COLORADO’S CREDIT RATING HAS BEEN UPGRADED BY S&P IN THE LAST DECADE, WHILE THE STATE HAS SKIPPED ITS PENSION ARCS, AND BREACHED ITS PENSION CONTRACTS.
HAVE COLORADO STATE AND PERA OFFICIALS EXAGGERATED PERA’S PENSION FUNDING STATUS FOR POLITICAL GAIN?
DO CLAIMS OF “ACTUARIAL NECESSITY” COMPORT WITH COLORADO GOVERNMENT’S REPRESENTATIONS MADE IN ANNUAL REPORTS, BOND STATEMENTS, AND REPORTS TO RATING AGENCIES?
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-
Note that over the last decade Standard and Poor’s has upgraded the State of Colorado’s credit rating from AA- to AA. In spite of the fact that Colorado has improved its credit status this decade, the Colorado General Assembly seeks to breach its contractual public pension obligations, claiming a fiscal necessity. Sorry, but something here does not add up.
An article in the Bond Buyer addresses attempts by politicians to exaggerate pension funding status:
“Some state and local officials, eager to garner public support for cuts in pension benefits, increases in contributions or other reforms, have been exaggerating their pension problems, according to several lawyers.”
“Christopher Platten, an attorney representing three labor unions in San Jose, Calif., filed a complaint with the SEC last month charging that the mayor made public estimates of pension costs that were significantly higher than the projections in bond documents.”
“The complaint contends the different estimates violate anti-fraud securities laws.”
“Platten said Reed should be held accountable for his statements. The mayor’s ‘projections are simply scare tactics, but now he has violated federal law. He insists on the $650 million, but hasn’t told that to the bond community,’ Platten said.”
“The SEC told Platten that it forwarded the complaint to its office of investor education and advocacy, which it said may be shared with other SEC units.”
“SEC spokesman John Nester declined to comment on Platten’s complaint, but noted that anti-fraud provisions in securities laws pertain both to actions and statements.”
“Securities lawyers declined to comment on the case. But Andrew Kintzinger, a bond attorney with Hunton & Williams, said the SEC’s 1994 interpretive guidance on its secondary market disclosure rules provides a ‘baseline test’ to determine if public speech could be subject to anti-fraud laws.”
“The guidance says issuers that release public information that is ‘reasonably expected to reach investors and the trading markets’ could be subject to anti-fraud liability, even if the statements are not meant for investors.”
“Robert Klausner, a principal at the Plantation, Fla.-based law firm of Klausner, Kaufman, Jensen & Levinson, said public officials frequently overstate pension and budget problems for political gain. He said officials’ public statements often contradict annual reports, bond statements and reports to rating agencies.”
“Klausner, who works on municipal retirement issues, is representing unions in lawsuits against Miami and Baltimore seeking to reverse changes in pension plans. The cities cut benefits in recent years, citing financial troubles. But despite such woes, the two cities have recently secured A-level credit ratings, he noted.”
“‘We are seeing announcements of doom and gloom as a justification for cutting employee benefits,’ he said. ‘And at the same time, the people who say, It’s disastrous, go to bond raters and say, Everything is great. We are paying our debts.’”
“The trend has become more widespread as officials from Maine to California, facing tighter budgets and under-funded pension plans, have pushed for pension reforms. ‘This dichotomy of statements, I’ve seen it all over the country – New Orleans and Houston and [Los Angeles] and Anchorage,’ Klausner said.”