U.S. Census Bureau: Colorado Reneged on its PERA Pension Contracts While Spending a Mere 2.08 Percent of Revenues on Public Pensions . . .

WHILE RANKING 35TH IN THE NATION IN FINANCIAL SUPPORT FOR PUBLIC PENSIONS . . .

WHILE DEAD LAST AMONG THE "NON-SOCIAL SECURITY" STATES IN PUBLIC PENSION SUPPORT.

Colorado PERA retirees have fully performed under their Colorado PERA pension contracts.  Nevertheless, in 2010, the Colorado General Assembly acted in bad faith, willfully breaching its contracts with these Colorado PERA pensioners.  The Colorado General Assembly is attempting to abrogate the PERA pension COLA, "escalator" provision of the written, statutory Colorado PERA pension contract.  The Colorado General Assembly is attempting to renege on one-third to one-half of its contractual obligations to pay Colorado PERA pension benefits.

In 2010, the Colorado Legislature allowed a pack of 27 lobbyists to ram a bill through the legislative process breaking the contracts of Colorado PERA pensioners.  During the debate on this bill, SB10-001, lobbyists, members of the Colorado Legislature, and Colorado PERA administrators argued that if the State of Colorado and local governments were forced to honor their PERA pension contracts, this would burden Colorado taxpayers.

Yet, according to the U.S. Census Bureau, at the time of the Colorado PERA pension contract breach in 2010, Colorado ranked 35th in the nation in taxpayer support for public pension obligations.  At the time of the taking of fully-vested, accrued Colorado PERA retiree pension COLA benefits by the Colorado Legislature, Colorado's financial support for public pensions was slightly more than two percent of all Colorado public sector expenditures.  (It would be interesting to examine complete historical data comparing Colorado's financial support for public pensions to the level of support of other states for public pensions.)

Colorado PERA's Chief Investment Officer, Jennifer Paquette, provided comparative data for the year 2008.  In a May 22, 2011, Denver Post Guest Commentary entitled, "Careful Planning, Not Hope, Drives PERA" Jennifer Paquette writes:

“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.”

http://www.denverpost.com/commented/ci_18100068?source=commented-

If we allow state governments in the United States to break their contracts based on flimsy, self-serving, political arguments, our Constitution will be meaningless, and the rule of law in the United States will be a myth.  It is not possible for the defendants in the lawsuit, Justus v. State, to legitimately argue that contracted Colorado PERA pension benefits are a burden on taxpayers while Colorado ranks 35th in the nation in support for public pensions, and support for public pensions consumes two percent of Colorado state and local government expenditures.  Two percent of expenditures is hardly a crushing burden on Colorado taxpayers.  In any event, under the Colorado Constitution, Colorado state and local governments cannot escape their contractual obligations even if meeting these contractual obligations is a burden on Colorado taxpayers.  Debts are by their nature "burdensome."  When Colorado state and local governments became parties to Colorado PERA pension contracts they freely assumed the contractual, financial burden of providing future deferred compensation to members of the Colorado PERA pension system.  In the United States, neither individuals, nor governments, may set aside the Contract Clause of the U.S. Constitution when it is simply convenient.  Governments cannot set aside their contractual obligations in order to make discretionary expenditures.

Here is a link to a recent NASRA Issue Brief reporting U.S. Census Bureau public pension expenditure data:

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

And, some background on NASRA:

"NASRA (the National Association of State Retirement Administrators) is a non-profit association whose members are the directors of the nation’s state, territorial, and largest statewide public retirement systems. NASRA members oversee retirement systems that hold more than $2.0 trillion in assets and that provide pension and other benefits to more than two-thirds of all state and local government employees."

http://www.nasra.org/AboutNasra/whoweare.htm

According to the U.S. Census Bureau, 34 states spend more on public pensions than does Colorado; however, only a handful of states are in breach of their public pension contracts.

"NASRA ISSUE BRIEF: Spending on Public Employee Retirement Systems, May 9, 2013."

"Table 1: State and Local Government Contributions to Pensions as a Percentage of All State and Local Government Spending, by State, 2010.

Alabama 2.85
ALASKA  2.25
Arizona 2.42
Arkansas 3.02
CALIFORNIA 3.58
COLORADO 2.08
Connecticut 4.54
Delaware 1.99
District of Columbia 1.33
Florida 2.58
Georgia 2.14
Hawaii 3.57
Idaho 2.38
ILLINOIS 4.75
Indiana 2.82
Iowa 1.73
Kansas 2.03
Kentucky 2.58
LOUISIANA 3.31
MAINE 2.77
Maryland 3.14
MASSACHUSETTS 3.36
Michigan 2.32
Minnesota 1.62
Mississippi 2.81
Missouri 3.08
Montana 2.40
Nebraska 1.60
NEVADA 2.84
New Hampshire 2.47
New Jersey 2.03
New Mexico 2.77
New York 3.68
North Carolina 0.99
North Dakota 1.20
OHIO 2.85
Oklahoma 3.34
Oregon 1.46
Pennsylvania 1.29
Rhode Island 3.99
South Carolina 2.24
South Dakota 1.54
Tennessee 1.97
TEXAS  2.16
Utah 2.76
Vermont 1.09
Virginia 3.15
Washington 1.40
West Virginia 3.87
Wisconsin 2.07
Wyoming 1.24
U. S. weighted avg. 2.77"

(My comment: Note that Colorado's support for public pensions [2.08 percent] was 25 percent below the national average support for public pensions [2.77 percent] in 2010.   Also, I show the 10 states "where more than one-half of public employee payrolls are estimated to be outside of Social Security in ALL CAPS in Table 1.)
 
Source: U.S. Census Bureau

The ten states where the preponderance of public employees are outside of Social Security:

ALASKA – 2.25 percent
CALIFORNIA – 3.58 percent
COLORADO – 2.08 percent
ILLINOIS – 4.75 percent
LOUISIANA – 3.31 percent
MAINE – 2.77 percent
MASSACHUSETTS – 3.36 percent
NEVADA – 2.84 percent
OHIO – 2.85 percent
TEXAS – 2.16 percent

(My comment: Note that the average public pension support among the ten "non-Social Security" states, in 2010, was 2.79 percent, while Colorado's level of support that year was 2.08 percent.  One might expect that in states where the preponderance of public employees are not eligible to receive Social Security benefits [such as Colorado] these states would offset that detriment to public employees with more robust financial support for public pension benefits.  One might have this expectation, since taxpayers in these states are spared the "burden" of making the 6.2 percent Social Security payment under FICA for these public employees.  Even in this select group we find Colorado at the bottom of the barrel in terms of financial support for public pensions at 2.08 percent.)

NASRA Issue Brief:

"Social Security Coverage: Twenty-five to thirty percent of state and local governments and their employees make contributions to their retirement plan instead of to Social Security. This is the case for most to substantially all of the state and local government workforce in seven states, 40 percent of the nation’s public school teachers, and a majority of firefighters and police officers.  Pension benefits—and costs—for those who do not participate in Social Security are usually higher than for those who do participate in order to compensate for the absence of Social Security benefits. This higher cost should be considered in the context of the 12.4 percent of payroll, or an estimated $31.2 billion annually, these employers and employees would otherwise be paying into Social Security."

NASRA Issue Brief:

"On a nationwide basis, pension contributions made by state and local governments account for roughly three percent of total spending (see Figure 1)."

(My comment: Note that Colorado governments contribute one-quarter less than the national average to support public pensions and yet they find this level of support so burdensome that they seek to escape their contractual obligations.)

NASRA Issue Brief:

"Three Percent Nationwide: Based on the most recent information provided by the U.S. Census Bureau, approximately three percent of all state and local government spending is used to fund pension benefits for employees of state and local government.  As shown in Figure 2, pension costs since 1980 have been reliably stable, declining from around four percent to three percent in 2010."

"Although pensions are not the state-local budget-drain that some claim they are, as shown in Table 1, spending levels for states and cities do vary from the national average, from less than one percent to more than four percent."

"In addition, some states and cities do not contribute the amount determined actuarially to adequately fund the plan."

(My comment: The Center for Retirement Research at Boston College compiles the “Public Plans Database,” which includes the State and Local Defined Benefit Plans dataset.

http://crr.bc.edu/data/public-plans-database/

Provided below are statistics relating to the failure of the Colorado General Assembly to pay its public pension “actuarially required contributions” [ARC], 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 Colorado PERA CAFR [annual financial report], 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.)

NASRA Issue Brief:

"The chronic failure by some pension plan sponsors to pay required contributions results in greater future contributions to make-up the difference."

(My comment: Instead, of "making-up the difference" resulting from ignoring its public pension bills, the Colorado Legislature is trying to escape its contractual PERA pension obligations, trying to take accrued public pension COLA benefits from pensioners.)

NASRA Issue Brief:

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

"The average ARC received in recent years has been around 90 percent.  Beneath this average ARC experience lies diversity: approximately 60 percent of plans in the Public Fund Survey   consistently receive 90 percent or more of their ARC.  This means that although a majority of plans have been receiving their required funding, many plans have not been adequately funded, which will result in higher future costs."

(My comment: In 2010, when the Colorado General Assembly broke Colorado PERA pension contracts, most Colorado state legislators did not know what a pension "ARC" is.  This ignorance resulted from the failure of Legislative Leadership to appoint an interim study committee on public pensions to educate the members, and the desire of Legislative Leadership break PERA retiree pension contracts.  The ignorance of state legislators regarding public pension administration and contractual public pension rights served the preconceived political goals of Colorado Legislative Leadership.)

NASRA Issue Brief:

"Generally, states and cities with a history of paying their required pension contributions are in better condition and have needed more minor adjustments to benefits or financing arrangements compared to those with a history of not adequately making their contributions."

Link to complete NASRA Issue Brief:

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

Colorado PERA active and retired members, the argument that contracted PERA pension benefits are a burden on Colorado taxpayers is clearly specious.  Support contractual public pension rights and the rule of law in Colorado.  Contribute at saveperacola.com.  "Friend" Save Pera Cola on Facebook!

Algernon Moncrief

About Algernon Moncrief

Independent Nationwide Public Pension Rights Blogger.

2 Community Comments, Facebook Comments

  1. hawkeye says:

    Algernon, I know you've already critiqued Mark Hillman's 3/29/13 Denver Post Guest Commentary … but one point is worth mentioning again.

    Hillman made the following statement: 

    "Do PERA pensioners really believe that keeping every last cent of their benefits is worth taking nearly $10,000 away from their grandchildren's classrooms?  Parents must wonder: What can possibly justify penalizing two full generations of students for a mess created long before their lives began?"

     

    One phrase that catches my attention is "keeping every last cent of their benefits"!!  We're not talking cents, but over $100,000 is being clawed back from the average PERA pensioner over the course of their retirement … not mere pocket change!!  In other words, over a third of their retirement pension.

     

    Another eye catching phrase is "their benefits", which denotes ownership.  Hillman appears to be admitting to the "taking" of PERA retiree benefits.  

    http://www.denverpost.com/opinion/ci_22893614/pera-bailout-shortchanges-students-teachers?IADID=Search-www.denverpost.com-www.denverpost.com

    • Algernon MoncriefAlgernon Moncrief says:

      FORMER COLORADO TREASURER MARK HILLMAN – SLURPING AWAY AT THE AGRI-WELFARE TROUGH – OCCASIONALLY LIFTS HEAD TO SNORT ABOUT PERA.

      Agreed hawkeye, note that Hillman (and Stapleton) assume in their fallacious arguments that Colorado governments will not pay their Colorado PERA pension bills, and that these contractual obligations must be paid by taking money from other public sector programs.  When Colorado governments meet the debt service on their outstanding bonds do we hear whining about how this debt service takes money away from potential alternative, discretionary allocations, e.g., law enforcement? road construction? Colorado corporate welfare programs?  Colorado corporate tax loopholes?  I see no whining about our state's bonded debt, but the whining about PERA pension debt is endless.

      It is incredibly hypocritical of former Colorado Treasurer Mark Hillman to whine about the financial burden borne by Colorado taxpayers in meeting the state's contractual obligations to pay EARNED, deferred compensation to public employees, given his years of sucking up UNEARNED agri-welfare cash.

      One website reports that farm subsidies received by a Mark Hillman of Burlington, Colorado approach one-half million dollars.  From the EWG website:

      “EWG Farm Subsidy Database – Subsidy Total 1995-2011”

      “135    Mark Hillman     Burlington, CO 80807       $463,616.75”

      http://farm.ewg.org/addrsearch.php?c=1&city=burlington&stab=CO&page=4

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