Colorado AFSCME’s Involvement in the 2010 Colorado PERA Pension Contract Breach. Yet Another Colorado PERA Distortion?

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

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”

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

I have suggested, in the past, that this support may have been motivated by the fact that active union members (of course) pay union dues, while retired union members no longer contribute to union coffers.  Did this economic reality motivate union officials to "toss retirees under the bus" in 2010?  Did public sector unions support the taking of PERA retiree assets in order to minimize future PERA contributions that might be needed from their active members?  Why did we not see Colorado's public sector unions insist that Colorado PERA-affiliated employers actually pay their annual pension bills and meet their contractual obligations in 2010? 

In a recent article AFSCME (International) writes:

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

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

Here was my response to this AFSCME article a few days ago:

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

I received a response from a former AFSCME Colorado official:

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

My response:

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

And another reply from the former AFSCME official:

"The entire AFSCME endorsement of screwing public employees out of their pension COLA's in Colorado is unfortunately quite true, however, it should be remembered that AFSCME no longer represents Colorado State Employees, and it hasn't for about 7 years now.  It was decided 7 years ago in a backroom deal in Washington that the three state employee unions would become Colorado WINS.  The rank and file members of AFSCME Locals in Colorado were not given the right to vote on this, nor were the members of CAPE or the CFPE. The people who espouse 'democratic labor trade unionism' in America, wouldn't allow it to take place in Colorado.  Ritter and company granted 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."

Here we have AFSCME's Collective Bargaining Director Steve Kreisberg on PERA:

"Investment returns in the exuberant 1990s had an unfortunate effect.  Governments grew lazy about making their regular contributions.  And that's a big reason that they're in so much trouble now.  'Defined- benefit plans have been victims of their own success,' says Steve Kreisberg, AFSCME's collective bargaining director.  'They've been so successful that some politicians decided that the benefits are free and stopped contributing to the plans.'"

"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

As I have noted before, I believe that Colorado WINS made a mistake in 2010.  What kind of a union casually discards the contracts of its retired members?  There is scant precedent for this type of behavior in the history of the U.S. labor movement.  This act was clearly immoral and treacherous.  It undermines the moral standing of the U.S. labor movement. Public sector unions have done much to improve the working conditions of middle-class Americans over the last century, but advocating the breach of the contracts of their retired union members crosses a moral line.

Rather than conspiring with others to "claw back" the earnings of Colorado's pensioners, I think that Colorado WINS should be demanding that the Colorado Legislature actually pay its public pension bills.  What are these lobbyists doing?  For the last decade, they should have demanded that the Colorado Legislature meet its contractual obligations, that the full pension "ARC" be paid.  Colorado WINS' lobbyists should have made these demands before the committees of the Legislature at every opportunity.  In every year that the Colorado Legislature failed to make its PERA pension payments and instead appropriated funds to cover local government pension debt that IS NOT the contractual obligation of the State of Colorado, Colorado WINS lobbyists (and previous union lobbyists) should have been there to demand an end to the practice.

As we have seen, the Colorado General Assembly has not paid its full Colorado PERA public pension bill 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

Colorado WINS membership and organization:

“The Colorado Association of Public Employees/Service Employees International Union (CAPE/SEIU); the American Federation of State, County and Municipal Employees (AFSCME); and the American Federation of Teachers (AFT) are joining forces to organize state employees. The new organization will be known as Colorado WINS (Workers for Innovative and New Solutions).”

"In addition, Colorado WINS will have the ‘sole authority to advocate for legislation affecting state employees, including but not limited to legislation affecting PERA [the Public Employees’ Retirement Association], the state personnel system, employee accountability and state employee protections.’”

“Under the agreement, SEIU will provide 50 percent of the budget for Colorado WINS; AFT and AFSCME will provide the rest.”

“The agreement also says that funding contributed by Colorado WINS members for political purposes will be divided, with 50 percent going to SEIU/CAPE and 50 percent to the AFT and AFSCME political funds.”

“A copy of the agreement is available online at:

http://www.eiaonline.com/coloradowins.pdf.”

https://www.cu.edu/sg/messages/5895.html

Colorado PERA active and retired members, help put an end to this travesty.  The rule of law will not be abandoned in Colorado, not even with the support of some union officials, some party officials, corporations or lobbyists.  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

What Do (a Few) Colorado Democrats Have in Common with Tea Party Anarchists?

Yes, I know that the very idea of conflating the machinations of the Tea Party with past practices of Democratic members of the Colorado Legislature is repulsive.  But, for a few minutes (for purposes of the following exercise) try to set aside your horror and dispassionately consider the behavioral commonalities noted below.  (This hurts me more than it hurts you.)  And, who knows?  Members of the Colorado Democratic Party might benefit in the future by acknowledging and correcting a few past mistakes.

To set the stage, a few particularly relevant lines from the platform of the Colorado Democratic Party:

"At a time when public confidence in government is perhaps at its lowest in our history, when government has come to a standstill, held hostage by those who seek to serve themselves and not the common good, it is imperative that health and trust be restored to our democracy or we risk losing it all together."

"Above all, we expect officials to uphold and defend the Constitution of the United States."

http://www.coloradodems.org/sites/coloradodems/files/CDP2012PlatformProposal4%2014%20v2.pdf

Today, (October 6, 2013) as I listened to the pundits analyze the Tealiban's efforts to repudiate the debt of the United States, it occurred to me that many Democratic members of the 2010 Colorado General Assembly have something in common with these Tea Party anarchists.  Steel yourself, dear reader,  as we engage in a rather unsavory juxtaposition.

Parallel #1:  Here we are in 2013, and Congressional Tea Party anarchists are pushing Congress toward a default on the debt obligations of the United States.  Incredibly, just three years ago, many (not all) Democratic Colorado state legislators supported a default on the debt obligations of the State of Colorado (contracted, accrued, Colorado PERA pension debts.)  Colorado legislators defaulted on PERA pension debt with full knowledge of the fact that making such payments is a contractual obligation of the state.

Colorado's Democratic (and Republican) state legislators have been aware of the contractual nature of accrued public pension benefits in our state for more than 60 years (since the Colorado Supreme Court decisions in the public pension cases Bills and McPhail.)

Colorado Court of Appeals 2012 decision in Justus v. State (October 11, 2012):

“We consider McPhail and Bills dispositive (indisputably bringing to a conclusion a legal controversy) of whether plaintiffs here have a contractual right to a particular COLA.”

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

Nevertheless, in 2010, many Democratic Colorado legislators embraced a contrivance advanced by lobbyists for Colorado state and local governments, unions and corporations that sought financial benefit through breach of contract.  The lobbyists convinced many Democratic state legislators that the inflation protection provision in PERA pension contracts (COLA provision) could be altered retroactively.

Yet, a public pension COLA provision is simply a method by which a total defined public pension benefit is provided.  There is nothing inherent in this "method" (provision of a pension COLA) that negates its essence as a contractual obligation of Colorado PERA-affiliated employers.  How many Colorado state and local government employees would have stipulated up front the right of the Colorado Legislature to claw back one-third or more of their total accrued PERA pension benefit after retirement?

When the Colorado Legislature created the "automatic" Colorado PERA COLA provision in statute, the Legislature could just as well have offered PERA members a higher monthly pension benefit with no COLA provision attached.  Instead, Colorado legislators chose to deliver accrued Colorado PERA pension benefits by means of a pension COLA "escalator."  For decades, Colorado PERA members have exchanged their labor (and their pension contributions) for this statutory offer of a PERA COLA benefit.  Many have retired based on the PERA COLA benefit contractual offer.

Note that many private insurance companies sell annuities that offer delivery of the total purchased annuity benefit by means of an annual COLA "escalator" on the purchased income stream.  Having supported SB10-001 in 2010, taking contracted PERA COLA benefits, will these Colorado Democrats now argue that insurance companies that have sold annuities with contractual COLA provisions should have the right to unilaterally eliminate the COLA provisions after the fact?  Do these Colorado Democrats support one constitutional standard for corporations (insurance companies) and a separate constitutional standard for public entities?

Not all Colorado Democratic legislators supported the Colorado PERA pension contract breach in 2010.  The Pueblo Chieftain quoting from House Minority Leader Sal Pace’s website in February 2010:

"'I voted against the proposal because I don’t believe that the problems with PERA need an immediate fix and the solutions proposed unduly placed a burden on our seniors,’ Pace said in a statement on his Web site Tuesday."

http://trsbaudit.wordpress.com/

Thanks also to the following Colorado House Democrats who refused to go along with the lobbyists' Colorado PERA debt-shift scheme in 2010: Representatives McFadyen, Merrifield, Massey, Weissman and Primavera.  When the lobbying pressure was intense, these state legislators retained their integrity.

Parallel #2: This week we see Congressional Tea Party anarchists decrying the level of the accumulated debt of the United States while ignoring the fact that these debts accrued in legislation adopted by the legislative body in which they currently serve.  Tea Partiers refuse to acknowledge that the nation's debt ceiling must be raised simply to meet debts that were previously incurred by Congress, legitimate debts of the United States.

Similarly, in 2010, many Democratic Colorado state legislators decried the levels of the public debt in Colorado (unfunded PERA pension liabilities) without acknowledging that these debts were accrued as a result of legislation adopted by the legislative body in which they currently serve (the Colorado General Assembly.)  The General Assembly sets PERA benefit levels in statute.  Colorado PERA pension benefits are offered by the General Assembly in statutory contracts as deferred compensation for work performed in the past.  In 2010, many of these Democratic state legislators enacted a bill that attempts to repudiate Colorado state and local debt.  In essence, the Colorado General Assembly is attempting to shift accumulated PERA pension debts onto the backs of a relatively small group of elderly Colorado residents.  (The Colorado General Assembly seeks to abrogate PERA pension contracts in spite of the fact that Colorado has the 16th lowest per capita public pension debt in the nation, according to the investment research firm Morningstar.  The Colorado General Assembly seeks to repudiate its pension debts in spite of the fact that less than three percent of all Colorado state and local government expenditures support public pension obligations, hardly a financial "burden.")

Parallel #3: Congressional Tea Party anarchists have no interest in raising additional resources to meet financial obligations that Congress has approved in the past.  Their preference is that the U.S. government default on its obligations.  Similarly, in 2009 and 2010, the first preference of many Colorado Democratic state legislators (encouraged, of course, by 27 statehouse lobbyists) was also default.  Rather than seeking additional resources to meet the accrued debts of Colorado state and local governments, these state legislators favored default.

(As we have seen, additional resources have been readily available to meet PERA pension debts.  For example, the legislators could have opted to honor their own contractual PERA pension obligations instead of appropriating $700 million for local government pensions that are not the state's contractual obligation, Old Hire Fire and Police Pensions.  Colorado legislators could have curtailed the state's generous corporate welfare programs.  Colorado legislators could have followed the example of other states and explored the use of mineral royalties to meet state pension obligations.  Colorado legislators could have submitted referenda to the voters proposing new revenues to meet the state's contracted debts.  Again, many Democratic legislators preferred breach of contract in 2010.)

Attention Colorado Democrats: Enough red flags have been raised by the party's complicity in the 2010 PERA pension contract breach to drape six miles of the Arkansas River.  The fact that I am able to draw any parallels at all between the behavior of some Colorado Democrats and the contemptible Teanderthals should raise concern in the party.

Is it acceptable for Colorado Democrats to abandon core principles (even when the lobbyists are wrenching their arms?)

More from the Colorado Democratic Party 2012 Platform:

"We petition Congress to enact legislation preventing courts and bankruptcy laws to be used to abrogate labor contracts and pension obligations."

"Colorado Public Employees Retirement Association (PERA) should remain a defined benefit plan, directed by a board elected by the membership."

"Colorado Democrats support: 'The implementation of cost of living adjustments on Social Security and Social Security disability benefits, equal to actual increases in the cost of living.'"

(My comment: the party supports the enhancement of Social Security COLAs that ARE NOT contractual obligations.  Should the party not also support the payment of COLAs that ARE INDEED contractual obligations?)

"Every human being has the right to be treated with dignity and all persons residing in the United States deserve equal protection under the law regardless of their race, disability, gender or gender identity, religion, sexual orientation, national origin, age, or physical or mental differences."

(My comment: Do Colorado PERA retirees not deserve equal protection under the law?  Is it acceptable that many Democratic Colorado lawmakers voted the break the contracts of this group in 2010?)

"We expect our elected officials to be committed to the highest standards of behavior, personal integrity and honesty and to demand transparency and open government . . .".

"The people must be informed by facts, not deception."

"We support the enforcement of laws addressing the inequities between men and women."
 
(My comment: Note that women were disproportionately impacted by the Colorado PERA pension contract breach.  Women make up 57 percent of all government workers, and 60 percent of local government workers.  Under the PERA pension contract breach, women provide a disproportionate share of the PERA pensioner subsidy to Colorado governments.
 
http://www.nwlc.org/resource/womens-stake-battle-over-public-employees-collective-bargaining-rights)

Not surprisingly, the Colorado Legislature's 2010 attempt to escape its contractual public pension obligations hits women, minorities, and particularly older women in Colorado hard.  Also, as noted earlier, the Colorado Legislature has just finished paying off $700 million in local government fire and police pension debt (that IS NOT the contractual obligation of the State of Colorado.)  It just happens that these local government pension contracts belong to primarily . . . males.

http://www.coloradodems.org/sites/coloradodems/files/CDP2012PlatformProposal4%2014%20v2.pdf

Colorado Democrats: We must examine the influence that lobbyists have on Democratic state legislators.  We must ask why a Democratic state legislator would support breaking the contracts of workers in order to lower the tax burden of corporations and wealthy taxpayers in the nation's 10th wealthiest state.

We must ask why Colorado Democrats helped employers attempt this abandonment of contractual obligations to pensioners in 2010?  Why a deal was cut in 2009 without deliberation of pension reform options in open legislative hearings in 2010?  Why Democratic Leadership relinquished the Legislature's public policy making authority regarding pensions to administrators and lobbyists in 2009?  Why Democratic Leadership failed to appoint an interim study committee in 2009 to examine legal, prospective pension reforms that were being enacted by other state legislatures?  Why Democratic Leadership failed to send an interrogatory to the Colorado Supreme Court in 2009 regarding PERA pension reform options? (Recall that the Legislature was encouraged to take this step.)

Colorado Democrats; let's clean up our act.  The Colorado Democratic Party is better than breach of contract.  The State of Colorado is better than breach of contract.  Support contractual public pension rights at saveperacola.com.  Friend Save Pera Cola on Facebook!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From the Silver and Gold Record archives:

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

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

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

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

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

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

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

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

Colorado PERA’s Pension Contract Breach Relies on “Biased” Research.

In 2010, a majority of Colorado state legislators, induced by lobbyists, passed a bill that attempts to illegally slash the accrued debt of Colorado state and local governments.  The bill, Senate Bill 10-001, proposes to shift Colorado state and local government debt (an obligation of all Colorado taxpayers) onto the backs of elderly pensioners in the state.  Apparently, in 2010, a majority of Colorado state legislators believed that, when one reaches a certain age, that person's rights may be freely trampled and their property seized by the State.  Apparently, many Colorado legislators, contravening their oaths of office, believe that protections afforded by the U.S Constitution no longer apply to this particular group of Americans.

In 2010, Colorado PERA pension administrators scheming to take property from PERA retirees employed the mantra "shared sacrifice" in their propaganda.  I will describe for you Colorado PERA's idea of "shared sacrifice":  According to the provisions of SB10-001, 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"?

In 2010, Colorado PERA officials, self-interested lobbyists, and a majority of state legislators supported public relations, lobbying and legal campaigns with pension research published by the Pew Center on the States.  Research disseminated by this organization has since been labeled "biased," "flawed," and "inflammatory" by the National Conference on Public Employee Retirement Systems.

Yesterday (September 24, 2013) the Huffington Post published an exposé regarding Pew's efforts to gut public employee pensions.

HuffingtonPost.com:

"Pew first thrust itself into the national debate on public sector pensions when its Center on the States released a headline-grabbing 2010 study claiming that the combined pension shortfall for all the states was a staggering $1 trillion."

http://www.huffingtonpost.com/2013/09/24/pew-trusts-pensions_n_3983654.html

Pew's "research" even made it into legal briefs filed in the Colorado PERA retiree pension COLA lawsuit, Justus v. State.  Clearly, information that was relied upon by the Colorado General Assembly and Colorado PERA in their SB 10-001 political, lobbying and legal campaigns to break PERA pension contracts is of questionable validity.  Below I provide examples of reliance on public pension statistics from the Pew Center in legal briefs filed in the case Justus v. State.  From the PERA Defendants motion to dismiss of May 10, 2010:

“According to a study cited in Plaintiffs’ Complaint, PERA experienced $11 billion in investment losses, with PERA’s assets falling from $43 billion to $32 billion. See Ex. A at 27 (Pew Center on the States, Pew Charitable Trusts, The Trillion Dollar Gap: Underfunded State Retirement Systems and the Roads to Reform (2010) (“Pew Report”)) (cited in Complaint ¶ 42).”

(My comment: The bias in the Pew study is clear, Colorado PERA could only experience an "investment loss" after a market decline by liquidating its portfolio.  Colorado PERA did not liquidate its portfolio after the 2008-2009 equity market volatility.  Colorado PERA administrators invest over an "investment horizon" that extends to 70 years.)

“According to the Pew Report, in 2008, PERA suffered investment losses of $11 billion, which constitutes a 26% decline in the value of its assets.”

“Plaintiffs also cite to the Pew Report, which concluded that PERA was one of many pension funds facing significant shortfalls between the value of pension assets and the amount of benefit obligations encompassed within the system. Id. ¶ 42 (citing Pew Report (Ex. A) at 27).  The Pew Report also identified PERA’s large investment losses during the market downturn as one of the causes of PERA’s unfunded liabilities.”

(My comment: Colorado is a low-debt, low-tax state.  Many Colorado taxpayers do not want to pay for governmental services.  In 2010, Colorado state legislators bought the votes of these taxpayers with a pension contract breach.  The funded ratio of the Colorado PERA pension system has declined because the Colorado Legislature has not paid its full pension bill for a decade.)

Link:

http://saveperacola.files.wordpress.com/2011/04/2010-05-10-pera-defendants_-motion-to-dismiss-first-amended.pdf

HuffingtonPost.com:

"And the head of the largest trade association for public sector plans finds serious flaws in Pew’s figures.  Hank Kim, executive director and counsel of the National Conference on Public Employee Retirement Systems, says that 'generally our position is that we are very disappointed in Pew.  Since 2010, we’ve expressed to Pew that its methodology for reports is flawed.  Their reports incite fear.'”

"With its $5.6 billion endowment, the Pew Charitable Trusts ranks number 19 on a list of the world’s wealthiest charitable foundations.  Originally called the Pew Memorial Trust, the foundation was created in 1948 by the heirs to the Joseph N. Pew Sun Oil fortune and hewed far more closely to the family’s conservative, small-government political beliefs."

"Pew first thrust itself into the national debate on public sector pensions when its Center on the States released a headline-grabbing 2010 study claiming that the combined pension shortfall for all the states was a staggering $1 trillion."

“'It’s an eye-popping number,' Kim says of Pew’s claim.  'But that trillion dollar deficit covers both pension and health care costs, and health care costs are at least 60 percent of that figure.'”

"Whether the report reflected actual history or hyperbole, it launched Pew into the public-sector fixit business in a big way."

(My comment: Accrued public pension debts represent a fraction of all state and local government debt in the United States.  Why do we see a corporate-funded public relations noise machine attacking public pension debt in the U.S., but ignoring all other state and local government debt?  These think tanks churn out an endless stream of material advocating the breach of public pension contracts.  Why do they not propose breach of state and local government contracts with corporations?  Or, default on state and local government bonds held by wealthy investors?  Why is public pension debt a "crisis" warranting breach of contract, but all other state and local government debt [multiples of public pension debt] is not a "crisis"?)

HuffingtonPost.com:

"To date, Pew has partnered with the Arnold Foundation in Illinois, Montana, Kentucky and Rhode Island, wading in with actuarial studies and polling data to prod municipal and state lawmakers into incorporating Pew-authored restructuring plans."

"Pew’s promotion of technocratic-sounding solutions to pension shortfalls, especially its mantra about 'data-driven' problem-solving, lends its white papers the texture of dispassionate scholarship.  Its partnership with the Arnold Foundation, however, has created intense controversy and provided ammunition to its critics."

http://coloradopols.com.lb.soapblox.net/diary/19042/texas-enron-billionaires-pension-reform-efforts-arrive-in-colorado

http://coloradopols.com/diary/19072/national-public-pension-coalition-criticizes-pew-center-on-the-states

http://coloradopols.com/diary/19039/denvers-donnellkay-foundation-hears-pension-reform-ideas-from-pew-center

HuffingtonPost.com:

"Jim Wayne (D-Louisville), who has been a member of the Kentucky House of Representatives since 1991, says that Pew played a crucial role throughout the legislative process."

"'They had a tremendous influence,' says Wayne.  'The parties interested in change needed to rely on an outside source.  Pew drew up the proposal, they did the analysis and presented the information to a [legislative] task force.'”

"Wayne says that Pew generally pushed the positions favored by his state’s Chamber of Commerce and League of Cities, working both behind the scenes and publicly."

(My comment: Colorado's "league of cities" [the Colorado Municipal League] did nothing to defend the contractual rights of their retired municipal workers during the 2010 PERA pension contract breach.  The CML, funded by Colorado cities, simply watched the efforts of pension administrators and legislators to slash the debts of CML's municipal members.  The CML did nothing in spite of the fact that its municipal members have benefited from the Colorado Legislature's transfer of $700 million to cover legacy Colorado municipal pension debt that IS NOT the contractual obligation of the State of Colorado.  [$142 million appropriated for this purpose at this year’s Colorado legislative session alone.])

HuffingtonPost.com:

“'Pew gave them credibility,' Wayne says of these two groups.  'Pew is recognized nationally as experts, with facts and figures.'  As a result of Pew’s work, Wayne adds, 'new workers have a much weaker pension program.'”

"'The fact is that they [Pew] go into states arguing they are non-partisan and then proceed to make recommendations and undermine and dismantle [public employee] pension plans,' says Hank Kim.  'They have a bias — that bias is that public plans ought to be closed or frozen.'”

"Pew has called for transparency in other groups that conduct public surveys and the Arnold Foundation boasts about its research transparency.  Yet both have given vague answers to specific questions about whether the Laura and John Arnold foundation has given financial support to Pew relating to work on public employee pensions."

"The collaboration between the two organizations, says Jordan Marks, could ultimately undermine Pew’s reputation for good works and non-ideologically driven research."

"'If Pew had its way,' Marks says, 'it would retire teachers and firefighters and others into poverty.'”

http://www.huffingtonpost.com/2013/09/24/pew-trusts-pensions_n_3983654.html

The Executive Director of the National Conference on Public Employee Retirement Systems (NCPERS), Hank Kim, states in an address to NCPERS members via YouTube that his organization has discovered “bias” in public pension statistics provided by the Pew Center on the States.

The National Conference on Public Employee Retirement Systems (I believe Colorado PERA is a member) has found the Pew Center’s public pension reports to be “inflammatory,” that the Pew Center’s methodologies have been “debunked,” that the Pew Center “has an agenda,” and that “they have been pitching themselves as honest brokers.”

Here’s a link to the video:

Here are a few important excerpts from Hank Kim’s presentation:

“Pew has issued reports that are inflammatory.”

“We have taken their reports and debunked a lot of the myths and methodologies they have used.”

“They are partnering with the Arnold Foundation, which is a foundation out of Houston, Texas to really attack public sector plans at the state level.”

“They have been pitching themselves as honest brokers.”

“Their methodologies are quite flawed.”

“It seems as if they do have an agenda.”

“We have good documentation from reputable actuaries who find great flaws in the way Pew and the Arnold Foundation calculate the funding status and their criticisms of public sector pension plans.”

“If the state legislature . . . has invited Pew to be an honest broker, let us know.”

The National Conference on Public Employee Retirement Systems.

“NCPERS is the leading advocate for public pensions on Capitol Hill and in federal regulatory agencies.  To achieve our goal of preserving retirement benefits for public employees, our staff maintains strong working relationships with Members of Congress, Congressional staffers and regulatory agency officials.”

Link to the website of the National Conference on Public Employee Retirement Systems:

http://www.ncpers.org/

The 2010 effort of Colorado state and local governments to escape their debts, to break fully-vested PERA pension contracts, rests upon a rotten legal foundation.  Colorado PERA active and retired members, continue to fight for your constitutional rights.  
Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Gazette Telegraph on Colorado PERA’s Self-inflicted Legal Fiasco.

The Colorado Springs Gazette Telegraph has broken the Colorado media radio silence on our state's attempt to break its contracts.  Last month, the Colorado Springs Gazette Telegraph ran a pair of articles on Colorado PERA.  As expected, these articles were dripping with the Gazette's consistent anti-government bias, but nevertheless, I found portions of the articles interesting.  I give the Gazette Telegraph some credit.  The newspaper has published an article that ACTUALLY MENTIONS the fact that the Colorado Legislature is attempting to escape contractual Colorado PERA pension COLA obligations.  (For readers new to this topic, in 2010 the Colorado Legislature enacted a bill, SB10-001, that attempts to shift [through breach of contract] the accumulated public pension debts of Colorado state and local governments onto the backs of old people.  The Colorado Legislature wants to seize up to 40 percent of Colorado PERA retiree's accrued pension benefits.)

Now, when the Colorado Legislature declares a new "official state amphibian," rest assured that our Colorado media will provide exhaustive coverage of the event.  However, if for the first time in the history of our state, the Colorado Legislature seeks widespread abandonment of the contractual obligations of the State of Colorado?  Nothing.  Why is that?  How many times has the Colorado PERA retiree lawsuit, Justus v. State, been mentioned by Colorado media in the last three years?  When a state government attempts to escape its contractual obligations is that not newsworthy?  So, kudos to the Colorado Springs Gazette Telegraph.

The two Gazette Telegraph articles on PERA were written by Gazette reporter Megan Schrader and published on August 17, 2013.  Although Megan's articles were badly bent when they were pressed through the Laugesen "Ayn Randian filter,"  they serve an important purpose by letting Coloradans know that their state and local governments are attempting to violate the contract clauses of the Colorado and U.S. constitutions.

I also commend Gazette Telegraph reporter Megan Schrader for her interviews with John Sugden, senior director in Standard & Poor's U.S. Public Finance Ratings Group, and Standard & Poor's senior Colorado analyst, David Hitchcock.

From Megan's articles, John Sugden, Senior Director, Standard & Poor's U.S. Public Finance Ratings Group:

"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."

(My comment: John Sudgen of Standard and Poor's provides an important historical perspective on public pension funding ratios.  Why are today's public pension funding ratios [i.e., funding ratios that far exceed those of the 1970s] considered a financial "crisis" while public pension funding ratios of the 1970s were a nonevent?  Answer: today we have a well-funded national political and public relations infrastructure created specifically to promote a "public pension crisis."  Note that, in 1975 Colorado PERA had a 59.6 percent actuarial funding ratio.)

From the Silver and Gold Record:

“One attendee asked if there was any similar controversy in the 1970s, when PERA's unfunded liability went as low as 54.7 percent [1973].  [Colorado PERA Executive Director Meredith] Williams said former Gov. Richard Lamm, who co-chaired the PERA commission [Treasurer's Commission to Strengthen and Secure Colorado PERA] made that same observation last year when he recalled that there was no outcry when he was governor and the unfunded liability was below its current level.”

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

Megan, realize that if the Colorado Legislature skips out on its public pension bills [as it has for a decade] Colorado PERA's funding ratio will fall.  Megan, if you choose to make only 60 percent of your mortgage payment, you will eventually encounter "foreclosure."  No surprises here.

Below I provide historical perspectives on public pension funding ratios from Keith Brainard of NASRA, and Ronald Wirtz of the Federal Reserve:

Keith Brainard;

February 14, 2011, Subcommittee on Courts, Commercial and Administrative Law, Committee on Judiciary House of Representatives, Testimony of Keith Brainard, Research Director, National Association of State Retirement Administrators:

“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.”

“Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.”

“The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.”

“While the impact of the financial crisis on state and local pensions will likely require spending to increase, the most recent studies find that the share of state and local budgets dedicated to pension contributions would likely need to rise to about five percent on average, and to about eight to 10 percent for those with the most seriously underfunded plans." [Alicia H. Munnell, Jean-Pierre Aubry, and Laura Quinby, “The Impact of Public Pensions on State and Local Budgets,” Center for Retirement Research, October 2010.]

“Although some states have accumulated significant unfunded liabilities, pension benefits are paid out over many years, not all at once.  These are long-term funding issues, and most thorough analyses by those familiar with governments and public finance find patient and measured responses are required."

http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf

Ronald Wirtz;

A 2006 Federal Reserve paper, by Ronald A Wirtz, notes that public pension funding ratios in the 50 to 60 percent range were typical in the 1970s:

“From a long-term perspective, however, one can't really pin too much of the pension problem on the recent stock market pullback—in fact, it's [the stock market in recent decades] been a savior for most pensions.  Rewind 50 years, and almost all pension assets were invested in U.S. bonds and other fixed-income sorts of securities.  Though comparatively safe in terms of protecting assets, such a portfolio could not generate the returns necessary for pension funds to keep up with the benefits promised by generous government employers.  During the 1970s, funding ratios generally hovered between 50 and 60 percent.”

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=1349

"As of Dec. 31, 2008, the state's Public Employees' Retirement Association pension fund [excluding the health care fund] was 69.8% funded, down from 75.1% in 2007 and a high of 105.2% in 2000."

http://www.leg.state.co.us/clics/clics2009a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/6778eb9ddf2ca301872575ee0050f424/$FILE/0709AttachmentB.pdf)

Gazette Telegraph reporter Megan Schrader quoting Standard & Poor's senior Colorado analyst, David Hitchcock: "Colorado is a 'low debt' state."  I ask why a "low debt" state faces such a financial "crisis" that is must break its contracts.

Megan quoting David Hitchcock:

"Their debt load is pretty low, so it's really the pension issue that is in our view creating a weakness.  It does affect the rating.  Most other things in the state are ranked relatively highly, and it is one of the things that is holding the state back from potentially a higher rating."

(My comment: Many Colorado politicians are primarily concerned with lowering taxes in the state, already a "low-tax," "low-debt" state.  Many of these politicians would gladly break state contracts if it results in lower taxes for constituents whose votes they seek.  Many Colorado voters do not want to pay for the governmental services they receive, and in particular, they do not want to pay contracted deferred compensation, such as public pension benefits.

If the Colorado Legislature's 2010 bill retroactively taking Colorado PERA COLA benefits is upheld by courts, then the need to raise revenue from Colorado taxpayers will be reduced.  Such a reduction of PERA's unfunded pension liabilities might result in a better credit rating for Colorado state and local governments, further reducing the need for taxpayer support of public sector services.  Morality and constitutionality aside, breaking the contracts of Colorado's pensioners, taking their property, and shifting the debt of Colorado state and local governments onto the shoulders of the state's elderly, would benefit Colorado's taxpayers.  Apparently, many Colorado state legislators would like to see our state become a place where the rule of law is a joke and immoral behavior by government is de rigueur, but hey . . . the taxes are low.)

As we have seen over the last three years, the Colorado General Assembly has historically mismanaged the Colorado PERA pension system.  Colorado PERA pension officials have failed to perform their fiduciary duty, to regularly and emphatically inform members of the Colorado Legislature's Joint Budget Committee that payment of the full PERA pension actuarially required contribution [ARC] is not optional.  The ARC is paid to meet contractual obligations.

One aspect of the ongoing mismanagement of the Colorado PERA pension system that is not widely recognized is the assumption by Colorado legislators that when they set PERA contribution rates in Colorado statute their contractual obligations are met.  This is an erroneous assumption that has resulted in declining public pension funding ratios in states where legislators have embraced this folly.  Simply setting PERA pension contribution rates in statute does not ensure that the Colorado Legislature has met its contractual obligations, paid its ARC.  The Colorado General Assembly must make additional annual appropriations to ensure that it has met the full PERA pension ARC obligation every year.  Such fiscally responsible behavior would have required that the Colorado General Assembly refuse to abide by the wishes of local government lobbyists in recent decades who have successfully redirected state revenues to paying off local government legacy pension debt [that is not the contractual obligation of the State of Colorado.]  Fiscally responsible behavior on the part of the Colorado General Assembly might have required the body to forego making $100 million appropriations for discretionary property tax relief that is popular with the electorate.  Statesmanship demands that Colorado's elected officials prioritize the sanctity of the Constitution of the State of Colorado ahead of next year's reelection campaign.

Below are a few excerpts from the first Gazette Telegraph article on PERA, "Legal issues cloud PERA's future" published on August 17, 2013, and my comments:

Gazette Telegraph reporter Megan Schrader:

"Adding to the uncertainty for the Public Employees' Retirement Association financial outlook are two pending court cases that could change the multibillion-dollar retirement fund's bottom line."

Gazette Telegraph reporter Megan Schrader:

"In a separate case with broad implications, the Colorado Supreme Court has agreed to rule on whether PERA violated its contract with current and future retirees when it lowered the annual cost-of-living adjustment."

"Lawmakers removed a guaranteed 3 percent annual cost-of-living increase to current retirees, instead capping the increase at 2 percent.  If retirees win that case, the cost-of-living increases will continue into perpetuity, costing PERA millions every year."

(My comment: Note to Gazette reporter Megan Schrader, Colorado PERA is a public sector defined benefit pension plan.  Here's how defined benefit [DB] plans work: governments offer a “defined” benefit at retirement to workers in exchange for a worker’s labor and pension contributions over decades.  The “defined” benefit contract includes a “base benefit” and, in the case of many public sector DB plans, a pension COLA “escalator.”  These benefits, base and COLA, are paid for the LIFETIME of the beneficiary [see “annuity”], they are not paid in perpetuity.  The Colorado Legislature could choose to end the payment of PERA pension COLAs in statutory contracts for NEW HIRES [although I do not support such a step.]  This action would be constitutionally permissible as it would not impair existing PERA contracts.  Thus, the payment of the PERA COLA benefit in perpetuity is a policy choice of the Colorado Legislature.  Megan, just as you cannot unilaterally cut the rate in your mortgage contract, Colorado PERA's payment of contracted PERA COLA benefits on EXISTING fully-vested PERA contracts is not optional.)

Gazette Telegraph reporter Megan Schrader:

"PERA is a more than $42 billion retirement fund that 500,000 public employees rely on.  The outcomes of these lawsuits will not immediately affect the ability of PERA to meet obligations but will extend the fund's growing unfunded liability."

(My comment: Megan, when the provisions of SB10-001 that seized PERA COLA benefits are found to be unconstitutional, this finding will not "extend" PERA's unfunded liability.  Since the provisions of SB10-001 taking PERA COLA benefits are facially unconstitutional, these provisions of SB10-001 never actually reduced PERA's unfunded liability.  PERA's unfunded pension liabilities will remain unchanged.  In 2010, Colorado PERA retirees agreed with the admonition of prominent public pension attorney Gino L. DiVito: “ . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”  In 2010, Colorado PERA administrators, Governor Ritter, and a misguided majority of Colorado legislators . . . all ignored this warning.)

Gazette Telegraph reporter Megan Schrader:

"Denver District Court will decide in coming months whether PERA is owed roughly $200 million by Memorial Health System for the unfunded liabilities of employees who departed when Memorial merged with University of Colorado Health.  If PERA loses that case, it will force other local government employers and retirees around the state to absorb the liability."

(My comment: Megan, Colorado PERA retirees will not "absorb" a "liability" if PERA were to lose this Memorial case.  Again, Colorado PERA retirees are members of a defined benefit plan.  Colorado PERA-affiliated employers, such as municipalities that exist in perpetuity, are contractually obligated to pay benefits to PERA members who possess fully-vested public pension contracts.  Colorado PERA pensioners have "defined" benefits.  Your articles reveal that you are having trouble with this concept.

If the City of Colorado Springs "wins" the PERA/Memorial case, and is allowed to escape its public pension debts, other Colorado PERA-affiliated local governments will pick up these costs for the City of Colorado Springs, including Colorado Springs Utilities.  In that event, Colorado Springs Utilities would pass part of these costs along to Colorado Springs residents in the form of higher utility rates.  On the other hand, if Colorado Springs loses the Memorial Hospital case the City will be forced to pay its debts.  Spoiler alert!  Colorado Springs will of course lose the case.  Their statutory obligation is clear.)

Gazette Telegraph reporter Megan Schrader:

"As part of the reforms passed in SB1, the annual cost-of-living increase for current retirees was reduced.  It had been a 3.5 percent annual guarantee."

"A group of retirees sued PERA, saying it was a breach of contract."

"Denver District Court ruled in favor of PERA, saying the annual increase was not contractual and could be adjusted."

"This month, the Supreme Court agreed to hear the case on appeal."

(My comment: Megan, your description of the status of the lawsuit, Justus v. State, omits an important fact.  In 2012, the Colorado Court of Appeals REVERSED the decision of the Denver District Court on the contractual nature of PERA COLA benefits.  I can forgive this omission, since Colorado PERA itself fails to acknowledge this aspect of the Colorado Court of Appeals decision in PERA propaganda.

On October 11, 2012, the Colorado Court of Appeals confirmed the contractual, "automatic" nature of the Colorado PERA COLA benefit.  Colorado Court of Appeals 2012 decision in the case 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.)

Link to the first Gazette Telegraph PERA article:

http://gazette.com/legal-issues-cloud-peras-future/article/1504971

Now to the second of the pair of August 17, 2013 Gazette articles on PERA, "Future of state retirement plan in doubt."

Link:

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

Gazette Telegraph reporter Megan Schrader:

"The financial stability of Colorado's $42 billion state pension fund will get worse before it gets better."

(My comment: Megan, this is not necessarily true.  Colorado PERA's investment performance might continue to improve, or the Colorado Legislature might decide to begin paying its public pension bills.  As noted earlier, the Colorado Legislature has not paid its full PERA public pension bill [ARC] for a decade.  Your comment assumes that the Colorado Legislature will continue to ignore its contractual obligations.)

Gazette Telegraph reporter Megan Schrader:

"The Public Employees' Retirement Association is $22.7 billion shy of what is needed to pay out retirement benefits over the next 30 years.  That unfunded liability grew by $143.4 million in 2012 despite a 12.9 percent return on investments."

(My comment: Note that just 16 years ago, Colorado PERA's statutory "maximum amortization period" [MAP] was set in law at 60 years, rather than 30 years.  The PERA amortization period is set arbitrarily, federal agencies do not mandate a particular amortization period.  Reductions of  the MAP give public pension plan sponsors yet another tool by which to place artificial financial pressure on public pension trust funds.  This pressure is useful to Colorado PERA and the Colorado Legislature in attempts to manufacture a  rationale for the breach of PERA contracts.

SB 06-235:
– Reduced PERA’s statutorily prescribed "maximum amortization period" (MAP) from 40 years to 30 years.

In 1997, the PERA MAP was set in law at 60 years.

HB 97-1114
– Reduced PERA’s maximum amortization period to 40 years from 60 years.

Link:

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

Gazette Telegraph reporter Megan Schrader:

"State Treasurer Walker Stapleton – who sits on the PERA board as an honorary member – said the fund is too far underwater for reforms made in 2010 to rescue the system from disaster."

(My comment: Megan, when the Colorado Legislature broke PERA contracts in 2010, PERA's actuarial funding ratio was 68.9 percent.  For the entire decade of the 1970s, PERA's actuarial funding ratio was below this level.  Ask yourself, why did the Colorado PERA pension system not suffer a "disaster" in the 1970s?  Megan, protect your journalistic integrity.  Your job is to find truth, not to advance a political agenda.  Escape as soon as you can.  Megan, see page 3 of this memorandum for an historical perspective on Colorado PERA's funded status:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application/pdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251666724124&ssbinary=true.)

Gazette Telegraph reporter Megan Schrader quoting Treasurer Stapleton:

"I want to see PERA succeed and make promises to workers it can fulfill," Stapleton said. "First and foremost, PERA needs to get to a rational and realistic rate of return, and then it needs to fund the plan properly.  They're spending money in anticipation of investment returns that I don't believe in the long run they are going to earn."

(My comment: Remember that in the most recent “highway bill,” Congress approved return assumptions for private sector defined benefit plans that average 7.5 percent . . . this level of return assumption is in the neighborhood with most public sector defined benefit plan return assumptions.  Good enough for the private sector, but not for the public sector?

"The bottom line is that those opposed to public employee pensions are forced to use low return numbers to grab headlines and try to make the case the systems are doomed.  Ironically, since the push for this began after 2008–pension systems have beat the 7-8% assumed rate of return for the past 1, 3 and 5 year period.  Apparently reality won’t interfere with your viewpoint."

http://www.reuters.com/article/2013/09/03/us-usa-states-pensions-idUSBRE9820YN20130903

"Corporate defined benefit plans have on average a higher than 8 percent assumed rate of return while PERA’s assumed rate of return is in the mid-range of other public retirement plans."

https://www.copera.org/pera/about/issueslist.htm

NASRA on public pension plan return assumptions:

http://www.nasra.org/resources/InvReturnAssumption_Final.pdf)

Gazette Telegraph reporter Megan Schrader quoting David Hitchcock, Standard & Poor's senior Colorado analyst:

"Even at 8 percent, they're not funding what they would need to, to amortize the unfunded liability," Hitchcock said. "You might say the 8 percent is aggressive or unaggressive, but even with 8 percent, they're not funding what they need to."

(My comment: Here we have David Hitchcock, Standard & Poor's senior Colorado analyst stating that the Colorado Legislature is not paying its public pension bills.  At the 2013 session of the Colorado Legislature did state legislators decide to pay their complete Colorado PERA public pension bill?  No, but they did manage to transfer $147 million of state revenue to pay for public pensions that ARE NOT the contractual obligation of the State of Colorado.  Local government lobbyists earned their keep at the 2013 session.)

Gazette Telegraph reporter Megan Schrader:

"Almost all state pension plans across the U.S. are in the red – lacking the funds to cover the future cost of retirement pensions promised to workers."

(My comment: Megan, your statement here assumes that public pension plans must have a 100 percent funding ratio.  They do not.  Colorado PERA has had a 100 percent funding ratio in only two years since its creation in Colorado statute eight decades ago.  In the past, the Colorado PERA Board of Trustees has sought to "cap" the funding ratio of the Colorado PERA trust funds at 90 percent.  They did so, since public pension funds with 100 percent funding ratios invite mischief on the part of elected officials overseeing the plans.  A decade ago, when PERA's funding ratio [AFR] hit 105 percent, Governor Owens decided to raid the PERA trust funds to lower public sector labor costs in Colorado.  Governor Owens championed legislation providing an incentive for the early retirement of older, “more expensive” public workers [sale of service credit.]  Governor Owens' bill also cut employer contributions to the PERA pension system.  You can see that, where irresponsible elected officials oversee a pension plan, a 100 percent funding ratio is not necessarily desirable.

Megan, you write that public pension systems across the U.S. are "in the red."  Megan, do millions of homeowners in the United States face a "crisis" because they are "in the red," that is, they have home mortgages?  Are these homeowners in a "crisis" because they cannot pay off 100 percent of their home mortgages tomorrow?  Public pension plans are well-funded at an 80 percent funding ratio according to Fitch Ratings.  Public pension plans never have to be funded at a 100 percent funding ratio.)

Gazette Telegraph reporter Megan Schrader:

"PERA wasn't always in bad shape.  In 2000, PERA was 104 percent funded.  Then Lehman Brothers collapsed in September 2008, and everything changed.  That year, PERA lost $10.5 billion in the stock market."

(My comment: Megan, Colorado PERA did not "lose $10.5 billion in the stock market."  Colorado PERA's investment staff could have only "realized" these losses if they liquidated PERA's portfolio in 2008/2009.  Colorado PERA did not liquidate its portfolio in 2008/2009 because Colorado PERA invests over a time horizon that extends to 70 years.  Megan, if you put all of your 401K assets into cash when the 2008/2009 markets bottomed you could have "realized" losses that year.  Colorado PERA did not.)

For her article Megan sought out and interviewed a few relatively wealthy Colorado PERA retirees who supported the 2010 breach of PERA COLA contracts.  A commentator has recently observed that wealthier PERA retirees were more likely to support SB10-001 in 2010 as the "COLA-theft" bill had little impact on their lifestyles or their ability to afford basic necessities such as health care.  Here are the "representative" Colorado PERA retirees Megan sought out for her article: a six-figure school district superintendent, a relatively well-off chief financial officer for a school district, and a retired water engineer.

Megan, where are your interviews with the typical PERA retiree?  Where is your interview with PERA member David Holme?  Remember, he was the PERA member who told the assembled Colorado PERA Board of Trustees in 2009:

“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://www.copera.org/Flash/DenverListeningTour/PublicComment.html

Megan, how about an interview with a retired teacher or janitor?  Megan, you should also take note of the fact that even wealthy PERA retirees have no power to abrogate the pension contracts of the average Colorado PERA retiree.

From Megan's interview with School Superintendent Walt:

"I keep a pretty close eye on it, and I think that it is on the right track," said Walt Cooper, superintendent of Cheyenne Mountain School District 12.  "I don't think it's the looming crisis that some critics would level.  I also don't think that there aren't other sacrifices and pieces that we should pay in there to help it to a greater solvency."

"In comparison, the private sector must pay 6.2 percent to Social Security – the government-run retirement system – and generally offers a retirement-fund match of 3 percent to 6 percent for a defined contribution plan like a 401(k)."

(My comment: A recent Colorado WINS study revealed that, when past, skipped PERA employer pension contributions are considered, [addressed in Colorado law through the AED and SAED] Colorado PERA-affiliated employers make only a 3 percent state contribution to PERA retirement benefits.  Megan, the state that puts forth the bare minimum of support for public pensions seeks to break its public pension contracts.

http://coloradowins.org/2013/08/19/2014-total-comp-comparing-pera-and-private-sector-retirement-benefits/)

Gazette Telegraph reporter Megan Schrader:

"In the great shake-up of 2010, retirees sacrificed some cost-of-living adjustment.  The 3 percent annual bump is no longer guaranteed.  In fact, it is capped at 2 percent."

(Megan, what occurred at the 2010 session of the Colorado General Assembly was not a "great shake-up," it was a "great shakedown."  In 2010, Colorado PERA retirees did not "sacrifice" their contracted pension COLA benefit, these COLA benefits were forcibly taken.  A bank does not "sacrifice" its cash to a bank robber, that property is taken by force.  Megan, in your article you write that Colorado PERA COLA benefits are "guaranteed," and you write that PERA COLA benefits, after seizure by the Colorado Legislature are no longer "guaranteed."  Do you see anything wrong with that picture?)

A commentator from the Colorado political website ColoradoPols.com on Megan's PERA retiree interviews:

"It appears as though they were both professional employees who were well compensated at the end of their public service careers.  Perhaps a lower COLA on $75K plus annual pension is done with pragmatic acceptance and is easier to swallow for these guys than for those PERA retirees making much less and who have no Social Security benefit.  It seems to me that retiree acceptance (or support) for SB10-001 goes up with increasing income."

(My comment: This relatively small group of wealthy PERA retirees does not feel the pain of the impairment of their PERA contracts like the average PERA retiree feels it.  For some older PERA retirees, the taking of their property by the state means diminished access to needed health care, and diminished quality of life.

At the beginning of PERA's campaign to break pension contracts in 2009 PERA found a handful of PERA retirees who were willing to relinquish their contractual rights, and frightened a few more into agreeing to give up their contracted benefits.  PERA officials argued that these few represented the acceptance of ALL PERA retirees for the breach of PERA contracts.  But, of course, one PERA retiree who is willing to accept breach of his own contract has no power to relinquish contractual rights that are held by others.)

Megan, to be fair you might also have noted in your article that the Colorado Springs region is home to thousands of U.S. military retirees who have federal military pensions.

Megan, this should pique your interest: Recall that Colorado PERA and the Colorado Legislature attempted to break Colorado PERA pension contracts in 2010 when Colorado PERA's funding ratio was 68.9 percent.  Many proponents of PERA pension contract breach call a pension funding ratio in the "60s" a "crisis."  Get this Megan: U.S. military pensions have A ZERO PERCENT FUNDING RATIO.  Military pensions are paid right out of operating budgets.  Yet, we do not see Wayne Laugeson trumpeting the "crisis" in military pensions in the Gazette Telegraph.  Why is that Megan?  Full disclosure requires that the Gazette Telegraph inform its readers that U.S. military pensions have a ZERO PERCENT FUNDING RATIO.

Megan, I hope that you now see the extent of the SB10-001 scam.  The "crisis" atmosphere surrounding Colorado PERA is manufactured.  Public pensions are "well-funded" at an 80 percent funding ratio according to Fitch Ratings.  The unfunded liability will be paid off over 50-70 years . . . like a mortgage, it's not due tomorrow.

Colorado PERA active and retired members, the Colorado Legislature's 2010 PERA default bill was RETROACTIVE, and RETROSPECTIVE, that is, unconstitutional under our Colorado Constitution.  The Colorado PERA pension system can be reformed LEGALLY, PROSPECTIVELY.

When SB10-001 is struck down in the courts, Colorado PERA will begin where they should have started three years ago, with legal, prospective pension reform.  Governments do not have the right to arbitrarily break their contracts.  In making this attempt, Colorado PERA officials have embarrassed themselves and the State of Colorado.  Continue to support public pension contractual rights and the rule of law, contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Forget Denmark . . . Something is Rotten in the State of Colorado.

COLORADO PERA: THE COLA BENEFIT IS OUR CONTRACTUAL OBLIGATION.

COLORADO PERA: THE COLA BENEFIT IS NOT OUR CONTRACTUAL OBLIGATION.

COLORADO PERA: WE'RE NOT SURE IF THE COLA BENEFIT IS OUR CONTRACTUAL OBLIGATION.

If you are a party to a contract, and you are uncertain as to your obligations under the contract, and a process exists by which you might easily identify your contractual obligations, would you choose to ignore that process?

In 2010, the Colorado Legislature placed itself in this very position, and ignored the opportunity to have the constitutionality of its pension "reform" proposal (taking accrued PERA COLA benefits from PERA pensioners) assessed by the Colorado Supreme Court.  The PERA COLA benefit is an annual "escalator" of the pensioner's benefits.  In lieu of offering a larger fixed monthly pension benefit in exchange for a PERA member's contributions and labor, the Legislature offers to have the total accrued pension benefit delivered by means of this "escalator."

Late in 2009, Colorado PERA pension administrators testified that payment of accrued public pension COLA benefits is a contractual obligation of public employers affiliated with the PERA pension system.

In 2009, Colorado PERA officials encouraged the members of the Colorado Legislature to ask the Colorado Supreme Court for an opinion on this question of taking back the accrued pension COLA benefits of pensioners.  For some incomprehensible reason, the Leadership of the Colorado Legislature decided against sending this question to the Colorado Supreme Court.  Why? Did they not wish to know the answer?  Or, were they simply trying to buy time with the enactment of a pension bill they knew to be unconstitutional?  Why did the Leadership of the Colorado Legislature not even bother to ask their own attorneys for an opinion on the constitutionality of taking the COLA benefit as has occurred in other states?

“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

Here we have the opinion of the proponents of breaking Colorado PERA pension COLA contracts in late 2009, BEFORE the contract breach, "the PERA COLA IS our contractual obligation":

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

Greg Smith, Colorado PERA General Counsel (in 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

Senator Josh Penry, co-prime sponsor, SB10-001 appearing on Your Show, Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on January 10, 2010 at 10:30 a.m.:

“What the courts have said with the case law and opinions have said is that you can’t, it is a contract unless there is actuarial necessity.”

Here we have the opinion of the proponents of breaking Colorado PERA pension COLA contracts AFTER the contract breach, "the PERA COLA IS NOT our contractual obligation":

Adam Franklin, Senior Staff Attorney, Colorado PERA, April 5, 2011 (as documented by the organization Friends of PERA):

“PERA believes that the COLA formula is not contractual.”

Link:

http://www.friendsofpera.com/0405meeting.pdf

Attorney General John Suthers to the Colorado Legislature’s Joint Budget Committee on December 4, 2012:

“We’re appealing because we believe there was no contractual right (to the PERA COLA.)”

Here we have the opinion of the proponents of breaking Colorado PERA pension COLA contracts later in 2010 . . . we don't know if the PERA COLA is our contractual obligation:

Greg Smith at 2010 PERA Shareholder meeting – YouTube video 10-11 minutes into the video.

“We need to know the answer of whether this action was constitutional.”

Again, if Colorado PERA "needs to know" if the taking of the PERA COLA is constitutional . . . why not simply ask?  Colorado law provides a mechanism for seeking such guidance from the Colorado Supreme Court.  Use of this mechanism might have saved Colorado taxpayer's millions of dollars.

Colorado PERA active and retired members, forget Denmark, it's clear that something is rotten in the State of Colorado.  Support public pension contractual rights in our exceptional state.  Colorado is better than breach of contract.  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Denver Post: Government Cannot “Unilaterally Ignore Contracts.” Contracts of AIG Executives Must Be Honored. Denver Post, Where is Your Editorial Defending the Contracts of PERA Pensioners?

That is, the Contracts that Were "Unilaterally Ignored by Government" in 2010?  Vince Carroll, Let's See the Denver Post Editorial Board Act on Principle, Write a Column Defending Existing Public Pension Contracts.

On March 18, 2009, in the thick of U.S. market turmoil, while the public was calling for the heads of the Wall Street banksters, and demanding that government break the contracts of AIG executives, the Denver Post Editorial Board admonished us all to keep our own heads and accept that governments in the United States cannot simply abandon their contractual obligations when it is politically popular to do so.

Yet, just ten months later, when it was politically popular to break Colorado PERA pension contracts, when the political power of Colorado pension administrators, unions officials, corporate interests, statehouse lobbyists, politicians and lawyers fueled the campaign to break the contracts of elderly Colorado PERA pensioners, what did we hear from the Denver Post Editorial Board? Not a peep.

The Denver Post Editorial Board:

"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."

"The president is up in arms."  "And the public anger is palpable."

"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. And the bonuses were paid legally — part of a program that had been disclosed in advance in filings AIG made with the government, according to the Associated Press."

(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 in March 2009:

"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

Wikipedia: "AIG Bonus Payments Controversy":

"The AIG bonus payments controversy began in March 2009, when it was publicly disclosed that the American International Group (AIG) was to pay approximately $218 million in bonus payments to employees of its financial services division."

"AIG is notable for having received taxpayer bailouts and in the fourth quarter of 2008 posted a loss of $61.7 billion, the greatest ever for any corporation.  Beyond the $165 million in bonus payments that were recently announced, total bonuses for the financial unit could reach $450 million and bonuses for the entire company could reach $1.2 billion."

"A March 24, 2009 CNN article said that private companies wouldn't feel comfortable doing business with the U.S. government if they thought the government would change the rules after the contracts have already been signed."

"Fred J. Joseph, commissioner of the Colorado division of securities and president of the North American Securities Administrators Association, said 'If these people could get their hands on pitchforks, they really would storm the castle.'"

"In a nationally syndicated opinion column, economist Thomas Sowell claimed that the politicians who did the most to create the situation that led to the use of taxpayer money to fund the bonuses are now the same ones who are complaining the most about the bonuses."

"AIG has defended the bonuses by citing contractual obligations."

"Sorkin also said not paying the bonuses could spark problems across the business community. 'If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right . . ."

(My comment: "Government abrogating contracts, left and right" . . . where is the condemnation of proposals that government break its contracts lately?  The crowds with pitchforks want public pension contracts to be abrogated, will we appease them? 

Does governmental breach of contract not somewhat diminish the lustre of that "shining city on a hill"?  If the rule of law in the United States is actually a myth, let's be honest about it, and cease the claims of "American Exceptionalism.")

Wikipedia:

"AIG has pointed out that Connecticut, the state where AIG is based, has a law called the Wage Act.  According to the law, employers who don't pay employees the money which they are contractually obligated to pay, could ultimately be required to pay twice that amount."

http://en.wikipedia.org/wiki/AIG_bonus_payments_controversy

Now (For Balance) I Give the Denver Post Editorial Board Some Credit.

In late 2009, the Denver Post did not condemn the ongoing public relations and lobbying campaigns to break Colorado PERA retiree pension contracts, but they did ask the Colorado General Assembly to check with the Colorado Supreme Court prior to acting (by submitting questions to the Colorado Supreme Court through an interrogatory.)  Of course, the Leadership of the Colorado General Assembly ignored this advice.  However, I give the Denver Post Editorial Board their due.  (I give the Editorial Board the same amount of credit that I would give a bank customer who suggests to a bank robber that he check in with the local police regarding the legality of his intended act . . . not much credit, but some!)

(My comment: DP Editorial Board, have you ever wondered why it is that the Colorado PERA pension system needed to be "rescued" when the funding ratio of the Colorado PERA pension system was 69.8 percent, but the PERA pension system did not require any sort of "rescue" in 1973 when PERA's funding ratio was 54.5 percent?  Doesn't add up does it?  By the way, don't fall for Colorado PERA's attempt to deceive the Colorado Supreme Court.  Colorado PERA has inserted a "market-based" funding ratio into its legal briefs instead of the "actuarial funding ratio" it has traditionally used in order to mislead Colorado courts.  This switch is not identified in Colorado PERA's legal briefs and is intended to bolster PERA's case for a PERA "financial crisis."  The funding ratios in SB10-001 and in the Colorado PERA statutes are "actuarial funding ratios."

Standard and Poor's:

"As of Dec. 31, 2008, the state's Public Employees' Retirement Association pension fund (excluding the health care fund) was 69.8% funded, down from 75.1% in 2007 and a high of 105.2% in 2000."

http://www.leg.state.co.us/clics/clics2009a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/6778eb9ddf2ca301872575ee0050f424/$FILE/0709AttachmentB.pdf)

Denver Post Editorial Board: If you decide to act on principle and defend Colorado PERA pension contracts in an editorial, I suggest that you address one other matter in the same piece.  In 2012, the Colorado Court of Appeals reversed and remanded the PERA retiree COLA case, Justus v, State, to the Denver District Court, simultaneously confirming the contractual nature of the Colorado PERA COLA benefit.  Yet, your Denver Post reporter Tim Hoover, in an article addressing the Court of Appeals decision, labeled this reversal a "win" for Colorado PERA.  Essentially, he parroted Colorado PERA propaganda.  Colorado PERA was happy with the initial Denver District Court's decision that the PERA COLA was not a contractual obligation.  Why would Colorado PERA consider a reversal of the Denver District Court decision a "win" for PERA?  They don't.  They are appealing this finding to the Colorado Supreme Court.  So, Denver Post Editorial Board, publish a (belated) correction to this Denver Post story by Tim Hoover.  Protect journalistic integrity!

Denver Post, October 12, 2012:

http://www.denverpost.com/newsheadlines/ci_21754161/pera-wins-ruling-cuts-pension-raises

 

"WE ARE A COUNTRY OF LAWS.  THERE ARE CONTRACTS.  THE GOVERNMENT CANNOT JUST ABROGATE CONTRACTS."

Larry Summers, Harvard Professor, Director of the National Economic Council in the Obama Administration . . . and next Fed Chairman?

http://www.latimes.com/la-oe-goldberg17-2009mar17,0,3689261.column

"Lawrence Henry 'Larry' Summers (born November 30, 1954) is an American economist.  He served as the 71st United States Secretary of the Treasury from 1999 to 2001 under President Bill Clinton He was Director of the White House United States National Economic Council for President Barack Obama from January 2009 until November 2010.  Summers is the Charles W. Eliot University Professor at Harvard University's Kennedy School of Government.  He is the 1993 recipient of the John Bates Clark Medal for his work in several fields of economics."

http://en.wikipedia.org/wiki/Lawrence_Summers

More on the Sanctity of AIG Executive Contracts, ABC News:

"The potential for a costly lawsuit stems in part from state law in Connecticut, where AIG's now-infamous financial products division — the arm of the company that employs the 400-some employees awarded the $165 million bonuses — is based."

"In a document submitted by AIG to Treasury Secretary Timothy Geithner, the company argues that were it to renege on contractual agreements to make retention payments — which were set in early 2008, before the

government enacted compensation limits under its Troubled Asset Relief Plan — the firm could be liable for 'double damages and attorneys' fees' under the Connecticut Wage Act."

(My comment: Conveniently, public sector entities are generally exempted in these "wage acts."  Thus, public sector workers are forced to rely on the Contract Clause.)

ABC:

"There 'are legal, binding obligations of AIG, and there are serious legal, as well as business, consequences for not paying,' Liddy wrote in a recent letter to Geithner."

"'If we're talking about the possibility of violating the Connecticut or other states' wage act, then there is a real risk that one needs to be concerned about. … Some of these states are fairly punitive,' said Donald P. Carleen, of the law firm Fried, Frank, Harris, Shriver & Jacobson LLP. 'For AIG to do what the public seems to want them to do and certainly what Congress would like them to do could in theory expose them to liability.'"

http://abcnews.go.com/Business/Economy/story?id=7097759&page=1

NYT:

"But the bonuses will go forward because lawyers said the firm was contractually obligated to pay them."

"The administration official said the Treasury Department did its own legal analysis and concluded that those contracts could not be broken."

http://www.nytimes.com/2009/03/15/business/15AIG.html?_r=0

"We Can't Break AIG Bonus Contracts But Worker Pensions?  No Problem!"

"But now that we’re talking about breaking contract to pay back pensions that middle class workers have paid into over the course of their professional careers, well — that’s another story."

"So, where was all this 'fiscally responsible' fighting spirit when it came to paying out $32.6 billion in taxpayer funded banker bonuses?"

"Well, as Larry Summers said, 'we are a country of law.'”

http://fdlaction.firedoglake.com/2011/02/23/we-cant-break-aig-bonus-contracts-but-worker-pensions-no-problem/

Politicsdaily.com:

"The United States is a country that follows the rule of law. And it does so even if that means paying employees of AIG, the failed insurance company whose actions nearly caused a global economic collapse last year, millions of dollars in bonuses."

"The second contract problem, involving the bonus payments, follows from the first.  One year ago, AIG revealed that it was paying its employees $165 million in deferred compensation, even though it was then effectively under government control."

"As then-CEO Edward Liddy explained to Geithner in a letter dated March 14, 2009, AIG entered into contracts with about 400 employees of the Financial Products division that guaranteed a minimum level of pay for 2008 and 2009 as retention bonuses. AIG wrote these contracts before it received the federal bailout and entered the TARP."

(My comment: Note that both the AIG controversy and the Colorado PERA retiree lawsuit, Justus v. State, surround the payment of deferred compensation.)

Politicsdaily.com:

"Despite the outcry, the money was paid.  Liddy explained that 'outside counsel has advised that these are legal, binding obligations of AIG, and there are serious legal, as well as business, consequences for not paying.'"

"Additional details attached to Liddy's letter explained that the tax code specifically limits a company's ability to modify deferred compensation agreements."

"As Liddy emphasized, 'Honoring contractual commitments is at the heart of what we do in the insurance business.  I cannot have our clients lose faith in our desire and ability to do just that."

(My comment: Does it matter at all if citizens of the United States lose faith in the willingness of U.S. state and local governments to honor their contractual commitments?)

Politicsdaily.com:

"Like it or not, the sanctity of contracts rules the land.  And, if AIG's contracts say that AIG's employees will receive $100 million in deferred compensation or that its counterparties will receive a $62 billion payment in full for their investments, then that's what the law says."

http://www.politicsdaily.com/2010/02/06/aig-bonuses-why-those-pesky-contracts-cant-be-ignored/

CNN Money, Corporations Won't Feel Comfortable Doing Business with a U.S. Government that Doesn't Honor Corporate Contracts:

"AIG has been given access to $182 billion in taxpayer funds in the past six months.  Recently it paid out $165 million in retention bonuses to employees in the company's financial products division.  Those bonuses were written into employee contracts written in early 2008."

"Another concern: Companies in the private sector won't feel comfortable doing business with Uncle Sam if they think he'll change the rules on them after a deal is done."

"One option: Legislative aides say lawmakers may try to find a face-saving way out of this — perhaps by passing something that beefs up rules concerning future bonuses while dropping the language about bonuses already paid."

http://money.cnn.com/2009/03/24/news/economy/bonus_tax_onsecondthought/index.htm?source=yahoo_quote

Dean Baker, Co-director, Center for Economic and Policy Research, on Public Pension Contractual Obligations:

"This is a contractual obligation, I just find it kind of striking here, because there is such a selectivity about how we view contracts.  You might remember that back when AIG was bankrupt, there was a big issue that they had these bonuses for their top people, hundreds of thousands of dollars per person, and we ended up paying them, because we got lectures, including from people in the Obama Administration about the sanctity of contracts.  Well, here you have contracts with workers that are actually guaranteed by the state constitution that apparently don't mean anything."

News Program Moderator:

"Let me just emphasize that, because that episode was, it was fairly early in the Obama Administration, there were all of these bonuses set to be paid to top AIG Executives . . .  there was massive populist outrage across the political spectrum and the answer that came from everybody was that these was that these bonuses had to be paid because these were contractual obligations and you could not just rip up contracts."

Dean Baker:

"Exactly . . . when it's ordinary workers rather than folks on Wall Street, they're prepared to rip up contracts.  That's what we're talking about here.  So, I think people should be outraged."

http://www.afscme.org/blog/saunders-on-msnbc-dont-scapegoat-detroit-workers

(My comment: Note that the City of Detroit is currently trying to abandon its public pension contracts in bankruptcy.  Note that the State of Colorado is currently trying to escape its contractual public pension obligations OUTSIDE OF BANKRUPTCY.  World of difference.  Also, note that pensioners in Detroit are paid contracted pension benefits that average $19,000 annually, and that most receive no Social Security benefits.)

Dean Baker, Co-director, Center for Economic and Policy Research on Detroit Pensions:

"But even if Detroit’s workers got a good deal with their pay and benefit package, so what?  A contract is still a contract.  Workers put in their time in exchange for a specific package of pay and benefits, how can the government arbitrarily change the terms of the deal after the fact."

"There are businesses that end up getting very good deals from the government all the time.  How often does a state or local government end up selling a parcel of land for a price that turns out to be hugely below its true value.  Or they may give tax concessions to lure businesses that prove to be overly generous.  It looks like the City of Chicago made a really bad deal in leasing its parking meters to Morgan Stanley for three quarters of a century.  Does Chicago get to just rewrite the terms of the contract?"

"In these cases involving businesses, somehow a contract is a contract, end of story.  The relationship is sacred and no one suggests changing the terms after the fact.  However, in the case of the pensions for city workers, these are just office workers, custodians, or garbage collectors.  The media would have us believe that contracts with these sorts of people aren’t real contracts.  If they prove inconvenient, then they can be changed."

"While that may be the view that the media is trying to push, the rest of us should insist that the law and the constitution be respected.  Detroit’s city workers have as much right to have their contracts respected as the Wall Street bankers making millions and billions off contracts that are often far more questionable."

"This is class war at its ugliest.  The elites have to learn that they don’t get to change the rules as they go along, if they want their contracts to be respected they will have to respect contracts that protect working people as well."

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-columns/in-detroits-bankruptcy-why-are-contracts-with-workers-a-joke

Colorado PERA members: In 2009, incredibly, Colorado's public sector unions joined the effort to break the contracts of their retired union "brothers and sisters."  Sharp lawyers bought the support of Colorado's public sector unions with the promise to bolster the PERA trust funds by raiding the assets of elderly PERA retirees, leaving the "dues-paying union members" relatively unscathed.  In 2009, Colorado's public sector unions joined the "class war," playing into the sharp lawyers' hands, dividing Colorado PERA members into a group of active members, and a group of retirees whose rights, they believed, could be trashed.  This is the world we live in, and it is going to take time and effort to clean it up.

Fight for your rights!  Support Save Pera Cola!  Contribute at saveperacola.com and Friend Save Pera Cola on Facebook.

AARP: We Will Defend the Contracts of Detroit’s Pensioners. AARP: We Will “Monitor” the Breach of Colorado PERA Pension Contracts.

Today (August 23, 2013) the AARP published an article on the AARP Blog: "Cutting Detroit Retirees’ Pensions Violates State Constitution."  The AARP has decided to defend the contracts of retirees in Detroit.  You may have heard that Detroit has filed for municipal bankruptcy and is attempting to take back contracted public pension benefits from the city's pensioners (who receive an average annual benefit of $19,000.)

Importantly, Detroit is trying to take contracted public pension benefits IN BANKRUPTCY.  The Colorado Legislature is attempting (in SB10-001) to claw back contracted Colorado PERA public pension benefits OUTSIDE OF BANKRUPTCY.  There is a world of difference between the two.  Detroit is a municipality facing severe financial distress.  Colorado is the tenth wealthiest state in the nation and has one of the strongest economies in the nation.  Colorado PERA's members include the State of Colorado and many Colorado local governments.

The AARP Will Fight for Detroit's Pensioners:

"Last month, we heard the news about the City of Detroit filing for Chapter 9 bankruptcy protection in federal court, becoming the largest city to ever do so.  The city’s financial crisis threatens the retirement security of more than 30,000 active and retired employees, and almost immediately, lawsuits were filed in state court to protect Detroit’s two pension funds during the city’s restructuring."

"Michigan Attorney General Bill Schulte has said that, under the state constitution, pension obligations to state and municipal employees and retirees in Michigan may not be 'diminished or impaired.'”

"Cutting the pension benefits of Detroit’s public employees, who have paid into the system over a lifetime of hard work, violates the constitution and the state’s contract with its retirees."

"In a statement, AARP Michigan State Director Jacqueline Morrison said, in part:

'The firefighters and police of Detroit have dedicated their careers to protecting the city’s citizens.  These first-responders – and other hard-working Detroit public employees – made their pension payments.  They count on their health benefits.  We can’t change the rules at the end of the game for these public employees.'

– Many retired public employees live on fixed incomes.

– Unlike most Americans, Detroit’s firefighters and police do not get Social Security, and instead rely more heavily during retirement on the pension benefits they earned.

– The average firefighter in Detroit survives on a pension of only $30,000 a year."

“'Raiding the pensions of hard-working Michiganders to make bondholders whole is not the way to right Detroit’s fiscal house,' AARP’s Morrison emphasized."

“Detroit’s retirees must have effective representation throughout
the process of addressing the city’s challenges.”  "We will continue to be a watchdog for our members and all older Michiganders, and will hold the politicians accountable for finding responsible solutions that protect retirees’ pensions and health benefits."

http://blog.aarp.org/2013/08/23/cutting-detroit-retirees-pensions-violates-state-constitution/

THE AARP FAILED COLORADO PERA RETIREES IN 2010.

The AARP did not "hold any politicians accountable" for the breach of Colorado PERA pension contracts in 2010.  Instead, AARP officials "held" their tongues.

Below, I provide an excerpt from a Colorado AARP statement regarding their decision to simply monitor the Colorado General Assembly's 2010 pension default legislation (public pension contract breach) rather than defending Colorado public pension contracts.

AARP:

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

(My response: In my opinion, some of the 27 self-serving lobbyists and lawyers seeking to break Colorado PERA pension contracts got to the Colorado AARP early, in 2009.  I believe that the taking of earned, contracted deferred compensation from retirees in SB10-001 was patently immoral.  Apart from the question of the constitutionality of SB 10-001, recognition of its immorality should have given pause to AARP officials and volunteers in 2010.  In my opinion, the AARP abandoned its mission and will find itself on the wrong side of history in our state.

The Colorado PERA public pension debate in 2010 provided an opportunity for the AARP to demonstrate its value to retirees in the United States, and to stand up for the many Colorado PERA retirees who are unable to defend their own contractual rights. (It's true, for a number of reasons many of these retirees are unable to defend their rights.)  The 2010 PERA debate was a missed opportunity for Colorado AARP officials to make it clear that the AARP is a champion of retiree interests.

Support public pension contracts and the rule of law in the United States, contribute at saveperacola.com!  Friend Save Pera Cola on Facebook!

Colorado WINS, a Proponent of Colorado PERA Pension Contract Breach, Condemns the Legislature’s Failure to Pay its PERA Pension Bills.

A few days ago, (8/19/2013) Colorado WINS (a coalition of public sector unions, "Colorado Workers for Innovative and New Solutions") posted an article on its website condemning the historical underfunding of the Colorado PERA public pension system by the Colorado General Assembly.

http://coloradowins.org/2013/08/19/2014-total-comp-comparing-pera-and-private-sector-retirement-benefits/

In 2010, Colorado WINS supported SB10-001, a bill that broke the pension contracts of pensioners in the Colorado PERA pension system.  The 2010 legislation sought to force a "sacrifice" from Colorado PERA pensioners, that is, forcibly take the property of these PERA pensioners, allowing Colorado state and local governments to escape their accrued pension debts. I believe, that Colorado WINS supported the breach of the public pension contracts of their retired union "brothers and sisters" in order to minimize the future pension contributions needed from their current active "dues-paying" union members.  (Retired union members no longer pay union dues, why should their interests and contracts be protected by Colorado WINS? . . . follow the money!)

Colorado WINS is looking out for their current, active members, but I think they made a mistake in 2010.  What kind of a union casually tosses its retired members under the bus?  There is scant precedent for this type of behavior in the history of the U.S. labor movement.  This act was clearly immoral and treacherous.  It undermines the moral standing of the U.S. labor movement. Public sector unions have done much to improve the working conditions of middle-class Americans over the last century, but advocating the breach of the contracts of their retired union members crosses a moral line.

As we read on the Colorado PERA website:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”

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

(My comment: Yes, Colorado PERA was able to frighten a few PERA retirees into supporting the breach of their own PERA pension contracts in 2009.  The public relations campaign to take money from Colorado PERA retirees was, ironically, funded with these retirees' own money [from PERA pension trust funds.]  It has been observed that many of the PERA retirees who supported the breach of PERA contracts in 2010 were among the wealthier PERA pensioners.)

Rather than conspiring with others to "claw back" the earnings of Colorado's pensioners, I think that Colorado WINS should be demanding that the Colorado Legislature actually pay its public pension bills.  What are Colorado WINS' lobbyists doing?  For the last decade, they should have demanded that the Colorado Legislature meet its contractual obligations, that full payment of PERA's pension bills be made.  Colorado WINS lobbyists should have made these demands before the committees of the Legislature at every opportunity.  In every year that the Colorado Legislature failed to make its PERA pension payments and instead appropriated funds to cover local government pension debt that IS NOT the contractual obligation of the State of Colorado, Colorado WINS' lobbyists should have been there to demand an end to the practice.

As we have seen, the Colorado General Assembly has not paid its full Colorado PERA public pension bill 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

Provided below are statistics relating to the failure of the Colorado General Assembly to pay its public pension “actuarially required contributions” (ARCs), from the Center for Retirement Research at Boston College Public Plans Database:

2001 Colorado School – 100% ARC Paid

2002 Colorado School – 100% ARC Paid

2003 Colorado School – 69% ARC Paid

2004 Colorado School – 51% ARC Paid

2005 Colorado School – 48% ARC Paid

2006 Colorado School – 62% ARC Paid

2007 Colorado School – 60% ARC Paid

2008 Colorado School – 68% ARC Paid

2009 Colorado School – 65% ARC Paid

2010 Colorado School – 70% ARC Paid

2011 Colorado School – 89% ARC Paid

2001 Colorado State – 100% ARC Paid

2002 Colorado State – 100% ARC Paid

2003 Colorado State – 69% ARC Paid

2004 Colorado State – 51% ARC Paid

2005 Colorado State – 48% ARC Paid

2006 Colorado State – 58% ARC Paid

2007 Colorado State – 56% ARC Paid

2008 Colorado State – 63% ARC Paid

2009 Colorado State – 61% ARC Paid

2010 Colorado State – 62% ARC Paid

2011 Colorado State – 85% ARC Paid

2001 Colorado Municipal – 100% ARC Paid

2002 Colorado Municipal – 100% ARC Paid

2003 Colorado Municipal – 69% ARC Paid

2004 Colorado Municipal – 62% ARC Paid

2005 Colorado Municipal – 64% ARC Paid

2006 Colorado Municipal – 85% ARC Paid

2007 Colorado Municipal – 84% ARC Paid

2008 Colorado Municipal – 98% ARC Paid

2009 Colorado Municipal – 96% ARC Paid

2010 Colorado Municipal – 101% ARC Paid

2011 Colorado Municipal – 139% ARC Paid

(According to the 2011 PERA CAFR, the dramatic increase in the percentage contributed for the Colorado PERA Local Government Division in 2011, is a “result of the changes contained in SB10-001,”  [2011 PERA CAFR Financial Section, page 82.]  Apparently, when the State of Colorado breaks its public pension contracts it really facilitates the payment of the full ARC in some PERA divisions.)

The Colorado WINS article published on August 19, 2013 highlights the Colorado Legislature's historical underfunding of the Colorado PERA pension system, and points out that the State of Colorado pays for only 17 percent of state employee retirement benefits.  The WINS article emphasizes the fact that Colorado PERA retirees are not eligible to receive Social Security benefits and are accordingly entirely dependent on their PERA pension benefits.  In the article, Colorado WINS states that the Colorado General Assembly "chose to underfund its portion of contributions," and that the "underfunding" of the Colorado PERA pension system "is not the fault of state employees."  If this is true, why did Colorado WINS support a bill that shifts the burden of this PERA pension underfunding onto state employees (and PERA members employed by local governments?)

Colorado WINS notes that the increased PERA employer costs (AED and SAED) put in place by the Colorado Legislature are the result of the Legislature's failure to make pension payments identified by Colorado PERA's actuaries [necessary to maintain a healthy public pension system, “actuarially required contributions, ARC.”]  Colorado WINS notes that the inclusion of the AED and SAED in public employee compensation studies leads to the false conclusion that the State of Colorado contributes more to retirement than do private sector entities in Colorado.

Colorado WINS on Social Security:

"What is important to remember, and which is often lost in the debate over public employee pensions, is that state employees do not earn Social Security while they are employed by the state.  When someone in the general public hears about a PERA Pension they often are not aware of this fact and assume that a state employee’s pension is an add-on to their Social Security benefits, similar to the role of a 401k or a pension in the private sector."

(My comment: The fact that Colorado PERA pensioners are completely dependent to their pension contracts renders the Colorado Legislature's self-serving breach of these contracts in 2010 unconscionable.  Contractual obligations were broken to free up money for discretionary programs popular with voters.)

Colorado WINS:

"The actuarial costs however include moneys needed to make up for years when the state underfunded their portion of the PERA contribution and all other such accrued liabilities and any  other contributions made to PERA."

(My comment: The underfunding of the Colorado PERA pension system by the Colorado Legislature was condemned at the 2009 Colorado PERA "Listening Tour" meeting in Denver, PERA member David Holme:

“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://www.copera.org/Flash/DenverListeningTour/PublicComment.html

Colorado WINS:

"Based on PERA’s report we see that a state employee pays 83% of the contribution necessary to pay for their future retirement benefits – this is significantly higher than what an employee pays in the private sector."

(My comment: The fact that the State of Colorado and other Colorado PERA employers put forth a minimal financial effort in the provision of public pension benefits renders the Colorado Legislature's 2010 breach of PERA pension contracts that much more egregious.

• 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.

Colorado WINS:

"The added employer costs in the DPA analysis are a result of underfunding of the State’s pension obligation by the State in previous years."

"First, the underfunding that AED and SAED are designed to address (circumstances that) occurred through no fault of any State employees.  Rather the State chose to underfund its portion of contributions.  Employees should not have their benefits attacked because of an action that their employer freely took.  Second, AED and SAED payments cannot be accurately categorized as part of the total annual compensation package for current employees.  These are not new benefits; rather they are payments on already owed benefits."

"In that analysis it is clear that the State is simply not competitive in any real world, practical analysis of their retirement benefits plan."

Link to the complete Colorado WINS article:

http://coloradowins.org/2013/08/19/2014-total-comp-comparing-pera-and-private-sector-retirement-benefits/

A comment from ColoradoPols.com on the support of Colorado WINS for breach of PERA pension contracts in 2010:

"However, (Colorado PERA's) placing 90% of the reform burden on PERA retirees was the master stroke to win key employee groups, especially Colorado WINS."

http://coloradopols.com/diary/46912/truthout-illinois-plutocrats-manipulate-state-bond-ratings-to-escape-public-pension-contracts-lower-their-tax-burden

The failure of the Colorado General Assembly to pay its public pension bills for the last decade has also been condemned by Colorado PERA officials:

Colorado PERA Executive Director Greg Smith, August 11, 2009:

“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.”

(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.)

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

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."

(Testimony to the House Finance Committee relating to the Colorado Legislature's historical underfunding of its PERA pension obligations.)

As we have seen, a columnist for the Wall Street Journal's Marketwatch.com has recently labeled such deliberate underfunding of public pension systems "corruption."

The columnist, Chris Tobe, has served as a trustee of a public pension system.  Chris Tobe:

"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."

"I compare Kentucky to Illinois, much of whose real corruption happened maybe ten years ago and Blagojevich, the governor, was deeply involved with it. They’ve also underfunded their actuarially-required contribution [ARC], much like Kentucky. Those two things went hand-in-hand, in Illinois and Kentucky, probably the two worst state systems. If people are willing to look the other way at corruption in investments, they’re willing to look the other way at deliberate underfunding, which I consider corruption as well."

Link:

http://www.publicsectorinc.org/podcasts/070613tobe.php#.UgQ3zr7nbX5

Colorado WINS membership and organization:

“The Colorado Association of Public Employees/Service Employees International Union (CAPE/SEIU); the American Federation of State, County and Municipal Employees (AFSCME); and the American Federation of Teachers (AFT) are joining forces to organize state employees. The new organization will be known as Colorado WINS (Workers for Innovative and New Solutions).”

"In addition, Colorado WINS will have the ‘sole authority to advocate for legislation affecting state employees, including but not limited to legislation affecting PERA [the Public Employees’ Retirement Association], the state personnel system, employee accountability and state employee protections.’”

“Under the agreement, SEIU will provide 50 percent of the budget for Colorado WINS; AFT and AFSCME will provide the rest.”

“The agreement also says that funding contributed by Colorado WINS members for political purposes will be divided, with 50 percent going to SEIU/CAPE and 50 percent to the AFT and AFSCME political funds.”

“A copy of the agreement is available online at:

http://www.eiaonline.com/coloradowins.pdf.”

https://www.cu.edu/sg/messages/5895.html

Colorado PERA active and retired members, your contracts have equal status to Colorado's contracts with corporations.  There is no reason why the contract of a public sector worker should be viewed as inferior to a contract between the State of Colorado and a corporation.  Note that no Colorado state legislator has proposed breaking state contracts with corporations.  Keep up the fight for your contractual rights!  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Grand Theft Pension: Lessons from the Colorado Supreme Court Case, Golden v. Parker, for the Colorado PERA Retiree COLA Lawsuit.

The Colorado PERA retiree COLA lawsuit, Justus v. State, is currently pending before the Colorado Supreme Court.  In this lawsuit, retirees in the Colorado PERA pension system contest the retroactive reduction of their contracted public pension COLA benefits by the Colorado General Assembly in 2010.  (The Colorado Legislature seeks to take money from old people to maintain Colorado's status as a "tax haven."  A deal IS NOT a deal, according to the Colorado Legislature.  This is the politician's idea of "good faith and fair dealing.")

In Colorado, we have long-standing, on-point public pension case law (Bills/McPhail) holding that, once a member of a public pension system meets all statutory conditions and retirees, the retirement benefits of that pensioner are inviolate . . . the contracted pension benefits cannot be reduced by the Colorado Legislature for any reason.  Colorado's public pension case law allows changes to be made to public pension benefits while a pension member is still working, under certain conditions.

Colorado's pension administrators at the public pension system Colorado PERA, and other conspirators truly want to claw back benefits from Colorado PERA pensioners.  In 2010, their lobbyists passed a bill (SB10-001) to do just that.  If they are successful in this pension "claw back" a significant chunk of the accrued pension debt of Colorado state and local governments will be wiped out with the stroke of a pen.  (I wish I could do the same with my home mortgage.)

In 2012, the Colorado Court of Appeals agreed with Colorado PERA pensioners that they have a contractual right to be paid the total amount of their earned, deferred compensation (PERA pension) that the Colorado General Assembly has chosen to deliver by means of a base benefit that is increased incrementally each year (a COLA.)  (Private sector insurance companies also offer COLA provisions in contracted annuities that are sold to the public.)  However, in the 2012 Decision, the Colorado Court of Appeals left open the possibility that “fully-vested” PERA retiree pension benefits can be reduced if it is “reasonable and necessary to serve a significant and legitimate public purpose.”  This finding, that public pension benefits can be changed under certain circumstances after a pension member retires does not comport with Colorado's long-standing public pension case law.  So, the PERA pensioners appealed the decision of the Court of Appeals to the Colorado Supreme Court.  The Colorado Supreme Court has agreed to take the case.

If the Colorado Supreme Court follows the doctrine of stare decisis, and determines that Colorado's public pension precedent (Bills/McPhail) continue to control, then PERA retiree COLA benefits will be confirmed as inviolate.

But, since launching the scheme to take pensioner property, the proponents of SB10-001 have found a new argument.  The proponents of SB10-001 now argue that a more recent Colorado Supreme Court decision addressing contractual rights is now in control (DeWitt.)  The proponents of taking pensioner assets argue that this newer Supreme Court decision sets the bar a little lower, and might allow property to be taken from retirees under certain conditions.  I believe that taking PERA COLA benefits from Colorado PERA retirees is not constitutionally permissible under Bills/McPhail, and further, that the taking is not constitutionally permissible even under the new rules (DeWitt) that the proponents of SB10-001 would like to see controlling.  In spite of the desire of those who seek to break PERA pensioner contracts, DeWitt is not a "get out of your contractual obligations free card."

Yesterday, I read another decision of the Colorado Supreme Court (from 2006) that addresses contractual rights in our state.  The Colorado Supreme Court decision in the 2006 case, City of Golden v. Parker, provides insight into the doctrinal views of the Supreme Court regarding the retroactive application of public acts in Colorado to existing contractual relationships.  I read through the 2006 case with the Colorado PERA retiree pension case, Justus v. State in mind.  Below are my layman's reactions to the case, City of Golden v. Parker.

City of Golden v. Parker.

In its 2006 decision in City of Golden v. Parker, the Colorado Supreme Court determined that the retroactive application of a City of Golden Charter Amendment (that required voter approval of development incentive agreements) to existing agreements with the developers was "unconstitutionally retrospective."  The Supreme Court found that the developers had vested rights in their agreements and that these vested rights were not overridden by "public policy considerations."

Here's a link to the Colorado Supreme Court decision in City of Golden v. Parker, June 26, 2006:

http://www.cobar.org/opinions/opinion.cfm?opinionid=5666&courtid=2

Here are some excerpts from the case, Golden v. Parker, and my comments.  Colorado Supreme Court:

"We granted certiorari to consider whether certain real estate developers . . . who entered into economic incentive agreements . . . with the City of Golden . . . and its City Council had vested rights in those agreements that could not be disturbed by an amendment to Golden’s home rule city charter . . . enacted subsequent to the Agreements which required, with certain exceptions, voter approval of all new grants of development subsidies or incentives in excess of $25,000."

"The Court of Appeals held that the Developers did not possess vested rights under the Agreements that precluded application of the Charter Amendment to subsidies and incentives paid to the Developers after approval of the amendment . . . We reverse the Court of Appeals’ judgment."

(My comment: The City of Golden created its economic incentives program in 1992.  Under the agreements, developers were eligible for reimbursement of taxes and development costs in exchange for the economic activity and jobs their projects would generate.  The Colorado Supreme Court notes, in the decision, that the TABOR amendment passed by Colorado voters in 1992 requires voter approval for the creation of multiple fiscal year debt.)

Colorado Supreme Court:

"All of the Agreements provided that the reimbursements did not constitute a multiple fiscal year debt or financial obligation and were subject to annual appropriations by the City Council."

Colorado's Constitutional TABOR Amendment.

(My comment: I have some views on Colorado's 1992 TABOR constitutional amendment and its impact on the Colorado PERA pension system.  The TABOR Amendment was adopted six decades after the creation of Colorado PERA.  An exclusion of public pension debt is incorporated into the TABOR Amendment.  Most current Colorado PERA retirees entered into a contractual relationship with Colorado PERA and their PERA-affiliated government employers before TABOR was adopted by Colorado voters.  Since the adoption of the TABOR amendment, the Colorado Legislature has acted to restrict its available revenues beyond that required under the amendment.  The existence of the TABOR amendment in the Colorado Constitution did not prevent the Colorado Legislature from improving the PERA COLA benefit in 2000 in HB 00-1458.  Such improvements in the PERA COLA benefit are permissible as no harm is done to PERA retirees.  The improvement of the Colorado PERA pension COLA provision to 3.5 percent [non-DPS], and further restriction of the State of Colorado's revenue stream occurred AFTER the adoption of the TABOR amendment.  Thus, the TABOR Amendment can provide no rationale for the 2010 breach of Colorado PERA pension contracts in SB10-001.

Colorado's TABOR Amendment recognizes public pension obligations as permissible multiple-fiscal year "debt" of Colorado's "districts":  "(b) Except for refinancing district bonded debt at a lower interest rate or adding new employees to existing district pension plans, creation of any multiple-fiscal year direct or indirect district debt or other financial obligation whatsoever without adequate present cash reserves pledged irrevocably and held for payments in all future fiscal years."

A recent Denver Post article on TABOR:

“But former state Rep. Brad Young, a Republican from Lamar and a former chairman of the legislature's Joint Budget Committee, agrees with many on the left who say TABOR reduces the size of government over time.”

“He and others point to state spending as a proportion of Coloradans' personal income, which has dropped from 6.7 percent of personal income in fiscal 1993-94, the first year TABOR took effect, to 3.9 percent in fiscal 2011-12, the budget year that ended in June.”

“Colorado ranks 45th in the nation in terms of combined local and state tax burden as measured by taxes paid per $1,000 earned.  By that measure, Colorado's combined state and local tax burden is lower than every one of its surrounding states.”

“In 1999, the Republican-controlled legislature reduced the state's income tax from 5 percent to 4.75 percent and then, a year later, to 4.63 percent.”

“Meanwhile, lawmakers cut the state's sales tax from 3 percent to 2.9 percent in 2000.”

“But because of TABOR, those effectively became permanent tax cuts, Young and others say.”

Link:

http://www.denverpost.com/ci_22248157/two-decades-later-tabor-praised-blamed-limiting-government

Since TABOR was adopted by the voters in 1992 the Colorado Legislature and Governor Owens have cut the state's revenue stream, imposing even tighter budgets than would have otherwise existed under TABOR.

Since TABOR's adoption the Colorado Legislature has transferred $700 million of state revenue to pay off Colorado local government legacy pension debt that IS NOT the contractual obligation of the State of Colorado, while failing to pay PERA pension bills THAT ARE the contractual obligation of the State of Colorado.  The Colorado Legislature has also limited its available revenues by granting discretionary corporate subsidies and foregoing opportunities to raise reasonable levels of revenue from mineral extraction.  Legislative and executive actions that have diminished Colorado PERA's funding ratio were taken with full knowledge of TABOR's presence in the Colorado Constitution and the contractual nature of accrued Colorado PERA pension benefits.  The decisions of Colorado voters at the polls over the last two decades have real consequences for our state; but, there is no polling booth lever that voters can pull to eliminate contractual protections in the Colorado and U.S. constitutions.)

Colorado Supreme Court:

"On November 6, 2001, Golden’s voters approved an amendment to the Golden City Charter, which required that the city obtain voter approval to grant development subsidies or incentives in excess of $25,000 in any one year."

"Subsequently, on June 13, 2002, Golden passed Ordinance No. 1590 . . . which provided in part that 'economic development subsidy or incentive agreements in effect on November 6, 2001, shall remain in effect, subject however to the provisions and conditions of each such individual agreement.'  In July 2002, following the adoption of the Ordinance, Donald G. Parker, a Golden resident and the respondent here, filed a complaint in the trial court challenging Golden’s continuing obligation under the Agreements. Parker sought a declaratory judgment and injunctive relief to prevent further appropriations to Developers in excess of $25,000 absent voter approval."

"The (trial) court determined that the Developers had vested rights to have the City Council exercise reasonable discretion annually in determining whether or not to appropriate funds to reimburse the Developers under the Agreements.  The trial court found that retroactive application of the Charter Amendment to the Agreements would violate the prohibition against retrospective law in the Colorado Constitution. Colo. Const. art. II, § 11.  The Court of Appeals reversed the trial court, holding that the Agreements did not confer vested rights upon the Developers.  We granted the Petitioners’ request for certiorari review and now reverse."

Retrospective.

"Under the Colorado Constitution, the General Assembly is prohibited from enacting any law that is 'retrospective in its operation . . . .' Colo. Const. art. II, § 11.  The prohibition against retrospective laws at the state level applies equally to local government."

"The general prohibition against retrospective legislation is intended to prevent any unfairness that might result from the application of new law to rights already in existence. In re Estate of DeWitt, 54 P.3d 849, 854 (Colo. 2002).  Legislation is presumed to operate prospectively unless there is legislative intent to the contrary.  Retroactive application of a law, although disfavored, is not necessarily unconstitutional and may be permitted if the law at issue effects a change that is procedural or remedial.  Kuhn v. State, 924 P.2d 1053, 1056-57 (Colo. 1996).  In order to distinguish legislation that is merely retroactive, we use the term 'retrospective' only in regard to legislation that 'impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past.'"

"However, in Ficarra we also stated that a vested right may originate from a statute or the common law and it is only 'once it vests that it is no longer dependent for its assertion upon the common law or statute under which it may have been acquired.' 849 P.2d at 15.  Our analysis in Ficarra in no way indicates that a vested right cannot originate from the common law."

(My comment: Colorado PERA officials have testified before the Joint Budget Committee of the Colorado Legislature that a reduction of the contracted PERA COLA benefit would necessarily operate retrospectively, impairing existing vested rights.

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

Statements made by the co-prime sponsor of SB10-001, Senator Josh Penry, document legislative intent that the bill operate in a retrospective manner:

Senator Josh Penry, co-prime sponsor of SB10-001, in a videotaped discussion with Representative Mike May, [videocenter. denverpost.com] said ‘we can’t, can’t miss this window.’  And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . .

“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age. You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return. So that could change the specter of actuarial necessity. We gotta’ do it this year or else these other structural changes won’t be possible.”

http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

SB10-001 co-prime sponsor Senator Penry states his intent here to use recent market volatility to justify the proposed PERA pension contract breach.  His comments reveal an awareness of the recovery of equity markets in 2009, his intent to justify the breach of PERA pension contracts based on outdated PERA pension funding statistics (prior to the release of new pension funding ratios,) an intent to impose a new disability on Colorado PERA retirees, and an intent to defeat the expectations upon which these PERA retirees have altered the course of their lives.

On-point Colorado public pension case law [McPhail] cites Retirement Board of Allegheny County v. McGovern, “The language of the [Pennsylvania] Court is applicable to the conditions which are here present: Retirement pay is defined as ‘adjusted compensation’ presently earned, which, with contributions from employees, is payable in the future.  The compensation is earned in the present, payable in the future to an employee, provided he possesses the qualifications required by the act . . .”.  “ . . . when the conditions are satisfied, at that time retirement pay becomes a vested right of which the person entitled thereto cannot be deprived; it has ripened into a full contractual obligation.”)

Colorado Supreme Court:

"We use a two-step inquiry to determine whether or not a law is retrospective in its operation. DeWitt, 54 P.3d at 854.  First, we look to the legislative intent to determine whether the law is intended to operate retroactively.  We require a clear legislative intent that the law apply retroactively to overcome the presumption of prospectivity."

(My comment: The mantra of the proponents of SB10-001 during the public relations, lobbying and legal campaigns to take fully-vested Colorado PERA retiree pension COLA benefits has been "shared sacrifice."  The proponent's of SB10-001 seek to force a "sacrifice" from Colorado PERA retirees.  Colorado PERA and the 27 statehouse lobbyists working SB10-001 in 2010 sought to force PERA retirees to relinquish their contracted benefits in order to diminish the accumulated pension debt of PERA-affiliated employers.  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.

If SB10-001 sought to alter the PERA COLA only on a PROSPECTIVE basis, the legislation's pension debt "cost-shift" would not be possible [90 percent of the bill's "savings" resulted from shifting costs from PERA-affiliated employers to PERA retirees.])

Colorado Supreme Court:

"If we find intent of retroactive application, the second step of the inquiry is to determine whether the retroactively applied law operates retrospectively.  A law is retrospective if it either "(1) impairs a vested right, or (2) creates a new obligation, imposes a new duty, or attaches a new disability.. .." DeWitt, 54 P.3d at 855."

(My comment: Again, a defendant in the case Justus v. State [Colorado PERA] has previously acknowledged [in recorded testimony to the Colorado General Assembly] that a reduction in fully-vested PERA COLA benefits impairs a vested right: “The General Assembly cannot decrease the COLA [absent actuarial necessity] because it is part of the contractual obligations that accrue under a pension plan protected under the Colorado Constitution Article II, Section 11 and the United States Constitution Article 1, Section 10 for vested contractual rights.”

The administration of Governor Bill Ritter [who signed SB10-001 into law] has acknowledged that SB10-001 attaches a new disability on Colorado PERA retirees.  Officials of the Ritter administration write that SB10-001 will cost an average PERA retiree $165,000 in the coming decades:

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)

Vested Rights.

Colorado Supreme Court:

"We do not employ a fixed formula or a bright-line test for determining whether a right is vested. Rather, we look to three factors: "(1) whether the public interest is advanced or retarded; (2) whether the statute gives effect to or defeats the bona fide intentions or reasonable expectations of the affected individuals; and (3) whether the statute surprises individuals who have relied on a contrary law." DeWitt, 54 P.3d at 855."

"A determination that retroactive application of a law impairs a vested right is not dispositive of the retrospectivity inquiry because such a finding 'may be balanced against public health and safety concerns, the state’s police powers to regulate certain practices, as well as other public policy considerations.'"

"Retroactive application of a law that implicates a vested right is only permissible, however, if the law bears a rational relationship to a legitimate government interest."

"In past cases, we have 'appl[ied] a balancing test that weighs public interest and statutory objectives against reasonable expectations and substantial reliance.'"

(My comment: Does a government have a "legitimate interest" in arbitrarily breaking its own contracts?  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.]
• 90 – percent of the financial burden of SB01-001 attributable to the taking of the contracted COLA benefit [according to Prime SB 10-001 bill sponsor, Senator Penry.]
• 3 – number of “No” votes that could have stopped the breach of retiree contracts from squeaking through in the Colorado House [would have died on a tie.]
• 27 – number of registered lobbyists [PERA staff, PERA hired lobbyists, public sector union lobbyists] engaged in taking the fully-vested, contracted retiree PERA COLA benefit.
• 5 – number of minutes after a PERA member retires that their PERA retirement benefits become “legally immune from any changes that would reduce their current, or future benefits,” according to Colorado PERA [Ewegen article].
• 17 – number of years during which the State of Colorado mistakenly adhered to financial restrictions [Arveschough-Bird] artificially limiting its available resources.
• 87% – level of Colorado PERA AFR that Colorado legislators contended was “too well-funded” in 1985 [Silver and Gold Record article.]
• 2 – number of times the Colorado PERA AFR has exceeded a 100% funding level in the 83-year history of Colorado PERA.
• 3.75% – Colorado PERA Board inflation assumption.
• $100 million – amount of discretionary tax relief grants by the Colorado General Assembly at recent legislative sessions.
• $700 million – amount of revenue the General Assembly has appropriated to pay for pension obligations that are not its legal responsibility (Old Hire Fire and Police Pension Obligations).
• 13 – Colorado’s rank among the states in per capita income in 2009.
• 9 – Colorado’s rank among the states in per capita income in 2013.
• 10 – Colorado’s rank among the state’s in GDP per capita in 2013.

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.")

Colorado Supreme Court:

" . . . we have prohibited retrospective application of a statute when the reasonable expectations and substantial reliance of a party vested prior to the enactment of the statute."

(My comment: From the Denver Post, November 30, 2008, 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.”

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

At the time of this statement, Greg Smith was Colorado PERA's General Counsel.  It appears that Colorado PERA's General Counsel, prior to the attempt to break PERA pension contracts, held the reasonable expectation that PERA pensioner COLA benefits cannot be retroactively diminished by the Colorado Legislature.

Colorado PERA's attorneys have recorded their expectation that Colorado PERA pension COLA benefits are contractual obligations that will be honored "absent actuarial necessity": “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.”  If Colorado PERA’s attorneys have an expectation that the contracted 3.5 percent PERA COLA cannot be taken by the General Assembly short of “actuarial necessity,” then why should relatively unsophisticated Colorado PERA retirees [who possess fully-vested pension rights] not also have this expectation?)

Colorado Supreme Court:

"The Petitioners did not submit any evidence of legislative intent."

(My comment: Of course, the Colorado PERA retiree COLA lawsuit has not yet been before a jury, but evidence of legislative intent surrounding the General Assembly's adoption of the "automatic" PERA COLA in 1993 is available:

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.])

Duty of Good Faith and Fair Dealing.

Colorado Supreme Court:

"Under Colorado law, every contract contains an implied duty of good faith and fair dealing. § 4-1-203, C.R.S. (2005); Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995).  A violation of the duty of good faith and fair dealing gives rise to a claim for breach of contract.  Cary v. United of Omaha Life Ins., 68 P.3d 462, 466 (Colo. 2003)."

"The good faith performance doctrine attaches to contracts 'to effectuate the intentions of the parties or to honor their reasonable expectations.' Amoco Oil Co., 908 P.2d at 498. The duty of good faith and fair dealing may be relied upon 'when the manner of performance under a specific contract term allows for discretion on the part of either party.'"

(My comment: The payment of the PERA COLA "automatic" pension benefit is not discretionary.  Colorado law provides that the PERA COLA benefit SHALL be provided.  Former "ad hoc" language relating to the PERA COLA benefit has been removed from Colorado law.

The provision in Colorado law requiring payment of 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.”

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 DeWitt Standards.

Colorado Supreme Court:

"We now turn to the DeWitt factors to determine whether application of the Charter Amendment to the Agreements implicates a vested right of the Developers."

"First, we consider whether the public interest is advanced or retarded by retroactive application of the Charter Amendment. DeWitt, 54 P.3d at 855.  Golden’s economic incentives program was enacted to advance the public interest in business 'development, expansion, and upgrade, for purposes of the economic revitalization of the community.' G.M.C. § 18.60.010 (2005)."

(My comment: Compensation [salary, benefits, and deferred pension compensation] is offered by public employers to prospective public employees to attract a talented workforce.  Colorado PERA pension benefits [including PERA COLA benefits] have been offered to prospective employees of Colorado PERA-affiliated employers to develop a skilled, valuable workforce.  Colorado PERA-affiliated employers and Colorado residents have benefited from this workforce for decades.  By attracting a qualified workforce, the PERA pension incentive advances the public interest.

The Colorado General Assembly has opted to deliver the total contracted PERA COLA benefit by means of a pension escalator [COLA] in retirement.  The General Assembly might just as well have offered a larger monthly pension benefit and no COLA to PERA members.)

Colorado Supreme Court:

"A countervailing consideration is the voters’ interest in limiting public expenditures, which likely motivated the passage of the Charter Amendment.  The Amendment ensures that the majority of Golden’s electorate supports any city expenditure of more than $25,000 to promote business development. However, application of the Amendment to contracts made prior to its enactment retards the public interest by preventing the city from honoring its commitments."

"Because Golden entered into the Agreements for the advancement of the public interest and because the public interest is best served by honoring the city’s contractual commitments, we find that the public interest would be retarded by retroactive application of the Charter Amendment to the Agreements."

(My comment: Clearly, the proponents of SB10-001 were motivated by the prospect of limiting public expenditures in support of accrued pension obligations.  Only ten percent of the SB10-001 "solution" came from those who actually owe the debt, Colorado governments in the PERA pension system.

July 14, 2009 –

Rep. Frank McNulty (R-Highlands Ranch) said he did not want to ask for higher contributions from governments, which are supported by taxpayers:

"I don't think at this point we can expect employer contributions to be part of the solution . . ."

http://www.9news.com/rss/story.aspx?storyid=119465

May 29, 2011

Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain:

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

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

In my opinion, the retrospective application of the provisions of SB10-001 to long-standing Colorado PERA pension contracts retards the public interest by preventing Colorado PERA employers from honoring their commitments.)

Colorado Supreme Court:

"Second, we look to whether the Charter Amendment gives effect to or defeats the bona fide intentions or reasonable expectations of the parties. DeWitt, 54 P.3d at 855."

(My comment: Here is an example of a Colorado PERA member explaining to Colorado PERA officials in 2009 [prior to the PERA COLA contract breach] exactly how PERA's idea to take accrued COLA benefits defeats her expectations, Sue Ellen Quam: "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.”

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

Colorado Supreme Court:

"Third, we examine whether the Charter Amendment surprises the Petitioners due to their reliance on contrary law."

(My comment: Below, I provide a few examples of testimony relating to reliance on the PERA statutory contract by PERA members presented to the Colorado PERA Board of Trustees and nine members of the Colorado General Assembly during the 2009 PERA "Listening Tour" meeting in Denver:

David Holme:

“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.”

Mike Morris:

“I just want you to know that our COLA benefit is the only thing that’s been between us and the increased cost of health care and numerous other issues during the last six or eight years.”

Alan Chapman:

“We shouldn’t be weighing things out on the future costs on the backs of those people who have already gone through the program, funded what was required of them, and now they’re in a position that they can’t recover.”

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

Colorado Supreme Court:

"We find all three of the DeWitt factors for implication of a vested right are met by application of the Charter Amendment to the Agreements here.  Additionally, we find no overriding public policy concerns that would justify retroactive application of the Charter Amendment to agreements entered into by the City of Golden that were already in existence at the time the Amendment was enacted. To the contrary, we find that the application of the Charter Amendment to the Agreement would frustrate the reasonable expectations and substantial reliance of the Developers in this case. See Kuhn, 924 P.2d at 1060."

(My comment: There is no overriding public policy concern that warrants breach of Colorado PERA pension COLA contractual obligations.  Accrued PERA pension benefits will be paid over the next five to seven decades.  There is no need for a radical solution that abrogates existing Colorado PERA pension contracts.  Colorado PERA Board Trustee Casebolt has assured PERA retirees present at the August 11, 2009 Colorado PERA Denver “Listening Tour” meeting that: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

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

The Colorado General Assembly has demonstrated [in SB12-149] that it is quite capable of enacting public pension reforms that are "less drastic" than the breach of PERA COLA contractual obligations in SB10-001.  Such reforms, ignored in 2010, may be applied to the Colorado PERA pension system in the future.  Even the current Colorado PERA Executive Director has argued that PERA will experience no "actuarial emergency" while it has billions of dollars in reserve in the PERA trust funds.

February 21, 2004 – Rocky Mountain News, David Milstead:

“PERA general counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that's not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.”)

Colorado Supreme Court:

"For the foregoing reasons, we find that the Court of Appeals erred in its determination that the Developers did not have a vested right that was disturbed by the adoption of the Charter Amendment. We reverse the holding of the Court of Appeals and remand the case with directions to return it to the district court."

(My comment: In 2010, the Colorado General Assembly decided to attempt a "claw back" of compensation [deferred pension compensation] owed to retired workers.  When the taking of Colorado PERA COLA benefits is viewed in light of Colorado case law, McPhail, Bills, or even DeWitt, one thing is clear . . . SB10-001 was not a valid use of the state's police powers.)

Colorado PERA active and retired members, continue to fight for your public pension contractual rights and the rule of law in Colorado.  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Colorado, Tenth Richest State in the Nation, “Forced to Break its Contracts.”

Colorado is forced to break its contracts?  The state that is now the 10th richest in the country faces such a financial "crisis" that it cannot pay its bills?  The State of Colorado is forced to break its Colorado PERA public pension contracts while it has the 10th highest GDP per capita?  (Colorado is 15th richest by median household income, 9th by per capita income.)  Of course, as we have seen, the State of Colorado is selective about the contracts "that must be broken," debts owed to corporations are of course off the table.  Wealthy bond holder?  No worries for you.  Defenseless Colorado PERA peasant?  You'll do nicely!

Perhaps the Colorado Legislature must continue to break Colorado PERA pension contracts in order that it be able to supplement the $700 million that it has already pumped into paying off local government legacy pension debt that IS NOT the contractual obligation of the State of Colorado.  It must break its own contracts to pay for the contractual obligations of other governments.  Perhaps the Colorado Legislature must continue breaking its pension contracts in order that it retain the ability to provide $100 million discretionary grants of property tax relief, or as Senator Morse proposed earlier this year, enshrining another quarter billion dollar tax cut into the Colorado Constitution under TABOR. 

10 Richest U.S. States in 2013 (GDP per capita) – Colorado #10 ($51,940)

See the Top Ten Richest States (by GDP) here:

See all states by median household income and per capita income here:

http://en.wikipedia.org/wiki/List_of_U.S._states_by_income

Colorado PERA active and retired members, fight for your rights!  Contribute to the cause at saveperacola.com.  Friend Save Pera Cola on Facebook!

Wall Street Journal Columnist Calls Deliberate Public Pension Underfunding, Like that of Colorado PERA, “Corruption.”

STUDY: ABOUT 40 PERCENT OF PUBLIC PENSION PLANS REPORTING HAD LOWER FUNDING RATIOS THAN COLORADO PERA AT THE TIME OF PERA'S CONTRACT BREACH.

On February 28, 2011, Wilshire Consulting released its 16th consecutive annual report addressing the financial condition of state-sponsored defined benefit retirement systems.

"This is Wilshire Consulting’s sixteenth report on the financial condition of state-sponsored defined benefit retirement systems and is based upon data gathered from the most recent financial and actuarial reports provided by 126 retirement systems sponsored by the 50 states and the District of Columbia."

Link to the 2011 Wilshire Report (covering 2010):

http://www.nasra.org/resources/Wilshire_2010.pdf

"About Wilshire Associates: Wilshire Associates, a leading global, independent investment consulting and services firm, provides consulting services, analytics solutions and customized investment products to plan sponsors, investment managers and financial intermediaries. Its business units include, Wilshire Analytics, Wilshire Consulting, Wilshire Funds Management and Wilshire Private Markets."

"Based in Santa Monica, California, Wilshire provides services to clients in more than 20 countries representing more than 500 organizations with assets totaling approximately US $7 trillion.  With ten offices on four continents, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality counsel, products and services."

http://www.wilshire.com/aboutus

From the February 28, 2011 Wilshire report:

"Of the 125 state retirement systems that reported actuarial data for 2009, 100% were underfunded."

(My comment: As Colorado PERA officials have told us, the Colorado PERA pension system has been funded at a level exceeding 100 percent only twice in its history, since creation of the Colorado PERA pension system more than 80 years ago.  Public pension liabilities are similar to a mortgage, they do not have to be "paid off tomorrow."  Pension liabilities are paid off over many decades.  Yet, the Colorado PERA Board of Trustees proposes to break Colorado PERA pension contracts and retroactively insert an unnecessary 100 percent funding requirement into PERA pension contracts.  The PERA Board proposes to shift market risk onto Colorado PERA retirees to reach this 100 percent funding level, but members of public pension systems by definition and statute bear no "market risk."

“In 2002, PERA Executive Director, Meredith Williams was asked, because of a downturn in the stock market, if retirement benefits were safe.  He replied, ‘First, the ‘loss’ is due to a decline in the stock market.  PERA still owns the same stocks that it did before the decline and this ‘loss’ is a result of the value of the stock decreasing. It is not ‘lost’ since we haven’t sold the stocks, and because PERA is a long-term investor, we can ride out the bad times the market experiences.  When the market recovers, the value of these stocks will also increase, offsetting this ‘loss.’”

“Mr. Williams was quoted in the same report as saying ‘Most pension funds are considered sound at 80 percent funding levels.’”

“Meredith Williams ‘said at the Senate Finance Committee hearing in January [2010] that PERA needed to be funded at 100 percent.  When the PERA representatives were asked by a member of the committee why in view of the fact that PERA had  only been funded at 100 percent for about seven of the past thirty years [actually two of the last eighty-one years], it was necessary now.  The answer was ‘it just makes things easier.’”

Link:

http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

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

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

According to the Wilshire report, while the Colorado PERA Board of Trustees contemplated breach of Colorado PERA pension COLA contracts in 2009, 100 percent of public pension plans reporting in the nation were "underfunded," i.e., the plans actuarial value of assets was less than plan accrued pension liabilities.  Should all public pension systems in the USA break their pension contracts until they reach a 100 percent funding level?  Do the United States Constitution and its Contract Clause mean nothing?  Should public employees accept that they work for whatever compensation [deferred pension compensation] their employers choose to provide?)

From the February 28, 2011 Wilshire report:

"Actuarial value funding ratios declined between the years 2001 and 2005, falling from 100% to 86% and holding relatively constant until the 2009 fiscal year’s 6% decrease to an estimated 79%."

(My comment: The 99 public pension systems that reported final actuarial values for 2010 [in the Wilshire report] reveal an average actuarial funding ratio of 76 percent, and an average market-based funded ratio of 66 percent in 2010 [page 4.]  This average actuarial funding ratio was just 7 percent higher than that of the Colorado PERA pension system at the time of the PERA pension contract breach.

Note that approximately 40 percent of these public pension systems had actuarial funding ratios at or below that of the Colorado PERA pension system at the time of the 2010 PERA pension COLA contract breach [page 7].  In spite of the historical mismanagement and underfunding of the Colorado PERA pension system by the Colorado Legislature, approximately 40 percent of these pension systems had actuarial funding ratios at or below that of the Colorado PERA pension system.  Should 40 percent of the public pension systems in the U.S. be permitted to break their public pension contracts due to the 2008/2009 market volatility?)

Wall Street Journal Columnist: Deliberate Underfunding of Public Pension Systems is "Corruption."

As has been documented at saveperacola.com and at the Center for Retirement Research at Boston College, the Colorado General Assembly has not paid its full public pension bill (actuarially required pension contribution, ARC) for a decade.

In 2009, Colorado PERA’s General Counsel Greg Smith blamed 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

This deliberate underfunding of the Colorado PERA pension system [ignoring contractual obligations] has permitted the Colorado Legislature to appropriate public funds for discretionary purposes that are popular with the voters who elect them, and popular with statehouse lobbyists.  For example, paying off $700 million in legacy local government pension obligations [Old Hire Police and Fire pension debts] that ARE NOT the contractual obligation of the State of Colorado, and making $100 million discretionary grants of property tax relief.)

Wall Street Journal Columnist Calls Public Pension System Underfunding "Corruption":

August 8, 2013

"Chris Tobe is a columnist for the Wall Street Journal’s Marketwatch.com, a Chartered Financial Analyst and investment professional who has done consulting work on many public pension plans.  He has also served as a trustee of the Kentucky Retirement System and is the author of a new book "Kentucky Fried Pensions: The Culture of Cover-up and Corruption."

Interview with Chris Tobe:

"I compare Kentucky to Illinois, much of whose real corruption happened maybe ten years ago and Blagojevich, the governor, was deeply involved with it.  They’ve also underfunded their actuarially-required contribution [ARC], much like Kentucky.  Those two things went hand-in-hand, in Illinois and Kentucky, probably the two worst state systems.  If people are willing to look the other way at corruption in investments, they’re willing to look the other way at deliberate underfunding, which I consider corruption as well."

"In this particular case, even though they put their stock market performance up at 11% for the year, the assets only grew about 3%, because they are still continuing to underfund and have a negative cash flow. 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 mathematics."

"The real question is how much transparency is there. A lot of newspaper reporters don’t even know about the pension systems in their own communities. There’s not a whole lot of knowledge by the public. Where the public is engaged and there’s a culture of full disclosure and transparency, you tend to have better pension funds, and it depends on who the board members are on pension funds. If you have people who are sincere community people who are looking out for everybody’s best interests, and they’re willing to speak out, I think that creates the right atmosphere."

(My comment: As we have seen, Colorado PERA uses our PERA trust funds to produce propaganda supporting PERA pension contract breach.  When the Colorado Court of Appeals reversed the decision of the Denver District Court, finding that Colorado PERA pension COLA contracts are a contractual obligation of PERA employers, the Denver Post inexplicably labeled this reversal a "win" for the Colorado PERA defendants.  Clueless? or Biased?

Colorado PERA pension administrators, members of the Colorado Legislature's Joint Budget Committee, Legislative Audit Committee, and House and Senate Finance committees have historically "looked the other way" at deliberate PERA pension underfunding.  For a decade, Colorado PERA pension administrators have been adhering to their own "Don't Ask, Don't Tell" policy relating to PERA pension underfunding.  The failure of the Colorado Legislature to pay the PERA pension system "ARC" is regularly skimmed over in a few seconds in meetings with state legislators who, by design, do not even know what an "ARC" is.  Colorado PERA seeks to break its pension contracts although Colorado governments contribute less than three percent of all revenue to public pension obligations, well below the national average.)

Interview with Chris Tobe:

"I’m more of a proponent for government in general, and I think that holding them to the ERISA standards 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

(My comment: The Colorado General Assembly was fully aware that equity markets had recovered significantly when a majority of its members voted to break Colorado PERA pension contracts in early 2010.

2009

Senator Josh Penry, co-prime sponsor of SB10-001, in a videotaped discussion with Representative Mike May, [videocenter. denverpost.com] said ‘we can’t, can’t miss this window.’  And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . .

“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age. You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return. So that could change the specter of actuarial necessity. We gotta’ do it this year or else these other structural changes won’t be possible.”

http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

I find it remarkable that the co-prime sponsor of SB10-001 intended to use recent market volatility to justify the PERA pension contract breach in early 2010, that he was fully aware that equity markets had recovered significantly, that he had no aversion to stating that his intent was to justify the SB10-001 PERA contract breach based on reported PERA funding ratios that he knew to be outdated, ratios that obviously did not reflect the current funding status of the Colorado PERA pension system.

I find it incredible that THE CO-PRIME SPONSOR OF SB10-001 INTENDED THAT SB10-001 OPERATE RETROSPECTIVELY, IMPAIR VESTED PERA PENSION RIGHTS CREATED IN SUBSTANTIVE STATUTES, IMPOSE A NEW DISABILITY ON PERA RETIREES, AND DEFEAT EXPECTATIONS REGARDING THEIR PERA CONTRACTS (if you have time read the Colorado Supreme Court case, Golden v. Parker.)

Link to complete Wilshire report:

http://www.nasra.org/resources/Wilshire_2009.pdf

Former Colorado PERA Executive Director Meredith Williams:

August 1, 2008

Colorado PERA website, "Ask Meredith": "Keep in mind that PERA is a long-term investor with a time horizon that is much longer than individuals have.  PERA does not 'time the market' nor do we actively move assets to less risky investments when the market is falling.  Because PERA is a long-term investor, we know that at times we'll have losses, but those losses will be offset by gains over the long run in PERA's diversified investment portfolio. The bottom line is that the PERA portfolio is well diversified and able to withstand the ups and downs of the market over time.
– Meredith"

https://www.copera.org/pera/about/askm.htm

December 19, 2008

Colorado PERA Executive Director Meredith Williams assures PERA retirees that market volatility has no impact on their contracted pension benefits:

"Since PERA is a defined benefit plan, your benefit is not based on the fluctuations in the financial markets, but on your contributions, age, and years of service."

https://www.copera.org/pera/about/askm.htm

May 29, 2011

Colorado PERA Executive Director Meredith Williams, Pueblo Chieftain:

“Retired public servants who live on fixed incomes no longer get the same cost-of-living-increases upon which many had come to depend.”

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

“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

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The Colorado Supreme Court Frames the Issues in the Colorado PERA Retiree COLA Lawsuit, Justus v. State.

The Colorado Supreme Court has recently announced that it will hear the Colorado PERA retiree pension COLA lawsuit, Justus v. State.  The Supreme Court also "framed the issues" in the case.  In my opinion, the Supreme Court simply adopted the framing of the issues in the case that were provided in petitions to the Supreme Court from BOTH the plaintiffs and the defendants.

Colorado PERA officials, on their website, state that the Colorado Supreme Court "framed the issues" in the manner that PERA requested the issues be framed:

"The Colorado Supreme Court framed the issue as PERA had requested.  Specifically, PERA and the State of Colorado asked the Court to address whether or not the reduction in the COLA under SB 1 was constitutional under the contract clause analysis in the DeWitt case.  Under the three-prong test set forth in DeWitt, the plaintiffs must establish: (1) that they have a clear and unmistakable right to an unchangeable COLA for the rest of their lives; (2) that the modification to the COLA was a substantial impairment that was inconsistent with their reasonable expectations; and (3) that the modification of the COLA was not reasonable and necessary to further or accomplish a legitimate public purpose."

"In its order, the Supreme Court set a briefing schedule for the parties, with the first brief due by the plaintiffs in October."

Link:

https://www.copera.org/pera/about/latestnews.htm#supreme

(Note here, that Colorado PERA officials write, on the PERA website, that their framing of the issue in the case is whether "the REDUCTION in the COLA under SB1 was constitutional," rather than "ADJUSTMENT" of the PERA COLA."  Colorado PERA's petition to the Supreme Court refers to the "adjustment" of the COLA.)

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)

Contrary to PERA's claims that the issues in the case were framed by the Supreme Court according to its wishes, it appears to me that the Colorado Supreme Court simply adopted (blended) the framing of the issues of both the plaintiffs and the defendants.

Here is my summary of the Colorado Supreme Court's framing of the issue, and the framing of the issue by the plaintiffs and the defendants:

Colorado Supreme Court framing:

(1) whether Dewitt or Bills/McPhail control in public pension contractual disputes;

(2) whether PERA retirees have a contractual right to their COLAs "without change";

(3) whether the adjustment of the COLA in SB10-001 was constitutional because it was not a substantial impairment, and reasonable and necessary to the long-term viability of the pension fund, and was not a taking.

Plaintiffs framing:

(1) On-point Colorado public pension case law, Bills/McPhail, found that adverse changes can only be made to "partially-vested" pension rights if balanced by a corresponding change of a beneficial nature, and if actuarially necessary.  The Court of Appeals, in its 2012 Decision, left open the possibility that "fully-vested" retiree pension benefits can be reduced if it is “reasonable and necessary to serve a significant and legitimate public purpose,” finding that Bills/McPhail are no longer "good law."  The plaintiffs frame the issue as to whether this finding by the Court of Appeals was error.

(So, it looks like the plaintiff's issue will be addressed by the Supreme Court in its decision on the first issue in its framing, i.e., whether DeWitt or Bills/McPhail control.)

Defendants framing:

(1) Whether PERA members have a contractual right to their COLA benefit in place at retirement "without change."

 (2)  Whether the "adjustment" of the COLA in SB10-001 was constitutional because it was not a substantial impairment, was reasonable and necessary for the plan's viability and was not a taking.

(Essentially, the Supreme Court's second and third issues in its framing.)

The plaintiffs wanted the Colorado Supreme Court to take the case, and the Supreme Court took the case.  The Supreme Court will decide if Colorado's on-point public pension case law (Bills/McPhail) is still good law.  It seems to me that if the court decides that Bills/McPhail continue as controlling precedent, the court need proceed no further.  Under such a finding PERA retiree COLA benefits would be inviolate.

The court's decision regarding its first "issue" (DeWitt or Bills/McPhail controlling) will determine if DeWitt standards are to be applied to the 2010 reduction in the PERA COLA.  (As you probably know, I believe that the taking of the PERA COLA benefit is also constitutionally impermissible under the DeWitt standards.)

In regard to the progress of the case, a PERA retiree asks:

"Does the manner in which the Supreme Court accepted this case indicate that we do indeed have a valid contract as ruled by the Court of Appeals?"

Note that I am not an attorney, and can only speculate.  (For that matter, attorneys could also only speculate.)  The Supreme Court asks whether PERA retirees have a contractual right to their COLAs "without change."  Does this question presuppose the existence of the PERA COLA contractual obligation?  When the court asks if retirees have a contractual right to the COLA without change are they acknowledging the existence of the contract?

An increase, "improvement" in the COLA is not a contractual violation, there is no harm.  So, the only relevant question is whether a reduction in the COLA is permissible.  If the COLA can be "changed" by the Legislature to completely eliminate it, then the automatic PERA COLA becomes an ad hoc COLA, and effectively there is no contractual right to the COLA benefit in place at retirement.  How can there be a contractual right to something that can be legally taken?  A contractual right to a COLA that can be eliminated has no value.  A contractual right is a claim.  By definition, in order for a "claim" to exist, something must be "claimed."

Would an ad hoc PERA COLA violate the anti-gratuity provision in the Colorado Constitution?

If the Colorado Legislature can unilaterally reduce its contractual pension COLA obligations, do PERA benefits remain "definitely determinable"?  In that event, would Colorado PERA remain a "qualified plan"?

A statutory COLA provision is simply the method by which the total pension benefit is provided. The Colorado Legislature could just as well have provided in PERA statutes that the total accrued PERA pension benefit be delivered by means of a larger monthly pension benefit with no COLA.

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

Private sector annuities may be purchased with or without a COLA provision.  Would a finding by the Supreme Court that the COLA is not contractual allow Colorado insurance companies to eliminate COLAs in annuities that they have sold?  How could the court find that a COLA provision in a public sector annuity is not a contractual obligation, while a COLA provision in a private sector annuity is a contractual obligation?

How could  future Colorado courts find that a provision in a private sector annuity stating that a COLA "SHALL" be provided by the insurance company IS a contractual obligation, if the Colorado Supreme Court has found that a provision in a public sector annuity stating that a COLA "SHALL" be provided by IS NOT a contractual obligation?

Are Colorado PERA members expected to work for whatever deferred pension compensation PERA employers choose to provide?  At the end of each day of labor, they would have no idea what their ultimate "defined" and "deferred" pension compensation will be for that day.

Colorado governments spend under three percent of revenues on public pension obligations, well under the national average, how can this minimal level of expenditures constitute a financial "crisis"?

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.])

A PERA retiree notes that:

"The issue of purchased service credit seems to be included in our case in chief in that it supports the original and continuing legislative intent to enforce the 3.5% Annual Benefit Increase.  Unfortunately it also tends to support a theory that one earns the ABI in place at the time of service."

Here’s the statute under which these service credit purchases were made:

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.”

For each day of labor by a PERA member subsequent to an "improvement" of the COLA by the Legislature, for example, improvement from "inflation to 3.5%" to "flat 3.5%," a PERA member's labor and PERA contributions are exchanged for that "improved" PERA COLA benefit.

HB00-1458:

"- Established 3.5% compounded annual automatic COLA effective March 2001.
– Prior to this date, the annual COLA equaled the lower of the actual inflation rate or annual 3.5% cumulative increases since retirement. "

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

My guess is that the bulk of Colorado PERA service credit purchases have been made as a result of the "Bill Owens service credit purchase offer," that is, after the 3.5% automatic COLA was placed in the statutory PERA pension contract.  This contractual offer induced many PERA members to retire.  They changed the course of their lives based on that reliance.

A PERA retiree writes:

"It also seems that the Court has bought into the sleight-of-hand presented by the opposition in the use of the word unchangeable when our position has been irreducible.  What are the chances of this being addressed in the case?"

The 2012 Colorado Court of Appeals Decision has exposed this "sleight of hand":

“We note, however, that plaintiffs contend that they have a reasonable expectation of an irreducible (not, as defendants assert, an unchangeable) COLA. Therefore, we direct the district court to consider whether there has been a substantial impairment with that in mind.”

I cannot see how the members of the court might avoid recognition of this ploy, which I consider, along with PERA's use of "market-based" pension funding ratios in briefs to be an attempt to deceive the court.

Here is an article addressing Colorado PERA's attempts to deceive:

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

November 30, 2008

Colorado PERA General Counsel 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.”

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

Colorado PERA Executive Director Meredith Williams commenting on Colorado Attorney General Ken Salazar’s 2004 Formal Opinion on PERA benefits (PERA Retiree Update, page 1):

“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.”

https://www.copera.org/pdf/5/5-40-08.pdf

A PERA retiree writes:

"There also exists the issue of how the plan deficit is determined."

My comment: Colorado PERA’s “actuarial funded ratio” at the time of the PERA contract breach 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.)

PERA's funding ratio was about three percent below the national average at the time of the SB10-001 COLA-taking.  Should every public pension in the country be permitted to break contracts at this funding ratio?

(Also recall the Colorado Supreme Court's dicta in the 1963 case Keterring v. Retirement Board: "Claimant's rights are in NO MANNER CONTINGENT on the fund being actuarially sound or unsound.")

From the Colorado PERA Supreme Court Brief:

“It made ‘modifications to the public employees' retirement association necessary to reach a one hundred percent funded ratio within the next thirty years.’"

As we have seen, Colorado PERA has had an internal board policy in the past to cap the PERA trust funds at a 90 percent funded ratio.  Thus, when Colorado PERA’s lobbyists put this “100 percent funded ratio” threshold into SB 10-001, they codified the hypocrisy of the PERA Board of Trustees.

The retroactive insertion of a 100 percent funding ratio into the PERA contract was absurd and unnecessary, these debts will be paid off by PERA-affiliated employers over many decades.  The debts are not due immediately as implied in the 100 percent funding ratio requirement.  Colorado PERA's funding ratio has reached 100 percent only twice since PERA's creation in Colorado law.

Also, we know that Fitch Ratings, one of the three large ratings firms in the United States, considers public pension funds to be “well-funded” at an 80 percent actuarial funded ratio.  We also know that according to the Federal Reserve, public pension actuarial funded ratios in the 50 to 60 percent range were typical in the 1970s and yet pension contractual rights were, nevertheless, upheld by U.S. courts.

PERA retirees, I think we have much working in our favor:

We have the defendant, (Colorado PERA officials) testifying and providing a written statement to the Legislature affirming the PERA COLA as a contractual obligation of PERA-affiliated employers;

We have a unanimous and recent Court of Appeals finding that the PERA COLA is such a contractual obligation;

We have long-standing precedent, Bills and McPhail, holding that the PERA COLA is a contractual obligation;

We have a recent Attorney General's opinion stating that reductions of retiree PERA benefits is not constitutionally permissible:

"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."

We have yet another Attorney General's opinion stating that any ambiguities in public pension statutes shall be construed in favor of the public employee:

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

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

The Colorado Legislature has demonstrated that it is capable of adopting prospective pension reforms for county governments, "arms" of Colorado state government, honoring retiree pension contracts:

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.”

We have evidence of actions by the Colorado Legislature (recently in receipt of $1 billion in unexpected revenue) that have contributed to the decline in PERA's funding ratio, failure to pay the full ARC for a decade, appropriating $700 million for pensions that ARE NOT the contractual obligation of the State of Colorado, and making discretionary $100 million grants of property tax relief.

August 11, 2009

Colorado PERA’s General Counsel Greg Smith blames the Colorado General Assembly for PERA’s fiscal downturn: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”

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

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Making Life Easy for Elliot Fladen. (Algernon Volunteers to Pull Excerpts from the AEI Public Pension Contractual Rights Paper on Elliot’s Reading List.)

Yesterday, fellow ColoradoPolster Elliot Fladen noted that he wants to do some "interesting reading" on public pension contractual obligations.  He referenced a paper written by Professor Amy Monahan of the University of Minnesota School of Law.  I consider Monahan to be the preeminent scholar in the nation in the area of public pension legal doctrine.

The paper on Elliot's reading list was written by Professor Monahan for the AEI:

http://www.aei.org/files/2013/05/29/-understanding-the-legal-limits-on-public-pension-reform_104816268458.pdf#sthash.kPA5Gs3k.dpuf

Although the paper Monahan wrote for the AEI is quite accessible, Monahan has written a beefier version entitled "Public Pension Reform: The Legal Framework."  Elliot, check it out too, when you have time.  (Also Elliot, note that most conservatives ardently defend the U.S. Constitution and its Contract Clause.  Be sure to join them in this effort.)

Since, you don't have time to read Monahan's AEI paper just yet, I have taken the initiative to extract some of the paper's highlights for you:

"Contract Approach. In many states, an employee’s right to public pension benefits is considered contractual, and therefore is protected against substantial impairment under both state and federal constitutions.  This protection is provided by the Contract Clause of the United States Constitution, which states, “No State shall . . . pass any . . . Law impairing the Obligation of Contracts.” Most state constitutions contain substantially similar language. As a result, once a court finds an employee’s right to her public retirement benefits to be contractual, it is generally unconstitutional for a state to take any action that substantially impairs the employee’s benefits."

(The Colorado Court of Appeals in 2012, and Colorado case law, Bills/McPhail, deem public pension benefits contractual obligations of public pension plan sponsors.)

"At the other end of the spectrum are states that find a contract to exist only once the employee has retired and begun receiving benefits under the plan.  In those states, it may be possible to make changes freely before an individual’s retirement."

(Colorado's Justus v. State lawsuit addresses RETIREE contractual rights.)

"They do so by examining the facts and circumstances of the case and often conclude that by providing retirement benefits that an employee can earn through performing services, the state has made a unilateral offer that the employee accepts through service, thereby creating a contract under traditional contract theory principles.  Even this approach is relatively uncontroversial when it is used to protect benefits that an employee has already earned.  However, in several of these states, courts have held that not only are benefits already earned through service protected, but so too are benefits to be earned in the future."

(In 2012, the Colorado Legislature adopted SB12-149, a bill that honors public pension benefits already earned by retirees in Colorado county government pension systems.  The bill allows prospective changes to the pension multiplier for benefits not yet accrued.  This "less drastic" pension reform could be applied to the Colorado PERA pension system.)

"In the pension context, courts typically find any decrease in the amount of retirement benefits to be a substantial impairment."

($165,000 for a typical PERA retiree in the coming decades according to the Ritter administration.)

"Where a state is seeking to impair a contract to which it is a party, a reviewing court does not completely defer to the state legislature’s determination of what is reasonable or necessary under the circumstances.  Relevant in determining reasonableness is whether the circumstances that necessitated the change 'were unforeseen and unintended by the legislature' at the time the contract was created."

(Colorado PERA's former Executive Director Meredith Williams has told us many times that PERA expects volatile markets, thus these volatile markets are not "unforeseen."  There was no talk from PERA of breaking PERA pension contracts during the 1987 market crash.)

"For an action to be considered necessary, (1) no other less drastic modification could have been implemented at the time of the challenged change, and (2) the state could not have achieved its goals without the modification."

(Numerous "less drastic" options were available to the Colorado Legislature in 2010, including the "SB12-149 plan.")

"As a general rule, changes that are purely prospective (changes that affect not what an employee has already earned but solely what he will earn through future service) invite less judicial scrutiny than changes that affect an employee’s already-earned and vested benefits because prospective changes are considered less substantial impairments than changes to accrued benefits."

("Ninety percent" of the "savings" [cost-shift] in SB10-001 is generated through substantial impairment of accrued pension benefits.)

"While distinct differences exist among the states with respect to the legal protections they grant to public employee pensions preretirement, changes to a participant’s benefits once she has retired will be extremely difficult to make in any state."

(This is what Colorado legislators were told before they voted to attempt to take the contracted PERA COLA benefit in 2010.  They didn't want to know the truth, they could not even be bothered to send the question to the Colorado Supreme Court through an interrogatory.  To their credit, the Colorado PERA Board of Trustees wanted to send this interrogatory.)

"The difference between the legal approach to pre- versus postretirement changes is that once a participant is retired, she has by definition fulfilled her side of any bargain that has been made. In contract theory terms, the participant has accepted the offer of pension benefits through performance."

(Colorado PERA retirees have acted in reliance on their PERA COLA contractual rights.  Many changed the course of their lives based on this reliance.)

"The protection given to pensions in this context is analogous to the legal protections given with respect to promised salary. If an employer offers an employee a specified salary and the employee accepts the offer by performing the desired work, the employee has a contractual right to the promised compensation."

(Public pension benefits are "deferred compensation, presently  earned.")

"However, COLA reductions that affect already-retired participants are typically analyzed under a contract analysis because the participant has already satisfied all of the conditions necessary to receive a benefit."

(SB10-001 reduced the automatic, contracted PERA COLA benefit for current PERA retirees.)

"Other courts see no distinction between base benefits and their COLA adjustments and protect COLAs to the exact degree that base benefits are protected, resulting in the state’s inability to reduce COLAs for current retirees unless the change is reasonable and necessary to serve an important public purpose."

(In Colorado public pension case law, a pension COLA is "pension."  Why would it not be?  The plan sponsor could have just as easily offered a larger flat monthly benefit in the contract with no contracted COLA benefit.

The Colorado Legislature's breach of PERA pension contracts in SB10-001 was not reasonable, nor was it necessary.  The Colorado Legislature has mismanaged the PERA pension, failing to make its full pension payment for a decade.  Further, the Colorado Legislature has paid off $700 million in local government legacy pension debt that IS NOT the contractual obligation of the State of Colorado, while ignoring its PERA pension debt.  The Colorado Legislature is looking to elderly PERA retirees to clean up its mess.)

Monahan:

"The (Denver District) court’s (2011) ruling (in Justus v. State) 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."

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Colorado Supreme Court Takes the Colorado PERA Retiree Pension COLA Lawsuit.

From saveperacola.com:

"We’re going to the Colorado Supreme Court!  Today the Court granted the writ of certiorari for the most important issues raised in the lawsuit against Colorado and PERA.  At this time, we do not have any more details than what is presented below on the Court’s website.  Only 3 of 43 petitions were granted by the court today.  Below is the announcement.  Find the original set of announcements at:

http://www.courts.state.co.us/Courts/Supreme_Court/Case_Announcements/Files/2013/8C16A3AUG.5.13.pdf"

"MONDAY, AUGUST 5, 2013

No. 12SC906

Court of Appeals Case No. 11CA1507

Petitioners/Cross-Respondents:

Gary R. Justus; Kathleen Hopkins; Eugene Halaas, Jr.; and Robert P. Laird, Jr., on behalf of themselves and those similarly situated,

v.

Respondents/Cross-Petitioners:

The State of Colorado; Governor John Hickenlooper, in his official capacity;

Colorado Public Employees’ Retirement Association; Carole Wright, in her official capacity; and Maryann Motza, in her official capacity.

Petition and Cross-Petition for Writ of Certiorari GRANTED. EN BANC.

JUSTICE EID and JUSTICE MÁRQUEZ do not participate.

Summary of Issues:

Whether the contracts clause framework articulated in In re Estate of DeWitt, 54 P.3d 849 (Colo. 2002), applies to all contract clause claims under the Colorado Constitution.

Whether Colorado Public Employees’ Retirement Association members have contractual rights to the cost-of-living adjustment formulas in place at their respective retirements for life without change.

Whether SB10-1, which adjusted cost-of-living adjustments to their current level of two percent compounded annually, was constitutional because it (a) did not substantially impair contractual expectations and was reasonable and necessary to ensure the pension funds’ long-term viability, and (b) was not a regulatory taking."

My comment: I am very pleased that the Colorado Supreme Court has agreed to hear the appeal in the case, Justus v. State.  In 2010, the Colorado General Assembly abdicated its policy-making authority relating to the Colorado PERA pension system to 27 statehouse lobbyists who represented self-interested parties.  These lobbyists successfully persuaded a majority of Colorado legislators to attempt to shift the accumulated pension debts of the State of Colorado and many Colorado local governments onto the backs of elderly Colorado PERA retirees, whose PERA pension contracts are fully-vested.  Since most Colorado PERA retirees are ineligible for Social Security benefits, they are entirely dependent on their PERA pension contracts.

As the Colorado General Assembly demonstrated last year with the adoption of SB12-149, it is capable of adopting prospective public pension reform that does not trample on fully-vested pension contracts to which the State of Colorado is a party.  (SB12-149 put in place prospective pension reform for Colorado county government pension systems, honoring the pension contracts of these county government retirees.)  Numerous prospective pension reform options were available to the Colorado General Assembly in 2010, but were unfortunately ignored.

Colorado is the 15th wealthiest state in the nation, it can afford to pay its debts.  Colorado is better than breach of contract.

Sadly, it appears that Colorado Supreme Court Justice Monica Marquez will be unable to participate in any ultimate decision in the case, Justus v. State as she has "worked on the case" according to a letter of recommendation written on her behalf by former Colorado Supreme Court Justice Jean Dubofsky.  Further, Justice Marquez has previously advised Colorado PERA officials.  From my perspective this is unfortunate as I believe Justice Marquez to be an unusually talented jurist, and I have complete confidence in Justice Marquez's objectivity and dedication to the rule of law.

2009.

Attorney Jean Dubofsky, at the request of Colorado PERA, provides 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

August 30, 2010

Former Colorado Supreme Court Justice 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 congressional redistricting, the challenges to voter-approved Amendments 41 and 54 to the Colorado Constitution, and 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

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Colorado PERA Pension Mismanagement Condemned in United States General Accountability Office (GAO) Report.

The United States General Accountability Office (GAO) has released a report to Congress that, in part, condemns the Colorado Legislature's failure to pay for contractual Colorado PERA pension benefits that have been enacted by the Legislature (that is, meet actuarially required pension contributions, ARC.)

The report, "State and Local Government Pension Plans: Economic Downturn Spurs Efforts to Address Costs and Sustainability, (GAO-12-322)" also notes that the Colorado Legislature has cut "guaranteed" Colorado PERA pension COLA benefits, and that prospective public pension reform alternatives are available to public pension plan sponsors.

Making a contractual offer to a party, failing to take reasonable steps to meet your contractual obligation while other parties act in reliance on that contract, then attempting to escape your contractual obligation . . . this is, without question, mismanagement of a public pension system.

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

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

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 . . ."

Silver and Gold Record on Governor Owen's "Fire Sale" bill, HB00-1458:

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

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

This action by Governor Owens (and the failure of the Colorado Legislature to pay its full PERA bills [ARC] for the last decade are largely responsible for the decline in Colorado PERA's funding ratio from 105 percent at the turn of the century, to the high 60s in the last decade.  Should Colorado PERA retirees sit back and let the State of Colorado break their public pension contracts because of a Bill Owens screw up?  Only a fraction of Colorado PERA retirees participated in Bill Owen's PERA early retirement offer.  Why should Colorado PERA retirees relinquish their contractual public pension rights?  Colorado PERA retirees are not responsible for mismanagement of the plan.  Now that Colorado governments have benefited from lower labor costs as planned by Governor Owens, why should Colorado courts allow these governments to renege on their contractual offer to government workers?

GAO report: In 2010, the Colorado Legislature Cut the "Guaranteed" Colorado PERA COLA Benefit:

"In the case of Colorado, the state recently reduced postretirement COLAs for future, current, and retired members.  According to plan documents, most plan members, who are not covered by Social Security, had previously been GUARANTEED an annual postretirement COLA of 3.5 percent, but the recent legislation eliminated the COLA for 2010 and capped future COLAs at 2 percent."

Legislative History of the "GUARANTEED" 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.”

Kim Natale, Chairman, Colorado PERA Board of Trustees, February 15, 2002; March 2002, Colorado PERA Member Update:

“As a comprehensive retirement plan, PERA benefits are GUARANTEED for life.”

http://www.copera.org/pdf/Newsletters/MemberUpdate3-02.pdf

From PERA Legislative Update, February 2006:

“Employees hired before January 1, 2007 remain in PERA Pioneer (and will receive) automatic increase of 3.5% per year after retirement.”

“PERA members hired January 1, 2007 or later, called PERA Centennial, no GUARANTEED annual increase after retirement.”

http://www.copera.org/pdf/Legislation/2006/LegUp2-06.pdf

GAO report: Prospective Public Pension Reform, (Creation of New Benefit Tiers), Takes Time, but is Effective at Reducing Unfunded Pension Liabilities.

"As we have reported previously, provisions in state constitutions, statutes, or recognized legal protections under common law often protect pensions from being eliminated or diminished for current or retired members.  Thus, some state and local governments change benefits by creating a new tier or plan that applies to new employees hired only after the date of the change, and sometimes also to newer employees who are not yet vested.  It takes time for these new employees with less expensive pension benefits to become a significant portion of the workforce, delaying for a decade or more any significant reductions in plan liabilities.  Over the long term, however, these benefit reductions can reduce pension liabilities and consequently lower actuarially required sponsor contributions."

Colorado PERA Board Trustee, Judge Casebolt, assured PERA retirees present at the August 11, 2009 Colorado PERA Denver “Listening Tour” meeting that: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

Link:

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

Colorado PERA Executive Director Meredith Williams in the August 13, 2005, Pueblo Chieftain:

"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."

Link to complete GAO Report:

http://www.gao.gov/assets/590/589043.pdf

Here's another recent report I found interesting : The Center on Budget and Policy Priorities, "Misunderstandings Regarding State Debt, Pensions, and Retiree Health Costs Create Unnecessary Alarm," Center on Budget and Policy Priorities.

("The Center on Budget and Policy Priorities [CBPP] is one of the nation’s premier policy organizations working at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals.")

CBPP report:

"States and localities devote an average of 3.8 percent of their operating budgets to pension funding.  In most states, a modest increase in funding and/or sensible changes to pension eligibility and benefits should be sufficient to remedy underfunding.  (The $700 billion figure implies an increase on average from 3.8 percent of budgets to 5 percent of budgets, if no other changes are made to reduce pension costs.)  However, in some states that have grossly underfunded their pensions in past years and/or granted retroactive benefits without funding them — Illinois, New Jersey, Pennsylvania, Colorado, Kentucky, Kansas, and California, for example — additional measures are very likely to be necessary."

(My comment, as we have seen, numerous prospective public pension reform options are available to the Colorado General Assembly. These reform options, such as the prospective reform option adopted by the Colorado Legislature last year for Colorado county government pension systems in SB12-149, are "less drastic" than the breach of fully-vested Colorado PERA retiree pension contracts in SB10-001.

Jennifer Paquette, Colorado PERA Chief Investment Officer, in the May 22, 2011, Denver Post:

“In fact, employer contributions to pensions account for just 2.16 percent of all Colorado state and local government spending, according to 2008 U.S. Census Bureau data.”)

CBPP report:

"Some states — such as Illinois, New Jersey, and Pennsylvania (and to a somewhat lesser extent Colorado, Kentucky, Kansas, and California) — have skipped or reduced deposits to trust funds and/or expanded future pension benefits without providing the commensurate funding."

http://www.cbpp.org/cms/index.cfm?fa=view&id=3372

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

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

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

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

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

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

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

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

Truthout: Illinois Plutocrats Manipulate State Bond Ratings to Escape Public Pension Contracts, Lower Their Tax Burden.

The Illinois Legislature is currently debating potential reform of its public pension systems.  Like Colorado, Illinois has traditionally failed to pay its public pension bills.  Like many Colorado politicians, many Illinois politicians are contemplating various means of escaping accrued public pension debt.  A recent article in Truthout exposes the surreptitious efforts of those conspiring to break public pension contracts in Illinois to rig the "pension default" game.

http://truth-out.org/opinion/item/17917-bombshell-plutocrats-brazenly-collude-to-hurt-state-economies-and-screw-working-people

Truthout:

"These days, many Americans walk around feeling like no matter how hard they work, how much they manage to save or how carefully they plan for the future, the game is rigged against them.  They suspect that behind closed doors, CEOs and Wall Street honchos are eagerly scheming to rip them off."

"Their worst fears of corruption and collusion just came true in Illinois, where corporate titans were caught red-handed in the act of Rigging the Game."

(My comment: This Truthout article exposes a representative of an Illinois business interest lobbying group, the Civic Committee of the Commercial Club of Chicago, [former Illinois Attorney General Ty Fahner] boasting of "working to scam the Illinois bond rating.")

Truthout:

"Fahner has tried a number of dirty tricks to attack pensions in his career.  But his most recent admission is absolutely breathtaking in its brazenness: He boasted of working to scam the Illinois bond rating."

(My comment: As I understand it, Ty Fahner admits [on video] that his organization has contacted the three large bond rating agencies in the U.S., Fitch, Moody's and S&P, and encouraged the agencies to downgrade their investment ratings of Illinois state debt.  Arguably, such downgrades provide ammunition to attack public pensions in Illinois.)

Link to the video:

http://preaprez.wordpress.com/2013/08/01/the-smoking-gun-in-this-video-the-civic-committees-ty-fahner-admits-he-colluded-with-the-bond-rating-agencies-to-destroy-illinois-pensions/#comment-35033

Truthout:

"During Fahner’s talk to the Union League Club, an unidentified person in the audience suggested that pressuring credit agencies to rig the state bond ratings in order to attack pensions might be a jolly good idea.  Fahner gleefully replied that he had already thought about that — and his group has tried it."

"Audience member: 'Maybe sometimes you gotta be irresponsible to be responsible.  If a political solution really doesn’t produce a favorable outcome, maybe you really need a market solution.  And a market solution, I don’t mean bankruptcy, I mean actually talking down the state rating even further so the state’s bonds essentially become below investment grade.  And it drives up the borrowing cost to the state and all of us to a significant level enough that you really feel the public pressure…'”

"Fahner: 'The Civic Committee, not me, but me and some of the people that make up the Civic Committee… did meet with and call – in one case in person – and a couple of calls to Moody’s and Fitch and Standard & Poors, and say, How in the hell can you guys do this?'"

"Fahner went on to take credit for downgrades to Illinois credit ratings, saying, 'If you watch what happened in the last few years, it's been steadily down.'”

"Check out the video at minutes 46:30 to 49:43 for the full remarks on the ratings scam:

Fahner: 'Civic Committee helped jaw down state’s bond rating.'"

(My comment: Inexplicably, the credit rating of the State of Colorado has actually been upgraded by S&P in the last decade in spite of the state’s [and SB 10-001 proponents’] claims of a PERA financial "crisis."  Colorado is in a financial crisis?  Colorado's bond ratings have been upgraded?  Doesn't make sense does it?

S&P has upgraded Colorado’s credit rating from AA- to AA.
Colorado’s S&P rating in 2012: AA
Colorado’s S&P rating in 2009 and 2010 at time of contract breach: AA
Colorado’s S&P rating during 2002 to 2006: AA-

Link:

http://www.pewstates.org/projects/stateline/headlines/infographic-sp-state-credit-ratings-20012012-85899404785

Thankfully, Colorado’s PERA "financial crisis" has not yet prompted the Colorado General Assembly to propose abrogating Colorado's contracts with corporations, or defaulting on Colorado bonds held by corporate interests [debts owed to corporations are a much higher priority than state debts owed to PERA peasants.])

Truthout:

"Fahner, a top GOP fundraiser, can’t abide the notion that teachers, firefighters, nurses and other public workers in the state of Illinois can still expect a decent retirement. Not a luxurious retirement, mind you — the average pension is $32,000 a year, and most state employees will not receive Social Security.  But even a modest retirement for hard-working people is too much for today’s fatcats."

Truthout:

"Fahner is part of a virulent strain of public raiders and economic crackpots who have become dominant in the Republican Party (and increasingly among the Democrats, too) who are hell-bent on destroying unions and attacking public employees.  Ultimately they wish to privatize everything and reduce their tax responsibilities down to nothing."

(My comment: As we have seen in Colorado, many Colorado Democrats have also conspired to break Colorado PERA pension COLA contractual obligations.  Even Colorado public sector unions have joined the plutocrats in attempting an unconstitutional taking of contracted PERA retiree COLA benefits.  Of course, such a taking from PERA retirees [who no longer pay union dues] will help minimize future pension contributions from active PERA members [who do pay union dues].  Follow the money.  In some states, public sector unions defend contractual public pension rights, obviously Colorado is not one of those states.

SB10-001 was a policy error of epic proportions on the part of Colorado public sector unions.  For a short-term gain, if they are successful in breaking Colorado PERA pension contracts, they will leave their members without contracted inflation protection for life.  If you believe that the Colorado Legislature will not extract every red cent from the PERA trust funds to the extent permitted by Colorado courts, you are sadly mistaken.)

Truthout:

"That’s why Fahner has declared war on pensions and is promoting a pension crisis in order to justify it.  He has called for cost of living cuts, raising the retirement age, capping pension earnings and shifting the cost of the pension obligation of teachers to local school districts, many of which are too poor ever to pay.  He styles himself as a savior who wants only to protect the public from debt, when in reality he is a brutal plutocrat who will stop at nothing to line his pockets at public expense and reduce his and his friends' taxes."

(My comment: As we have seen, many in Colorado have also promoted the idea of a "pension crisis" in order to justify the breach of Colorado PERA pension contracts.  Obviously, in spite of the Colorado Legislature's failure to pay its full PERA pension bill for a decade, no such PERA "pension crisis" exists in Colorado.  At the time of the Colorado PERA pension contract breach in 2010, the combined funding ratio of the Colorado PERA trust funds was 69 percent.  The PERA funding ratio has been as low as 54 percent in the past and yet there was no perceived "pension crisis."

Silver and Gold Record:

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

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

States that face a public pension "crisis," states that are unable to meet their contractual public pension obligations, are not able to voluntarily pay off $700 million in local government legacy pension debt that IS NOT their contractual obligation [$142 million of this appropriation at the 2013 Colorado legislative session.]

In Colorado, corporations have also joined the effort to claw back earned, contracted compensation from the middle class.  To me, this doesn't make sense.  Corporate America could not function without the sanctity of contractual obligations.  Here we have corporate lobbyists listed on the website of the Colorado Secretary of State as having supported SB10-001 in 2010, the bill that broke the contracts of Colorado PERA pensioners, a bill that takes the property of Colorado's elderly to keep taxes low in the state with the lowest per capita state tax burden in the nation:

Peter Kirchhof – Colorado Concern – supporting
Janice Sinden – Colorado Concern – supporting – http://www.coloradoconcern.com/, Colorado Concern is a business organization. Denver Mayor Hancock has selected Janice Sinden to be his Chief of Staff.

Link: http://www.coloradoconcern.com/index.html

From the Colorado Concern website:

“Colorado Concern’s membership now includes 100 CEOs and business and community leaders from across the state.”

The Colorado Concern Board of Directors:

“Joe Blake – Chancellor Emeritus, CSU System
Dr. Ted Clarke, MD – Chairman and CEO, COPIC
Steve Farber – President, Brownstein Hyatt Farber Schreck
Pat Hamill* – Chairman and CEO, Oakwood Homes
A. Barry Hirschfeld – President, A B Hirschfeld & Sons
G. “Buck” Hutchison – President and CEO, Hutchison Western
Bill Hybl – Vice Chairman, Broadmoor Hotel
John Ikard* – President and CEO, FirstBank
Walt Imhoff – Retired Managing Director, Stifel Nicolaus & Co.
Walter Isenberg – President and CEO, Sage Hospitality
Don Kortz – Chairman of the Board, Fuller Real Estate
David McReynolds – President, Columbine Health Plan
Larry A. Mizel – Chairman and CEO, M.D.C. Holdings, Inc.
Kay Norton* – President, University of Northern Colorado
Kathryn Paul – President and CEO, Delta Dental of Colorado
Blair Richardson – Managing Partner, Bow River Capital Partners
Dan Ritchie – Chairman and CEO, Denver Center for the Performing Arts
Dick Robinson – Co-CEO, Robinson Dairy, Inc.
Richard M. Sapkin – Managing Principal, Edgemark Development, LLC
Sylvia Young – President and CEO, HealthONE”)

Truthout:

"Illinois has real problems. However, Fahner desperately hopes the public will not catch on to the fact that states are having difficulty paying out pensions because of the lack of revenue caused by a Wall Street-driven financial crisis and the deep recession it set off, regressive taxes, and the myriad bond scams financiers have already inflicted on states, cities, towns, and municipalities which have triggered funding crises for pensions and other programs. (See 'How Wall Street Fraudsters Plunder Public Finances, And 5 Ways to Fight Back.')"

"As the audience member correctly adduced, pushing down the bond rating is a great way to screw workers, the state and taxpayers.  Pension funds buy bonds, often from the state, to stay financially healthy.  In order for the pension fund to buy the bond, it must have a passing grade.  If the grade is lowered, say from A to B, the price of the bond goes down, and the pension fund will suffer a loss.  If the bond rating is dropped below a minimum standard, then the pension fund must sell the bond, and take a much bigger loss."

"Lowering the bond rating also has the effect of artificially inflating the interest rates that bond holders must pay on future bonds, making them more expensive to buy and reducing the state’s ability to borrow. The basic idea is to manufacture a crisis by financially starving pension funds.  Fahner & Co. know this will put political pressure on Illinoisans to take away worker pension benefits."

(My comment: The Colorado Legislature has also manufactured its Colorado PERA pension "crisis."  It has accomplished this by habitually underfunding the PERA pension [failure to pay the ARC], cutting PERA pension contributions over the last 20 years, shifting labor costs from PERA-affiliated employers to the PERA trust funds [Bill Owens PERA service credit "fire sale,"] cutting state tax receipts beyond that even required under the TABOR amendment, ensuring that Colorado is a "tax haven," inserting a ridiculous and unnecessary "100 percent PERA funding threshold requirement" into the PERA statutory contract through SB10-001, slashing PERA's maximum amortization period from 60 years to 30 years [over the last 15 years,] using public resources for copious corporate welfare, and even granting access to the PERA trust funds for more corporate welfare.)

Truthout:

"CEOs think nothing of willingly and knowingly screwing the bond rating and economic standing of their home state in order to enact their anti-worker philosophy and fatten their own bank accounts."  "Committing economic treason against fellow citizens and taxpayers is simply a matter of course for today’s American plutocrats."

Truthout:

"The state attorney general should immediately open an investigation into whether any members of Fahner’s group sold bonds before the downgrades, based on their conversations. That is plainly insider trading.  Everyone who held bonds at the time of the downgrades also took a loss.  Attorneys general and treasurers in other states whose portfolios took a hit should also consider suing, given that political pressure seems to have played a role in causing their losses."

Truthout:

"It’s time for the trustees of the pension funds to stand up for those whose interests they are charged with protecting, and not shrug off one more crime against the public interest that reduces pensions for working people."

(My comment: Fat chance of PERA trustee advocacy for PERA retirees happening in Colorado.  In 2010, Colorado PERA Board trustees were persuaded to support the breach of the fully-vested pension contracts of Colorado PERA retirees.  The trustees used PERA trust fund assets that belong to PERA retirees to pay for political and lobbying campaigns to break those retiree's pension contracts.

Our Colorado PERA Board trustees are in the pocket of corporate interests.  Note that the trustees have recently granted corporate access to the Colorado PERA trust funds for corporate welfare.  Is the provision of corporate welfare through PERA's “Colorado Mile High Fund” in conformance with the fiduciary obligation of the Colorado PERA Board of Trustees to act “for the exclusive purpose” of providing PERA pension benefits?  How does this scheme guarantee improved investment performance for this tranche of the PERA trust funds for beneficiaries?

If Colorado businesses are so desperate for capital why do these businesses not take advantage of available historically low market interest rates?  Is it simply the case that these businesses are considered too great a risk by private lenders?  This risk must be assumed by the beneficiaries of a public pension fund?  Public pensions should invest in businesses that the private sector won’t touch?

If the geographical restriction of PERA Trust Fund investment options is a prudent investment philosophy will the PERA Board please explain why this policy has not been in place at Colorado PERA for decades?  Why the artificial, geographical restriction of investment options is summarily rejected by securities industry professionals?

How did the PERA Board go about determining the geographical investment boundaries that offer the greatest risk/reward potential for the investment our funds? What analysis was conducted?  What advantages did Colorado’s borders offer over limiting investment of the funds to venture capital or private equity opportunities in Massachusetts?  California?  Australia?

Complete PERA "Colorado Mile High Fund" propaganda available here:

http://www.copera.org/pera/about/latestnews.htm#ColoradoFund

Complete Truthout article available here:

http://truth-out.org/opinion/item/17917-bombshell-plutocrats-brazenly-collude-to-hurt-state-economies-and-screw-working-people

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Sal Pace, Thank You for Opposing the Breach of Colorado PERA Pension Contracts, Demonstrating Integrity.

Sal Pace is on the right side of Colorado history.  Sal Pace is an elected official who actually has integrity.  Sal Pace is the future of Colorado Democratic politics.

In 2010, when 27 hired Colorado statehouse lobbyists successfully persuaded many of his peers to trash the Colorado Constitution, Sal Pace told them to piss off.  Former Colorado House Minority Leader Sal Pace (currently a Pueblo County Commissioner) deserves recognition for standing on principle while many sold out.

In 2010, twenty-seven lobbyists attempted to force feed House Democratic Leader Sal Pace a legal contrivance that would allow Colorado governments to escape their accrued pension debts.

Twenty-seven lobbyists preyed on the ignorance (by design) of Colorado state legislators on the question of Colorado public pension contractual rights.

Twenty-seven lobbyists tried to coerce Sal Pace into violating his oath of office.

He showed them the door.

In 2010, self-interested hired guns succeeded in persuading a majority of Colorado legislators to pay off accumulated Colorado state and local government debt by taking money from elderly Coloradans . . . pushing the debts of all Colorado taxpayers onto a relatively small group of Colorado PERA pensioners.

This act diminished our state.  It was immoral.  It was unconstitutional.  It will not stand.

Thanks also to the following Colorado House Democrats who refused to violate their oaths of office to uphold the Colorado Constitution in 2010: Representatives McFadyen, Merrifield, Massey, Weissman and Primavera.  When the pressure was intense, you kept your integrity.

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

The Pueblo Chieftain quoted from Sal Pace’s website in February 2010:

"'I voted against the proposal because I don’t believe that the problems with PERA need an immediate fix and the solutions proposed unduly placed a burden on our seniors,’ Pace said in a statement on his Web site Tuesday.

Pace noted the high concentration of PERA enrollees in Pueblo and said projections that PERA would be insolvent within 20 years don’t take into account the possibility that the slumping economy will rebound, and that a target date for solvency of 50-60 years from now (which before SB1 had been the goal) ‘would be less onerous and more fair.’"

http://trsbaudit.wordpress.com/

Precisely, simply moving this "maximum amortization period" back to 60 years (where it was 15 years ago, would have taken the pressure off of the PERA trust funds.  Why should we break PERA contracts to pay off PERA debts in 30 years, when these obligations are due over the next 60-70 years?  (That is, 70 years, for brand new PERA hires.)  Dozens of "less drastic" PERA pension reform options were ignored by the Colorado Legislature in 2010.

2006

SB 06-235
– Reduced PERA’s statutorily prescribed "maximum amortization period" (MAP) from 40 years to 30 years. (In 1997, the PERA MAP was set in law at 60 years.)

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

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Vince Carroll: Governor Owens Pulled a Boner, Congressman Coffman Benefited.

Here's Denver Post editorial page editor Vince Carroll in today's (7-31-2013) 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 . . ."

This action by Governor Owens (and the failure of the Colorado Legislature to pay its full PERA bills [ARC] for the last decade are largely responsible for the decline in Colorado PERA's funding ratio from 105 percent at the turn of the century, to the high 60s in the last decade.

The Colorado Legislature is now trying to raise Colorado PERA's funded ratio (pay off Colorado state and local government debt) by taking money from old people (SB10-001)  . . . breaking Colorado PERA retiree pension contracts.  Should all Colorado PERA retirees sit back and let the State of Colorado break their public pension contracts because of a Bill Owens screw up?  We're old, not stupid.

Governor Owens sold Colorado PERA service credit at less than full actuarial cost in order to encourage the older, "more expensive" state and local government employees to retire and be replaced by cheaper labor, effectively pushing labor costs onto the Colorado PERA pension trust funds.  Colorado governments have saved billions as a result of Governor Owen's and the Legislature's contractual Colorado PERA service credit offer.  Now that these governments have taken their benefit from the Bill Owen's PERA cost-shifting plan, why should they be allowed to break their PERA pension contracts?  That is, their PERA COLA contractual obligations?

Only a fraction of Colorado PERA retirees participated in Bill Owen's PERA early retirement offer.  Why should all Colorado PERA retirees relinquish their contractual public pension rights?

For that matter, I'm surprised that we have not yet seen these people who bought years of service credit in the Colorado PERA pension plan also file a lawsuit (as have Colorado PERA retirees over the SB10-001 COLA-taking.)  (I think they have six years to file under Colorado contract law's statute of limitations?  2016?)

Here's the statute under which these service credit purchases were made:

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.”

When Colorado PERA members sent thousands of dollars to the State of Colorado under this PERA contractual offer (many taking the money from other retirement accounts) they believed Colorado PERA's offer and the statute's language that the benefits provided by this service credit purchase will include the COLA applicable under their contract.  There is no language in this statute about the state later retroactively lowering the COLA benefit that was purchased.  As Greg Smith at Colorado PERA has told us, the Legislature has never reserved the right to make retroactive changes to the PERA pension plan.

August 17, 2005, Rocky Mountain News:

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

"Smith said in his opinion that 'other (non-Colorado) courts have set a high burden to meet the necessity threshold.'"

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

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

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

(My comment: Vince, you are a conservative. Conservatives support the sanctity of contracts in the U.S.A. [outside of bankruptcy.]  The free market rests upon this sanctity of contracts.  Conservatives vigorously defend the U.S. Constitution and its Contract Clause.  Why have we not seen a Vince Carroll column condemning the breach of Colorado PERA pension COLA contractual obligations?  You claim to seek truth, seek it and damn the torpedoes!

Vince, last year, when the Colorado Court of Appeals reversed and remanded the case Justus v, State to the Denver District Court, confirming the contractual nature of the Colorado PERA COLA benefit, why did your paper call this reversal a "win" for Colorado PERA?  It doesn't make sense does it?!  Colorado PERA has (conveniently) argued in court (the contrivance) that the PERA COLA is not their contractual obligation.  Why would Colorado PERA consider a reversal of the Denver District Court's decision on that point a win for PERA?  Let's face it, your reporter simply parroted PERA propaganda.  Suck it up and publish a (belated) correction to this Denver Post story by Tim Hoover.  Protect journalistic integrity!

Denver Post, October 12, 2012:

http://www.denverpost.com/newsheadlines/ci_21754161/pera-wins-ruling-cuts-pension-raises

Why not a Vince Carroll column condemning that ridiculous contrivance of PERA's lawyers that a COLA benefit partly earned, and partly purchased under the PERA statutory contract is not actually part of the PERA pension?  If not, then what is it?  A gratuity?  Gratuities are forbidden under the Colorado Constitution.

Is the mortgage interest rate I pay not part of my mortgage contract?  Now that rates have risen does my mortgage company have the right to retroactively hike the mortgage rate in my mortgage contract?)

Silver and Gold Record:

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

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

Silver and Gold Record:

“An early retirement bill working its way through the General Assembly may be a true win-win situation: a good early retirement incentive for classified employees, increased health insurance contributions from employers and substantial savings for state government.” “Last week, Rep. Doug Dean (R-Colorado Springs) introduced HB 1458, which would modify retirement benefits for members of the Public Employees’ Retirement Association (PERA).”

https://www.cu.edu/sg/messages/2229.html

Comment in the Post:

"In 2003, Gov. Owens went after it, but was thwarted by the AG's opinion that the state could not walk away from contracts.  So that administration took a different tack by offering early retirement buy-outs and reduced rates to purchase service credit."  "Granted the slide (in PERA's funding ratio) was accelerated by the economic downturn, but it began when the state figured out how to supplement the general fund by raiding PERA."

http://www.denverpost.com/legislature/ci_16159422

From Friends of PERA:

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

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

“PERA benefits are actually lower than private industry and other public plans that have Social Security plus a pension.”

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

Governor Bill Owens, 2006 State of the State address:

"We also need to take the politically tough step of examining benefit levels for our current employees.  We can help make the system more sustainable by changing the age at which retirees receive full benefits and-if necessary-reducing benefits in the ‘out’ years for those furthest from retirement.  These changes should not affect those closest to retirement, but could be phased in for those who have years to go.”

Link:

http://www.pewstates.org/projects/stateline/headlines/colorado-state-of-the-state-address-2006-85899394414

Colorado Treasurer Walker Stapleton on Amy Oliver:

" . . . these Republican lobbyists unfortunately, are willing to trade what I believe should be their economic principles and values for their livelihood as lobbyists and they go down to the Capitol and convince legislators to vote a certain way against any PERA reform measures, which is why this issue really is an issue, and I’m sure I made myself really popular by just saying that.”

Amy Oliver responds: “Well, and I’m going to name the lobbyist, because I’ve named that lobbyist before, and that’s Mike Beasley, who used to be a Bill Owens staffer.  He was the Legislative Liaison, and he is the lobbyist for PERA.”

http://www.1310kfka.com/audio/amy060612hr2.mp3

January 18, 2006, Rocky Mountain News:

“We believe lawmakers already have that authority, but PERA disagrees.  It insists benefits can’t be cut for current retirees and employees, and claims court decisions uphold that view.”

http://m.rockymountainnews.com/news/2006/jan/18/no-time-to-lose-on-pera-reform/

"History of Colorado PERA Legislation," link:

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

Back to Vince Carroll:

"Is it hypocritical for a politician who receives a state pension to push for reform of federal pensions?  Not in my book, but apparently not everyone agrees — at least based on reaction to news that Republican Rep. Mike Coffman pulls down $55,547 in a Colorado state pension."

(My comment: It is hypocritical for a politician [Coffman] to complain about Colorado PERA's funding ratio [69 percent at the time of the Colorado PERA pension contract breach in 2010] and ignore the fact that military pensions have a ZERO percent funding ratio?  This might be particularly hypocritical if that politician is also receiving a military pension.  Coffman's condemnation of public pension funding levels reminds me of Hillman's condemnation of agri-welfare.  Come clean Coffman, are you also a receiving a military pension?)

Vince Carroll:

"Even the original article on Coffman's pension, which appeared in the National Journal, implied that he was somehow less than forthcoming when urging his colleagues to abolish congressional pensions while failing to volunteer that he's already cashing government retirement checks."

(My comment: Is Coffman Colorado's unparalleled champion of personal public pension benefit acquisition?)

Vince Carroll:

"But of course Coffman didn't go back to work for the same employer. He moved to a different level of government — one that oversees pension systems that collectively have built up an unfunded liability of trillions of dollars."

(My comment: Public pensions in the USA consume less than three percent of all state and local government expenditures, such a burden!

“The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.”

http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf

How is the fact that state and local governments have not "banked" the three percent of future revenues needed to support their public pension debt a "crisis," while the fact that state and local governments have not banked the 97 percent needed for all other future public expenditures is not a "crisis."  Doesn't fit the political agenda does it?

State and local governments in the U.S. have three times as much bonded debt as they do public pension debt.  How is it that public pension debt (900 billion?) is such a burden while all other state and local government debt (300 percent greater debt) is not a burden?  ($2.8 Trillion according to the U.S. Census Bureau.)

http://ballotpedia.org/wiki/index.php/Bond_issue

http://www.census.gov/compendia/statab/2012/tables/12s0439.pdf)

VINCE CARROLL: SIZE MATTERS.

"There is, however, one thing about Coffman's pension that does deserve more attention: its size. Coffman spent about 20 years in state government, first as a relatively low-paid state lawmaker, then as a low-paid state treasurer and finally as a low-paid secretary of state (salaries for Colorado's statewide elected offices rank among the lowest in the nation)."

"Coffman topped out at $68,500. That means his pension is currently nearly 81 percent of his highest state salary. And while pensions provided by the Colorado Public Employees' Retirement Association (PERA) are certainly generous compared to Social Security or almost any of the dwindling array of private plans, they're not typically that generous. What gives?"

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

A comment from the Post:

"Mike Coffman's career has been carefully and artfully planned to collect as many government pensions as possible.  Indeed, there is no mention in his Wiki biography of any substantial private sector employment, but I assume he'll probably end up with at least the required 40-quarter minimum … perhaps mostly from 1983 to 1989."

"According to Wiki, Coffman's military career, mostly Army and Marine reserves (1972 to 1994), started at the age of 17 in 1972.  He transferred from Army Reserve to active duty in the Marines in 1979, and then his status changed to Marine Reserves in 1983 until 1994.  He spent close to a year in Iraq on active duty.  When you tabulate all the years, it's a little over the magical 20 years for a military pension.  May I add, he served honorably."

"Coffman spent about 14 years in Colorado state government (1989 to 2009) in both the House and Senate, and also as Treasurer and Secretary of State.  In order to get his $55K PERA benefit, I'm guessing he bought close to 15 years of service credits to get him close to the magical 30 years for a full state PERA pension."

"Up to about 20 years ago, PERA allowed military service time to be used in purchasing service credit, so since Coffman started state service in 1989 (prior to the rule change), I assume he was allowed to use his military time in purchasing PERA service credits.  This practice is currently not permitted under revised PERA rules."

"Coffman is in his third term as US Congressman (2009 to present), so he has met the minimum 5 year requirement for a Congressional pension.  He is currently in a heated campaign for a fourth term in CD-6."

"Between 1983 (start of Marine Reserves) and 1989 (elected to state House), he may have had private sector employment toward the necessary 40-quarters (10-years) for a future Social Security benefit."

"So, Coffman will be collecting three pension checks, along with a *reduced Social Security check (* a consequence of collecting a state pension benefit) … not bad."

"Nothing wrong with Coffman's financial planning skills, but he has a tendency to want to close the gate (or reform) after he's entered, as evidenced in his interest in PERA reform and his recent interest in reforming the scandalous congressional pension program right after he became vested in both state and congressional pensions."

Vince Carroll:

"There are many PERA beneficiaries like Coffman who bought years of service — often at a very advantageous discount — and who now receive pension checks larger than you would expect based upon the span of their careers.  A large number of those transactions occurred over a three-year period a decade ago, when PERA conducted what one executive called, in retrospect, a 'fire sale' on the service credit," according to a 2005 analysis by the Rocky Mountain News."

VINCE CARROLL ON BILL OWENS MISMANAGEMENT OF COLORADO PERA.

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

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

(My comment: Colorado PERA officials did nothing while Owens and the Legislature raided the PERA trust funds a decade ago to lower personnel costs.  Colorado PERA officials meet three times each year with state legislators for "PERA updates."  If you listen to these legislative hearings you will see that Colorado legislators are not sufficiently sophisticated to oversee Colorado PERA . . . this is by design.  State legislators who know little of public pension administration and contractual obligations are easily manipulated by PERA lobbyists.  For a decade, Colorado PERA officials have said (quite little) at these legislative meetings about the Legislature's failure to pay its PERA bills.  This practice continued at the most recent PERA meeting with the State Audit Committee.  The Legislature again, this year, failed to pay its full PERA pension bill [ARC], but this failure was ignored by state legislators.  As fiduciaries, Colorado PERA officials should emphatically and regularly point out that the Legislature must pay its actuarially required contributions.  Instead, they are complicit in the decline of PERA's financial status, and now conspire to break Colorado PERA pension contracts.

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Save Pera Cola Friends . . . Tell Your Story! How Did it All Go Down? We Want to Know the Truth!

“I have no doubt that the nation has suffered more from undue secrecy than from undue disclosure.  The government takes good care of itself.” ― Daniel Schorr

In 2010, the Colorado Legislature passed a bill that, for the most part, ignored prospective reform of the Colorado PERA pension system, and generated 90 percent of the cost savings in the pension reform bill (SB10-001) by retroactively taking up to 42 percent of contracted PERA COLA benefits.  (That is, the inflation protection due under Colorado PERA pension contracts.)

Were you involved with the development of SB10-001 in 2009/2010?  Tens of thousands of Colorado PERA retirees want to know the whole story.  They deserve to have the whole truth!  As it stands, they only have a murky sketch of what went down in 2009/2010.  PERA retirees own a good part of the Colorado PERA trust funds, and they paid into the PERA trust funds for most of their lives.  They should have complete information about this bill (SB10-001) that, if unchecked, will inexorably lower the quality of their lives in order to keep Colorado taxes low. Let's have complete transparency in Colorado government.

(I, for one, would find the full back-story on the 2009/2010 PERA COLA-taking fascinating.)

During debate on SB10-001, on the floor of the Colorado Senate, we heard that "this was a deal cut before this body met."  So, how was the SB10-001 "deal" cut?

Who gets to claim credit for coming up with the original proposal to take PERA COLA benefits?  Who brought the idea to the PERA Board?  How did the board react initially?  Who was not "on-board"?  How did the PERA Board address the obvious constitutional questions?  Were objections raised by PERA's legal staff?  How difficult was it achieving board unanimity?  What persuaded the trustees to run with the COLA-taking plan?  What objections were raised by board members?  Did the idea of a prospective reduction of the PERA pension multiplier ever come up?  If so, why was this idea dismissed?  Did the union's representatives resist going in that direction?

Why did the PERA Board opt against limiting PERA reform to the creation of new tiers as was their historical practice?  What options for the creation of new tiers were priced out by actuaries?

What were the early conversations about the COLA-taking idea?  Why were so many prospective public pension reform options excluded?  (It was pointed out at PERA's Denver "Listening Tour" meeting that only a few reform options on the table impacted those who actually owe the PERA debt, i.e., PERA-affiliated employers.)

Who dissuaded Legislative Leadership from submitting an interrogatory (through Ritter) to the Colorado Supreme Court on the constitutionality of the developing SB10-001 proposal?  We know that the PERA Board wanted to send this interrogatory to the Supreme Court, why were PERA's lobbyists not able to make this happen?  Did Legislative Leadership shut it down?

How was Governor Ritter, an attorney himself, persuaded to make the COLA-taking attempt?  What did he have to say about the adverse Colorado public pension case law?

How was the decision made to hire the Dubofsky law firm to create the legal opinion rationalizing the COLA taking?  Who had the idea to hire Dubofsky?  Was her firm hired for legal expertise in this area of the law or for other reasons?

How did Colorado PERA's lobbyists (including any of Senator Shaffer's "bad lobbyists") go about persuading the members to support SB10-001?

We know that certain lobbyists were assigned to target various caucuses at the Legislature, how did lobbying strategies differ for each caucus?

Former Colorado legislators involved in SB10-001's development, how were you lobbied?  What was your role?  Why were you convinced or unconvinced that SB10-001 was a real solution?

When did Colorado PERA officials first anticipate that they would have to fight a court battle to take the COLA benefit?  Why was the decision made to proceed considering the significant legal battle ahead?

Who had the idea to put the "request" for the PERA Board to develop pension reform recommendations into SB09-282 at the end of the 2009 session?  Did the PERA Board really "ask itself" to make these recommendations by having its lobbyists place that language into SB09-282?  Who filed the amendment request with legislative staff?  A PERA lobbyist?  Senator Penry?  Did a lobbyist take this idea to Senator Penry?

Did PERA's lobbyists coach Senator Penry on strategy to enact the SB10-001?  Did they warn him against making public statements that the COLA was contractual, (happened.)  Was PERA's legal strategy to take the COLA unsettled at that point in time?  Why did PERA go forward with the COLA-taking attempt if the legal strategy was unsettled?  PERA officials had the Dubofsky opinion in hand, was there a debate over attempting to use "actuarial necessity," or Dewitt?  Why did we hear Senator Penry talking about "actuarial necessity" rather than Dewitt at the beginning of the 2010 session?

Why did PERA submit a written document to the JBC stating that the COLA was a contractual obligation prior to the attempt to take it?

Which state legislators were unhappy about having PERA run the COLA-taking show?  Who originated the idea to have PERA pension reform recommendations developed outside of the Colorado legislative process?  In most states, the members of the state legislature are educated about public pension administration and contractual obligations, then the state legislators actually make the policy decisions.  In most states, it is the elected state legislators who debate and determine public pension policy.  Why did Legislative Leadership agree to have this entire process moved outside of the Colorado legislative process?  What advantages did moving the pension reform debate outside of a normal public policy-making  process offer the various interested parties?

What is special about this policy area, Colorado public pension policy, that it should be developed outside of the legislative process?  Too complex for state legislators to grasp?  How do other state legislatures manage to debate public pension reform options in open legislative hearings?  How many arrange to have a "deal cut" with union lobbyists and then ignore all other reform options?

How much of the ultimate 2010 PERA reform legislation was actually finalized by the Colorado PERA Board of Trustees in Executive Session?

Former Colorado PERA staffers, remember, you were employees of a "transparent" organization.  Be transparent, what's the real story?  What "deals" were cut?  Who were the players in that "smoke-free" room?

What instructions were provided to Colorado PERA's actuaries during consideration of pension reform alternatives in 2009/2010?  Why do PERA's actuaries feel compelled to continue to point out in PERA CAFRs that the 100 percent funded ratio in SB10-001 is a "MUCH STRONGER POSITION THAN REQUIRED TO MEET CURRENT GASB STANDARDS"?  Don't they know that this harms the case for the bill?  Did they suggest an 80 percent threshold as a more "reasonable" breach of PERA COLA contractual obligations?  How was the decision reached to "go big" and seek a 100 percent funding ratio threshold in SB10-001?

Why has the PERA Board had a practice of limiting the PERA trust fund's funding ratio to 90 percent in the past?  Was this official board policy?  When was this policy scrapped?  Did this board policy come up during the discussion of placing a 100 percent funded ratio threshold into the PERA statutory contract?
Why did Meredith begin job hunting in the months after SB10-001 was enacted?  Did he just need a change of scenery?  Was he fully on-board with the COLA-taking plan?

In light of his past comments supporting PERA COLA contractual rights, how was Greg Smith brought on board?

What were the roles of Colorado's public sector unions and the Colorado Coalition for Retirement Security in developing the COLA-taking plan?

Why were PERA's lobbyists unable to kill SB12-149 at the 2012 legislative session?  Why were PERA's lobbyists or staff unwilling to put a pension funding threshold into SB12-149?  How was Senator Steadman able to rationalize sponsoring a bill that honored the vested contracts of Colorado county government retirees, SB12-149, after having supported SB10-001 breaking Colorado PERA retiree pension contracts?

Who has lobbied the Legislature to finish paying off $700 million in local government legacy pension debt (Old Hire Fire and Police pensions) before the SB10-001 case is completed?  Local government lobbyists perhaps?

During the meetings at which SB12-149 was developed did Cindy Birley make the case that prospective reform of Colorado pensions under Colorado case law was much more likely to pass court muster?  What compromises were PERA's lawyers/lobbyists able to achieve in the developing SB12-149?

I think it was critical that Colorado PERA retirees decided to defend their PERA COLA benefits in court in 2010.  I see that lawyers for the City of San Jose are arguing in court that, since city employees have agreed to increases in their pension contribution rates in the past, further increases in those contributions are now permissible.  The lawyers make the argument that contributions can be increased, since the employees "cannot waive a legally protected vested right."  My take-away is that public employees who do not defend their contractual pension rights in court, public employees who compromise, will eventually see lawyers for public pension plan sponsors arguing in court that those rights are not vested.  What is not nailed down will be taken.

Words of wisdom: “Sunlight Is the Best Disinfectant,” U.S. Supreme Court Justice Louis Brandeis.

Let the world know what really happened with the 2010 Colorado PERA COLA-taking.  Post the real story on the Save Pera Cola Facebook page, or post it anonymously on ColoradoPols if that is your preference, or send it anonymously to saveperacola.com.  In any event, let's have the whole unadulterated truth!  We only live once, let's seek truth while we have the chance!

Do your part to support contractual public pension rights in Colorado, contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

http://saveperacola.com/

Colorado PERA’s Executive Director Drops a Load of PERA Propaganda on the Denver Post.

There is a pervasive stench about the 2010 Colorado PERA pension contract breach conspiracy.

Where to begin?

Today's Denver Post (July 27, 2013) includes an editorial by the Executive Director of the Colorado PERA pension system, Greg Smith, attempting to defend the Colorado Legislature's 2010 breach of state and local government contractual obligations.

http://www.denverpost.com/opinion/ci_23740082/what-detroit-could-have-learned-from-pera

Why does Colorado PERA's Executive Director, Greg Smith, continue to defend this breach of the contracts of the State of Colorado?  The organization that he represents, Colorado PERA, has more than 200 employees.  Many of these employees have worked in public pension administration for decades.  They know perfectly well that accrued public pension benefits in DEFINED benefit pension plans are contractual obligations of public pension plan sponsors.  Unlike most members of the Colorado Legislature, many members of the Colorado PERA staff have actually read Colorado's public pension case law, public pension legal theory, and the recent (2012) Colorado Court of Appeals ruling confirming the contractual status of Colorado PERA COLA benefits.

These employees know that their employer, Colorado PERA, is attempting to base the breach of Colorado public sector pension contracts on a fiction, a contrivance.  These employees know that the contrivance (PERA's recently developed argument that the "automatic" PERA COLA is not a contractual obligation) . . . is a crock.

When the boss feels compelled to regularly spout propaganda that the rank and file knows is a crock, many employees find that quite embarrassing.  It embarrasses the employees of Colorado PERA, and it is embarrassing to the State of Colorado.  It is embarrassing that Colorado, the 15th wealthiest state in the nation is attempting to break its contracts to minimize taxes in the state.  It is embarrassing that, in 2010, a majority of the members of the Colorado Legislature, decided to try and pay off state and local debts by taking money from old people.  That action was sick, immoral, unjustifiable.  Public pension funds can be legally bolstered with PROSPECTIVE pension reform that does not break pension contracts, such as SB12-149 adopted by the Legislature last year.  In 2010, the first choice of Colorado PERA and the Colorado Legislature was breach of fully-vested Colorado PERA retiree pension contracts.

Why does Greg Smith continue to support the breach of the contracts of the State of Colorado?  In my opinion, it's because he simply screwed up in 2009, and now he's trapped.  He was the General Counsel for Colorado PERA before, and during the 2010 pension contract breach in SB10-001.  It was his job to steer the Colorado PERA Board clear of this legal fiasco.  He failed.

When, as I suspect, one or more sharp attorneys (you know who you are) for Colorado public sector unions showed up armed with a ridiculous legal contrivance to unload the debts of PERA-affiliated employers onto PERA retirees, Smith should have stood his ground, shown them the door, warned the PERA Board of Trustees, and performed his fiduciary duty regardless of the consequences.  But, it appears that he caved, and joined the conspiracy.  We can't know the extent to which Greg Smith objected to the proposed PERA contract breach prior to caving, since such discussions at the "transparent" organization Colorado PERA are conducted in Executive Session.

Instead of shopping for a law firm (Dubofsky) that would create a legal opinion attempting to justify the taking of the contracted pension COLA benefit in early 2009, Greg Smith should have been informing PERA employer lobbyists that shoring up the pension plan may very well involve altering the rate of FUTURE accrual of PERA pension benefits, that is, the multiplier.

But, it's too late now.  Greg Smith had his chance to aggressively defend Colorado PERA pension contracts in 2009/2010, as has been his practice historically, but instead, he appears to have joined the conspiracy.  Was he forced to hop on the PERA contract breach bandwagon as a condition of employment?  Did Meredith Williams begin looking for a new job shortly after the PERA contract breach in order to escape an environment where ethics were being casually tossed in the trash bin?  (Meredith was seeking a job in Texas in the months following the PERA contract breach.)  Did Greg see a Meredith Williams rift with the PERA Board over the breach as his opportunity to ascend to Executive Director?  He just had to play along with the PERA contract breach?  PERA retirees want to know the truth.

Taking money from old people to pay off state and local government debts, breaking the contracts of people who have dedicated their lives to public service, ignoring prospective, legal pension reform alternatives that have been adopted across the nation, conspiring with union officials to minimize future contributions from their active dues-paying members (follow the money) through breach of contract, all of this is manifestly immoral.

Let's spread Greg Smith's latest Colorado PERA propaganda piece from the July 27, 2013 Denver Post out on the table for dissection.  This new Colorado PERA propaganda piece is entitled: "What Detroit could have learned from PERA," and is it ever rich!

Greg Smith in the July 27, 2013 Denver Post:

"The PERA board's proactive recommendation called on members to pay in more of their salaries and retirees to take modest reductions to their benefits.  These decisions were painful, but necessary.  PERA members and retirees shoulder 90 percent of the burden to restore PERA to financial stability and ensure a solid, modest retirement for Colorado's public employees.

(My comment: Incredibly, here, Colorado PERA's Executive Director, Greg Smith, has written and published a claim that SB10-001, resulted in PERA retirees taking a "modest reduction to their benefits."  The mendacity of this claim is shocking, to the point that Smith appears to be delusional.

Depending on the number of years that a PERA retiree remains alive, the provisions of SB10-001, illegally seize 30 to 40 percent of total, earned, accrued contracted PERA retiree pension benefits.  Greg Smith is attempting to minimize the extent of the "crime" I perceive.  Under SB10-001, some Colorado PERA retirees who live long enough will lose more than half of their contracted benefit.  If half of Smith's 401K balance were seized by the State of Colorado, would he find that taking "modest"?

The Ritter Administration on the "modest reduction" resulting from the 2010 Colorado PERA pension contract breach:

“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

[Recall that Governor Ritter signed SB10-001 breaking PERA pension contracts.]

I 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 42 percent, that is, (from 3.5 percent to 2 percent.)  Pension contributions raised by two percent, contracted pension COLA benefits slashed by 42 percent.  Greg, PERA retirees are old, but they are not stupid.

As PERA officials and the sponsors of SB10-001 have bragged repeatedly, 90 percent of the cost-shift in SB10-001 was pushed onto Colorado PERA retirees.  Was the idea that these old people were not paying attention?  Too sick or preoccupied to fight for their constitutional rights?  A subclass that did not deserve equal rights under the Colorado and U.S. constitutions?)

Greg Smith in the July 27, 2013 Denver Post:

"It is my firm belief that other cities, states, and our national government need to take the steps we took in Colorado to ensure that all Americans have a secure retirement."

"It's good public policy and, as we've demonstrated in Colorado, it makes sense for our economy."

(My comment: In my opinion, this is what we are hearing from Greg Smith, it is his "firm belief" that other cities and states need to break their public pension contracts like Colorado PERA. Contract breach is "good public policy."  Colorado PERA officials have been hoping that many other states would join them in attempting a public pension COLA theft.   Where a "crime" is ordinary, the conscience of the "criminal" is assuaged.

I also note that Greg Smith has changed his tune since embracing pension contract breach, it looks like this "good public policy" that should be emulated by other states was quite recently considered by Greg Smith to be breach of contract.

Greg Smith in the Denver Post:  “The attorney general's opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”

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

Colorado 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)

Greg Smith in the July 27, 2013 Denver Post:

"Coloradans are known for their willingness to step up and find solutions to problems.  So, as the country was beginning to feel the effects of the recession several years ago, PERA, the retirement plan for most of Colorado's public employees, was one of the first such plans in the country to recognize that our long-term sustainability was in jeopardy."

(My comment: Greg, give it up, you don't get to break public pension contracts in a recession.  Public pension contracts were upheld even during the Great Depression.  Public pensioners bear no market risk in their defined benefit pension plans, for God's sake ask your staff!

Greg, it was not "Coloradans" who stepped up and proposed the breach of Colorado PERA pension contracts.  It was public sector union officials, members of the Colorado PERA Board of Trustees, Colorado PERA pension administrators, lobbyists hired by PERA-affiliated employers looking to cut their debt, uniformed politicians, and easily manipulated politicians.

Greg, in spite of the fact that 27 lobbyists joined forces to break Colorado PERA pension contracts in 2010, in spite of the fact that public sector unions and many members of both political parties conspired to break PERA pension contracts, in spite of the fact that many in the Colorado Legislative Branch and the Colorado Executive Branch and numerous corporate interests sought to break PERA pension contracts, just three "No" votes in the House of Representatives would have killed SB10-001.  The assembled lobbying juggernaut barely squeaked out a win in the House in 2010.  What does that tell you?

It tells me that many members of the Legislature refused to casually discard their oaths of office, refused to disgrace the Legislature and the Colorado Constitution, knew what was happening ("a deal cut before this body met,") and rightly wondered why the Legislature had abdicated its policy-making authority in this area to self-interested lobbyists, and pension administrators.  Examples: Weissman, DelGrosso, Pace . . .

All of these political, legal and lobbying resources were brought to bear and yet SB10-001 just barely squeaked through.  Greg, why was it so difficult for the Legislature to adopt this "good public policy" that you refer to?

The extent of the power of Colorado PERA's hired lobbyists is interesting to me.  PERA's hired lobbyists conspiring with PERA-employer lobbyists were ultimately able to push SB10-001 through the legislative process in 2010 . . . some lobbying strength there.  On the other hand, PERA's lobbyists were not able to kill SB12-149, the bill that enacted PROSPECTIVE, legal public pension reform for Colorado county governments in 2012, a "less drastic" alternative to contract breach.

Colorado PERA administrators and the Colorado Coalition for Retirement Security wanted this bill, SB12-149, postponed indefinitely, since it hurts their case for the PERA COLA pension contract breach.  But, they couldn't pull it off.  This is evidence of the limits of Colorado PERA's lobbying power.

While we are on the subject of PERA lobbyists, please explain what the co-prime sponsor of SB10-001, Senator Brandon Shaffer, intends by labeling PERA's lobbyists "bad lobbyists"?  It would be very interesting to have full disclosure of all of the political machinations that went on behind the scenes while the SB10-001 scheme was developed, finalized and implemented.  Who are PERA's "bad lobbyists"?  They got the job done, why are they "bad"?

Senator Brandon Shaffer, co-prime sponsor of SB10-001:

“PERA is very good at crunching numbers, but they’re terrible at getting their message out.  They need to make it toxic for any politician to go up against PERA.  As individuals, you need to sit down with PERA and tell them you’ve spoken to President Shaffer, and he says you have bad lobbyists.”

Link:
http://www.bouldervalleyea.org/images/AdvocateJanuary2012.pdf)

Greg Smith in the July 27, 2013 Denver Post:

"That's when, in 2010, the PERA Board of Trustees recommended to the Colorado General Assembly that a plan was needed to ensure PERA's financial health for the long term."

(My comment: Greg, I notice that PERA is no longer claiming that the Colorado General Assembly requested that the Colorado PERA Board of Trustees develop and present pension reform recommendations.  Is this because PERA lobbyists were actually responsible for putting this "request" into statute?  Did PERA lobbyists take this request to the Legislature's Legal Services office and request that the amendment be drafted?  Or, did PERA lobbyists plant this idea in Senator Penry's head?

I can see that, if PERA lobbyists actually originated the idea to place this "request for pension reform recommendations" from the PERA Board into statute, the claims made in PERA legal briefs that the Colorado General Assembly "mandated" such pension reform recommendations by the PERA Board appear misleading and disingenuous.  Why would PERA submit such a brief to a court knowing of this misrepresentation?

Was this all part of an effort to make the preordained breach of PERA COLA contractual obligations appear to be the result of a thorough, fair deliberative process by the PERA Board?  Why did the PERA Board not insist that the Legislature conduct its own hearings and due diligence, instead of abdicating its policy-making authority?  The PERA Board, administrators and union officials did not want the members of the Legislature to be educated on this topic?  This would have hindered the contract breach?  Who persuaded Legislative Leadership to play along?

Greg Smith in the July 27, 2013 Denver Post:

"This shared sacrifice between members, retirees, and employers cut nearly $9 billion in future liabilities in 2010 alone."

(My comment: Greg, you are an attorney.  You know that a sophomoric argument for "shared sacrifice" is not a license to break contracts.  Should all existing contracts in the USA be scrapped when one party expresses a desire to retroactively change contractual terms for a "shared sacrifice."  Again, a crock.  If I walked into a bank and asked for a shared sacrifice, they would lock me up.

If public sector unions had decided to break PERA contracts by taking the entire PERA COLA benefit in 2010 your "savings" might have been $30 billion.  Why didn't you choose to "save" the taxpayers $30 billion if you had the opportunity?  I'm sure they would have appreciated that more than a mere $9 billion savings.

Greg, you point out that significant savings for some parties to a contract can be achieved through breach of contract.  Tremendous demand for your legal skills certainly exists among debtors in the United States.

Greg, if a private insurance company sold your mother an annuity with a COLA provision, and later notified her that, due to the need for discretionary expenditures at the insurance company, they intended to unilaterally reduce the COLA provision in your mother's annuity contract, I think we would see you pop a vein!

Greg Smith in the July 27, 2013 Denver Post:

"We now live in a world that is constantly changing, and requires us to continuously adapt to new circumstances."

(My comment: Well, Greg, the world may be changing, but the contract clauses in the U.S. Constitution and in the Colorado Constitution have not changed.)

Greg Smith in the July 27, 2013 Denver Post:

"We (PERA) are a not-for-profit economic engine that is adaptive, innovative, and consistently delivering value to Colorado's largest workforce."

(My comment: Colorado PERA is not a "not-for-profit" entity.  Colorado PERA is a governmental agency.  Colorado PERA is an arm of Colorado state government, an "instrumentality of the state.")

Greg Smith in the July 27, 2013 Denver Post:

"There are a lot of important lessons in the sad news of Detroit's serious economic woes."  "It will take time for that city to work its way back toward recovery, but it's hard not to think that such a crisis could have been averted if they had taken action sooner."

(My comment: I find it alarming that the leader of our state's largest public pension system, Greg Smith, is not above using a distressed Detroit to bolster his Colorado PERA contract breach propaganda.  Detroit's public pensions are relatively well-funded at 87 percent and 96 percent funded levels.  Detroit is trying to break its public pension contracts in bankruptcy.  Detroit's unfunded public pension liabilities represent about $2.5 billion of Detroit's estimated, total $18 billion debt.  The unfunded pension liabilities of the Detroit pension plans are due over the next 50-70 years.  This debt will be paid out incrementally over many decades.  It is not due tomorrow.

"Public pensions are not part of Detroit's problem.  In fact, its public pensions are well funded – over 96 percent for the Police and Fire plan and over 87 percent for other city employees."

http://www.ncpers.org/Files/NCPERS%20Response%20to%20Bloomberg.pdf)

Greg Smith in the July 27, 2013 Denver Post:

"I can't underscore enough the importance of this proactive, bipartisan, collective effort, especially as Detroit looks to shed its retirement obligations through bankruptcy."

(My comment: Greg, Detroit is a municipality, it is eligible to address pension obligations in bankruptcy.  Colorado PERA is attempting to shed its pension obligations outside of bankruptcy.  There is a world of difference.  Detroit is in a poor financial condition, although its public pension plans remain quite well-funded.  Colorado is the 15th wealthiest state in the nation.  The Colorado Legislature has just completed [last session] paying off $700 million in local government pension obligations that ARE NOT the contractual obligation of the State of Colorado, while ignoring its own PERA pension debts [failing to pay the full PERA pension ARC for a decade.]  The support of Colorado PERA pensions consumes three percent of all Colorado state and local governmental expenditures, such a "burden."  Further, as you know, state governments cannot file bankruptcy under federal law.)

From the July 27 Detroit Free Press:

"Michigan Attorney General Bill Schuette announced this morning that he will defend the state’s constitutional protections of public pensions in Detroit’s historic bankruptcy filing."

"Michigan’s constitution, Article 9, section 24, is crystal clear in stating that pension obligations may not be 'diminished or impaired,' Schuette said.  As attorney general, I will defend the rights of Michigan citizens and defend the Constitution of the State of Michigan."

http://www.freep.com/article/20130727/NEWS15/307270059/Michigan-AG-to-defend-public-pensions-in-Detroit-s-bankrputcy-filing

Greg Smith in the July 27, 2013 Denver Post:

"One can't help but wonder if Detroit had been more proactive about finding common-sense solutions for public employees, retirees and taxpayers, perhaps its future would look more like ours."

(My comment: To me, it looks like Greg Smith is attempting to conflate Detroit's financial predicament, of which public pension unfunded liabilities are a small part, with Colorado's financial condition.  It appears that he does so in an attempt to somehow justify the breach of Colorado PERA pension contracts.
Again, Detroit is a municipality attempting to alter its well-funded public pension plans in bankruptcy.  Colorado is attempting to break public pension contracts outside of bankruptcy, and of course, state governments cannot declare bankruptcy under federal law.

Is breach of contract a "common sense" solution?  It sounds like a temporary solution to me, kicking the can.  Is taking a third or more of Colorado PERA retiree contracted benefits a "common sense" solution?  We know that the PERA contract breach was not "reasonable," nor was it "necessary."

Greg, in my opinion, "your future" will include an opportunity to watch the enactment of PROSPECTIVE Colorado PERA pension reforms that you should have insisted upon before the Colorado PERA Board of Trustees in 2009.)

Here's a bit more from Colorado PERA's Executive Director Greg Smith:

Senate Finance January 29, 2010, Greg Smith:

“There are few case laws that address the issue, Smith said, but one, regarding a fire and police pension plan, was litigated when the plan ran out of money and benefits were being paid for with current revenues.”

http://www.coloradostatesman.com/content/991568-pera-reform-bill-passes-first-test-capitol

RMN, August 17, 2005:

“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/

RMN, February 21, 2004:

“PERA general counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that's not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.”

PERA Trustee Casebolt at the Colorado PERA "Listening Tour," August 11, 2009, there's plenty of cash to pay current PERA benefits:

“PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

Link:

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

RMN, August 17, 2005, Greg Smith:

“His 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.”  (My comment: Let's have a look at this Smith briefing paper, surely the "transparent" organization Colorado PERA will make a copy available.)

Greg Smith at 2010 PERA Shareholder meeting – YouTube video 10-11 minutes into the video.

“We need to know the answer of whether this action was constitutional.”

(My comment: Then why did the Colorado PERA Board not insist that an interrogatory be sent to the Colorado Supreme Court?  Would have rocked the boat?)

Colorado PERA active and retired members, support public pension contractual rights in our state.  Colorado is better than breach of contract.  Contribute at saveperacola.com.  Friend Save Pera Cola on Facebook!

Montana Retiree COLA-Theft Lawsuit Progressing. Colorado PERA Retiree COLA-Theft Lawsuit Cert Petition Pending.

Like contracts offered by Colorado's largest public pension system, Colorado PERA, Montana public pension system contracts include an "automatic," annual cost-of-living adjustment (COLA).  In Montana, the automatic pension COLA benefit is called the GABA, "guaranteed annual benefit adjustment."

Also like Colorado, a majority of legislators in Montana have decided to try to escape the state's public pension contractual obligations by taking the pension COLA benefit in state legislation. Although Montana's Governor and attorneys for the Montana Legislature believe that the breach of Montana retiree pension COLA contracts is unconstitutional, Montana's Governor opted to sign the bill taking the COLA benefit in order to enact the balance of the pension reform bill.

In Colorado, Governor Ritter supported the breach of Colorado PERA retiree pension COLA contractual obligations in 2010 (as does Governor Hickenlooper) and the Colorado Legislature did not bother asking their own attorneys for an opinion on the constitutionality of the "pension default" bill, SB10-001.  It is odd; however, that Colorado legislators are making this attempt in light of the fact that attorneys at the Colorado PERA pension system have confirmed in testimony before the Legislature that the PERA COLA benefit is a PERA 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

COLA benefits are included in public pension contracts to slow the erosion of the purchasing power of pensioners during their remaining years.  "Automatic" public pension COLA benefits are contractual obligations of public pension plan sponsors, identical to contractual COLA provisions in annuities that are sold by private insurance companies.  Purchased annuity COLA benefits in the private sector:

"One way to address this problem is by purchasing a cost-of-living adjustment (COLA) option with the immediate annuity. The COLA option increases the dollar amount of future payments to keep up with inflation, with the goal of preserving the buying power of the immediate annuity payments."

http://www.myretirementpaycheck.org/savings-investments/immediate-annuities.aspx

No attorney for a private insurance company is brazen enough to argue in court that the insurance company should have the right to break contractual COLA provisions in annuities that the insurance company has sold, simply because the insurance company is a party to other annuity contracts with varying COLA provisions.

Colorado PERA and Montana COLA benefits are "automatic" COLA benefits as opposed to "ad hoc" COLA benefits:

June 2011

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

State legislators in a half-dozen states have decided to attempt a breach of retiree public pension contracts:

August 16, 2010

“Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. ‘The belief is that if the employer [the state] prevails, it will have been worth the political risk,’ Klausner says.  ‘And if they lose, they will be no worse off than before.’  Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the ‘bad guy’ if they overturn the law.”

http://www.governing.com/news/state/States-Test-Whether-Public-Pension-Benefits-Given-Can-Be-Taken-Away.html

On October 11, 2012, the Colorado Court of Appeals confirmed the contractual, "automatic" nature of the Colorado PERA COLA benefit.  Colorado Court of Appeals 2012 decision in the case 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

MONTANA RETIREES ON THE STATUS OF THEIR COLA-THEFT LAWSUIT.

The Association of Montana Retired Public Employees, supported by Montana public sector unions, is preparing to file their lawsuit contesting Montana's breach of public pension contracts.  Here's a link to the latest AMRPE newsletter:

http://www.amrpe.org/wp-content/uploads/2012/12/Newsletter-May-2013.pdf

Excerpts:

"AMRPE needs your help. We will file a lawsuit over the provision in HB 454 that lowers the 3% Guaranteed Annual Benefit Adjustment (GABA) to 1.5% or even lower.  AMRPE believes this action is in violation of the contract clause in our state and federal constitutions."

"House Bill 454 was introduced at the request of the Governor’s office and originally provided that employers and employees would contribute an additional 1% of salary to the fund.  It also included the unallocated portion of the coal severance tax, as well as a portion of the interest earned on the coal severance tax trust fund.  AMRPE was the first to propose the use of coal severance tax revenues to help the various pension funds become actuarially sound (House Bill 632 in 2011 and HB 382 in 2013 Legislative Sessions).  As introduced, this session’s HB 454 assisted in making the PERS system actuarially sound.  It initially did not contain provisions to modify the GABA."
 
"The AMRPE board has retained the law firm of Browning, Kaleczyc, Berry and Hoven to represent us in this important legal undertaking."

"While the monies from the coal tax certainly help, the bottom line is that by reducing the GABA, retirees are carrying the biggest burden in making the fund actuarially sound.  This is clearly a breach in the employment contract and is constitutionally suspect."  "Your Association has decided to legally challenge the provisions of HB 454 that reduce the GABA in court, and we will need your help in doing so.  We will have our day in court . . ."

(My comment: the Montana Legislature's taking of the GABA benefit will cost a Montana retiree with a $12,000 annual contracted pension benefit a total of $135,000 if they manage to live for the next 30 years, or $88,000 if they can only squeeze out another 25 years.)

"Your AMRPE Board of Directors has voted to pursue litigation against the State of Montana over the Guaranteed Annual Benefit Adjustment reduction included in HB 454.  The reduction harms and places the brunt of the pension fix on the backs of PERS retirees.  We feel this is a direct violation of our Contract Rights specified in Montana Law, 19-2-502(2) MCA which states:

“Benefits and refunds to eligible recipients are payable pursuant to a contract as contained in statute.  The contract is entered into on the first day of a member’s covered employment and may be enhanced by the legislature.  Unless specifically provided for by statute, the contract does not contain revisions to statutes after the time of retirement or termination of membership.”

MONTANA PUBLIC SECTOR UNIONS TO SUE OVER PENSION COLA THEFT. (COLORADO'S UNIONS SUPPORTED THE TAKING OF THE COLORADO PERA COLA BENEFIT FROM PERA PENSIONERS.)

MEA-MFT:

"We keep getting calls and emails asking if MEA-MFT is in fact going to litigate legislated amendments seriously truncating and delaying Guaranteed Annual Benefit Adjustments or GABAs in PERS and TRS."

"The answer is YES!"

"MEA-MFT is right now working with other advocate organizations representing current and future retirees on a common, comprehensive legal challenge to the legislature's GABA attacks. We have retained counsel. We are developing compelling legal arguments. We are vetting possible plaintiffs. We will file when it is the right time to file. And we expect to win."
 
From helenair.com:

"The plan is expected to face legal challenge from unhappy retirees who will argue in court that the changes unconstitutionally break the contractual obligations the state made to employees."

"The state's largest employee union, MEA-MFT, said it expects to support the litigation — even though it also still supports the overall fixes."

http://helenair.com/news/state-and-regional/bullock-signs-pension-fixes-school-funding-bill/article_3502dd1e-d19b-5d69-bb25-c77671a6792f.html

Eric Feaver, President, MEA-MFT:

"There are constitutional questions, questions of contract rights that are raised by so doing (changing guaranteed annual benefit adjustments.)"

MONTANA GOVERNOR: THE COLA TAKING IS UNCONSTITUTIONAL.

From helenair.com:

"In response, Bullock’s budget director Dan Villa said the governor’s office opposed the amendment that sought to change the GABA (COLA) and questioned its constitutionality."

"'We understand that both current employees and retirees are considering legal challenges to address the amendments, and we support that action,' Villa said. 'It’s important to keep in mind that this likely unconstitutional amendment doesn’t change one important fact: by implementing the remainder of Gov. Bullock’s plan, Montana is the first state in the nation to fix our pension system without raising taxes.'"

http://helenair.com/news/legislature/feeling-betrayed-retiree-group-asks-governor-to-veto-pension-bill/article_a6b2eaac-b2eb-11e2-b352-0019bb2963f4.html

Montana pensioners:

"The Legislature’s own attorneys have repeatedly advised it that GABA is a constitutionally-protected contract with public employees and should not be broken.  If the Legislature chooses to advance legislation to renege on this important commitment it has to raise concerns with all citizens as to what other contracts the state may choose to ignore.  If a 'deal’s a deal' only when the Legislature chooses to honor it, then what about Montana’s other contract commitments?"

"The Legislature should not violate the contract it statutorily committed to with Montana’s public employees. Rather, it should honor the commitments made to current and future government retirees including fully funding GABA."

"Unlike other states that have variable Cost of Living Adjustments in their pension plans, Montana enacted a guaranteed statutory annual percentage adjustment for its public employees."

(My comment: Again, Montana and Colorado have "automatic" public pension COLA benefits rather than "ad hoc" COLA benefits.)

http://helenair.com/news/opinion/readers_alley/montana-should-keep-commitments-to-its-public-employees/article_8cee6aac-98c8-11e2-8aaf-001a4bcf887a.html

Colorado PERA active and retired members.  Support public pension contractual rights in the USA.  Contribute at saveperacola.com, and "Friend" Save Pera Cola on Facebook!

Does Quaker Hickenlooper’s Support for the Breach of Colorado PERA Pension Contracts Comport with “Quaker Values”?

AS A BUSINESSMAN, HOW IS IT THAT HICK SUPPORTS BREACH OF CONTRACT?

Is just does not compute.

Apparently, Quakers do not traditionally embrace contractual relationships, Dr. Emma Lapsansky-Werner, Emeritus Professor of History, University of Pennsylvania:

"It is helpful to provide context by pointing out that even while eschewing formal contracts, Friends have shaped their theology and behaviors around what might be described as contractual premises."

http://law.hamline.edu/files/Lapsansky.Rev_..pdf

http://www.haverford.edu/faculty/elapsans

(Note that many branches of Friends exist today, and that belief in the sanctity of contracts, or whether one should become a party to a contract may vary among these branches.  Also, in case you're curious Wynkoop patrons, Teetotalism among Quakers is a myth.)

Hickenlooper has identified himself as a Quaker:

"In 2010, Hickenlooper told the Philadelphia Inquirer that he and Thorpe attend Quaker meetings and try to live by Quaker values."

http://en.wikipedia.org/wiki/John_Hickenlooper

"Back on the bus, Hickenlooper credits this approach to his Philadelphia roots.  'We go to Quaker meeting three times a week,' he said of himself and his wife, author Helen Thorpe.  'My great-grandparents were Quakers.  And I tried to take that ethic into business.  Quaker honesty, Quaker mindfulness, that effort to build community across differences. . . . I get that from my Philly background.'"

http://articles.philly.com/2010-10-27/news/24953518_1_colorado-governor-wynkoop-brewing-denver-s-lower-downtown

As is common among the population as a whole, my guess is that most Friends respect existing contracts and believe that the failure to meet one's contractual obligations is immoral.  But, can the traditional aversion of Friends to enter into contractual relationships help explain Hickenlooper's lack of respect for Colorado PERA pension contracts?  How does Hick's support for the breach of the contracts of the State of Colorado constitute "Quaker honesty"?

HICKENLOOPER: Break Colorado PERA retiree pension contracts, seize contracted, accrued, PERA pensioner benefits:

“Hickenlooper told the group that changes two years ago seeking to sustain the Public Employees’ Retirement Association were insufficient . . .”.  ‘I personally think that we probably should go further,’ Hickenlooper said.  He said options the state could consider include reducing inflation adjustments for retirees, raising the retirement age for new hires and averaging employees’ last five years of earnings to determine pension payments rather than the last three years.”

http://www.chieftain.com/hickenlooper-talks-energy-water-pensions/article_25f92ef8-4ef1-11e1-a99f-001871e3ce6c.html

HICKENLOOPER ON LAST WEEK'S MIKE ROSEN SHOW: Break Colorado PERA retiree pension contracts.

Every month, Mike Rosen has Governor Hickenlooper as a guest on his radio program.  Last week, during a discussion of the public education ballot measure that may make this Fall's general election ballot, Hick repeated his call to break Colorado PERA retiree public pension contracts (July 11, 2013 – 10:00 AM Mike Rosen Show, 20 minutes into the discussion):

"I'm all for sitting down and figuring out the calculus of . . .  at what point,  if 8 percent is too high an expectation for PERA, is there a trigger at which point we say all right, then we have to lower the inflation rate of the money we pay to retirees or one of these other electric Third Rails, but what is that trigger?"  "That's a separate argument though . . ."

Hickenlooper on the relationship of the education funding ballot proposal to PERA funding:

"There is no lump sum subsidy of PERA anywhere in this."

Mike Rosen: "I didn't say there was."

Link:

http://www.850koa.com/pages/mikerosen.html

Hick, you never wanted to be a "politician," but you are certainly behaving like one.  Why do you believe that you can break the contracts of a small group of Colorado's residents with impunity?  Are these people just part of a subclass of Coloradans who have no constitutional rights?  Or, have you simply not taken the time to study public pension legal theory and case law?  Have you read the work of public pension legal scholar Professor Amy Monahan of the University of Minnesota?  Put some time into it prior to advocating breach of PERA pension contracts.

HICKENLOOPER: Seizing CORPORATE property is a “taking," how about PERA member property?

When government regulates mineral development, Hickenlooper believes that regulation is an illegal taking of private property.  When government takes property from PERA members by breaking their pension contracts, Hick thinks that's just hunky-dory:

"When you ban fracking, you're telling all those people that paid their money, their savings, their investments to get their mineral rights now they're being taken away," Hickenlooper said to The Coloradoan.  "That's called a taking."

http://www.huffingtonpost.com/2013/03/07/hickenlooper-says-state-w_n_2828221.html?utm_hp_ref=denver

2012 Colorado Court of Appeals Decision on PERA Member Property Rights:

Last Fall the Colorado Court of Appeals reversed a Denver District Court ruling on PERA retiree's Takings Clause claim in the Colorado PERA retiree pension lawsuit, Justus v. State.  On page 36 of its decision remanding the case to the Denver District Court, the Colorado Court of Appeals restores the plaintiff’s Takings Clause claim and cites the case Lynch: “contract rights can constitute property interests protected by the Takings Clause.”

HICKENLOOPER: Use Colorado PERA Member Trust Funds for Corporate Welfare.

“He (Hickenlooper) said the state could raise $100 million from investors and securitize about $50 million from the Public Employees Retirement Association to provide the loans.  ‘We would only use a small part of state retirement funds.  It would have to be run like a business.  This would provide access to capital they can’t get now,’ Hickenlooper said.”

http://csbj.com/2010/10/13/hickenlooper-considering-tapping-pera-for-loans/

Hold the phone, why should Colorado PERA members who own the Colorado PERA pension trust funds assume risk that the private sector won't touch?  How is it the responsibility of Colorado PERA members to meet a private financing need that is not being met by the private sector?  How is it the responsibility of PERA members to provide loans to corporations in an artificially limited geographical area?  How is that the highest and best use of their trust funds?  Hick, do you simply not care about the property rights of this lowly caste of Colorado residents?

As fiduciaries, members of the Colorado PERA Board of Trustees should have no responsibility to provide corporate welfare.  Why don’t these businesses try a bank loan?  Too risky for the banks?

Colorado PERA statutes:

“As fiduciaries, such trustees shall carry out their functions solely in the interest of the members and benefit recipients and for the exclusive purpose of providing benefits and defraying reasonable expenses incurred in performing such duties as required by law.”

Comment from saveperacola.com, Hick has an “imperious CEO mentality,” (from “Deborah”):

“Hickenlooper appears to have little concept of the state’s legal and moral obligations to the people who have worked long and hard to provide critical services to the people of Colorado.  His CEO mentality that assumes he can sweep away anything he decides upon, at our expense, is imperious, undemocratic and dangerous.”

BUSINESSMAN HICKENLOOPER: Break the State's Contracts.

Hickenlooper has years of experience in business.  He is successful businessman.  He holds a graduate degree.  He considers himself qualified to sit in the United States Senate (Ritter rejected him for Bennet.)

"In a brief interview, Hickenlooper touted his experience as a business owner and his time as mayor as pluses for Gov. Bill Ritter to consider when weighing whom he should appoint to replace Sen. Ken Salazar, who has been nominated for secretary of the Interior Department."

http://www.denverpost.com/newsheadlines/ci_11292904

Hick's business acumen:

"Hickenlooper has been an advocate of bringing the experience of business leaders into government service and has reached out to the business community through events which bring together executives government, education, and corporate sectors such as The IT Summit's IT Conferences."

http://en.wikipedia.org/wiki/John_Hickenlooper

"He praised Hickenlooper's 'lack of cynicism, his businessman's belief that government can be honest, smaller, and still serve people.'"

http://articles.philly.com/2010-10-27/news/24953518_1_colorado-governor-wynkoop-brewing-denver-s-lower-downtown

"John Straayer, professor of political science at Colorado State University, said, 'John's business background makes the business community comfortable.'"

http://articles.philly.com/2010-10-27/news/24953518_1_colorado-governor-wynkoop-brewing-denver-s-lower-downtown

It just doesn't add up.  Businessmen support the sanctity of contracts.  Corporate America could not function without a general acceptance of the sanctity of contracts.  I am confident that, throughout his life, Businessman Hickenlooper has demanded that contracts to which he is a party be honored.  Does Hickenlooper possess some category of constitutional rights that are superior to those possessed by Colorado PERA retirees?

Not all Governors support the taking of accrued public pension benefits from elderly public pensioners.  From Pennsylvania Governor (of the Quakers) Tom Corbett’s 2013 State of the State:

“Resolving our pension crisis will be the single most important thing we do for decades to come. I will not allow any cuts to any benefits of our retirees.”

“Let me repeat that: no cuts to any retiree benefits. They earned their retirement. They earned their guaranteed security.”

“Nor will I allow any pension dollars already earned by any current employee to be diminished in any way.”

http://www.governing.com/news/state/pennsylvania-corbett-2013-speech.html

Republican Governor Bill Owens 2006 State of the State address:

"We also need to take the politically tough step of examining benefit levels for our current employees.  We can help make the system more sustainable by changing the age at which retirees receive full benefits and-if necessary-reducing benefits in the ‘out’ years for those furthest from retirement.  These changes should not affect those closest to retirement, but could be phased in for those who have years to go.”

Link:

http://www.pewstates.org/projects/stateline/headlines/colorado-state-of-the-state-address-2006-85899394414

Even the Terminator knows that public pension contractual obligations cannot be unilaterally terminated.  Republican Governor of a state with serious financial problems, California Governor Schwarzenegger, January 6, 2010, State of the State address: "Now, for current employees these pensions cannot be changed, either legally or morally. We cannot break the promises we already made.  It is a done deal."

As we have seen, the State of Colorado has not paid its bills for a decade; instead, the Colorado Legislature has placed expenditures for state programs on a "credit card."  The Colorado Legislature has funded state programs for the last ten years by borrowing from the state pension trust fund, Colorado PERA.

But, the Colorado PERA pension trust funds are not the property of the State of Colorado.  These trust funds are owned by the beneficiaries of the trust, active and retired workers who have paid into the PERA pension system.  Having failed to pay its Colorado PERA pension bills, and racked up its debt, the Colorado Legislature is seeking to push this debt onto others.  Apparently, Governor Hickenlooper would like to join a majority of Colorado legislators in this effort.  In 2010, the Colorado Legislature enacted a bill SB10-001, that breaks Colorado PERA retiree pension contracts, taking their earned, accrued, "fully-vested" public pension benefits to pay off the state's debt.

Colorado PERA active and retired members, we live in a state where many representatives of the Executive and Legislative branches do not respect our contracts, or our property.  They ask that the Judicial Branch of Colorado state government join them in setting aside the contract clauses of the Colorado and U.S. constitutions.  They ask that the debts of the State of Colorado be shifted onto the backs of a relatively small group of the state's elderly.

We have arrived at this point.  Only the Judicial Branch of the State of Colorado has the power to preserve justice in our state.  Support public pension contractual rights and the rule of law in Colorado.  Contribute at saveperacola.com.  "Friend" Save Pera Cola on Facebook!

How Do Unions Respond to the Breach of Public Pension Contracts? Oregon AFSCME: “We’ll See You in Court.” Colorado AFSCME: We’ll Help You Break Our Former Member’s Pension Contracts.

In 2010, Colorado AFSCME officials supported SB10-001, a bill that took accrued, "automatic" public pension COLA benefits from their retired union "brothers and sisters," breaking these retiree's pension contracts.  Note that retired union members pay no union dues, and the breach of retiree pension contracts can reduce the level of pension contributions needed from active union members.  Does this explain Colorado AFSCME's support for the breach of public pension contracts in SB10-001?  If so, is this an acceptable public policy position, supporting the breach of the contracts of former union members to minimize costs for current members?  From my perspective such a policy is patently immoral.

Colorado AFSCME's support for the bill that broke Colorado PERA retiree pension contracts in 2010 is recorded on the Colorado PERA website at the following link:

“In Colorado, Senate Bill 1 passed with the support of  . . . AFSCME Colorado . . .".

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

On October 11, 2012, the Colorado Court of Appeals confirmed the contractual, "automatic" nature of the PERA COLA benefit.  Colorado Court of Appeals 2012 decision in the case 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

So, how have Oregon AFSCME officials responded to a recent breach of the pension COLA contracts of their retired union brothers and sisters?  We see Oregon AFSCME filing a lawsuit to protect the accrued, contracted, pension COLA benefits of retired union members.

What do Colorado AFSCME and Oregon AFSCME have in common?  Does the parent organization for AFSCME lack uniform standards for supporting the contractual rights of their union members?  Is it acceptable to the AFSCME parent organization that one union local aggressively protects public pension COLA contracts, while another union local supports legislation taking contracted pension COLA benefits?

It should be noted that 90 percent of the cost-shift in the 2010 legislation, SB10-001, was directed at Colorado PERA retirees in the PERA pension system.  Colorado PERA officials were asked during their 2009 "Listening Tour" campaign (seeking to break PERA contracts) why the pension reform options under consideration placed such an enormous burden on the parties who DO NOT OWE the pension debt (retirees), rather than on the PERA employers who actually DO OWE the pension debt.

Oregon AFSCME:

'WE'LL SEE YOU IN COURT' — Our own inimitable Mary Botkin had the quote du jour June 27 in her testimony on SB 857 before the Senate Finance and Revenue Committee.  After Gov. John Kitzhaber and several business groups testified in favor of the measure that would take another chunk out of PERS members, Botkin, Council 75's longtime PERS lobbyist, led the opposition.  Her blunt assessment — "We'll see you in court" — was picked up by the Associated Press and appeared in newspapers and other media outlets across the state.

[Botkin's assessment was spot on, because the PERS Coalition's legal challenge to SB 822, the initial PERS 'reform' legislation passed early this session, was filed Monday (July 1)."

http://www.oregonafscme.com/?zone=/unionactive/view_page.cfm&page=E2Dlerts

From oregonafscme.com:

"AFSCME and the PERS Coalition have filed suit with the Oregon Supreme Court to overturn Senate Bill 822, the PERS reform legislation passed earlier this year by the 2013 Oregon Legislature."

"While the lawsuit was filed on behalf of 13 specific plaintiffs, any decision rendered by the court would impact all PERS members."

"SB 822 addressed two main issues that AFSCME is fighting.  The measure dropped retirees' annual cost-of-living adjustments, or COLAs, from a straight 2 percent across-the-board to a four-tier system that sees retirees receiving 2 percent for their first $20,000 of retirement income, $1.5 percent for the next $20,000, 1 percent for the following $20,000 and 0.25 percent on any PERS retirement income above $60,000.  SB 822 also removes a tax offset for retirees who live out-of-state."

"PERS Coalition lead attorney Greg Hartman says the underlying basis for the legal challenge is that the Legislature both impaired and breached retirees' contracts via SB 822, under both state and federal constitutional guarantees.  Simply put, you can say that the legislation is 'unconstitutional,' that it's an 'impairment of contract' or that it's a 'breach of contract' — all three terms are correct in this instance, said Hartman."

"The 120-page lawsuit document seeks 12 different 'claims for relief' ranging from both impairment and breach of contract under the Oregon and United States constitutions to 'unauthorized takings.'"

"Hartman says while the filing document may be complex, the underlying premise is simple.  'A promise is a promise,' says Hartman.  'In this case, it's a contract promise.  Members were told that if you accept this employment offer and fulfill your end of the bargain, this is what you'll get in return.  The employees did their part, and now the state is forcing PERS to renege on their part.  That's what this is all about."

"SB 822 contained a provision that directed any legal challenge immediately to the Oregon Supreme Court, thereby shortening the amount of time needed for a decision.  Even so, it will likely be 18 to 24 months before the high court issues its verdict."

http://www.oregonafscme.com/index.cfm?zone=%2Funionactive%2Fview_article.cfm&HomeID=295779

June 2011

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

AFSCME'S PARENT ORGANIZATION SUPPORTS CONTRACTUAL RIGHTS TO "AUTOMATIC," ACCRUED PUBLIC PENSION COLA BENEFITS . . . SO, WHY IS COLORADO AFSCME SUPPORTING THE BREACH OF PENSION COLA CONTRACTS?

Note that AFSCME's national, parent organization has a clear position on the contractual nature of "automatic" public pension COLAs.  On September 17, 2010, AFSCME sent a letter (Letter of Comment #103) to the Governmental Accounting Standards Board (GASB) addressing proposed changes to state and local public pension accounting and financial reporting.  The AFSCME "comment letter" is available here:

http://www.gasb.org/cs/ContentServer?site=GASB&c=Page&pagename=GASB%2FPage%2FGASBSectionPage&cid=1176157376653

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.)

“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 plans 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.”

From seattlepi.com:

"Ore. public employee unions challenge pension cuts."

"As expected, public employee unions have filed a legal challenge to the Oregon Legislature's effort to cut benefits for retired public employees."

"The Oregonian reports (http://bit.ly/12HuHYd) that a coalition of unions has petitioned the state Supreme Court to review Senate Bill 822, which has been signed by Gov. John Kitzhaber."

"The bill reduces cost-of-living increases for people who get benefits under the Public Employee Retirement System."

http://www.seattlepi.com/?controllerName=search&action=search&channel=news&search=1&inlineLink=1&query=%22Public+Employee+Retirement+System%22

From oregonlive.com:

"PERS cuts challenged by Oregon union coalition."

"The first legal challenges have been filed against the Oregon Legislature's effort to cut benefits for retired public employees."

"A coalition of public employee unions has petitioned the state Supreme Court to review Senate Bill 822, which passed both chambers and has been signed by Gov. John Kitzhaber. Two retirees who now live outside the state also have asked for a review."

"The bill reduces cost of living increases for people who get benefits under the Public Employee Retirement System.  It also cuts benefits for PERS members who live out of state and don't pay Oregon income taxes."

"The main challenge, filed by Portland attorney Greg Hartman, contends the changes amount to an unconstitutional breach of contract.  It asks the court to appoint a special master to hear evidence and make fact-findings for the court to review.  It further asks the court to declare SB 822 unconstitutional in part or in its entirety."

http://www.oregonlive.com/politics/index.ssf/2013/07/pers_cuts_challenged_by_oregon.html#incart_river_default#orpol#orleg#pers

From NW News network:

"Attorney Greg Hartman filed the suit on behalf of 13 current and past employees of state and local governments in Oregon.  He says the public pension cuts signed into law in May violate the Oregon Constitution.  'When the legislature made a contract, they stated very specifically in the statute that people were entitled to get a COLA, a cost of living increase, in a certain amount.'"

"The new pension law cuts that amount for people with annual pensions above $20,000. Lawmakers said the cuts were needed to reduce expensive pension costs for state agencies, schools and local governments."

"Separately, two other retired public employees have also filed lawsuits to overturn the law."

http://nwnewsnetwork.org/post/union-backed-lawsuit-seeks-overturn-pension-cuts

Incredibly, Oregon state legislators (in breaking public pension COLA contracts) ignored the advice of their own attorneys.  Prior to acting, the Oregon Legislature requested an opinion on a proposal to take back accrued public pension COLA benefits from their in-house legislative attorneys, the Oregon Legislative Counsel.  Here is the February 4, 2013 response of Oregon’s legislative attorneys:

“You asked about the legality of a proposal to limit the cost-of-living adjustment (COLA) to service retirement allowances of retired members of the Public Employees Retirement System (PERS) by applying the COLA only to the first $24,000 of annual benefits. The proposal would amend ORS 238.360, which has long required that PERS make annual adjustments to service retirement allowances based on changes to the cost-of-living as reflected in the Consumer Price Index.”

“Based on recent Oregon Supreme Court precedent, we conclude that an attempt to limit the COLA in this way would be found to be a violation of the contract rights of the members.”

“The Oregon Supreme Court has found several times that the 1953 law establishing PERA created a contract between public employers and public employees.”

“The court stated several times in Strunk that there is a contract right to the COLA. For example, the court found that:

‘We note that the status of the law is particularly clear with regard to retired members, and there can be little question that the COLA is a fully accrued benefit for a member who has retired.’”

Here is a link to the complete February 4, 2013 opinion of the Oregon Legislative Counsel:

http://media.oregonlive.com/politics_impact/other/LC%20Opinion.pdf

Colorado PERA active and retired members, help put an end to the cavalier treatment of your PERA pension contracts by politicians, pension administrators and public employers.  Defend public pension contractual rights and the rule of law in Colorado by contributing at saveperacola.com. "Friend" Save Pera Cola on Facebook!