wordpress.com/2011/04/2010-06-23-state-defs-reply-in-support-of-motion-to-dismiss1.pdf

THE JUSTICE DUBOFSKY/JUSTICE MARQUEZ CONNECTION:

As we have seen, our undeniably talented Colorado Supreme Court Justice Monica Marquez has worked for the defense in the Colorado PERA retiree lawsuit, Justus v. State.  Attorney Jean Dubofsky, author of the Colorado PERA "COLA-taking" legal opinion: "I worked on" the case, Justus v. State, with Colorado Supreme Court Justice Monica Marquez.  The author of the Colorado PERA "COLA-taking" legal opinion wrote a letter of recommendation for Monica Marquez to serve on Colorado Supreme Court: “In particular, I’ve worked on several cases where she provided superb briefing, argument and/or advice for the Attorney General’s office, including . . . the current challenge to the amendments to PERA (Justus v. State), the government’s pension system.”

“ . . . and Ms. Marquez would bring to the court sophistication about the numerous cases that involve, for example, TABOR, ballot titles, election issues, voter-initiated constitutional amendments, property tax, public pensions, labor law, and regulations issued by a wide variety of state agencies.”

“Sincerely, Jean E. Dubofsky.”

http://www.scrib.com/doc/36638245/Letter-for-Monica-Marquez-by-Jean-Dubofsky

(My comment: Why did former Justice Dubofsky write in this letter that Justice Marquez would "bring sophistication" to the Colorado Supreme Court on public pension litigation?  Given Justice Marquez' involvement [representing a defendant] in ongoing Colorado PERA litigation, Dubofsky must have been referring to future public pension litigation involving public pension claims unrelated to the current Colorado PERA litigation.)

As we have observed earlier, Justice Monica Marquez's name appears on the PERA Defendant's Motion to Dismiss submitted to the Denver District Court on May 10, 2010:

Page 29 of the "PERA DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED
CLASS ACTION COMPLAINT":

"John W. Suthers
Monica Marquez
Maurice G. Knaizer
William V. Allen
Megan Paris Rundlet
Attorney General’s Office
State of Colorado
1525 Sherman St. 7th Floor
Denver, CO 80203

http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf

Attorney Monica Marquez (soon to be a Colorado Supreme Court Justice) advises Colorado PERA on March 19, 2010:

https://www.copera.org/pdf/Board/Minutes/2010/Minutes3-19-10.pdf

Visit saveperacola.com.  Support the Colorado Constitution and the rule of law in our state.

Legislature Ratchets Up Corporate Welfare in 2014 . . . Continues to Ignore Contracted Colorado PERA Debts.

As we have seen, the Colorado Legislature has not met its full public pension obligations since 2003, and now seeks to shift the resultant, accumulated state debt onto public pensioners.
These pensioners bear no "market risk" under their state public pension contracts, yet the Colorado Legislature is attempting to retroactively alter the pensioners' contracts, imposing "market risk" on them.  The Colorado Legislature intends to break Colorado PERA pension contracts, after having granted tens of billions of dollars in corporate welfare in recent decades.  In 2014, the Colorado Legislature continues its addiction to corporate welfare, giving away more millions in state revenues, while its lawyers argue poverty before the Colorado Supreme Court.

The article at the link below includes a table identifying skipped Colorado PERA public pension payments, i.e., the "Colorado PERA ARC deficiency" over the last decade.  The Colorado PERA ARC deficiency itself now total billions of dollars.

http://coloradopols.com/diary/47980/colorado-wins-a-proponent-of-colorado-pera-pension-contract-breach-condemns-the-legislatures-failure-to-pay-its-pera-pension-bills

The most recent Colorado PERA financial report (last summer's CAFR) reveals that the Colorado Legislature also failed to pay its public pension bills in 2012.  Page 35 of this Colorado PERA CAFR (Financial Section) for calendar year 2012, published June 25, 2013, identifies the most recent PERA ARC deficiency:

"In 2012, the actual contributions, as set in statute, were $143.4 million less than the ARC as calculated by the actuaries."

Link to 2013 Colorado PERA CAFR:

https://www.copera.org/pdf/5/5-20-12.pdf

Two rare instances have been recorded in which Colorado PERA's current and former Executive Directors have condemned the Colorado Legislature's failure to pay the PERA pension system's actuarially required contributions (ARC.)  Below, I provide Colorado PERA Executive Director Meredith Williams' comments on February 23, 2012 to the Colorado House Finance Committee (relating to the Legislature's historical under-funding 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):

"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."

In 2009, in an unusual off-script moment, Colorado PERA's erstwhile General Counsel (and current Executive Director) Greg Smith condemned the Colorado General Assembly's failure to meet PERA pension system ARC obligations.  Greg Smith's moment of candor occurred prior to legislative enactment of the 2010 PERA COLA contract breach in SB10-001.  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 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

Having driven down the funding ratio of the Colorado PERA pension system by opting to habitually give away needed state revenue to corporations, and by adopting myopic public policy to serve special interests, the Colorado Legislature now asks the Colorado Supreme Court to bless this history of legislative mismanagement, and to shift accrued state debts through breach of contract.

The Governor of the State of Colorado agrees that the state must meet its contractual obligations, and must not seize the property of Colorado citizens.  Here we have Colorado Governor Hickenlooper aggressively defending the property rights of owners of oil and gas resources:

“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/

According to our Governor, Colorado local governments and the state government should not take the property of Colorado residents.  Where is his defense of the property rights of Colorado PERA pensioners who are parties to fully-vested contracts with the State of Colorado?

The State of Colorado and its public pension administration arm, Colorado PERA, have argued in their legal briefs that the state is confronted by a financial crisis of such proportions that contracts to which the state is a party (Colorado PERA public pension contracts) must be broken.  But, this claim begs the question.  "If the State of Colorado is faced by such a financial 'crisis,' why does the Colorado Legislature continue to give away state tax resources?"

A recent article in the Denver Business Journal reports that the Colorado General Assembly, at its recently concluded 2014 legislative session, continues to add to the billions of state tax dollars annually awarded in corporate subsidies, exemptions, and credits.  Some of the Colorado General Assembly's billions of dollars in "tax expenditures" obviously have more merit than others.  Yet all state legislative tax expenditures are without question, discretionary.  Colorado state legislators are not compelled to give away state resources through "tax expenditures."  Attorneys defending the State of Colorado in the Colorado PERA retiree lawsuit, Justus v. State, cannot logically or legitimately argue in court that the State of Colorado is forced to abrogate state contracts due to financial stress while the Colorado Legislature continues to voluntarily forego revenue.  Unlike legislative adoption of "tax expenditures," state public pension contractual obligations are not discretionary on the part of the Colorado General Assembly.

A recent article posted at the Colorado political blog Coloradopols.com explores the profusion of business subsidies that have been enacted by the Colorado Legislature:

http://coloradopols.com/diary/57319/colorado-pera-pension-contracts-versus-colorado-corporate-welfare

An article in the Denver Business Journal covers the Colorado Legislature's newly adopted corporate welfare bills for the recently concluded 2014 legislative session:

"Colorado Legislature passes 11 business tax-credit bills.  But why?"

“'There’s been a lot of tax credits this year.  It’s certainly not sustainable to keep adding them at this pace to the budget,' said Senate President Morgan Carroll, D-Aurora."

The new 2014 Colorado state tax credits include:

"A tax credit for people who invest in early-stage advanced-industry companies."  "An expansion of a state tax credit for relocating and expanding companies that hire at least 20 people."  "A business personal property tax credit for businesses with $15,000 or less of equipment."  "A tax credit for companies that clean and redevelop contaminated brownfield sites."  "A sales and use tax exemption for equipment used in space flight."  "A sales and use tax exemption for equipment used to produce biogas."  "A sales and use tax exemption on equipment used for parts of on-demand aircraft."  "An income-tax credit for low-emission and alternative-fuel vehicles."

"Not all Republicans are big fans of the tax credits, however. Senate Minority Leader Bill Cadman, R-Colorado Springs, said he believes that businesses would prefer that the state government simply cut regulations and get out of their way rather than try to become 'the author of marketplace success by pushing tax credits that everybody pays for.'”

(My comment: The corporate lobbyists who championed these new Colorado state tax credits at the 2014 session beg to differ with Senator Cadman.  The lobbyists have no problem with the Legislature becoming the author of the marketplace success of their corporate employers.  The fact that "everybody" pays for the lobbyists' employer's success is not problematic for corporate lobbyists, it is by design.)

http://www.bizjournals.com/denver/blog/capitol_business/2014/05/coloradolegislature-passes-11-business-tax-credit.html

Colorado PERA retirees who are defending their "fully-vested" public pension contracts before the Colorado Supreme Court should examine closely the following publication of the Colorado Department of Revenue, the "Colorado Tax Profile and Expenditure Report, 2012."

This state publication (link below) provides a simple means of isolating Colorado's multi-billion dollar "corporate welfare" tax expenditures.

A few excerpts from the publication:

"This report is to include information identifying and describing tax expenditures administered by the Department, estimates of the identified tax expenditures, the Colorado Tax Profile Study (CTPS), and the Colorado Statistics of Income (SOI) reports."

”Although this study will present the latest data available, 2009 data will be used for purposes of tabulating a grand total of annual tax expenditures."

"Actual data from Colorado returns were used to determine the revenue impact of fuel, cigarette and tobacco, income and severance tax deductions and credits, to the extent the information was available from the forms.  However, retailers are not required to provide the level of information on sales tax returns necessary to report the impact of the numerous exemptions and deductions. In the case of sales tax exemptions, various sources of data at the state and national level including census and other industry-related reports were used to develop an estimate of the exemption or deduction."

(My comment: According to this report of the Colorado Department of Revenue, total Colorado subsidies, credits and exemptions in 2012 exceeded $2.7 billion.  Severance tax exemptions and credits alone exceeded $200 million that year.)

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251847897557&ssbinary=true

It is apparent that the State of Colorado (the 10th wealthiest state in the nation) and Colorado local governments face no financial "crisis" that warrants breach of Colorado PERA pension contracts.
The recorded legislative history of the Colorado PERA pension COLA benefit makes it clear that the PERA COLA benefit is a contractual obligation of PERA-affiliated employers, that the COLA benefit is "permanent," that PERA workers and retirees may "rely" on the offer of the COLA benefit in exchange for their labor and contributions, that it is an "automatic" pension COLA benefit and a Colorado PERA "liability," and that the PERA COLA benefit is "guaranteed, now and in the future":

March 24, 1993 (1:32 PM – 2:28 PM)

Rob Gray, Director of Government Relations, Colorado PERA 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.])

It is time for the State of Colorado and its pension agency, Colorado PERA, to give up the charade that Colorado PERA-affiliated employers are unable to meet their contractual obligations to elderly Colorado PERA pensioners.  These PERA pensioners have given their lives in public service, they trusted their employers and their union representatives, and were rewarded with betrayal through deception and self-serving in 2010.

Colorado PERA pensioners accepted the offer of their Colorado PERA employers for "defined" compensation in exchange for their labor.  They relied on this offer when they planned their retirements.  They expect that their contracts will be honored.  Support public pension contractual rights at saveperacola.com.  Help restore the rule of law in our state.

Federal Reserve Paper Explains Colorado PERA’s Failure to Pay its Public Pension Bills.

Readers new to this discussion should know that the State of Colorado is currently seeking to break contracts to which the State is a party, specifically public pension contracts.  In less than one month, the Colorado Supreme Court will hear oral arguments in the resulting lawsuit, Justus v. State.

In 2009, a public pension system administered by an arm of Colorado state government, (the Colorado PERA pension system) reached a certain funding level, a 69 percent funding ratio (actuarial funding ratio.)  The Colorado PERA pension system arrived at this funding level primarily due to the failure of the Colorado General Assembly to pay its public pension bills (actuarially required contributions, ARC) during the previous decade.  At the time of the PERA pension contract breach, this 69 percent funding ratio was within a few percentage points of the average funding ratio for the PERA pension system in recent decades.  Nevertheless, the Colorado PERA Board of Trustees, and lobbyists hired by the PERA Board, and certain self-interested groups, and lobbyists for the self-interested groups all successfully persuaded a slim majority of state legislators that the 69 percent funding ratio level was a "crisis."  They persuaded the state legislators that this purported "crisis" was of such magnitude that it allowed the State of Colorado to abrogate contracts to which the State was a party.

Below is a link to an article that includes the history of missed Colorado PERA ARC payments:

http://coloradopols.com/diary/44193/u-s-census-bureau-colorado-reneged-on-its-pera-pension-contracts-while-spending-a-mere-2-08-percent-of-revenues-on-public-pensions

Naturally, those whose property was taken when state contracts were abrogated in 2010 filed a lawsuit.  The lawsuit, Justus v. State, has progressed through Colorado courts over a four-year period, and the target of the pension contract breach, Colorado PERA retirees, have studied the law, learned of their contractual public pension rights, and paid close attention to the work of public pension legal scholars in the United States.  Colorado PERA retirees have, in particular, followed the writings of the preeminent U.S. public pension legal scholar, Professor Amy Monahan, of the University of Minnesota School of Law.

Recently, I discovered yet another interesting paper by Professor Amy Monahan, this one produced (with a co-author) for the Federal Reserve Bank of Cleveland in 2012.  Although this Federal Reserve "working paper" is comprehensive, I have extracted (and present below) only certain select portions of the paper that I find germane to the case, Justus v, State.

The title of the Federal Reserve working paper: "Who’s Afraid of Good Governance?  State Fiscal Crises, Public Pension Underfunding, and the Resistance to Governance Reform," Thomas J. Fitzpatrick and Amy B. Monahan, Working Paper, November, 2012.

Excerpts from the Monahan/Fitzpatrick paper:

"This article presents the results of a qualitative study of the funding and governance provisions of twelve public pension plans that are a mix of state and local plans of various funding levels."

"If neither plan participants nor state taxpayers are able to effectively monitor and challenge a state’s inadequate funding or improper investment decisions, public plans are very likely to remain underfunded."

(My comment: Unfortunately, for many state and local government elected officials who oversee public pension plans, political concerns trump any fiduciary obligation or inclination to observe contractual governmental pension obligations.  I also recall former PERA Executive Director Meredith Williams lamenting losses to the PERA Trust Fund sustained as a result of the PERA Board's past decisions to embrace "alternative investments."  Should PERA retirees, who bear no market risk, make PERA plan sponsors whole for Board investment errors by relinquishing their constitutional rights?)

Monahan/Fitzpatrick paper:

"Control of these assets, however, is often in the hands of political actors, whose short-term political interests may be very different than future retiree's interests."

(My comment: The Colorado PERA Board of Trustees is itself a political actor.  The PERA Board's hired outside lobbyists, and in-house lobbyists, influence state politicians.

As a state legislator noted on tape in 2010, the political PERA Board "cuts deals."  Colorado PERA lawyers inform the Board about the deals that were "cut" in regular executive sessions.
The PERA Board codifies these backroom deals in Colorado law via purchased lobbyist influence over the Colorado law-making process.  How many public pension systems in the U.S. engage in such practices?  Remember, this is our state government.

Political considerations prompted the PERA Board to stand idly by last year while the Colorado General Assembly directed $142 million toward local government pensions that are not the state's contractual obligation, this while underfunding state PERA contractual pension obligations.  Total appropriations for this Colorado local government obligation have reached approximately $700 million.

Political considerations prompted the PERA Board to stand idly by while the Colorado General Assembly failed to pay the PERA pension system actuarial required contribution, for a decade.  Why does the PERA Board invariably fail to defend the interests of vested PERA members?)

Monahan/Fitzpatrick paper on the failure of state legislatures to pay their public pension ARC:

"In many states, the decision to fund the state pension plan is subject to the legislative budgeting process.  If legislators decide that other budgetary needs have greater importance, the pension plan simply is not fully funded.  And there are many reasons for legislators to avoid full pension funding, one of which is the time-inconsistency inherent in intertemporal decision making.  That is, legislators may be likely to underfund public pension plans because they mistakenly give current needs greater weight than future needs."

(My comment: As we have observed earlier, state legislatures [like the Colorado General Assembly] that have opted to place employer and employee contribution rates in statute, rather than prioritizing payment of the pension ARC [actuarially required contribution] each year in the budgeting process, are much more likely to have significant unfunded pension liabilities.)

Monahan/Fitzpatrick paper:

"This phenomenon is well documented with respect to individuals making retirement savings decisions, and it is likely that the same psychology affects legislators making pension funding decisions."

(My comment: My observations of legislative hearings on PERA-related legislation lead me to believe that Colorado legislators are generally not aware that the state has failed to meet Colorado PERA public pension [ARC] obligations for the last decade.  I perceive this lack of awareness of the PERA ARC obligation, resulting from the fact that, inexplicably, Colorado PERA officials and PERA trustees have historically felt no obligation to inform Colorado legislators [at their three regular annual PERA meetings with lawmakers] that the General Assembly is not meeting PERA ARC obligations.)

Monahan/Fitzpatrick paper:

"As a result, legislators may attempt to defer contributions to public pensions in order to make room in state budgets for more immediate concerns.  They may do so even though they know that it will require higher contributions in the future, and then for similar reasons resist or attempt to delay making the increased contributions that result.  If the choice is between funding current needs, or funding pension benefits that will be paid out in thirty years, it is easy to see why current needs might win out.  There is also, of course, a public choice aspect to the pension funding dynamic.  A legislator that has an interest in being re-elected would be wise to favor current needs that provide tangible benefits to her constituents over funding future benefits
for state workers."

(My comment: Politicians who seek reelection have an incentive to ignore long-term public pension contractual obligations in favor of discretionary spending that will benefit special interests, especially when these special interests are able to deliver endorsements, campaign cash and votes.  The total amount of PERA-affiliated employer revenue lost to special interest tax subsidies and credits over the last two decades should be determined.)

Monahan/Fitzpatrick paper:

"The problem with systemic underfunding, regardless of its precise cause, is that it shifts the burden of paying for current benefits to future taxpayers.  It is essentially a form of off-balance sheet borrowing."

(My comment: Unless, of course, the politicians succeed in eliminating the "off-balance sheet" debt through breach of pension contracts.)

Monahan/Fitzpatrick paper:

"Given the political influence that is present on many boards, scholars have raised concerns that politicians are likely to interfere in board decision making in order to secure political gain."

(My comment: Colorado legislators have interfered with PERA Board investment decisions and trust fund management, certain divestment requirements and the use of PERA trust funds for business loans [that private lenders apparently won’t touch] come to mind.

We do not have a clear picture of genesis of the political scheme to break Colorado PERA pension contracts in 2009.  However, this was clearly the aim of the PERA Board that year since the Board hired former Colorado Supreme Court Justice Jean Dubofsky to create a legal rationale with that specific goal [a taking of accrued PERA pension COLA benefits] identified.  This fact is confirmed in the Dubofsky deposition referenced repeatedly on saveperacola.com in recent years.  Did the contract breach scheme originate with a public sector union, education association, legislator, or a union lawyer?  It would be rather ironic if the plan to target the contracted COLA benefit for 90 percent of SB10-001's "costs savings" originated with an attorney whose firm had previously represented PERA.  It would be ironic if this attorney initially represented the defendant Colorado PERA in the lawsuit, Justus v. State.  The irony would be magnified further if such an attorney's fellow law firm shareholder during a period of PERA legal representation ultimately heard the resulting PERA retiree lawsuit upon arrival at Colorado's highest court.

I speculate that outside political influence was brought to bear on the Colorado PERA Board, and that subsequently the Board decided to hire Jean Dubofsky to create a COLA-taking legal rationale, and later the board directed staff to promote the 2009 "2-2-2" ruse for use in PERA's political, public relations, and legal campaigns to break pension contracts.

My opinion is that the PERA Board also directed PERA lobbyists to seek an amendment to legislation at the conclusion of the 2009 legislative session placing into Colorado law a formal legislative request for the PERA Board to make recommendations to the General Assembly regarding PERA pension "reform."  That is, I think the PERA Board asked itself to develop the plan for PERA pension reform, rather than allowing development of the plan in open state legislative hearings [as is the practice at most state legislatures.]

Given Meredith Williams and Greg Smith's long history of supporting public pension contractual rights, including Smith's legal briefs on the subject, and his testimony before Treasurer Coffman's PERA Commission, I imagine that quite a bit of persuasion was needed to prompt their abandonment of long-held beliefs regarding these contractual rights.  Notably, soon after the contract breach in SB10-001 was adopted, Meredith began job hunting, failed to win the Texas pension position, but soon escaped the self-inflicted PERA legal fiasco when he secured a new public pension industry job in California.

For the record, I also find it truly bizarre that Colorado PERA has abandoned its original "actuarial necessity" legal strategy midstream in favor of DeWitt.  How is this switch of legal strategy explained?  Will we ever know the rationale for the abrupt change in the PERA contract breach legal strategy?  Will PERA retirees ever have the opportunity to read the Dubofsky rationale for contract breach?  Will PERA retirees ever have the opportunity to read Greg Smith's briefs supporting contractual public pension rights?

One hopes that since PERA administrators were aware of the forthcoming litigation of PERA COLA contractual obligations [at least as early as the Dubofsky product was solicited] that these PERA administrators preserved all relevant materials via early adoption of a litigation hold.)

Monahan/Fitzpatrick paper:

"This lack of enforcement gives states the clear ability to act on their inclination to favor current needs over retiree's benefit security."

"The only possible method by which to avoid such a situation is for participants and beneficiaries to exert political power to force adequate funding, but experience shows that in many instances participants and beneficiaries do not wield the necessary amount of power to safeguard their benefits."

(My comment: Does it simply come down to political power?  The State of Colorado will not honor the contracts of parties to state contracts if those parties lack political and lobbying influence?  In 2009/2010, contracts belonging to Colorado PERA retirees were relatively exposed due to their lack of a robust public pension retiree advocacy organization, as exists in many states.)

The Monahan paper (suggests a solution):

"Before moving on to our next example, it is important to note that a state has the ability to change this outcome.  A state could pass a law or amend its constitution to provide that participants have the right to a plan that is adequately funded on an annual basis.  We also saw in our study that state courts have in some instances inferred such a right, even in the absence of a specific statutory or constitutional provision."

"Experts tend to agree broadly about what good governance looks like in the context of public pension plans.  Plans should be governed by trustees who are relatively isolated from the political process."

(My comment: In Colorado, PERA Board trustees are up to their ears in politics.  Each year, they spend at least $400,000 on statehouse lobbyists who pursue political outcomes.  PERA Board trustees have taken money from Colorado PERA retiree trust funds and used the money to hire lawyers and lobbyists to, incredibly, take even more money from those same retirees.)

Monahan/Fitzpatrick paper:

"Plans should be adequately funded on an ongoing basis so as not to burden future taxpayers."

"In other words, there may be other factors, such as the political climate in a state, that have much more influence on a plan's success than the content of its governing rules."

(My comment: Politicians should know that the constitutional Colorado TABOR amendment recognizes public pension obligations as state "debt."  TABOR is, under no circumstances, an excuse for legislators to avoid meeting state contractual pension obligations.)

Monahan/Fitzpatrick paper:

"There are several ongoing lawsuits challenging unilateral reductions in public plan benefits that were justified by the relevant states as ways to address underfunding."

"It is simply too easy in nearly all states and cities to ignore funding requirements when other needs that appear to be more pressing arise."

"If public pension plans are to succeed, we need to get serious not only about reforming plan governance, but also ensuring that there is a reliable method to enforce plan funding requirements grounded in realistic assumptions."

Link to Monahan/Fitzpatrick paper:

http://masonlec.org/site/rte_uploads/files/Monahan%2C%20Amy%20-%20Who%C2%B9s%20Afraid%20of%20Good%20Governance%20State%20Fiscal%20Crises%2C%20Public%20Pension%20Underfunding%2C%20and%20the%20Resistance%20to%20Governance%20Reform.pdf

Support the sanctity of contracts and the rule of law in Colorado.  Visit saveperacola.com.  Since statehood, Colorado government has honored its contracts.  The Colorado General Assembly's recent effort to so blatantly and casually ignore constitutional limits on its authority is certainly unprecedented and shocking.

Business Groups Educate Judges on Public Pension “Crisis.” No Conference Yet Scheduled on Corporate Welfare “Crisis.”

A number of prominent U.S. business interests that stand to benefit from the reduction of contractual public pension obligations are graciously sponsoring (multiple) conferences to ensure that U.S. judges are well-informed in this important public policy and legal arena.  (I do not know if any Colorado judges have attended or plan to attend the scheduled events.  Readers new to this public policy issue should know that the State of Colorado is currently attempting to abrogate its Colorado PERA public pension contractual obligations.)

It is somewhat odd that judicial conferences are being held to address a perceived public pension "crisis," yet there seems to be a relative dearth of conferences designed to educate judges regarding the U.S. corporate welfare "crisis" (multiples of the purported "public pension crisis.")  The most recent "impartial" judicial conference intends to address "the looming financial and structural crisis facing state pensions systems."

David Sirota on the U.S. Corporate Welfare Crisis:

"While public pensions face a $46 billion annual shortfall, the report found, it is 'dwarfed by the $80 billion a year states and cities spend on corporate subsidies.'"

http://www.truth-out.org/news/item/23401-koch-brothers-major-corporations-sponsor-pension-reform-seminar-for-judges

As readers have seen, I also find it curious that state and local government contractual public pension obligations (which will consume 2-3 percent of state and local revenues in the coming decades) constitute a "crisis."

On the other hand, I am encouraged by the fact that Professor Amy Monahan of the University of Minnesota School of Law is a participant in planned judicial education events.  Colorado PERA retirees have followed Professor Amy Monahan's work over the last few years, and noted her opinions on the Colorado Legislature's attempt to escape its contractual PERA pension obligations.  (I would be interested in following the lectures at the planned judicial education events.  However, I am not sure if the events will be public, or if audio/video of the events will be available.)

The administration of our own Colorado Governor Ritter (who signed the Colorado PERA pension contract breach legislation in 2010) agrees that the SB10-001 taking from Colorado PERA retirees was substantial:

“In Colorado, a class action lawsuit has been filed challenging recently passed statutory reductions in annual COLA increases which for an average member would result in $165,000 of reduced benefit over a 20 year period.”

“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”

“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits (such as COLAs), or an increase in required employee contributions both serve to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”

“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)

Colorado PERA officials in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 state that the PERA COLA benefit IS a contractual obligation of PERA, “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 aforementioned 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."

Professor Monahan on Colorado's Public Pension Lawsuit, Justus v. State:

"In Colorado, retirees challenged actions by the state legislature that reduced the COLA retirees were eligible to receive.  The plaintiffs included individuals who had retired under Colorado’s public employee retirement system at a time when there was a guaranteed 3.5 percent COLA in place."

Professor Monahan: The Denver District Court's Initial Decision in Justus v. State was Surprising in Light of Colorado Public Pension Case Precedent.

Professor 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."

From a recent article in Truthout:

"Koch Brothers, Major Corporations Sponsor Pension Reform Seminar for Judges."

"As state courts across the nation prepare to referee numerous public pension reform disputes, a gaggle of interested parties — from major corporations to the Koch brothers — will next week sponsor an expenses-paid conference on public pension reform for judges who may decide the cases' fates."

"It's unclear which judges — and how many of them — will be attending the conference, although George Mason's judicial seminars are traditionally open to both state and federal judges.  George Mason does not publicly list conference attendees, and federal judges who attend privately funded educational seminars aren't required to publicly disclose which conference they attended until 30 days after it ends."

David Sirota:

"'We are having a debate over pension shortfalls, calling them an emergency, when in fact they are in aggregate far smaller than what is spent each year on subsidies to business,' Sirota told the Center for Public Integrity. 'And business likes that imbalance.'"

"Hank Kim, executive director of the National Conference on Public Employee Retirement Systems, said he's tired of pension reform advocates claiming that state and local municipalities can only overcome their fiscal problems on the backs of public workers."

"'If it's really about 'shared sacrifice,' which is the terminology folks have been using since the Great Recession, it occurs to us that the groups that aren't sharing the sacrifice are the wealthy and the corporations because they're still getting the tax breaks,' he said. 'You can't be crying poverty when you are still giving away the shop to corporations.'"

"Sirota, for one, said the conference hosted by George Mason's Law & Economics Center is 'an effort to lobby judges.'"

"'It's crossing a line that's not supposed to be crossed,' he said.

'What's next? Is a company going to be able to hire a lobbyist to go lobby a judge in chambers?'"

http://www.truth-out.org/news/item/23401-koch-brothers-major-corporations-sponsor-pension-reform-seminar-for-judges

Excerpts from an agenda at a recent judicial education conference:

"Judicial Symposium on the Economics and Law of Public Pension Reform.

Event Date: Sunday, April 27 to Tuesday, April 29, 2014

Location: Francis Marion Hotel, Charleston, South Carolina

Program Description: The Judicial Symposium on the Economics and Law of Public Pension Reform discussed the looming financial and structural crisis facing state pensions systems across the nation.

It also discussed the legal challenges to reform efforts under state constitutions citing both the contacts clause and the takings clause.

Legal Questions Raised by Pension Reform

Amy B. Monahan, Julius E. Davis Professor of Law, University of Minnesota School of Law

http://masonlec.org/events/event/195-judicial-symposium-economics-law-public-pension-reform

Conference Sponsor List:

https://www.documentcloud.org/documents/1146936-george-mason-public-pension-reform-seminar-funders.html

Visit saveperacola.com.  Support the rule of law in Colorado.  Colorado is better than breach of contract.

Colorado PERA Pension Contracts Versus Colorado Corporate Welfare.

Study: Colorado PERA pension obligations are 30 percent of Colorado's annual corporate welfare grants.

As readers of Coloradopols.com are fully aware, the State of Colorado is currently trying to break its contracts.  Count me among a growing number of Coloradans who find this fact disturbing.  Have Colorado state and corporate interests merged?  Clearly, the Colorado Legislature should avoid adoption of public policies that give our state the character of a lawless banana republic.

Yet, while the Colorado Legislature attempts to escape its contractual obligations, a recent study has found the cost of meeting Colorado's (currently litigated) contractual pension obligations to be approximately 30 percent of Colorado's existing corporate tax loopholes and subsidies.

Here are a few comments on the study from the Executive Director and Counsel of the National Conference on Public Employee Retirement Systems (Hank Kim):

"Enriching corporations by stealing from public pensions."

"Those of us in the public pension world know that the vast majority of plans are on solid financial ground – and that the few that aren’t are in jurisdictions whose legislatures have consistently failed to make some or all of the actuarially required contributions to those plans, even in boom economic times."

"The rhetoric has been as impressive as it is deceitful.  There’s money there to fund public pensions.  It just isn’t going to public pensions – it’s going to wealthy corporations."

" . . . a far more detailed – and damning – picture is painted in a recent report by the nonpartisan research group Good Jobs First.  The report looks at 10 states where the controversy over pension costs has been intense.  In each state, it compares public pension costs to the amount of revenue lost to corporate welfare – including economic development subsidies, tax preferences and accounting loopholes (even offshore tax havens)."

"Colorado’s annual pension costs are just 30 percent of its nearly $600 million in corporate subsidies."

(My comment, this $600 million figure is, as we shall see, a grossly understated amount.)

Excerpts from the recent report and a news release on the report:

“As a matter of honest accounting and fair budgeting, state leaders should examine all forms of spending before they single out pensions or any other expense,” said Mattera.  “Corporate tax breaks and loopholes are often poorly understood and little-noticed because they do not get debated as appropriations, nor do they often get sunsetted or audited.  But over time they add up to hundreds of millions, or even billions, of dollars per year.”

http://www.goodjobsfirst.org/sites/default/files/docs/pdf/statepensions_prrel.pdf

"Public pension costs have been a subject of controversy in Colorado during the past few years. In 2010, the legislature reduced cost-of-living adjustments for participants in the Public Employees Retirement Association (PERA) plans . . . "

"The state’s most expensive subsidy is the enterprise zone program.  EZ tax credits cost about $103 million a year.  Colorado also provides other lucrative tax breaks for business.  The most expensive is the oil & gas ad valorem credit against the severance tax, which costs about $101 million per year.  A policy exempting purchases of manufacturing equipment from the sales tax costs about $54 million annually."

"Colorado is one of the states that allow corporations to apportion their taxable income by methods other than the traditional three factor (payroll, property and sales) weighting.  The state’s tax expenditure report does not include an estimate of the revenue loss relating to the use of the single sales factor apportionment formula."

"An archaic tax rule that allows retailers to keep a portion of the sales tax revenues they collect from customers costs about $24 million a year."

"Another major form of corporate tax avoidance that eats into state revenues is the use of offshore tax havens.  In January 2013, the U.S. PIRG Education Fund published a report in which it calculated the impact on this practice on each state.  For Colorado, the estimated annual cost is $310 million."

"The total of these corporate subsidies, official tax breaks and unofficial tax dodging amounts to more than $593 million year, as summarized in the table below."

"In other words, the annual taxpayer cost of funding the retirement benefits of current Colorado public employees belonging to the main state administered public pension systems is only 30 percent of the cost to the state of economic development subsidies and corporate tax breaks and loopholes."

http://www.goodjobsfirst.org/sites/default/files/docs/pdf/statepensions_national.pdf

"The New York Times reported recently that governments rarely track how many jobs are created by corporate welfare – and even those who do admit it’s impossible to know whether the jobs would have been created even if the subsidies hadn’t been granted."

http://www.benefitspro.com/2014/04/08/enriching-corporations-by-stealing-from-public-pen

Corporate lobbyists helped push the Colorado PERA pension contract breach bill (SB10-001) through the legislative process in 2010.  These contracts, that the Colorado Legislature has set its sights on, are contracts to which Colorado public workers (retired and active) are a party.  The idea that the Colorado Legislature would ever attempt to impair a state contract with a corporation is, of course, absurd.  Far from ever entertaining the idea of breaking a state contract with a corporation, the Colorado Legislature (and Colorado local governments) have historically taken pains to actually give away public resources to corporations.

The New York Times has calculated Colorado's corporate welfare at $198 per capita each year and 13 percent of the state budget:

http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html?_r=0#CO

Why does Colorado, a state purportedly facing a "financial crisis" of such scale that the abrogation of state contracts is required, give away billions of dollars in public resources to corporations?
Recall that part of the rationale for the breach of Colorado PERA public pension contracts in 2010 was this alleged inability of the State of Colorado to meet its contractual obligations over the coming three to five decades.

Some (advocates of the Colorado PERA contract breach) have argued that it was "reasonable" for the State of Colorado to abandon its contractual obligations in 2010 since the state was confronted by a claimed financial "crisis."  Senator Penry, co-prime sponsor of SB10-001 argued that this claimed "crisis" was just the ticket, just the "window of opportunity" (Penry's words) needed to escape contractual PERA pension obligations.

But, I don't follow.  If Colorado PERA-affiliated employers (all located in the 10th wealthiest state in the nation) were actually in a financial "crisis" would they not seek to maximize their available financial resources?  Why have these Colorado governments (PERA-affiliated employers) given away billions of dollars to businesses for decades?  Why do these Colorado governments continue to give away billions of dollars in revenue?  Why is the Colorado Legislature adding to this pile of billions of dollars of lost revenue at the current legislative session?  A desire to please constituents who want to starve public service funding?  A desire to direct tax subsidies to fund projects in legislative districts and thus please constituents?  A desire to cut the tax bill of politically connected businesses in legislative districts?  The hope for campaign contributions?

The Colorado Legislature foregoes the receipt of billions of dollars in revenue each year lost to corporate income tax exemptions, sales tax exemptions, oil and gas company property tax credits to offset severance taxes, enterprise zone corporate tax credits, etc.  Further, Colorado has the lowest level of state service taxation in the nation, the highest vendor's sales tax discount in the nation, lacks a motor fuel sales tax, and grants endless agricultural tax breaks.  (See Appendix.)

What is the true total of revenue lost each year by Colorado state and local governments in corporate credits, exemptions and business subsidies?  Who can actually compile the real total?  Certainly, the Colorado Legislature will not answer this question.

Whatever your position might be on the propriety of corporate welfare grants by the Colorado Legislature certainly there is agreement that this Colorado corporate welfare is, without question, a discretionary expenditure, a policy choice by the Colorado Legislature.  Contractual public sector obligations on the other hand, such as public pension obligations, are manifestly not discretionary expenditures.

For your information, I provide below, a list of $2 billion in annual Colorado state sales tax exemptions.  (Yes, Colorado currently gives away more than $2 billion a year in sales tax revenue, a substantial portion of the state's General Fund.)

Looking over the list of Colorado sales tax exemptions I find some that I agree have merit, but many that I deem to be the work of self-interested special interest and industry lobbyists.  Have a look at the list.  The Colorado sales tax exemptions represent taxpayer dollars lost on sales of everything from farm vehicles, dairy equipment, pesticides, sales of cattle, sheep, swine and goats, (a quarter billion subsidy right there,) not to mention bull semen sales and factory-built housing sales.

List of sales tax exemptions:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251847897827&ssbinary=true

Condemnation of Colorado Corporate Welfare from the right, the Colorado Independence Institute:

"Gaylord Entertainment is offered $81 million in Colorado taxpayer money for its proposed 1,500-room Denver International Airport hotel and other projects.  By what authority can the state government take tax money out of your pocket and give it away to a private corporation? The answer is that corporate welfare schemes, such as so-called 'public-private partnerships,' flagrantly violate the Colorado Constitution."

"Article V, section 34, of the Constitution states: 'No appropriation shall be made for charitable, industrial, educational or benevolent purposes to any person, corporation or community not under the absolute control of the state … .' Very easy to understand."

"Another provision of the Colorado Constitution requires that the government treat people equally.  The government cannot pass laws giving a particular corporation special privileges: 'The general assembly shall not pass local or special laws in any of the following enumerated cases, that is to say; … granting to any corporation, association or individual any special or exclusive privilege, immunity or franchise whatever.' Article V, section 25."

"Simply giving taxpayer money to a corporation is also illegal: 'Neither the state, nor any county, city, town, township, or school district shall make any donation or grant to, or in aid of … any corporation or company … .' Article XI, section 2."

http://tax.i2i.org/tag/corporate-welfare/

Colorado's $700 Million Gift to Local Government Lobbyists for Pension Obligations that Are Not the State's Contractual Obligation.

Let us not forget that the Colorado Legislature has also given away $700 million for purposes other than corporate welfare.  Recently (at the 2013 legislative session) the Colorado Legislature found that $142 million in state revenue (now totaling approximately $700 million) was somehow available to meet local government pension obligations that (as I have amply demonstrated before) ARE NOT the contractual obligation of the State of Colorado.

How is it that Colorado state government (the government allegedly in "crisis") paid $142 million for public pensions (Old Hire Fire and Police local government legacy pension obligations) that ARE NOT the state's contractual obligation, while ignoring public pension debts (Colorado PERA) that ARE INDEED the state's contractual obligations?

Colorado's History of Sports Team Corporate Welfare.

Let us not forget that, historically, Colorado legislators have been quite eager to facilitate delivery of hundreds of millions of taxpayer dollars to build a football stadium for a multi-millionaire.  With, of course, the encouragement of a good number of hired lobbyists, legislators put this question before statewide voters.  Non-metro state legislators were happy to have metro-area voters tax themselves to subsidize sports entertainment that is quite popular in Colorado's rural counties.  This, remember, is public policy adopted by the same Legislature that feels compelled to break its own contracts.  To wit, sufficient public resources to subsidize sports entertainment . . . but a currently claimed inability to meet the contractual obligations of Colorado governments.

From the Denver Post:

“The stadium came in at a cost of about $400 million — modest compared with today's apparent going rate of $1 billion .”

“The Metropolitan Football Stadium District, which includes all or part of the seven counties around Denver, was created to plan, acquire land and build the stadium.  It collected a sales tax of one-tenth of 1 percent from Jan. 1, 2001, until Jan. 1, 2012, to finance it.”

http://www.denverpost.com/news/ci_22252202/would-retractable-lid-boost-denvers-bid-host-super-bowl?IADID=Search-www.denverpost.com-www.denverpost.com

Colorado House Speaker Ferrandino and Senate President Carroll on Colorado's most recent relinquishment of Colorado taxpayer dollars (quoted in the Gazette Telegraph):

"Senate President Morgan Carroll, D-Aurora, said she is keeping an eye on the legislation."

"'Any time we are giving out subsidies, incentives, the line between corporate welfare and incentives is a really tricky one,' Carroll said."

House Speaker Ferrandino:  “That seems like a lot of good lobbying.  Well spent money by the applicant and the developers, but bad spent money by the state of Colorado, probably.”

"City for Champions is a proposal to build an Olympic museum in southwest downtown Colorado Springs with an adjacent sports arena . . ."

"The proposal received the promise in December of an estimated $120.5 million over 30 years from the Economic Development Commission."

"A third-party analysis of the projects suggested City for Champions should only receive about $53 million in sales tax revenue incentives over 30 years."

"Ginsburg said at the time that the state was not in a position to be giving away that much revenue when funding levels hadn't been restored to education since the recent budget cuts."

http://gazette.com/bill-targets-state-tourist-act/article/1518957

Comments on Colorado's "Regional Tourism Act" corporate welfare, from coloradonewsagancy.com:

"Both parties were involved as well in getting the Regional Tourism Act passed in 2009.  It authorizes the Economic Development Commission to grant state tax incentives to projects that might attract more tourists to the state."

"He described it as 'corporate welfare,' similar to the enterprise zones that were established many years ago in 'economically challenged' areas.  Now they cover most of the state."

http://www.coloradonewsagency.com/2013/01/17/industry-acceleration-its-still-just-corporate-welfare/

Boulder Weekly article on the public pension/corporate welfare nexus:

"When people in the general public hear about a PERA pension, many think that it’s an add-on to Social Security.  But it is a substitute.  PERA members do not earn Social Security.  According to the Census Bureau, pension expenditures account for just 3 percent of all state and local government spending.  If you want to find wasteful spending, look at corporate welfare."

"According to The New York Times, 'states, counties and cities are giving up more than $80 billion each year to companies in the form of subsidies and tax expenditures.'  How about some austerity in that department?"

http://www.boulderweekly.com/article-11853-limit-corporate-welfare.html

Time Magazine on corporate welfare:

"Sometimes called 'corporate welfare,' this pattern of legalized rip-offs has been widespread — yet little of the story seems to emerge in major news outlets."

"Meanwhile, 'a different kind of feeding frenzy is taking place' at the state and local level — where 'politicians stumble over one another in the rush to arrange special deals for select corporations.'”
"In theory, the giveaways create jobs.  In practice, the theory is hogwash: 'Time’s investigation has established that almost without exception, local and state politicians have doled out tens of billions of taxpayer dollars to businesses that are in fact eliminating rather than creating jobs.'”

"Government should not be using tax dollars to help the rich get richer."

http://www.progress.org/tpr/corporate-welfare-now-a-major-issue/

David Sirota on the public pension/corporate welfare nexus:

"This same fantastical story, portraying public employees as the primary cause of budget crises, is being told across the country.  Yet, in many cases, we’re only being told half the tale.  We aren’t told that the pension shortfalls in many locales were created because local governments did not make their required pension contributions over many years.  And perhaps even more shocking, we aren’t told that while states and cities pretend they have no money to deal with public sector pensions, many are paying giant taxpayer subsidies to corporations — subsidies that are often far larger than the pension shortfalls."

"The wealthy corporate interests who bankroll politicians have for years convinced those politicians to not make required pension payments and to instead spend the cash on taxpayer subsidies — the kind that happen to go to those politicians’ donors."  "Now that the bill for such irresponsibility is coming due, those bankrolled politicians are trying to protect the subsidies their donors so cherish by trying to balance budgets primarily through punitive measures against taxpayers and public employees."

http://www.timesdispatch.com/opinion/their-opinion/columnists-blogs/david-sirota/sirota-chicago-style-corruption-reflected-across-the-country/article_d352b35c-1311-57ea-9b92-c83f00751d91.html

Colorado's Enterprise Zone Corporate Welfare.

"A Denver Post review of the state's Enterprise Zone Program found that in 2010, companies filed documents stating they were owed more than $75 million in tax credits, chiefly for making a capital investment or hiring or training workers inside an enterprise zone.  Those companies created a net 564 jobs, a cost of nearly $133,000 per job — a cost that has risen as the economy soured."
Denver Councilwoman Jeanne Faatz, a Republican who co-sponsored the legislation that created the program when she was a state legislator, agreed:

"'I don't believe, at this point, that it's nearly as effective a tool as it was supposed to be,' Faatz said. 'It's just become corporate welfare.'"

Williams Field Services, Encana Oil and Gas Inc., and Pioneer Natural Resources — said the state owed them $65.4 million in tax credits."

"As a result, in two years, an estimated deferred tax credit bill of more than $45 million will hit a state still struggling with sluggish revenues, according to estimates by the Colorado Legislative Council.  That amount, coupled with the normal, annual enterprise zone tax credit bill, could push the program's cost past $100 million for that year."

"That provision allowed accounting firm Deloitte & Touche to get $70,041 in tax credits for spending more than $2 million remodeling its downtown Denver office in 2007."

http://www.denverpost.com/news/ci_19274608

How is it that this situation does not even register with members of the Colorado Legislature? The Colorado Legislature is trying to escape contractual obligations of the State of Colorado, while squandering billions of taxpayer dollars on corporate welfare.

For decades, lobbyists at the Colorado Legislature have worked to put corporate welfare into Colorado statutes.  This is a primary goal for scores of lobbyists in Colorado.  They continue to hound Colorado legislators for more tax breaks.  For evidence of this fact look no further than the current session of the Colorado General Assembly.  (Perhaps the topic of a future article?)

Appendix – Excerpts from a University of Denver Analysis of Colorado Corporate Tax Breaks.

When one examines the extent of corporate tax breaks that benefit Colorado corporations it is not at all surprising that corporate lobbyists joined the effort to break Colorado PERA pension contracts in 2010.

From Colorado Tax Expenditures: A Compendium, University of Denver:

https://www.du.edu/economicfuture/documents/TaxExpenditureCompendium_000.pdf

"Since 1987, the state has reduced the income tax rate twice and has adopted many new deductions and tax credits. The current income tax rate is 4.63 percent."

"The (Colorado) Department of Revenue does not track deductions on the corporate income tax return, so we do not have the ability to report on these tax expenditures."

"As with the individual income tax, the tax expenditures for corporations take the form of specific deductions and tax credits allowed by Colorado law."

"2009 Conservation Easement Corporate Tax Credit – $8.4 million – number of beneficiaries (96.)

2009 Enterprise Zone Corporate Tax Credit – $19.7 million – number of beneficiaries (1,534.)"

(Note that many Colorado sales tax exemptions were enacted in years during which the Colorado Legislature failed to meet its Colorado PERA actuarial required contribution [ARC.])

"The value of Colorado’s sales tax exemptions increased 42.6 percent between FY 2001-02 and FY 2007-08. Meanwhile, revenue from the sales and use tax grew just 24.1 percent."

"Exemptions totaling an estimated $43.2 million were enacted during this timeframe . . ."

"Colorado imposes a sales tax on relatively few services.  The initial sales tax law included broad taxation of services, but these were eliminated from taxation in the early 1940s. This tax expenditure study does not consider the non-taxation of services as an exemption because they are not initially included in the tax base."

The Colorado Legislature has distinguished our state as the state with the least service taxation effort in the nation:

"The Federation of Tax Administrators (FTA) conducts periodic surveys of state policies on services taxation. (See http://www.taxadmin.org/fta/pub/services/btn/0708.html.) Colorado is listed as taxing only 14 services of the 168 included in the survey. Colorado’s number was the lowest of the states that impose a sales tax."

"The vendor’s discount is allowed to all businesses to compensate them for their costs of collecting the sales tax for the states."

"Colorado’s vendor discount percentage was the highest in the country in FY 2006."

"Several states do not allow retailers to retain any amount."  "Estimated amount of expenditure: $66.1 million."

"Gasoline and other motor fuels are already subject to the state excise tax on these fuels. This does not preclude the state from imposing a sales tax. For example, sales taxes are imposed on alcoholic beverages which have an excise tax. At least eight other states impose a sales tax on top of the motor fuel excise tax.  Estimated amount of expenditure: $179.2 million."

"Purchases of Machinery or Machine Tools Used in the Manufacturing."  "This exemption was passed as an economic development and business cost reduction measure."  "Estimated amount of expenditure: $77.4 million."

"Sales of Cattle, Sheep, Lambs, Poultry, Hogs, Goats, and Horse Breeding Stock."  "The agricultural industry is also a favored industry that receives many tax breaks."  "Estimated amount of expenditure: $61.5 million."

"Charges on Internet Access Service."  "The 2000 legislation permanently extended the exemption."  "Estimated amount of expenditure: $13.3 million."

"Sale of Food through Vending Machines."  "The General Assembly in 1999 exempted all food and beverage purchases from vending machines from the state sales tax."  "Normally, purchases of food intended for immediate consumption are taxable. Most vending purchases are for immediate consumption."  "The vending machine industry is the prime beneficiary of the exemption."  "Estimated amount of expenditure: $7.7 million."

"Sales of Newspapers, Preprinted Newspaper Supplements and Direct Advertising Materials."  "Estimated amount of expenditure: $7.3 million for newspapers, $1.6 million for preprinted newspaper supplements, $1.5 million for direct advertising materials."
"Sales of Farm Equipment."  "The exemption includes farm equipment sold for at least $1,000, as well as equipment with a value of at least $1,000 that is rented or leased."  "Estimated amount of expenditure: $4.9 million."

"Special Fuel for Farm Vehicles."  "The sale of special fuel (diesel fuel) for use in farm vehicles on a farm or ranch is exempt from the sales tax."  "Estimated amount of expenditure: $2.9 million."

"Sales of Agricultural Compounds."  "Agricultural compounds include insecticides, fungicides, growth compounds, and drugs and pharmaceuticals used in the care of livestock.  The exemption also applies to sales of semen used for ranching purposes."  "Estimated amount of expenditure: $2.8 million."

"Sales of Bags and Other Containers to Retailers and Food Vendors."  "Estimated amount of expenditure: $2.3 million."
"Sales of Pesticides."  "Estimated amount of expenditure: $1.7 million."

"Sales of Construction Materials to a Common Carrier by Rail and Sales of Railroad Capital Equipment."  "These are separate exemptions for the railroad industry."  "Estimated amount of expenditure: The Department of Revenue combined the amounts of these tax expenditures. The estimated amount of the combined expenditures is $1 million."

"Sales of Wireless Telecommunications Equipment."  "The General Assembly stated that the imposition of sales and use tax on the sales of wireless telecommunications equipment would impede the development of the industry."  "Estimated amount of expenditure: $0.9 million."

"Sales of Aircraft Component Parts."  "Estimated amount of expenditure: $0.7 million."

"Sales of Biotechnology Equipment."  "Estimated amount of expenditure: $0.6 million."

"Sales of Bingo and Raffle Equipment."  "Estimated amount of expenditure: $0.1 million."

"Sales of Straw for Livestock and Poultry Bedding."  "Estimated amount of expenditure: Less than $100,000."

"Sales of Dairy Equipment."  "This exemption applies to the sales of dairy equipment for use at farm dairies."  "Estimated amount of expenditure: Less than $100,000."  "Number of beneficiaries: There are approximately 130 dairy farms in Colorado."

"The Department of Revenue could not disclose the value of two exemptions because only a few taxpayers were involved.  The Department is prohibited from disclosing this information when  the taxpayers could potentially be identified. These exemptions include: sales of aircraft used in interstate commerce by commercial airlines and sales of low-emitting vehicles."

Colorado PERA’s Recent Use of Political Influence to Break Pension Contracts.

Fellow ColoradoPols readers, this morning, a post relating to the use of political influence by supporters of the 2010 Colorado PERA pension contract breach appeared on ColoradoPols.com.  The post suggests that proponents of the pension contract breach might attempt to politically influence the Colorado Supreme Court prior to the court's consideration of claims in the PERA pension lawsuit, Justus v. State.  In approximately six weeks, the Colorado Supreme Court will hear oral arguments relating to the 2010 Colorado PERA pension contract breach.

(For readers new to this topic, in 2010, the Colorado Legislature enacted a bill, SB10-001, that retroactively eliminated Colorado PERA pension COLA benefits for which current PERA retirees had exchanged decades of labor and pension contributions.  The idea that the Colorado Legislature would grant private sector insurance companies similar authority to ignore contracted COLA benefits on annuities they have sold is of course, absurd.)

Given that our very identity as Coloradans rests on the rule of law in our state, the integrity of our Colorado courts, and the sanctity of our Colorado Constitution, I respectfully request that ColoradoPols.com promote my response below.

Here is the April 20, 2014 post on ColoradPols.com:

"The SecurePera.com (proponents of the PERA pension contract breach bill, SB10-001) has sent out a mass email announcing a teleconference next month, and the retiree lawsuit is one of the topics.  I suspect they'll encourage SB10-001 supporters to make their presence felt during the oral argument phase of the lawsuit on June 4 (during oral arguments before the Colorado Supreme Court.)

The spectacle of seeing some misguided (or intimidated) retirees supporting the breach of their own pension contracts is surely a dream come true to such uber right-wing billionaires such as the Koch brothers, and John Arnold, infamous for his role in the massive Enron fraud.

It wouldn't surprise me if a certain retired school principal, who is also both a SecurePera supporter and PERA ambassador, tries to rally a contingent of SB10-001 supporters.  This goes along with my supposition that a handful of high-end retirees (such as school principals) with 30 plus years of service make up the bulk of the retired SB10-1 supporters.  A 2% annual increase on a $100K plus benefit works for them."

Here is my response to the April 20, 2014 ColoradoPols post:

First, we do not know with certainty that the supporters of the 2010 PERA contract breach will attempt, or have actually contemplated, any sort of political demonstration (or political presence) during Colorado Supreme Court oral arguments in the case Justus v. State on June 4, 2014.

However, the proponents of the Colorado PERA pension contract breach did indeed use political maneuvering, and the force of purchased lobbying influence, to achieve their desired outcome before the Colorado General Assembly in 2010.  What arrogance they had in 2009/2010 to assume that the property of others can be casually taken in Colorado, that one board of Colorado state government is somehow exempt from the strictures of the Colorado Constitution, that government debts can legally be shifted onto elderly pensioners.

Colorado PERA pension administrators, and Colorado PERA Board members CAN indeed buy lobbying muscle at the General Assembly with our PERA trust fund dollars.  But, Colorado PERA administrators and Board members CANNOT buy influence at the Colorado Supreme Court.

Perhaps the group of PERA contract breach advocates will try to "make their presence felt" in the Colorado Supreme Court Chambers, but such a step would be misguided.

Colorado PERA's Board and their hired lobbyists used politics to push the COLA-taking bill, SB10-001 through the legislative process in 2010.  Ultimately, 27 lobbyists reported positions in support of SB10-001 to the Colorado Secretary of State.

From Chalkbeat.org in 2009:

"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."

http://co.chalkbeat.org/2009/10/22/pera-woes-loom-large-for-education/

But, the Colorado PERA retiree COLA lawsuit, Justus v. State, does not address a political question.  It addresses a legal question.  Can Colorado public pension contracts be abrogated in order to minimize taxation in the state with the lowest per capita state taxation in the nation?  The Colorado Supreme Court is confronted by a legal question.  Can the court ignore our foundational document to achieve a desired political outcome?

The Colorado Court of Appeals has found that the Colorado Constitution is beyond the reach of purchased lobbying muscle at the Colorado Legislature.  I sincerely hope that all Colorado courts will continue to defend the Colorado Constitution and public pension contractual rights.

I believe that the Colorado Supreme Court must proceed with extreme caution to prevent all political considerations from infecting litigation of the case, Justus v. State.

I recognize that one current (and in my view, quite talented) member of the Colorado Supreme Court has previously represented Colorado PERA for the Colorado Attorney General's Office (I expect that she will not participate in this case.)

I recognize that another current Colorado Supreme Court justice did not participate in the court's earlier action in this case.

I recognize that a third (newly appointed) member of the Colorado Supreme Court has previously worked at a firm that has represented Colorado PERA for many years, and was a colleague (and a shareholder at the firm while PERA was a client) of the long-time party lawyer who represented Colorado PERA in the current lawsuit, Justus v. State.

http://coloradopols.com/diary/51026/congratulations-to-our-new-colorado-supreme-court-justice

Finally, I recognize that in 2009, the Colorado PERA Board of Trustees hired a former Colorado Supreme Court Justice to draft a legal memorandum that would support PERA pension contract breach.  For some reason, the Colorado PERA Board sought out this former Colorado Supreme Court Justice (who is not a specialist in public pension law) rather than seeking out an attorney who has spent a lifetime in a public pension legal practice.

Why did the PERA Board seek out this former Colorado Supreme Court Justice, whose practice does not specialize in public pension litigation?  Why seek out this former Colorado Supreme Court Justice in lieu of an attorney with decades of experience in public pension litigation, such as Cindy Birley, a proponent of the PROSPECTIVE pension reform bill, SB12-149 adopted by Colorado Legislature in 2012?

http://coloradopols.com/diary/39652/colorados-statutory-double-standard-on-public-pension-contracts

In 2009, the PERA Board hired this judicially connected (and accomplished) former Colorado Supreme Court Justice to create a legal rationale by which the Board and their union collaborators might seize assets that belong to PERA pensioners.  It is incomprehensible that this former Supreme Court Justice chose, at the end of an impressive legal career, to be part of a scheme to break public employee contracts.

See this article:

http://coloradopols.com/diary/39311/jean-dubofsky-one-of-a-dwindling-breed-of-unabashed-liberals

When the Colorado PERA Board hired former Colorado Supreme Court Justice Dubofsky to create a PERA contract breach rationale did they disclose to her the fact that PERA's own representatives identified the PERA COLA benefit as a contractual PERA liability at the inception of the "automatic" PERA COLA benefit?  That is, did PERA fully inform their hired attorney?  If so, why have PERA's current attorneys shifted from their original "actuarial necessity" legal defense strategy espoused after receipt of the Dubofsky COLA-taking product, to their current "DeWitt-based" legal strategy?  Why are they now ignoring the Dubofsky memorandum?  For that matter, why are they ignoring the legal writings of their own current Executive Director and former General Counsel Greg Smith on the contractual nature of PERA pension benefits?

March 24, 1993 (1:32 PM – 2:28 PM)

Rob Gray, Director of Government Relations, Colorado PERA 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.])

In 2012, the Colorado Legislature adopted PROSPECTIVE, legal pension reform for Colorado county governments (administrative arms of the state.)  The bill, SB12-149, allows Colorado county governments to alter THE RATE OF FUTURE ACCRUAL of pension benefits in order to shore up county pension trust funds.  The Colorado Legislature is perfectly capable of adopting similar legislation that will apply to Colorado PERA, shoring up the PERA Trust Fund without retrospectively impairing existing PERA pension contracts.

Why was such PROSPECTIVE pension reform legislation not adopted for the Colorado PERA pension system in 2010?  This PROSPECTIVE pension reform legislation was not adopted in 2010, because it was not the POLITICAL PREFERENCE of PERA pension administrators and board members, hired PERA lobbyists, union lobbyists, some conservatives who were happy with any PERA pension cut, as well as corporate lobbyists glad to jump on the PERA contract breach bandwagon.

For all of these reasons, I expect that the Colorado Supreme Court will closely adhere to established Colorado public pension jurisprudence in this case, Justus v. State.

What do Teacher Union Leaders Get in Return for Supporting Breach of PERA Pension Contracts? Unnecessarily Stingy K-12 Funding.

Rhode Island Court: "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."

Just as politics was in the driver's seat in 2009/2010 during the Colorado PERA pension contract breach (SB10-001), politics was in the driver's seat in Rhode Island during the 2011 Rhode Island pension contract breach attempt.

In Rhode Island, State Treasurer Gina Raimondo hoped to ride the pension contract breach she championed all the way to the Rhode Island Governor's mansion.

(Note that unlike Colorado's public sector unions, public sector unions in Rhode Island sued the state over their Legislature's attempted pension COLA-taking.)

Colorado public sector unions sold their soul in 2009/2010 by going along with an attempt to let Colorado state and local government employers off the hook for their contractual obligations to pay accrued PERA pension benefits.  Colorado teacher union officials let PERA-affiliated employers off the hook for their failure to pay annual PERA pension bills for a decade, for their failure to make PERA actuarially required contributions (ARC), identified by PERA's own actuaries.

Colorado public sector union leaders agreed with (or initiated?) the attempted PERA pension contract breach in SB10-001.  What thanks have union-represented Colorado teachers received for supporting breach of PERA pension contracts in 2010?  Here is their answer:  Minimal state legislative support for restoration of K-12 funding as the Colorado economy continues to improve, unnecessarily minimal buy down of the K-12 "negative-factor" by the Colorado Legislature.

Here's what union-represented teachers agreed to in 2010: teacher union leaders agreed to the attempt to shift state and local government financial obligations onto the backs of "fully-vested" PERA retirees, breaking written, statutory PERA contracts.  For many, since this backroom deal tarnished the spirit of the U.S. Labor Movement itself, and took money from the state's elderly to keep taxes low in our state, the deal was hard to swallow.

So, how have teachers been repaid?  In return, in 2014, the State Legislature is providing minimal support for K-12 education going forward, and with lots of strings attached to the proposed miserly funding effort.  Such a deal!!

What Colorado politician has the stones to stand up and publicly state the obvious?  TABOR is crushing our state.  TABOR does not sanction breach of state contracts!

A few days ago a Rhode Island court confirmed the contractual nature of public pension COLA benefits in Rhode Island.  Here is media coverage of the Rhode Island court decision, from Plansponsor.com:

"In its opinion, the court rejected the state’s argument that no contractual relationship existed between it and the plaintiffs at the time the pension reform was enacted.  The court noted that under Rhode Island law, retirees are provided benefits and cost-of-living adjustments (COLAs) which may not be altered retroactively."

"The court found that in exchange for the offer, the retirees had fully performed their duties as public-sector employees for the required number of years and had already retired before the reform was enacted.  'Plaintiffs’ pension benefits constitute part of their compensation for the services which they have already rendered to the State,' the opinion says."

http://www.plansponsor.com/RI_Retirees_Pension_Reform_Challenge_Moved_Forward.aspx

More press coverage:

"In her ruling, Taft-Carter found that there is 'an implied in-fact contract' between the state and the public employees challenging the pension overhaul."

http://ripr.org/post/taft-carter-rejects-state-motion-dismiss-pension-lawsuit

"In deciding Wednesday to reject the state’s 2012 motion to dismiss the case, Taft-Carter noted that the plaintiffs had served the public and contributed the required amount toward their pensions."

http://www.providencejournal.com/breaking-news/content/20140416-judge-denies-motion-to-dismiss-lawsuit-over-r.i.-pension-overhaul.ece

Link to the recent Rhode Island court's opinion on a motion to dismiss:

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

Excerpts from the Rhode Island court opinion:

"The General Assembly, in November 2011, enacted the RIRSA, which overhauled the public pension system.  Specifically, the legislation reduced the pension benefits, including the COLA, for retired employees."

"It also provides that no annual COLAs will be paid to retired teachers and state employees until the retirement system is eighty percent funded, which is not estimated to occur for about sixteen years."

(Note that the union plaintiffs in Rhode Island are also defending rights to "partially-vested" pension contracts until an 80 percent pension funding ratio is reached, unlike Colorado where "fully-vested" pension contracts were targeted in 2010 until a ridiculous and unnecessary 100 percent pension funding ratio is achieved.)

Court decision:

"This Court denied Defendants’ motion for summary judgment on September 13, 2011, holding that the plaintiffs had a unilateral implied-in-fact contractual right arising from their partial performance by working at least ten years."

"Plaintiffs urge the Court to follow its analysis in Pension I, wherein this Court found that vested employees possessed implied-in-fact contract rights to their pension benefits."

"It is well-settled, however, that these doctrines may not be used by government simply 'as a means to escape from contracts that it subsequently concluded were unwise.'”

"Specifically, 'a statute is itself treated as a contract when the language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State.'”

"Accordingly, this Court will consider whether the State made an offer to the Plaintiffs, whether the Plaintiffs accepted the offer, and whether the offer and acceptance were supported by consideration and a valid contract."

"There is no doubt, however, that in Rhode Island pensions are not gratuities of the State."

(As we have seen, the Colorado Constitution prohibits the payment of gratuities.  If a PERA pension COLA benefit is a gratuity, it is unconstitutional.)

"Indeed, the only difference between deferred compensation and contract theories is the time at which pension rights vest."

"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."

"Courts have long accepted the importance of pension benefits as a 'term and condition of public employment.'"

"Here, Plaintiffs accepted the State’s offer of pension benefits by beginning their employment with the State and continued their service for the required time."

"Through Plaintiffs’ faithful service, the State had already received the full benefits it expected from creating the ERSRI.  Plaintiffs’ pension benefits constitute part of their compensation for the services which they have already rendered to the State."

"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."

Visit saveperacola.com, defend the Colorado Constitution, defend public employee contracts.  Colorado is better than breach of contract.

Colorado’s 2010 Public Pension Legal Fiasco.

LEGAL SCHOLARS DECRY THE BREACH OF FULLY-VESTED PUBLIC PENSION CONTRACTS . . . CONSERVATIVE SCHOLAR SASHA VOLOKH ADDS HIS VOICE TO SCHOLARS DEFENDING ACCRUED PUBLIC PENSION BENEFITS.  (Does Colorado State Treasurer Walker Stapleton disagree with the conservative legal scholar Volokh?)

In 2009 (when the scheme to pay off Colorado state and local government debts by forcibly taking money from older Coloradans was hatched) there seems to have been an assumption on the part of the Colorado PERA Board of Trustees that PERA pensioners were (1) too weak politically to defend their contracts at the Legislature, (2) too unorganized to defend their rights in court, and (3) too unsophisticated to even research and comprehend the on-point Colorado court precedent supporting their PERA contractual pension rights.

Well, in 2009, the Colorado PERA Board was wrong.  Colorado public sector union officials complicit in the taking were wrong.  And, those who conveniently reversed their long-standing recognition of contractual rights to the PERA COLA benefit, i.e., Colorado PERA Executive Director Meredith Williams and then General Counsel Greg Smith, were wrong.

The weak, unorganized, unsophisticated Colorado PERA retirees challenged the breach of their contracts in 2010.  The case, Justus v. State, has arrived at the Colorado Supreme Court.

In recent years, Colorado PERA retirees involved in the public pension case, Justus v. State, have followed the work of Professor Amy Monahan of the University of Minnesota School of Law.  Professor Monahan is the preeminent legal scholar in the United States on public pension contractual rights.  "Amy Monahan is a professor and the Solly Robbins Distinguished Research Fellow at the University of Minnesota Law School."

Professor Monahan argues that previously accrued public pension benefits should be protected, but suggests that public pension plan sponsors should have the flexibility to alter the rate of FUTURE accrual of pension benefits:

March 17, 2010

Professor Amy Monahan in "Public Pension Plan Reform, the Legal Framework": "This Article has argued that pension benefits that have already been earned through services rendered to the state should be protected against impairment, but that it is hard to find legal justification for protecting the rate of future benefit accruals.”

http://www.ncsl.org/documents/fiscal/AMonahan_Handout.pdf

May, 2013

Professor Monahan addresses the Colorado PERA retiree lawsuit, Justus v. State in her paper, "Understanding the Legal Limits on Public Pension Reform":

"In Colorado, retirees challenged actions by the state legislature that reduced the COLA retirees were eligible to receive.  The plaintiffs included individuals who had retired under Colorado’s public employee retirement system at a time when there was a guaranteed 3.5 percent COLA in place."

Professor Monahan notes that the Denver District Court's initial decision in the case, Justus v. State, was surprising in light of Colorado public pension case precedent:

"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."

https://www.dropbox.com/s/cvzed3lmwt8t8v2/Understanding%20Pension%20Reform.pdf

Professor Monahan on the public pension legal doctrine, the "California Rule" (embraced by Colorado courts):

“The (Denver District) court’s ruling is surprising both because the court broke from the previously endorsed 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.”

Iowa Law Review article):

http://www.law.umn.edu/facultyprofiles/monahana.html

Recently, conservative legal scholar Alexander Volokh, added his voice to those questioning the "California Rule," but Volokh (like Professor Monahan) defends contractual rights to previously accrued public pension benefits.

Link to the Volokh paper:

http://www.fed-soc.org/doclib/20140103_VolokhPublicPensionsWP.pdf

Volokh's recent paper was published serially in the Washington Post:

"Courts in California, and in other states following California’s example, follow a particularly strict rule: they hold not only that public employees are entitled to the pension they’ve accrued by their work so far, but also that they’re entitled to keep earning a pension (as long they continue in their job) according to rules that are at least as generous. Thus, in states where the California rule applies (my comment, including Colorado,) one can’t constitutionally increase employee contribution rates or reduce (my comment "automatic" as opposed to "ad hoc") cost-of-living allowances."

http://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/02/03/how-california-courts-overprotect-public-employee-pensions/

Volokh in the Washington Post:

"I argue that protecting pensions accrued based on past work is reasonable; protecting the current rules into the future is far less so."

"California case law holds that 'a public employee’s pension constitutes an element of compensation and that the right to pension benefits vests upon the acceptance of employment even though the right to immediate payment of a full pension may not mature until certain conditions are satisfied.'”

"But with defined-benefit pensions, which are more common in the public sector, the financial risk is borne by the pension provider."
(My comment: Colorado PERA officials seem to have conveniently forgotten this fact.  They are attempting to unconstitutionally shift market risk to pensioners.)

Volokh:

" . . . governments, free from the ERISA regulations that govern private employers, find it easier to promise generous pensions and then underfund them, leaving future generations to pick up the bill.  Underfunded public employee pensions are thus a form of deficit spending."

(My comment: In 2010, uninformed members of the Colorado Legislature were not aware of the fact that Colorado PERA-affiliated governments had not paid the full PERA pension ARC [annual required contribution as calculated by PERA's actuaries] for a decade.  Given that the plan to take PERA pensioner assets was developed outside of the open legislative process, most members of the Legislature could not be expected to comprehend that the failure to pay the ARC constitutes deficit spending in our state.)

Volokh:

" . . . borrowing money from future taxpayers by underfunding current pensions is less transparent than traditional borrowing."
http://www.washingtonpost.com/news/volokh-conspiracy/wp/2014/02/05/are-public-employees-well-served-by-the-california-rule-for-pensions/

VOLOKH: WE CAN SAFELY CONCLUDE THAT A CONTRACT EXISTS AND PROTECTS ACCRUED PENSION BENEFITS.

Volokh:

"We can safely conclude that a contract not only exists but also covers at least the services performed so far.  The government owes the employee for whatever work has been completed. Overdue salaries are owed, as is accrued vacation time . . . and the pension one has accrued so far.  This much should clearly be within the bounds of federal deference."

Link to the Volokh paper:

http://www.fed-soc.org/doclib/20140103_VolokhPublicPensionsWP.pdf

Excerpts from the Volokh paper:

"Courts in California, and in other states following California’s example, follow a particularly strict rule: they hold not only that public employees are entitled to the pension they’ve accrued by their work so far, but also that they’re entitled to keep earning a pension (as long they continue in their job) according to rules that are at least as generous."

". . . in 1977, in U.S. Trust Co. v. New York v. New Jersey, the Supreme Court reaffirmed that some limits remain on state abrogation of contracts, and that in fact the limits are stricter when
the state seeks to abrogate its own (public) contracts since then its own 'self-interest is at stake.'”

"Ultimately it’s a question of federal law; otherwise, states—whether their legislatures or their courts—could define contract rights out of existence, making the Contract Clause 'a dead letter.'”

Volokh on the public pension case, United Firefighters of Los Angeles . . .

"In the court’s view, the (my comment, in United Firefighters, prospective only) COLA cap had no relation to the goals of a pension system (it reduced retirees’ economic security rather than enhancing it); any unsustainability in the pension system came from the government’s history of underfunding rather than from the recent history of high inflation rates; and the city’s desire to 'enhance [its] ability to predict and plan for long-range . . . budgeting and financing' could also be fulfilled by, for instance, levying 'a separate ad valorem property tax specifically to meet the pension system funding requirements.'  Thus, the city couldn’t show that its modifications were reasonable; nor could it show comparable new advantages, since the change to the pension system was merely disadvantageous on its face."

(My comment, if we allow a measure adopted by Colorado voters in 1992, TABOR, to justify the breach of contracts to which the State of Colorado is a party, we are granting Colorado voters the right to ignore both the Colorado and United States constitutions.)

Volokh:

"It makes good sense to defer to California’s doctrine that pension statutes form a contract—even without analyzing the language of the statute—because pensions are a form of deferred compensation."

"Thus, 'the circumstances' of the statutory enactment 'evince a legislative intent' to be bound."

Volohk argues that the "California Rule" is constitutional, but it is bad public policy.  (He believes that states should be allowed to change the rate at which pension benefits will be earned in the future):

"If the legality of the California rule isn’t the problem, what remains is pure policy."

. . . “'deferred compensation in the form of pension rights has the status of a contractual obligation from the moment one accepts public employment.'"

Colorado PERA members and retirees, please take note that the Colorado PERA Board of Trustees, through their lobbyists, are asking much more from the Colorado Supreme Court than simply eliminating Colorado's historical embrace of the "California Rule." 

Colorado PERA is asking that: (1) the California Rule be abandoned in Colorado public pension legal doctrine, (2) fully-vested contractual rights of current PERA retirees be discarded, and (3) certain specific accrued public pension benefits (COLAs) in our state be deemed gratuities, (of course, a finding that would itself conflict with the Colorado Constitution's prohibition against gratuities.)

In his paper, Volokh channels former Colorado Governor Bill Owens . . .

"The inability to adjust pensions for existing employees may also lead to a bias in favor of replacing existing employees with new ones or encouraging existing employees to leave . . ."

(My comment: Recall that this was Governor Bill Owens' plan 14 years ago when he initiated the PERA "service credit fire sale" to encourage the early retirement of older, "more expensive" PERA members and (as has been documented) shift labor costs from PERA-affiliated employers [Colorado state and local governments] to the Colorado PERA trust funds.)

Volokh:

"How much leeway to modify public pensions does a 'fiscal emergency' offer?  Not much.  As the Allen rule says, one can modify pension rights before retirement for the sake of flexibility in light of changed conditions, but the changes must be reasonable, which means both that they need to have a relation to pension theory and must compensate for disadvantages with comparable advantages.  Clearly, merely reciting the need to shore up pensions is insufficient, and arguments in favor of COLA caps that 'the integrity of the pension system is strengthened when it can be determined with certainty what the obligations of the system are' are likewise insufficient."

To some conservatives (specifically, former United States Senator Hank Brown) the breach of Colorado state contracts is (in Hank Brown's words) "Colorado Courage."  The legal analysis of the conservative Volokh truly sets former Colorado U.S. Senator Hank Brown's simple-minded arguments in bold relief.

Volokh:

"In United Firefighters, the Court of Appeal rejected the contention that the modifications were necessary to preserve the soundness of the system because it held that the fiscal crisis was caused by the government’s own conduct in inadequately funding the system: 'a public entity cannot justify the impairment of its contractual obligations on the basis of the existence of a fiscal crisis created by its own voluntary conduct.'"

"And even if the modifications are justified by sound pension theory, this doesn’t prevent the government from having to offer compensating advantages.  So the ability to modify pensions seems to be of little help in resolving a fiscal crisis."

"Another possibility would be a state constitutional amendment abolishing the California rule and establishing that pension statutes only entitle the employee to that portion of the pension accrued so far."

Volokh on the Colorado Court of Appeal's 2012 support for contractual rights to accrued PERA COLA benefits, reversing the Denver District Court:

"The Colorado lower-court case, Justus v. State, No. 2010-CV-1589 (Colo. Dist. Ct. June 29, 2011), has now been reversed, 2012 WL 4829545 (Colo. App. Oct. 11, 2012), and cert. has been
granted by the Colorado Supreme Court, 2013 WL 4008216 (Colo. Aug. 5, 2013)."

Link to the Volokh article:

http://www.fed-soc.org/publications/detail/overprotecting-public-employee-pensions-the-contract-clause-and-the-california-rule

Alexander Volokh's paper was written for the Federalist Society.  What is the Federalist Society?

"The Federalist Society for Law and Public Policy Studies, most frequently called simply the Federalist Society, is an organization of conservatives and libertarians seeking reform of the current American legal system."

"The Society asserts . . . that it is emphatically the province and duty of the judiciary to say what the law is, not what it should be."

"The Lawyers Division consists of over 30,000 legal professionals and others interested in current intellectual and practical developments in the law.  It has active chapters in sixty cities, including Washington, D.C., New York, Boston, Chicago, Los Angeles, Milwaukee, San Francisco, Denver, Atlanta, Houston, Pittsburgh, Seattle, and Indianapolis."

http://en.wikipedia.org/wiki/Federalist_Society

The Federalist Society has a Denver Chapter.  Our State Treasurer, Walker Stapleton, spoke to the Denver group of the Federalist Society in 2011:

http://www.fed-soc.org/events/detail/colorados-pera-unfunded-liabilities-require-a-fix

Who is Alexander Volokh?  "Alexander 'Sasha' Volokh is an Associate Professor at Emory Law School.  An economist by training, he has written numerous articles on law and economics, privatization, antitrust, prisons, constitutional law, regulation, and legal history."

http://www.fed-soc.org/doclib/20140103_VolokhPublicPensionsWP.pdf

Colorado PERA retirees, continue to demonstrate strength, unity, and sophistication in defending your contractual rights!

Montana Considers Ditching Term Limits.

From washingtonpost.com:

“'Term limits have created a much more divisive and uneducated legislature in Montana,' said state Sen. John Brendan (R), of Scobey, near the borders with Canada and North Dakota. 'Now under term limits, we have sophomores and sometimes freshmen heading committees, as they only have eight years of service.'”

"State Sen. Tom Facey, a Missoula Democrat, said it can take six to ten years to pass comprehensive legislation, and several sessions to learn enough about complex topics like education funding and taxes.  State Rep. Kris Hansen, a Havre Republican, said term limits mean the legislature is led by less experienced leaders."

“'Term limits need to change so that the institutional knowledge can be transferred from one generation to the next,' said Rep. David “Doc” Moore (R) of Missoula.  'Currently we are only hurting ourselves.'”

"The Montana legislature is one of the least experienced in the country.  At the start of the 2013 session, more than 70 percent of the state House had served two terms or less."

“'One might ask, where in private business, after having been in your job for nine months, are you qualified to be senior management?' Miller said."

“'The strongest branch of government is the executive and the lobbyists,' said state Sen. Mary Caferro (D), who said she had voted for term limits when they were on the ballot in the early 1990s."

(Gratuitous pet issue reference:  In my opinion, the fact that so many Colorado state legislators had so little knowledge of public pension administration and public pension legal doctrine in 2010 largely explains the ability of 27 statehouse lobbyists to push a Colorado PERA pension contract breach through the legislative process that year.  This epic blunder will cost the state millions of dollars spent on fruitless litigation and further run up the state's PERA pension debt, [that has already been run up by the Legislature's failure to pay its PERA pension bills for the last decade.]

Washington Post:

"Several states that instituted term limits in the early 1990s have already rolled back those laws. State supreme courts threw out term limits in Oregon, Washington and Wyoming, while legislators in Utah and Idaho voted to scrap limits about a decade into the experiment."

Link to complete Washington Post article:

http://www.washingtonpost.com/blogs/govbeat/wp/2013/10/25/montana-legislators-debate-rolling-back-term-limits/

Visit saveperacola.com.

Congratulations to Our New Colorado Supreme Court Justice.

Congratulations to newly-appointed Colorado Supreme Court Justice William Hood III.  As a critic of the Colorado General Assembly's 2010 breach of Colorado PERA pension COLA contractual obligations, I have more than a passing interest in the Colorado Supreme Court justices who will render a decision in the case (Justus v. State.)  In the past, Justice William Hood has been employed by a (now-defunct) law firm, Isaacson Rosenbaum, P.C. that has represented a defendant in the Colorado PERA retiree COLA lawsuit, Justus v. State.  In spite of the fact that Justice Hood has worked for Isaacson Rosenbaum P.C. (with an attorney, Mark Grueskin, who has represented the defendant in the case, Justus v. State) I have full confidence in Justice Hood's judicial impartiality and fairness.  Nevertheless, in litigation, it is always best that all current and former relationships be openly acknowledged.

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

"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

Justice William Hood's work at 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

"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/

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

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/

“ . . . 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/

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

Isaacson Rosenbaum's recent (2011) closure:

"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/

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."

"Hickenlooper said geography was a consideration but that his top priority was finding the best fit to represent all of Colorado."

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

From Justice Hood's Colorado Court Biography:

"Some of his legal writing on trial work and criminal procedure has been published by the Colorado Lawyer and the Virginia Law Review.  Judge Hood is also a certified instructor for the National Institute of Trial Advocacy and a past member of the Denver Bar Association’s Board of Trustees."

http://www.courts.state.co.us/Bio.cfm?Employee_ID=560

Justice William Hood also has experience with Colorado PERA litigation:

From "Tracey Lawless v. Standard Insurance Company and Colorado PERA":

"In sum, Standard’s Motion to Dismiss Plaintiff’s first and second claims is denied.  Summary judgment enters in favor of PERA and against Plaintiff on Plaintiff’s first, second, and third claims for relief."

"Statutory interpretation is a question of law.  Sperry v. Field, 205 P.3d 365, 367 (Colo. 2009). 'A reviewing court begins the analysis with the plain language of the statute.  If the statute is clear and unambiguous on its face, then the court need look no further.' Id. The statutory scheme should be considered as a whole, giving 'consistent, harmonious and sensible effect to all its parts.' People v. Luther, 58 P.3d 1013, 1015 (Colo. 2002)."

(My comment: The plain language of the Colorado PERA statutes identifies accrued, "automatic," Colorado PERA COLA benefits as a contractual obligation of Colorado PERA-affiliated employers.

According to the September 29, 2010 version of the Legislative Drafting Manual, the Colorado Legislature’s lawyers believe that “shall” means mandatory.  The lawyers have another word that they use if they want to indicate that an action is discretionary. That word is “MAY.”

Colorado Legislative Drafting Manual, Revised 9/29/2010:

Drafting Manual, page 5-15 – “In the statutes, ‘shall’ should be used to indicate a command.”
Drafting Manual, page 5-18 – “Use the word ‘shall’ in statutory directions or requirements.”
Drafting Manual, page 5-19 – “‘Shall’ indicates a command.”
Drafting Manual, page 5-19 – “Use ‘may’ to grant discretion.”

The provision in Colorado law providing the contracted Colorado PERA 3.5 percent COLA benefit (prior to its retroactive alteration by SB10-001) read:

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.”

In November of 2011, the Colorado General Assembly’s Legislative Drafting Manual was revised.  Drafting rules (on pages 5-16 through 5-20) relating to use of the word “shall” in Colorado law were changed.  According to the November 29, 2011 version of the Legislative Drafting Manual, “shall” now means “has a duty to.”  (Note that the date of revision on the Legislative Drafting Manual is found on the final page of the document.)

From the November 29, 2011 Legislative Drafting Manual:

“Shall” means that “a person ‘has a duty to.’"

“(a) Shall. Use ‘shall’ to impose a duty on a person.  ‘Will’, ‘must’, and ‘should’ should not be used as a substitute for ‘shall’.”

“(II) When using ‘shall’ to mandate an action in which the outcome is in the discretion of the actor, include alternative actions the actor may take:

Avoid: The commissioner shall approve an application within thirty days.

Write: The commissioner shall approve or deny an application within thirty days.

(c) May. Use ‘may’ to permit or grant discretion or authority with regard to a thing or person.”

In my mind, it doesn’t really matter whether Colorado PERA is “commanded” to provide the 3.5 percent contracted COLA benefit, or Colorado PERA “has a duty” provide the 3.5 percent contracted COLA benefit.  Under either set of legislative drafting definitions, Colorado PERA is required by law to pay Colorado PERA retirees their contracted, accrued 3.5 percent COLA benefit as deferred compensation.  Thus, Colorado PERA and the State of Colorado are currently in breach of contract.)

From Tracey Lawless v. Standard Insurance Company and Colorado PERA:

"If the statute is ambiguous, the court looks to the statute’s legislative history, the consequences of a given construction, and the overall goal of the statutory scheme to determine the proper interpretation of the statute.” Sperry 205 P.3d at 367.  Therefore, it is appropriate for me to look beyond the plain meaning of the words, including the statute’s legislative history, the consequences of a given construction, and the overall goal of the statutory scheme to determine the proper interpretation of the statute."

http://www.svs-law.com/_images/Order%20MSJs%20&%20MTD%20010412.pdf

Legislative history of the PERA COLA benefit:

March 24, 1993 (1:32 PM – 2:28 PM)

Rob Gray, Director of Government Relations, Colorado PERA 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.])

Justice Hood's Judicial Performance Review:

"As a result, prior to taking his seat on the bench, Judge Hood completed several courses in domestic relations matters and read extensively on the subject to advance his skills in this area. Judge Hood was highly rated by the attorneys in the areas of case management, overall application and knowledge of the law, communication and demeanor. The non-lawyers surveyed found him to be fair, compassionate, and an effective communicator."

http://www.coloradojudicialperformance.gov/retention.cfm?ret=719

Justice William Hood is knowledgeable on the subject of spousal maintenance:

"- Spousal Maintenance 2013 – Gary Polidori, Denise Mills , and Hon. William Hood III."

http://cle.cobar.org/HomeStudies/productinfo/productcd/FL080913D.aspx#.Umvwbr7na4M

Justice Hood helped write Colorado's new divorce law:

"Judges, including William Hood of the 2nd Judicial District and Angela Arkin of the 18th Judicial District, helped craft the law, so that it would work for families and courts in the way that those who drafted the law intended."

http://www.denverpost.com/breakingnews/ci_24340928/new-law-changes-alimony-landscape-divorcing-colorado-couples

"New law changes alimony landscape for divorcing Colorado couples."

"Divorcing couples will face dramatic changes — and significant uncertainty — related to alimony after a new state law goes into effect on Jan. 1."

"Judges, including William Hood of the 2nd Judicial District and Angela Arkin of the 18th Judicial District, helped craft the law, so that it would work for families and courts in the way that those who drafted the law intended."

http://www.canoncitydailyrecord.com/ci_24346211/new-law-changes-alimony-landscape-divorcing-colorado-couples

From the recent Act, House Bill 13-1058:

"CONCERNING GUIDELINES FOR THE DETERMINATION OF SPOUSAL MAINTENANCE."

"(c) (I) 'GROSS INCOME' MEANS INCOME FROM ANY SOURCE AND

INCLUDES, BUT IS NOT LIMITED TO:

(H) PENSION PAYMENTS AND RETIREMENT BENEFITS ACTUALLY RECEIVED THAT HAVE NOT PREVIOUSLY BEEN DIVIDED AS PROPERTY IN THIS ACTION, INCLUDING BUT NOT LIMITED TO THOSE PAID PURSUANT TO ARTICLES 51, 54, 54.5, AND 54.6 OF TITLE 24, C.R.S., AND ARTICLE 30 OF TITLE 31, C.R.S."

http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont2/DF14C3B93C0EBF9387257A8E0073C4E0/$FILE/1058_enr.pdf

"Like the child support statute, the list defining income is lengthy, and can include most sources, such as income from employment, self employment, retirement or pension pay . . ."

http://www.denverdivorceattorneyblog.com/2013/03/changes-coming-related-to-colo-1.html

"Accrued or vested retirement benefits are community property. This means they need to be divided in a divorce."

http://www.legalzoom.com/divorce-guide/retirement-benefits-divorce.html

"You can value this (defined benefit pension) plan in one of two ways.  First, an actuary or accountant can mathematically compute the present-day value of the future income stream from the plan.  Second, rather than using a present-day cash value, you can divide the future income stream by a Domestic Relations Order.  The present-day cash value of the retirement benefit may be a substantial amount, especially for an employee who has participated in the plan for a long period of time.  A divorcing spouse may benefit from using this valuation method as a tactic to encourage the other spouse to trade an interest in the pension for a different asset."

"Some states and some judges will not value a defined benefit plan by the present-day cash value method.  In these instances, the court may choose to divide the pension account by a Domestic Relations Order rather than award the pension to the participating spouse."

http://smartdivorce.com/articles/retirement.shtml

If the 3.5 percent Colorado PERA COLA is not a contractual obligation of Colorado PERA-affiliated employers, and can be legally "clawed back," must all past Colorado divorces that have involved a division of PERA annuities be revisited?

From saveperacola.com:

"Finally, it appears that Judge Hyatt has previously ruled that the statutory PERA COLA provisions are a contractual obligation of PERA plan sponsors."  "A comment from 'Alan B' was posted in the on-line version of the Denver Post regarding his divorce case.  If Alan’s post is authentic and accurate it makes one wonder whether or not Judge Hyatt believes the COLA (aka, annual benefit increase) is contractually protected.  Here’s what Alan wrote: 'What truly confounds me in this case is that Judge Hyatt ruled the opposite in my divorce case. Which only shows what I have read before that it takes the courts 5 to 10 years to figure something out. He ruled that my wife was entitled to her share of PERA discounted at the legal rate assuming that PERA would pay my pension compounded at 3.5 percent for the rest of my life. Her lawyers argued that her social security could not be guaranteed yet the PERA could be. Judge Hyatt ruled for her and in this case he ruled the opposite of what he had ruled in the current case. Is the 3.5 percent annual adjustment guaranteed or not, Hyatt has spoken on the record, yes and no.'”

How can the 3.5 percent PERA COLA obligation be recognized as a contractual obligation in Colorado divorce cases by Judge Hyatt, if the 3.5 percent PERA COLA obligation is not itself a contractual obligation?

Coincidently, Mark Grueskin's daughter (Abigail Grueskin) has also worked for Colorado PERA.  She is young, talented and just beginning her professional life.

"Brainstormed, edited, and assisted in the editorial process of Colorado PERA’s newly created sub-branding effort, 'The Dime Colorado'."

. . . as well as for Isaacson Rosenbaum, "Records Assistant, Isaacson Rosenbaum P.C., Facilitated the implementation of the firm's record retention and storage policy.  Interacted with various lawyers and staff members to acquire accurate data"

http://www.linkedin.com/pub/abigail-grueskin/50/723/482

More relationships:

"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

In the rarefied environment of the Colorado legislative arena many of the key players are acquainted.

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 the contractual obligation of the State of Colorado.  Many of these past legislative appropriations, to cover Colorado local government debts, were made during years in which the Colorado General Assembly failed to pay its full Colorado PERA pension bill (ARC.)  An appropriation of $142 million in state revenue was made for this purpose (paying local government legacy pension debts) at the 2013 legislative session.

From KDVR:

“House Republican leaders are floating a proposal to repay a longstanding debt (My comment, this is not a state 'debt,' sloppy reporting) to the state’s Fire and Police Pension Association in full as a way to get some GOP lawmakers to vote in favor of the $20 billion state budget for next year, which will be up for debate in the House on Thursday.”  “‘It’s (House Minority Leader) Waller’s effort to buy some Republican votes,’ one GOP lawmaker told FOX31 Denver Tuesday." "Waller, who is almost certain to run for Attorney General (next) year, would like to be able to demonstrate that he leads a group of lawmakers who are pragmatic and responsible; and helping forge a bipartisan budget compromise would help him make that case.”

http://kdvr.com/2013/04/02/republicans-considering-pension-deal-hoping-for-bipartisan-budget-vote/

FPPA CHIEF EXECUTIVE OFFICER: THESE LOCAL GOVERNMENT PENSIONS ARE NOT A CONTRACTUAL OBLIGATION OF THE STATE OF COLORADO.

September 19, 2012, FPPA testimony (Dan Slack, CEO, FPPA) regarding the obligation of the State of Colorado to pay for local government "Old Hire Police Officers Pension Plans" to the Colorado General Assembly's Police Officers and Firefighters Pension Reform Commission (29 minutes into the hearing):

"So the State has made certain commitments, but has been very careful not to make binding obligations upon itself as the state to provide some assistance with funding for these plans."

Link:

http://www.leg.state.co.us/clics/clics2013A/cslFrontPages.nsf/Audio?OpenPage

Colorado Municipal League:

"Mark Grueskin is a partner with the Denver law firm of Heizer Paul Grueskin LLP."

"Formerly a political campaign manager, Mark has worked as a lawyer on election related issues for more than 25 years."

"Mark served as Deputy Legislative Director for the Governor of Colorado and as the Governor’s Legal Counsel before re-entering private practice."

http://www.cml.org/uploadedFiles/CML_Site_Map/_Global/training/atty_bios.pdf

Colorado PERA active and retired members.  Continue to support public pension contractual rights and the rule of law in Colorado.  Contribute at saveperacola.com.  "Friend" Save Pera Cola on Facebook!

Illinois Senate President: The Public Pension “Crisis” Has Been Manufactured to Lower Taxes.

To the extent that state legislatures (such as the Colorado General Assembly) can break state contracts, escape their debts, ignore state constitutions, and push the debts of all taxpayers onto a small group of pensioners . . . well, taxes can be further reduced, and votes will be won.  Politics is a ruthless, dirty business.  Politicians are not beyond using the force of government to illegally seize property to curry political favor.  Only the courts can prevent such immoral, extralegal behavior.

As we have seen, the Colorado General Assembly has skipped out on its Colorado PERA public pension bills for a decade, and now seeks to escape its accumulated pension debts through breach of Colorado PERA pension COLA contractual obligations (SB10-001.)  For several years now, Illinois' politicians have also toyed with the idea of taking contracted, accrued, earned, "automatic," public pension COLA benefits in order to escape their debts.  After all, the State of Illinois is the poster child of public pension mismanagement and underfunding among the states.  Illinois Senate President John Cullerton has been among those pondering a potential pension contract breach, a contract breach advocated by corporate interests in his home state.  Yesterday, (October 20, 2013) Senator Cullerton finally admitted what public pensioners in the United States already know.  This modern public pension "crisis" in the United States has been manufactured, and promoted by corporate interests seeking to lower their tax burdens.  In Colorado, lobbyists for the business organization, Colorado Concern, supported the bill taking contracted PERA COLA benefits in 2010, SB10-001.

In the 1950s, public pensions in the U.S. typically had funded ratios in the 50-60 percent range.  Several U.S. public pension systems currently have comparable levels of funding.  Yet, in the 1950s, no claims of a financial "crisis" among U.S. public pension systems were made by politicians overseeing these pension systems.  Why is this?  Answer: In the 1950s, a well-funded, self-interested, corporate noise machine promoting such a public pension "crisis" did not exist.

Chicago Tribune:

"Illinois Senate President John Cullerton said Sunday that the state's massive public employee pension debt is not a 'crisis,' but instead an issue being pushed by business-backed groups seeking lower income taxes at the expense of retiree benefits."

"'People really misunderstand the nature of this whole problem.  Quite frankly, I don't think you can use the word 'crisis' to describe it at the state level,' Cullerton said in an interview on WGN-AM radio."

"'It's something we have to deal with, but it's not something that we're on the verge of bankruptcy on,' Cullerton said."

(My comment: As Senator Cullerton knows, state governments cannot declare bankruptcy under federal law.)

Chicago Tribune:

"A bipartisan House-Senate panel has been meeting since June in an attempt to come up with a plan to alter retirement benefits without running afoul of a state constitutional prohibition against diminishing or impairing pensions."

"Still, Cullerton said that under a 1996 law aimed at gradually boosting the amount of money put into the state's pension funds to eventually get them funded at 90 percent of their liability, payments to the retirement systems are already near their highest level and require only small annual future increases to stay on track."

"As a percentage of state general revenues, pension payments would continue to be about one-fifth of the state's general revenues through 2044, his office said."

(My comment: Colorado's public pension obligations are a fraction of the pension obligations of the State of Illinois.  These obligations represent a few percentage points of revenue that will be received by Colorado governments over the next five decades, an insignificant portion of future Colorado state GDP.  Nevertheless, in 2010, many Colorado politicians were persuaded by lobbyists to attempt the PERA COLA contract breach, taking one-third or more of a pensioners contracted benefit.)

Chicago Tribune:

"But the Senate president also noted that the state's personal income tax rate is scheduled to fall from 5 percent to 3.75 percent, and the corporate rate is supposed to drop to 5.25 percent from 7 percent in 2015.  The loss of revenue is estimated at about $5.4 billion."

"'But the pension reform then is about tax reduction — not about the solvency of the pension fund or about diverting money to spend more money for education,' he added."

(My comment: Colorado politicians, former Governor Bill Owens in particular, have made a habit of cutting state revenues that would otherwise be available to meet Colorado state contractual obligations.  Governor Bill Owens also advocated and signed legislation that shifted labor costs from Colorado governments to the PERA pension system.  Having cut available revenues, skipped PERA pension payments, mismanaged the PERA pension system, effectively borrowed from the PERA pension trust funds, and run up the Colorado PERA debt, Colorado politicians now pursue their "solution," namely, abrogation of state contracts.)

Chicago Tribune:

"Cullerton said the conference committee's pension framework represents savings equivalent to lowering the state income tax by 0.25 percent."

"'That's really what it's about.  Now, I wouldn't call that a crisis.  I think people should put that in perspective,' he said.  'Keep in mind, it's not going bankrupt. The money that we save by lowering those benefits is going to be used to lower the tax rates.'"

"Cullerton contended top business organizations were pushing the pension changes for the benefit of lower taxes and that the public was generally supportive because many people have been moved to 401(k)-style defined-contribution plans from the defined-benefit type of plans that state retirees receive."

http://www.chicagotribune.com/news/politics/clout/chi-cullerton-pension-debt-not-a-crisis-but-about-lowering-taxes-20131020,0,4245590.story

WSILTV.com:

"The Chicago Democrat told WGN Radio that the pension shortfall is not an imminent crisis, but that finding a solution can help keep Illinois' income taxes down."

"Cullerton made the remarks as lawmakers head back to Springfield to begin their fall veto session Tuesday.  They face considerable pressure to deal with the pension problem, considered the nation's worst."

http://www.wsiltv.com/news/local/Cullerton-Illinois-Pension-Problem-Not-Crisis-228638501.html

A few interesting comments made on yesterday's Chicago Tribune article:

"If there is any crisis (in Illinois) then it was caused by lowering taxes, and by giving tax incentives to corporations, in the first place.  Let's not lose sight of the fundamental issue: the state and localities failed to pay MANDATED pension contributions ('borrowing') and now refuse to repay the money they 'borrowed'.  This is wage theft, pure and simple.  If the state refused to pay out tax refunds – claiming it was borrowing them – and then years later said 'sorry, we won't repay you the money we borrowed' it would be called a default, and the interests pushing to steal pensions now would be outraged."

"This is a zero sum game, that the 1% don't want to lose, Simple as that."

Illinois' Corporate Interests Lobbied for a Downgrade of Illinois State Debt to Support Their Manufactured Pension "Crisis."

"Not only was (Ty) Fahner (of the Civic Committee of the Commercial Club of Chicago) open about how aggressive the lobbying by the CEOs for the downgrade had been, and didn’t disagree with the questioner who called it irresponsible (as in 'we know we are doing harm to promote what is good for us'), he said they’d had to back off because they didn’t want their handiwork to be too visible, and was exhorting people in the room to take up the campaign for him."

"I asked a colleague who had worked for Moody’s in the 1990s why outside parties were allowed to influence ratings."

"When I first read about the downgrade, my reaction had been that Rahm must have pushed for it.  My colleague had a similar reading."

"Also, I’m pretty sure I read in last couple of days that Rahm himself lobbied Moody’s to downgrade his state."  ". . . I’m sure his hedge fund buddies taught him all about it."

http://www.nakedcapitalism.com/2013/07/chicago-ceo-club-with-rahm-and-pritzkers-on-board-pushed-for-chicago-bond-downgrade-whacking-local-investors-and-pension-holders.html

An Illinois pension conference committee has been appointed to consider "reform" of Illinois' pensions.  The conference committee is chaired by Senator Kwame Raoul, a very engaging politician who has been, unfortunately, sucked into the Illinois pension conspiracy.

Instead of enactment of PROSPECTIVE, LEGAL public pension reform measures, Senator Raoul recently expressed support for shifting the debts of all Illinois taxpayers onto the backs of a relatively small group of the state's elderly.  Illinois' plutocrats are smiling.

"Sen. Kwame Raoul, Chicago:

Raoul, the committee chairman, who considered a campaign for governor, says he remains optimistic a plan can be brought for a vote in the coming weeks.  Last spring he supported a Senate-backed plan that would have given retirees an option of the benefits received during retirement, saving $58 billion according to Senate estimates. He now is pushing the $138 billion savings plan.  It includes a provision that would reduce a current 3 percent annual compounded cost-of-living adjustment in retirement benefits to half the rate of inflation and a reduction in employee contributions by one percent — a concession to state employees for other sacrifices."

http://www.pjstar.com/free/x1155177197/Illinois-pension-panel-split-on-proposed-fix

Kwame Raoul on Illinois public pension retiree COLA benefits:

"It’s identical in that aspect (the plan’s primary component is changing a 3 percent compounded cost-of-living increase to a percent equal to half of the inflation rate)."

"One of the attractive aspects is the notion of inflation protection for the employees and retirees. And that’s attractive both from just a moral standpoint and from making an argument of constitutionality in terms of having something offered."

(My comment: Senator Raoul, breaking a contractual public pension COLA obligation is not at all "attractive from a moral standpoint," nor is it "constitutionally permissible."  Taking something from a person is not giving something to a person.  Illinois' public pensions have "automatic," contracted COLA benefits.  Public pension COLA benefits are deferred compensation, presently earned.  It looks like Kwame wants to see the State of Illinois "inflate away" its pension debt, by taking money from the elderly.

Note that some members of the Illinois Legislature are at least paying lip service to the constitutionality of reform proposals [proposing that something must be “offered” to Illinois pensioners to compensate for the theft of their contacted COLA benefits.]  In 2010, the Colorado state legislators who supported the breach of fully-vested Colorado PERA pension COLA contractual obligations made no pretense of "offering" anything to affected PERA pensioners.  The 2010 Colorado PERA pension COLA taking was brazen.)

http://www.chicagolawbulletin.com/Articles/2013/07/30/dispatch-7-30-2013.aspx

A pension reform bill in Illinois will not pass court muster if a "less drastic" reform is available to the Legislature.  Numerous "less drastic" public pension remedies are indeed available to the Illinois Legislature.  The Illinois Legislature could simply extend its recent income tax hike to pay down the state's pension debt.  This solution has the advantages of unquestionable morality and constitutionality.  It is perfectly legal and moral for governments in the United States to pay off their accumulated debts.

The State of Illinois could impose a financial transaction tax that would be collected by securities exchanges in the state.  Dozens of nations around the world impose such a "FTT."  A one dollar tax per transaction on Illinois exchanges (a fraction of the level of such assessments in place in other countries) would raise billions of dollars, have an inconsequential impact on the securities industry, and allow the State of Illinois to pay its accumulated debts.  The FTT would be paid by the industries that created a real financial crisis in 2008-09, driving down public pension funding ratios.  The Illinois Supreme Court should take note of the fact that the imposition of a small FTT to meet Illinois' contractual obligations is manifestly a "less drastic" option than the breach of Illinois state contracts.  IF THE STATE OF ILLINOIS BREAKS ITS PUBLIC PENSION CONTRACTS, THIS BREACH OF CONTRACT WILL HAVE BEEN A CHOICE RATHER THAN A "NECESSITY."  Illinois public employees did not cause the pension crisis, they have made uninterrupted pension contributions, unlike the State of Illinois.

The Illinois Legislature could consider reforming the state tax system, closing corporate tax loopholes that cost the state billions of dollars.  The Illinois Legislature could consider re-amortizing the state's pension debt over the life of the debt, 50-70 years.  (See Ralph Martire's public pension refinancing plan for Illinois.

http://www.sj-r.com/opinions/x1665859717/Ralph-Martire-Dont-pass-unconstitutional-pension-fix)

The Illinois Legislature might consider lowering the rate of FUTURE accrual of pension benefits in the state by reducing the public pension "multiplier" on a PROSPECTIVE basis (for pension benefits not yet accrued.)  See Professor Amy Monahan's paper: "Public Pension Reform: the Legal Landscape."  She is Professor of Law at the University of Minnesota School of Law, and the foremost expert in the U.S. on public pension contractual obligations.

But, let's be clear . . . taking "fully-vested," contracted, earned, and accrued public pension COLA benefits from current Illinois retirees is the MOST DRASTIC idea that has been put forth at the Illinois Legislature.

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 would Senator Cullerton consider going down this path in Illinois?  Kick the can?

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

Senator Cullerton's recent statements:

"The proposal now on the table, he (Senator Cullerton) said, is "less unconstitutional than SB1."

http://www.sj-r.com/breaking/x452546738/Cullerton-backs-pension-reform-plan-to-save-138-billion

"He (Senator Cullerton) called the committee's proposal 'less unconstitutional' than the Madigan-backed plan."

http://www.chicagobusiness.com/article/20131003/NEWS02/131009900/cullerton-supports-138-billion-pension-plan

A question for Senator Cullerton: Is one pregnant woman "less pregnant" than another pregnant woman?

Another means by which Illinois' public pensions might be bolstered is elimination of the Illinois property tax breaks that have been won in the past by Illinois House Speaker Madigan's law firm and Senator Cullerton's law firm for various business interests, and use of the resulting state revenues to meet the state's contractual public pension obligations:

"Chicago Ald. Ed Burke, chairman of the City Council finance committee; Illinois House Speaker Michael Madigan; and Illinois Senate President John Cullerton.  Their firms have collectively won more than $114 million in property tax refunds for Cook County businesses since 2003, according to the Sun-Times analysis."

http://www.bettergov.org/three_top_pols_steeped_in_ethical_conflicts/

Colorado PERA active and retired members.  The campaign to break public pension contracts is nationwide and well-funded.  It is imperative that, in Colorado, we continue to do our small part to defend the contracts of vulnerable, politically weak public pensioners.  It is critical that we stand up for rights guaranteed under the U.S. Constitution.  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Virginia Legislature Vows to Begin Paying its Public Pension Bills. Colorado Legislature Prefers Breach of Pension Contracts.

The Colorado Legislature has not paid its full public pension bill for a decade.  By failing to pay its pension bills, the Colorado Legislature has effectively borrowed from the trust funds of the Colorado PERA pension system to finance state and local government operations.

In 2010, rather than paying back the money "borrowed" from the Colorado PERA pension system, rather than meeting contractual obligations and paying accrued debts, a majority of Colorado state legislators decided to attempt to break the state's pension contracts.  Few Colorado residents know about this ongoing contract breach by the State of Colorado, since most of Colorado's media tacitly support the Colorado attempt to further cut taxes in our state through breach of contract.

Like the Colorado Legislature, the Virginia Legislature has also failed, historically, to pay its public pension bills (called the pension ARC), but rather than enacting legislation to attempt a pension contract breach, Virginia state legislators now propose to actually pay their debts.  What a concept!

From the Times Dispatch:

"Currently, the state is paying about 70 percent of the pension contributions required by the VRS, but Gov. Bob McDonnell and the General Assembly agreed last year to require the state to gradually increase its contributions to 100 percent of the requirement in six years."

As we have seen, the Colorado General Assembly has not paid its full Colorado PERA public pension bill (ARC) for a decade.

2012 PERA CAFR, page 35 – "ARC Deficiency."

"In 2012, the actual (PERA) contributions, as set in statute, were $143.4 million less than the ARC as calculated by the actuaries."

"During the past 10 years, this shortfall in funding . . . has been $3.4 billion."

https://www.copera.org/pdf/5/5-20-12.pdf

It is exceedingly ironic that the amount of money by which the Colorado Legislature underfunded its contractual PERA pension system obligations (in just 2012) is almost exactly the amount of money that the Colorado Legislature appropriated in 2013 to pay for public pensions that ARE NOT the contractual obligation of the State of Colorado.

It is simply incredible, but the Colorado Legislature, while failing to keep up with its own contractual pension obligations has transferred a total of $700 million of state funds to pay for local government pensions (Old Hire Fire and Police legacy pension debt) that is not the legal responsibility of the State of Colorado.  That's sort of like skipping your own mortgage payment to pay your neighbor's mortgage.  Your neighbor is happy, but your own mortgage company?  Not so much.

When a group of lobbyists is able to persuade elected officials to skip paying their own contractual obligations, in order to meet the contractual obligations of other organizations, rest assured that either these lobbyists are very talented, or the elected officials involved have so little knowledge of their pension obligations that they are easily manipulated.  In 2010, 27 Colorado statehouse lobbyists were registered as supporting the bill that seized Colorado PERA retiree assets, SB10-001.  Colorado legislators have relatively little knowledge of public pension administration and contractual obligations due to the fact that Colorado PERA pension administrators, lobbyists, and many Colorado public sector union officials find financial benefit in this ignorance.  These self-interested parties cut a pension COLA contract breach deal with the Leadership of the Colorado Legislature in 2009, thus an interim study committee (that would have educated Colorado legislators in the area of public pension contractual obligations) was never appointed by Legislative Leadership.

From the Richmond (Virginia) Times-Dispatch:

"'We were well aware it was going to be a significant number when we agreed to the reforms,' said Del. S. Chris Jones, R-Suffolk, chairman of the House Appropriations subcommittee on compensation and retirement. 'We’re not surprised at all.'”

"Sen. John Watkins, R-Powhatan, was the main sponsor of the reforms, including the escalating requirement on state pension funding."

"'That was the deal we made,' Watkins said Wednesday.  'Nobody is going to be happy with it, but that was the deal.'”

"The state has underfunded VRS so much that they had to pass a law so they could partially fund it,' said Henrico County Manager John A. Vithoulkas, who expects a significant increase in the county’s share of teacher pensions."

"The state still is not paying its full share of required pension contributions, which then increase unfunded liabilities."

“'Every time the full contribution is not paid, that adds a little bit to the unfunded liability,' Fernandez (Jose I. Fernandez, principal actuary for the VRS and its consulting firm, Cavanaugh Macdonald) said."

(From a publicsectorinc.ord article:

"If people are willing to look the other way at corruption in investments, they’re willing to look the other way at deliberate [public pension] underfunding, which I consider corruption as well."

"So the state is only putting in 50% of what they’re supposed to, and negative cash flows have actually hurt and dampened the investment return.  When you continue to underfund the ARC, it messes up all the usual [pension] mathematics."

"I’m more of a proponent for government in general, and I think that holding them to the ERISA standards [federal standards for private sector pensions] would get rid of a big portion of the corruption that’s out there.  A corporate pension plan could not pay half the payments for ten years like the states like Kentucky and Illinois have done.  Those guys would be in jail.  I think that public pension plans should be held to the same standard as corporate defined benefit plans. There may need to be some type of federal bailout.  If there is, we want some accountability."

Link:

http://www.publicsectorinc.org/podcasts/070613tobe.php#.UgQ3zr7nbX5)

Richmond Times-Dispatch:

"The estimate, first given to lawmakers in July by VRS Director Robert P. Schultze, has been proved accurate by an actuarial study that recommends an increase of about 3.5 percent of pay for state employee pensions and nearly 3 percent for teacher retirement just to cover 80 percent of the system’s long-term liabilities."

"The plans remain underfunded, based on the assets available to pay long-term unfunded liabilities."

"The state employee plan, with about $7.4 billion in unfunded liabilities, has a funded status of 65.1 percent.  The teacher plan, with $15 billion in unfunded liabilities, has a funded status of 62.1 percent."

"Ideally, the plans should be at least 80 percent funded, but the retirement system is still recovering from the stock market crash and recession, which slashed the value of its investments nearly 22 percent in 2009."

(My comment: Of course, equity markets have more than doubled in recent years, and in any event, public pensioners in DEFINED benefit plans bear no market risk under their statutory contracts.  Colorado PERA pension administrators seem to have forgotten this fact.

Note that the 2010 bill taking contracted PERA retiree COLA benefits, SB10-001, proposes to continue the theft of contracted PERA pension benefits until the Colorado PERA pension system achieves a 100 percent funded ratio.  That is, the Colorado legislators who voted for SB10-001 in 2010 propose to continue taking PERA retiree assets to cover state and local debt until the pension system is funded at a level 20 percent higher than the level considered to be "well-funded" for public pensions.  The pension administrators and lobbyists who developed the scheme to take property from Colorado's pensioners in 2009 decided to "Go Big."

Virginia Attorney General Kenneth T. Cuccinelli in the Harvard Journal of Law and Public Policy – "Judicial Compulsion and the Public Fisc – A Historical Overview," September 13, 2011.

Cuccinelli:

“It is widely thought that a funded ratio of about 80 percent or better [is] sound for state and local  government pensions."

“One factor militating in favor of challengers [to public pension contract breach] is that the state is entitled to less deference in the question of reasonableness and necessity, the third prong, when it exercises its sovereign power in a manner that benefits itself.”

“Attempts to change the [public pension] benefits of the retired, those qualified to retire, and voluntary participants in contributory programs probably would not be worth the effort."

"The legislatures in all states have great discretion in altering benefits prospectively for those to be newly hired.”

http://www.harvard-jlpp.com/wp-content/uploads/2013/10/35_2_525_Cuccinelli_Getchell_Russell.pdf)

Richmond Times-Dispatch:

"Pressure on contribution rates also is expected to ease as new employees enter the public workforce with reduced pension benefits under reforms enacted in 2010 and again last year.  But the new hybrid retirement program adopted last year for state and local employees will not begin applying to new hires until Jan. 1."

"The law that imposed the hybrid — a combination of limited pension benefits and a 401(k) style contribution plan — also requires the state to fully fund its share of pension plans by the fiscal year that begins in mid-2018."

(My comment: Note that the Virginia Legislature has adopted PROSPECTIVE legislation to reform Virginia public pensions, whereas the Colorado Legislature has enacted blatantly RETROSPECTIVE legislation [SB10-001] addressing the Colorado PERA pension system.  Oddly, after having adopted such retrospective legislation, taking accrued benefits from retirees in the Colorado PERA pension system in 2010, two years later the Colorado Legislature adopted SB12-149 honoring the accrued pension benefits of retirees in Colorado county government pension systems.  So, if you happen to be a retiree in certain county government pensions in Colorado, your pension contract is honored.  On the other hand, if you are a Colorado PERA retiree, your pension contract has been abrogated.  A constitutional double standard on public pension contracts is now enshrined in Colorado law.)

http://www.timesdispatch.com/news/state-regional/pension-figures-prove-accurate/article_57b47a06-2a5b-5024-ab0a-ddaec7d83459.html

Colorado PERA active and retired members, clearly, the power that lobbyists have to manipulate members of the Colorado Legislature, and in particular the power of lobbyists for Colorado PERA-affiliated employers, deserves extensive scrutiny.  In SB10-001, the Colorado Legislature gave these lobbyists access to the Colorado PERA pension trust funds, through the front door.

Support public pension contractual rights and the rule of law in Colorado.  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!