Steve Kreisberg, AFSCME (International) on Public Pension Contractual Rights.
A few important statements from a former AFSCME Colorado Official:
"AFSCME's endorsement of screwing public employees out of their pension COLAs in Colorado is unfortunately quite true."
"AFSCME has always placed the interests of the union and the Democratic Party above that of rank and file employees they profess to represent."
"What WINS wants is current state employees, and most of them who have been hired since 2005 don't have the same pension plan as older state employees, and that is not what they are concerned about . . ." "So why play the heavy and alienate the incumbent politicians in somebody else's fight?"
In 2009/2010, Colorado PERA officials campaigned for the taking of contracted PERA COLA benefits and claimed the support of AFSCME Colorado. Here we have a former AFSCME Colorado official explaining his organization's endorsement of the 2010 PERA COLA taking.
In my mind, AFSCME Colorado's support for the PERA COLA taking was shortsighted. If the support of AFSCME Colorado for the bill breaking PERA COLA pension contractual obligations (a finding of the Colorado Court of Appeals) is successful, what is to prevent the Colorado Legislature from using this successful breach of PERA public pension contracts of AFSCME members, to break the pension contracts of AFSCME members, at will, in the future?
If the Colorado Legislature is allowed to determine the compensation of AFSCME members after these employees have already provided their labor, then AFSCME Colorado's members are inescapably doing volunteer work for their employers. In that event, these AFSCME members should at least know that they are doing volunteer work. AFSCME union members assume that they work for defined compensation in the form of a salary. They also trade their labor and contributions for deferred compensation (defined public pension benefits) in a contractual relationship.
In 2010, Colorado PERA officials claimed the support of many Colorado public sector unions for their proposed breach of PERA pension contracts, including AFSCME Colorado. See this link:
This article explores: AFSCME Colorado's involvement in the 2010 Colorado PERA pension contract breach; the positions of AFSCME (International) officials on breach of public pension contracts and contractual public pension COLA obligations; the failure of state legislatures in the U.S. to fund their pension systems on an actuarially sound basis; the habit of these legislatures to give away billions of dollars of government resources in corporate welfare; and the objections of certain AFSCME Colorado officials to public pension contract breach. (Colorado PERA has published on-line PERA pension contract breach propaganda that fails to mention any dissension in the AFSCME union ranks in regard to the breach of public pension contracts.)
When an AFSCME member's governmental employer breaks the employee's pension contract the AFSCME member loses compensation that they have already earned. Colorado governmental employers of AFSCME members affiliated with the Colorado PERA public pension system are seeking the legal right (in SB10-001) to decide what compensation a worker will receive after the employer and the public have already benefited from the services provided by the worker. This desired legislative arrangement is without question immoral and unconstitutional.
Legislative bodies in the United States currently give away tens of billions of dollars each year to corporations. When a legislative body successfully breaks a public worker's pension contract, this contract breach makes available even more resources that legislatures may then give away to corporations. Thus, money is inescapably taken from the pocket of the public worker (many are AFSCME members) and placed into the pockets of wealthy corporate shareholders. This practice is (surprisingly) supported by many Democrats in the United States, that is, Democrats who are purportedly concerned about the growing problem of "income inequality" in the United States.
How do legislative bodies in the United States arrive at this point, where elected officials are willing to violate their oaths of office, ignore their state constitutions, and enact bills that break worker contracts? (They don't get there of their own accord.) They need some help from lobbyists for the governmental entities whose debt will be wiped off the books by a pension contract breach. They also need some help from corporate lobbyists who are happy to see public sector debts diminished. Low public sector debts may very well result in lower corporate taxes in the future, and even more taxpayer resources directed to corporate welfare.
A few links on corporate welfare:
In 2010, a total of 27 lobbyists for corporations, lobbyists hired by the Colorado agency that administers the PERA pension, and lobbyists for employers affiliated with the pension system "helped" Colorado legislators reach the conclusion that compensation owed to Colorado public sector workers, including many current and former AFSCME members, should be retroactively taken by the State of Colorado.
According to Colorado Secretary of State records, lobbyists for the business group, Colorado Concern, helped Colorado legislators along in 2010 by supporting SB10-001, the bill that broke PERA pension contracts. A former consultant for the business group Colorado Concern, Henry Sobanet (now the state's Budget Director) was "intimately involved" in crafting the bill, SB10-001.
Again, in 2010, AFSCME Colorado supported the bill, SB10-001, that the Colorado Court of Appeals has confirmed as a breach of Colorado PERA pension contracts. Yet, AFSCME Colorado's parent organization (International) vigorously defends the contractual rights of its 1.6 million AFSCME union members.
Earlier this year, AFSCME's Director of Research and Collective Bargaining, Steve Kreisberg, presented to an audience at a meeting of the National Conference on Public Employee Retirement Systems (NCPERS) of which Colorado PERA is a member.
In my opinion, the message that was delivered by Steve Kreisberg during this 30 minute talk could not be more dissimilar from the message that was sent by AFSCME Colorado in the 2010 Colorado PERA pension COLA taking discussion.
Here is what Steve Kreisberg of AFSCME thinks about those who break public pension contracts:
"They've demonstrated that they're not trustworthy. They've demonstrated a willingness to violate their oath of office, which is to uphold the state's Constitution. So, they have no credibility . . . with our union."
So, how was the leadership of AFSCME Colorado persuaded to be part of this Colorado "deal" that was "cut" in 2010? Who approached Colorado's public sector unions with this offer to "cut a deal"? That is, the "deal" that violated the trust of Colorado PERA active and retired members, and sullied the U.S. Labor Movement?
In my opinion, Colorado's public sector unions made a myopic and self-serving business and financial decision to support the unconstitutional SB10-001 in 2010. Retired union members (for the most part) do not contribute to union coffers. To the extent that retiree's pension contracts can be broken, contributions needed from active union members in the future might be reduced.
Link to video of AFSCME official Steve Kreisberg's January 27, 2014, NCPERS Conference presentation in Washington, D.C.:
(Note that in his presentation, Steve Kreisberg, graciously, did not mention AFSCME Colorado's support for the 2010 Colorado PERA pension contract breach.)
Kreisberg on the Targeting of COLA Benefits for Breach of Contract:
"The COLAs become the target for the same reason that Willy Sutton robbed banks, because that's where the money is."
(My comment: February 10, 2010, Joel Judd, Chairman, House Finance Committee, during the hearing on Senate Bill 10-001 Chairman Judd stated (near the end of the hearing) that SB 10-001 [the “COLA theft bill”] must be supported "because that's where the money is.")
Kreisberg on Pension Plan Sponsor Bankruptcy:
"A state cannot petition for bankruptcy."
Kreisberg on Off-balance Sheet Legislative Borrowing from Public Pension Funds:
"The politicians have decided that they would borrow money from the pensions." "You borrow money by simply not making the contributions."
Kreisberg, "Unfunded Public Pension Liabilities" are Simply Benefits that Someone has Earned:
"The way that I look at (public pension) liabilities, is that a liability is nothing more than a benefit that someone has earned." "So, a liability is a name, and its sounds very negative, but as we know . . . a liability is an earned benefit . . . somebody has already performed the service, and the promise has been made, I will compensate you for that service."
Kreisberg on the Provision of Corporate Welfare in Lieu of Meeting Contractual Pension Obligations:
"They create loophole after loophole." "We have a environment across the country . . . where there is kind of this competition to get corporations to move to your state by saying well if you come here you don't have to pay taxes."
"You've got a Legislature that has an insatiable appetite for spending money, on all sorts of things." "Somewhere along the line, the pensions became the lowest priority."
"It was looked at as though, revenues are fixed and we can't address corporate loopholes . . . that are ineffective, inefficient, don't create jobs, but give breaks to the wealthiest corporations in the United States, well the wealthiest corporations in the world, since almost all of them are multi-nationals." "And, it doesn't help the residents of the state in any way, but it does help the shareholders of the corporations."
"They're spending money on all sorts of things, including inadvisable economic development subsidies."
Kreisberg on the Use of Political Influence to Break Public Pension Contracts:
"It's really about politics. It's not about law, and it's about how in the 21st century we're seeing a challenge to our basic legal underpinnings of our Democracy." "Because the Constitution is our foundational document, but now it's being interpreted in a political way that's very different from what we've seen throughout the nation's history."
"I think that's a function of the consolidation of economic power." "The same people who have obtained that economic power, now want to consolidate political power."
The State of Illinois "has never funded its pensions on an actuarial basis. Their pensions have been funded on a political basis."
(My comment: Likewise, Colorado PERA public pensions have been funded only "on a political basis" for the last 12 years. Why have the fiduciaries on the Colorado PERA Board failed to insist that the Colorado Legislature pay its public pension bills? Has the staff of the Colorado Joint Budget Committee ever pointed out to JBC members that they were failing to pay the PERA pension system actuarially required contributions?)
"I believe they exempted the judges though, they don't want to get the judges pissed off at them." "In Illinois the Supreme Court judges are elected, and the Speaker is known to have some political influence, and . . . there are seven judges . . . he only needs four people to agree with him."
"We'll leave it to the Attorney General who is the daughter of the Speaker of the House to figure how to make those arguments."
(My comment: A quotation from Senator Lundberg during floor debate on SB10-001: "This is a deal that was cut before this body met.")
Kreisberg on Anti-worker Corporate Democrats:
"As you know, we tend to support Democrats because we think Republicans are anti-worker, I think the Democrats in Illinois are anti-worker."
"Our union has a history of progressive activism, but we very much resent how the expenses for pensions are portrayed." "We have Democrats who call themselves progressives, or 'pro-worker Democrats', who would come to us and say 'yes, but these pension expenses are squeezing out social spending, and we can't have that."
"We have no reason to trust the State of Illinois' Legislature. They've demonstrated that they're not trustworthy. They've demonstrated a willingness to violate their oath of office, which is to uphold the state's Constitution. So, they have no credibility . . . with our union."
Note that state legislatures that actually pay their public pension bills have well-funded public pensions, even in the State of Illinois. Kreisberg on the well-funded Illinois Municipal Retirement Fund:
"The Illinois Municipal Retirement Fund (IMRF) is 100 percent funded." "The states make in almost all cases the municipalities pay the normal cost and the ARC."
"Which demonstrates that there's nothing wrong with pensions. It's not the pension system that leads to these types of things. It's determinations and decisions made by politicians to do other things with the money."
(My comment: Instead of requiring payment of contributions that are determined as actuarially necessary by Colorado PERA's actuaries each year, the Colorado Legislature places insufficient contribution rates into Colorado statutes and "calls it good." This frees up money for discretionary spending on the part of the politicians, pleasing their constituents [who vote.])
The Illinois Municipal Retirement Fund Models Responsible Public Pension Management for Colorado PERA Trustees, Instead of Supporting Pension Theft, the PERA Board Should Support Payment of the ARC, (from the Chicago Tribune):
"Those who have followed the detailed coverage in our pages of Illinois' staggering, worst-in-the-nation pension crisis know that the problem is largely the result of irresponsible leadership — pension holidays and sweeteners, unreasonable projections and the exhibition by lawmakers of a blithe willingness to spend tomorrow's money on today's programs and projects."
"But I'm also no fan of phony, piteous arguments to justify breaking a promise and flouting the constitution." "We know the arguments are phony because the Illinois Municipal Retirement Fund, which serves some 400,000 current and former employees of local governments and is not covered under the disputed law, reports being 97 percent funded."
"'It's not rocket science,' said IMRF executive director Louis Kosiba in an interview Friday."
"We've done it the old-fashioned way, with sound actuarial principles applied consistently. Each year our board of trustees calculates what the units of government need to contribute, and 99.9 percent of them comply."
"IMRF went through the same economic downturn that the rest of us did. 'Our assets dropped from $24 billion down to $18 billion,' said Kosiba. 'But now we're at $33 billion. Because slow and steady wins the race.'"
Kreisberg on Removing Legislative Discretion from Paying Actuarial Public Pension Costs, Comment from the NCPERS audience:
"Illinois does have one good retirement system that is well-funded, and the reason why it is well-funded is that the politicians cannot mess with the system." "So, we have a system that works in our state when you take the discretion out of funding." "If politicians have the right to have discretion in funding they won't fund it."
Kreisberg: "We see the same thing in New York State, it's based on actuarial requirements and you fund it."
A final quotation of AFSCME's Steve Kreisberg:
"'It's essentially similar to salary – you just don't reach inside somebody's savings account and take their pay back, nor should you reach inside their pension and deny them their pension benefits,' said Steve Kreisberg, director of collective bargaining and pensions for the American Federation of State, County and Municipal Employees."
FORMER AFSCME COLORADO OFFICIALS CONDEMN PENSION CONTRACT BREACH:
Former AFSCME Colorado and Colorado WINS Official Dave Anderson:
"Anderson is a PERA retiree and was an activist with the American Federation of State, County and Municipal Employees and Colorado WINS (Workers for Innovative and New Solutions.)"
"Dave Anderson was a librarian at the University of Colorado Boulder for 30 years and retired in 2009. He has been a free lance writer since 1970. He was the president of CU Boulder's Local 3592 of AFSCME (American Federation of State, County and Municipal Employees) and in the state leadership of AFSCME."
Dave Anderson Quoting Ross Eisenbrey of the Economic Policy Institute:
"When you cut someone’s wages, at least that person can say, ‘I’m not working for you.’ By cutting retiree pensions, this is literally reaching into their bank account and stealing from them after the fact.”
Dave Anderson in the Boulder Weekly:
"They like to pretend that the modest retirement benefits of public workers caused the shortfalls in pension plans. That’s nonsense."
"In 2010, a law was passed that reduced the cost-of-living increase PERA retirees receive. A lawsuit was filed charging that the law is an unconstitutional breach of contract. It is now before the Colorado Supreme Court."
"When people in the general public hear about a PERA pension, many think that it’s an add-on to Social Security. But it is a substitute. PERA members do not earn Social Security."
(My comment: Most PERA pensioners who were AFSCME members do not receive Social Security benefits. Unlike Colorado PERA pension benefits, Social Security benefits receive full inflation protection. By seizing the inflation protection due under Colorado PERA pension contracts, the Colorado Legislature disrupts the lives of pensioners who are parties to those contracts, and may ultimately force many of the pensioners into poverty.)
Former AFSCME Official Dave Anderson:
"According to the Census Bureau, pension expenditures account for just 3 percent of all state and local government spending."
"If you want to find wasteful spending, look at corporate welfare. According to The New York Times, 'states, counties and cities are giving up more than $80 billion each year to companies in the form of subsidies and tax expenditures.' How about some austerity in that department?'"
Former AFSCME Official Dave Anderson:
"Pension cuts serve the rich: Pension and health care benefits of retired public employees are under attack"
"The money is there. We just need a government serving the people, not the rich."
Former AFSCME Official Dave Anderson in the Colorado Daily:
"A study by the Bell Policy Center found that the creation of 'enterprise zones' (economically distressed areas where tax credits and incentives are offered) produced few significant benefits. The Colorado Fiscal Policy Institute estimates we could save $400 million if corporations paid their fair share (eliminating tax exemptions, credits and loopholes)." "Corporate welfare has got to end."
My response (on Facebook) to an AFSCME article:
FORMER AFSCME COLORADO OFFICIAL: "AFSCME'S ENDORSEMENT OF SCREWING PUBLIC EMPLOYEES OUT OF THEIR PENSION COLA'S IN COLORADO IS UNFORTUNATELY QUITE TRUE."
Below I present an on-line conversation (Facebook) that I had with a former AFSCME Colorado official regarding an AFSCME (International) article addressing public pension contractual rights:
"AFSCME, if you really believe this post, why did you allow your affiliate, AFSCME Colorado, to support the breach of Colorado PERA pension contracts in 2010, after the Colorado Legislature had underfunded the pension for a decade? The Colorado Legislature failed to pay its pension bills for a decade, essentially borrowing from the pension fund, now they seek to shift their debt onto the backs of retired public sector workers. It's sick, but your own people supported this in 2010."
I received a response from a former AFSCME Colorado official:
"Actually Al, that isn't what happened: The rank and file members of Colorado State Employees AFSCME Local 821 had their local dissolved by a unilateral decision of AFSCME International and the Executive Board of Colorado AFSCME Council 76, prior to the sellout, as they were to be 'incorporated' into the Colorado WINS 'partnership' created with Ritter: without their consent or even being given the right to vote on the matter. The AFSCME 'representatives' who endorsed the PERA plan (i.e. Vivian Stovall and company) weren't even state employees: they were members of Denver City employees AFSCME Local 158, who aren't even covered by PERA. The Colorado State AFSCME retirees (Phyliss Zamaripa, Kathy Bacino, and Guy Santo) opposed the PERA plan put forth by Ritter, Schaffer, and Penry at the public hearing where proponents were allowed to testify first, and at length while opponents had their testimony relegated to the end of the hearing, and had their testimony time truncated. So please don't give the impression that the rank and file members of Colorado State AFSCME Local 821 had anything to do with this sellout, because we didn't. Give the credit to where it is due: Give it to Colorado WINS, and the SEIU."
"Thanks for this new information. I have noted that Colorado AFSCME supported the PERA pension contract breach since Colorado PERA has made this claim in its propaganda. Al"
(My comments: Vivian Stovall is identified as having supporting the PERA COLA pension contract breach in 2010. She represents the interests of Colorado's elderly on the Colorado Commission on Aging [appointed by Governor Ritter] and has worked for the Alliance for Retired Americans Colorado. She has also served on the State Central Committee of the Colorado Democratic Party.
"Vivian Stovall, Chairperson of the Colorado Commission on Aging, was appointed to represent the aging population."
I find it odd that a person who represents the interests of Colorado's elderly would support legislation breaking the fully-vested pension contracts of the elderly.)
And another reply from the former AFSCME official:
"The entire AFSCME endorsement of screwing public employees out of their pension COLA's in Colorado is unfortunately quite true, however, it should be remembered that AFSCME no longer represents Colorado State Employees, and it hasn't for about 7 years now. It was decided 7 years ago in a backroom deal in Washington that the three state employee unions would become Colorado WINS. The rank and file members of AFSCME Locals in Colorado were not given the right to vote on this, nor were the members of CAPE or the CFPE. The people who espouse 'democratic labor trade unionism' in America, wouldn't allow it to take place in Colorado. Ritter and company granted a an exclusive franchise to Colorado WINS (which is a subsidiary of SEIU) and Colorado State employees do not have the right to belong to any other union, as both Change To Win and the AFL-CIO have prevented other unions (such as the CWA, which has had a consistent record of fighting for public employees' pensions) from organizing. Thanks to their betrayal of Colorado State employees, Colorado AFSCME Council 76 is now a bankrupt shell of an organization that represents some county employees in Pueblo, city employees in Aurora, the remnants of Denver City employees Local 535 and 158 and the maintenance staff at DU. They have one 'assistant Executive Director' and two clerical workers for a staff. All they are is a paper tiger, shell organization that is used as a conduit to 'move money' in state elections."
"That seems rather disingenuous on the part of Colorado PERA to attempt to rationalize the COLA-taking by citing the support of AFSCME Colorado, if AFSCME Colorado does not actually represent any employees in PERA."
"Have you ever heard any sort of an explanation from Colorado WINS for breaking PERA contracts? I have always assumed it was to minimize future contributions that might be needed from active Colorado WINS members. To the extent that money can be taken from PERA retirees, the needed pension support from current workers is diminished, not a very good reason to trash the Colorado Constitution."
Former AFSCME official:
"Yes, doesn't it? But then again, let us not forget the first piece of legislation that Colorado WINS supported was the bill written by Democratic Senator Dan Gibbs to do away with state employees having the right to strike or engage in labor stoppages. The 'S' in AFSCME is supposed to stand for 'State' but the International of AFSCME basically gave up on Colorado when Wellington Webb failed to deliver his campaign promise to give Denver City employees collective bargaining. The grand plan was 'First we'll get collective bargaining for Denver, then we'll repeal 8-73-104 (C) of the Colorado Labor Peace Act, and get all public employee's collective bargaining rights.' After they realized that wasn't going to happen, Gerry McEntee, Paul Booth, and Larry Scanlon decided to cut their losses, and 'traded' the Colorado State Employee locals to the SEIU which had acquired CAPE (that had gone into virtual bankruptcy when Bill Owens prohibited employees having their dues deducted from their paychecks.) All in all, it was a rather tawdry affair, and for AFSCME Council 76 to come out in favor of screwing public employees out of their pensions by having members of Local 158 of who were hacks from the Denver Democratic Party and Ritter supporters is just reflective of the fact that AFSCME has always placed the interests of the union and the Democratic Party above that of rank and file employees they profess to represent."
"As I recall, Miller Hudson, formerly of CAPE also supported SB10-001. This is ironic since Bill Owens eviscerated CAPE financially. Bill Owens is very culpable in the decline of PERA's funded ratio (selling PERA service credit cheap to encourage the departure of the more 'expensive' older employees, i.e., shifting labor costs from Colorado governments to PERA.) Why would Miller Hudson go along with pushing the PERA debt burden onto Colorado PERA retirees when the problem was caused by Bill Owens, and Bill Owens actions harmed CAPE? It doesn't make sense."
(My comment, Recall Alan Greenblatt's Governing article in 2006:
"In Colorado, at least some of Bill Owens' pension problem was self- inflicted, the result of his pressuring PERA to sell discounted 'service credits' to public employees, allowing them to buy more time on the job." "Owens hoped that state employees would retire early, helping his efforts to streamline government." "Because pensions are, by their nature, a long-term problem, it's difficult to get public officials–classic short-term thinkers–to pay them serious attention even when the bills are coming due."
Former AFSCME Colorado official:
"You'd have to ask Miller about that one. Now as far as Colorado WINS goes, well, you have to understand the way union organizers think: Why should they be concerned about the pensions of state employees who were not members of their union? What WINS wants is current state employees, and most of them who have been hired since 2005 don't have the same pension plan as older state employees, and that is not what they are concerned about: By concentrating on health care costs, and doing away with the inequitable 'pay for performance' plan proposed by Penn Pfifner and signed into law by Romer, Colorado WINS needs to play nice with the legislature and the executive branch so that they can market themselves with a 'victory,' to the majority of state employees who don't belong to their organization, or care about somebody else's pension. So why play the heavy and alienate the incumbent politicians in somebody else's fight? If you win, well, good. They'll get up there and say they were with you all the way……"
Quotations of Miller Hudson:
"They will pay their taxes and rely on politicians to keep the promises made to them when they were hired. After 30 or more years, they will rely on their Public Employee Retirement Association (PERA) pensions rather than social security to provide a modest but dignified retirement."
"In fact, they will shoulder more than 90 percent of the costs of fixing PERA. This isn’t because they haven’t been doing their part. They have."
"If state employees have learned little else, it should be that when economic times get tough both Democratic and Republican administrations will move swiftly to balance state budgets on their backs."
"Miller Hudson is a former state representative from Denver who served five years as executive director of the Colorado Association of Public Employees."
Miller Hudson states that Colorado PERA faces no financial "crisis," yet Miller Hudson "helped negotiate" the 2010 COLA-taking bill, SB10-001:
"Taxpayers have been told they will be held responsible for an imminent fiscal catastrophe projected in the tens of billions of dollars. These scare tactics fail to put the true situation in perspective. PERA benefits are much like the mortgage on your house. They will be paid out over the next 30 to 50 years. If Colorado misses a payment — or, more accurately, fails to collect as much as revenue as it should for a year or two — these shortfalls can be remedied in succeeding years. A home mortgage doesn't become due and payable just because a homeowner loses his or her job. Payments can be made out of savings."
"For Colorado's public employers, total contributions into PERA represent about 3 percent of their annual budgets. If this were to be doubled, it would be less than half the current 'sequester' cuts being absorbed in the federal budget. PERA is not a fiscal calamity."
"Unfortunately, when the plan went into surplus during the dot.com boom at the turn of the century, the legislature reduced the state's contributions, increased the match for refunds paid before normal retirement eligibility and held a fire sale on the purchase of unearned years of service credit at a fraction more than 15 cents on the dollar."
"Miller Hudson served as executive director of the Colorado Association of Public Employees for six years (2003-10) and helped negotiate the 2007 and 2010 PERA reform bills."
"It is important to understand why tax credits and exemptions are referred to as tax expenditures. Without loopholes, taxpayers (both individual and corporate) would otherwise pay higher taxes dumping additional moneys into the general fund. Business and special interest lobbyists have understood this relationship for decades. Find a plausible rationalization and then you can begin campaigning for special treatment."
AFSCME has published materials claiming that Colorado PERA did not face a “financial crisis” in 2009. If this is true, then why was it necessary for the General Assembly to attempt a breach of PERA retiree pension contracts?
Here is a link to an AFSCME Fact Sheet addressing Colorado PERA’s finances:
Here are a few excerpts from this AFSCME Fact Sheet:
"PERA is Financially Sound.”
“There have been some recent claims that retirement systems covering public employees are facing a financial crisis. These claims are rarely true, and they are not true of PERA. As of December 31, 2009, the combined pension plans held assets with an actuarial value of $52.8 billion and had accrued liabilities of $75.3 billion. In other words, the fund had 70.1 percent of the money it will need to pay accrued benefits in upcoming years. (Recent surveys show that the average funding level for large public sector plans is in the range of 70 to 75 percent).”
“This ratio of assets to liabilities is simply a snapshot that captures a plan sponsor’s ongoing effort at one point in time to fund its pension obligation; any unfunded liabilities can be made up over many years. If the plan sponsor is consistently making its annual required contribution, its pension plan can have a funded ratio below 100 percent yet still be on track toward full actuarial funding.”
“A recent National Association of State Retirement Administrators report points out that Colorado governments spent just 2.16 percent of their budgets on pension contributions in FY 2008, while the national average was 2.96 percent. (Issue Brief: State and Local Government Spending on Public Employee Retirement Systems, National Association of State Retirement Administrators, January 2011).”
(My comment: According to this AFSCME Fact Sheet, it appears to me that AFSCME or AFSCME Colorado believes that since Colorado PERA had “70.1 percent of the money it will need to pay accrued benefits,” at the time of the taking of the contracted retiree COLA benefit, Colorado PERA did not face a “financial crisis” at that time.
According to this Fact Sheet, it appears to be the opinion of AFSCME [or AFSCME Colorado] that a pension plan may have “a funded ratio below 100 percent yet still be on track toward full actuarial funding.” If this is the position of AFSCME, then why did AFSCME support a bill that attempts a clear overreach . . . a taking of PERA retiree contracted COLA benefits until the PERA actuarial funded ratio achieves a 100 percent funded level? This PERA actuarial funded ratio has occurred only twice in Colorado PERA’s 81-year history.)
Another AFSCME Fact Sheet addressing public pensions, “The Truth About Public Service Workers’ Pensions” is available at the following link:
Here are a few excerpts from this Fact Sheet that I find relevant to the taking of the Colorado PERA retiree contracted COLA benefit:
“Employee contributions and investment returns fund the overwhelming majority of the cost of pensions. Taxpayers shouldered only 14.3 percent of all pension funding in the 11-year period ending in 2007.”
“Public service workers often are not covered by Social Security, so their employer (state or local government) does not pay into Social Security as other employers do. Since the worker does not qualify for Social Security benefits, his/her pension is the only source of retirement security.”
“While politicians who run state and local governments have often failed to faithfully contribute to their employees’ plans, public workers have contributed year in and year out.”
“The deep financial downturn of 2008 and 2009, spurred by recklessness on Wall Street, caused significant problems in many pension funds. Until the recent market crash, public pensions were well funded and not a problem – they had on average 86 percent of the assets they needed to pay for accrued benefits (anything over 80 percent is considered healthy.)”
(My comment: If AFSCME believes that a pension actuarial funded ratio exceeding 80 percent is “considered healthy,” again, why did AFSCME Colorado support a bill that proposes to confiscate the contracted PERA retiree COLA benefit until the Colorado PERA pension’s actuarial funded ratio reaches a 100 percent level?)
“Pension funds are not at imminent risk of default, and they have years to recover investment loses. The history of public pension fund management demonstrates that pensions have not been a long-term burden to governments.”
“Where the problems with pension funds are substantial, the cause is the failure of employers to consistently fund pension plans and recent investment losses. In the past, too many politicians ignored pension contributions in favor of wasteful programs or special-interest tax breaks.”
“The unfunded pension liabilities may be paid during a period of 30 years under generally accepted accounting. During this 30-year period, state and local government revenues will be approximately $40 to $50 trillion, so the unfunded liabilities are approximately 2 percent of governmental revenues during the payback period.”
(My comment: This statistic, provided by AFSCME, does an excellent job of placing public defined benefit pension plan obligations in their proper perspective.)
“Because of the recession, a substantial majority of state and local governments have lost between 10 percent and 20 percent of their revenues during the past two to three years. As revenues recover, governments will be able to set aside appropriate money to cover their pension obligations.”
(My comment: Instead of waiting for a turn in the volatile Colorado economic cycle, the sponsors of SB 10-001 considered the recent downturn a “window of opportunity” during which they could attempt a breach of PERA retiree COLA contractual obligations.)
“The reason costs are increasing for public pension plans is because employers are now paying for past service that the employer did not properly fund.”
(My comment: This AFSCME perspective describes the accumulation of Colorado PERA unfunded pension obligations perfectly.)
Also worth considering in view of the taking of the Colorado PERA contracted COLA benefit is a letter that AFSCME sent to the Governmental Accounting Standards Board (GASB) on September 17, 2010. The letter addresses proposed changes to state and local public pension accounting and financial reporting.
The AFSCME comment letter that was sent to GASB is available here:
Here are a few excerpts from the letter that I find particularly pertinent to the Colorado General Assembly’s attempted taking of the contracted PERA retiree “automatic” COLA benefit:
“AFSCME agrees with the GASB view expressed in Chapter 2: ‘that for accounting and financial reporting purposes, an employer has an obligation to its employees for pension benefits by virtue of the employment exchange, and this obligation is not satisfied until the defined pension benefits have been paid to the employees or their beneficiaries when due.’”
“Our disagreement arises where GASB intends to project the cost of ad hoc COLAs. The reason pension plans utilize ad hoc COLAs, as opposed to automatic COLAs, is so that they can make a decision about whether or not the COLA can be funded on a regular basis.”
(My comment: Here AFSCME recognizes the distinction that is made in public defined benefit pension administration between “ad hoc,” i.e., “discretionary” COLA benefits and “automatic” pension COLAs, i.e., COLA benefits that are a contractual obligation of public pension plans and their employer-affiliates. As we have seen, Colorado PERA officials, and PERA's actuaries have identified the Colorado PERA COLA benefit as an "automatic" pension COLA benefit, in writing, on dozens of occasions.)
AFSCME's GASB Letter:
“We also have concerns with the added subjectivity that arises when determining whether facts and circumstances exist to conclude that ad hoc COLAs are not substantively different from automatic COLAs. Actuaries and accountants should not be required to guess at future employer decisions.”
(My comment: If one skims through all of the comment letters that have been sent to GASB on this subject of state and local public pension accounting and financial reporting it is interesting to note that there is NO DEBATE AT ALL regarding the contractual obligations of public pension plans and their employer-affiliates to pay “automatic” pension COLA benefits. The debate in these GASB comment letters surrounds the degree to which public pension plan sponsors are contractually obligated to meet long-standing “ad hoc” pension COLA promises and expectations.)
This GASB comment letter was submitted by:
“Steven Kreisberg, Director of Collective Bargaining and Health Care Policy, AFSCME.”
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