October 12, 2013 01:02 PM UTC
Colorado AFSCME's Involvement in the 2010 Colorado PERA Pension Contract Breach. Yet Another Colorado PERA Distortion?
5 Comments- by: PolDancer
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!
As I consider the elaborate scheme put together by PERA and others in crafting SB10-1 the following quote comes to mind:
Oh what a tangled web we weave,
When first we practise to deceive!
Sir Walter Scott, Marmion, Canto vi. Stanza 17.
Scottish author & novelist (1771 – 1832)
Hey Algernon, I came across the following report written by David Sirota for the Institute for America's Future which describes the Pew-Arnold campaign to undermine America’s retirement security – and leave taxpayers with the bill
Plot Against Pensions
http://y.ourfuture.org/wp-content/uploads/2013/09/Plot-Against-Pensions-final.pdf
http://www.summitdaily.com/news/8466950-113/public-states-pension-pensions
Consider the math of state budgets. According to Pew’s estimates, “The gap between states’ assets and their obligations for public sector retirement benefits (is) $1.38 trillion” over 30 years. As the Center for Economic and Policy Research notes, this gap was not caused by benefit increases, as conservatives suggest. Data prove that most of it was caused by the stock market decline that accompanied the 2008 financial collapse.
Of course, regardless of cause, a $1.38 trillion shortfall sounds like an emergency. But it is a relatively tiny problem — one that may require small changes, but does not require radical schemes to entirely eviscerate retirement benefits. That’s because, as CEPR points out, in most states the shortfall “is less than 0.2 percent of projected gross state product over the next 30 years.”
To put those numbers in perspective, remember that the 30-year $1.38 trillion pension shortfall is just $46 billion a year — and “just” is the operative word in comparison to the amount states give away in the form of corporate subsidies.
According to a 2013 study by the U.S. Public Interest Research Group, states lose roughly $40 billion a year thanks to loopholes that let corporations engage in offshore tax avoidance. Additionally, a New York Times analysis recently found that “states, counties and cities are giving up more than $80 billion each year to companies” in the form of subsidies — many of which create no jobs.
State and local governments, then, aren’t bankrupt. Indeed, contrary to pension-cutters’ assertions, they are so flush with cash that they spend a combined $120 billion a year on corporate handouts — almost three times the total pension gap.
That’s why, as the National Association of State Retirement Administrators, says: “The idea of imminent (public pension) insolvency is a gross distortion.” It is also why McClatchy Newspapers declared that “there’s simply no evidence that state pensions are the current burden to public finances that their critics claim.”
Hey Hawkeye, yes, I have always wondered why it is that the three percent of all Colorado state and local governmental expenditures that will be directed to support public pension obligations over the next 50 years is a "crisis" that warrants breach of contract, yet the 97 percent of future Colorado state and local government expenditures that will be used to support all other Colorado governmental services over these years is a non-issue.
The Social Security COLA for 2013 was 1.7%, while the COLA for 2014 will likely be 1.5%. Politically speaking, the Colorado Supreme Court justices will have some reservation in supporting the guaranteed 3.5% annual benefit increase. Quite a predicament, especially from a PR standpoint.
Pension reform (or claw back) in Arizona is also being challenged in the state courts. It should be noted that the Arizona Constitution provides strong protections for public pensions. Pew/Arnold and other conservative groups are prepared to go directly to AZ voters if their reform measures fail in court. In like manner, if SB10-1 is struck down, it's not unreasonable to surmise that Pew/Arnold would send grant money to the Independence Institute (or some other conservative think tank) to organize a campaign to get a ballot measure before CO voters to change PERA into a defined contribution plan.
Hey Hawkeye, I have a somewhat different take. The Colorado PERA COLA is a contractual obligation, whereas, Social Security benefits are not a contractual obligation. Also, the PERA COLA benefit is an "automatic," statutory benefit fixed at 3.5 percent. It remains at this level regardless of the inflation rate. Historically, inflation and the Social Security COLA have been significanlty higher than 3.5 percent. Note that the Colorado PERA long-term inflation assumption is currently 3.5 percent (recently lowered from 3.75 percent.) The PERA long-term inflation assumption is set by the PERA Board of Trustees.
As with a fixed-rate home mortgage, once the PERA COLA is "locked-in" in a statutory contract, it makes no difference how interest rates or the inflation rate fluctuate going forward. As with a COLA provision in a purchased annuity contract, once both parties have entered into the contractual arrangement (the annuitant has paid for the contracted income stream and contracted, fixed COLA) the terms of the contract are immutable regardless of fluctuations in the level of inflation or interest rates.
I would not support it, but Colorado voters have the ability to change the offer of Colorado PERA benefits to a defined contribution plan on a prospective basis (for new hires) if they choose to do so. They could do so in an initiative amending either Colorado statute, or the Colorado Constitution. This step would be constitutionally permissible as it would not impair existing PERA contracts. As you and I know, the COLA provisions of SB10-001 were an outrageous, flagrant breach of exisiting PERA contracts. Conversion to a DC plan going forward would likely increase the public pension financial burden of Colorado taxpayers while providing less retirement security for workers AND eliminating an incentive for attracting qualified employees to Colorado state and local governments. Although, I wonder (given the 2010 PERA pension contract breach) if this incentive has not already been removed in our state. Will qualified workers choose to seek employment with an employer that has a record of contract breach? It is unlikely that the best and brightest (if they are informed) would choose to work for Colorado-PERA affiliated employers under these circumstances.