For decades I refused to believe it, but it is now incontrovertibly established. The Colorado Supreme Court is indisputably a political actor. Our Colorado Supreme Court exists to serve Colorado political parties. At present, the Colorado Supreme Court is more rightly considered an adjunct of the Colorado Legislative Branch, than a check on the Colorado Legislative Branch. Rather than "truth-seeking," the Colorado Supreme Court now sees its role as "political-outcome seeking." Litigants successfully use the Colorado Supreme Court to achieve political purposes. In the Ralph Carr Justice Center, rather than meeting impartial guardians of the law, litigants meet their political allies on the bench.
“I think there are many who think of judges as politicians in robes. In many states, that’s what they are.” “They seem to think judges should be a reflex of the popular will.”
Sandra Day O'Connor
In this article, I provide an example of the political and partisan role of the Colorado Supreme Court. I describe a case in which the Colorado Supreme Court summarily erases billions of dollars of debt owed by Colorado state and local governments. That is, one branch of Colorado state government relieves another branch of Colorado government of its legal debts.
The case involves Colorado statutory contracts that create financial obligations on the part of Colorado governments. Over decades, political considerations induced the Colorado Legislature to mismanage the financial obligations. In recent years, the terms of these statutory contracts were deemed politically inconvenient and politically unpopular. The Legislative Branch asked the Colorado Supreme Court to discard the contracts.
In 2010, the Colorado Legislative Branch requested that the Colorado Supreme Court grant this political favor by ignoring the Contract Clause of the US Constitution, ignoring the history of legislative mismanagement of these state financial obligations, and relieving Colorado governments of their accrued legal debts.
In this article, I address the Colorado Supreme Court's lack of independence, integrity, and impartiality. I provide a brief history of the efforts of the Colorado Legislature and the Colorado Supreme Court to escape Colorado governmental financial obligations. I comment on the recent (October, 2014) Colorado Supreme Court Decision itself, which summarily erased these billions of dollars of Colorado public sector debt. I highlight some of the numerous factual and logical errors that exist in the Colorado Supreme Court's Decision in the case. I express incredulity at the Colorado Supreme Court's willful ignorance of public pension administration, knowledge that was necessary to any court claiming to "seek truth" in the case.
My intent in writing this article is to enhance the public record of, and further document, what I consider to be one of the greatest "crimes" in Colorado history.
On October 20, 2014, the Colorado Supreme Court ruled that Colorado PERA pensioners have no contractual right to their public pension COLA benefits. Yet, here we have documentation of Colorado PERA's own lawyers acknowledging Colorado PERA's contractual obligation to pay the PERA COLA as recently as 2009.
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.”
The Colorado Supreme Court, having presided over a superficial review of the contractual right to the Colorado PERA "COLA" (ABI) benefit, now claims that Colorado PERA members have no contractual right to their accrued pension COLA benefits. Yet, here we have documentation of the co-prime sponsor of the legislation that abrogated the Colorado PERA COLA contract admitting to the existence of the contract.
The co-prime sponsor of SB10-001, the bill that violated Colorado PERA retiree contracts, was Senator Josh Penry. In 2009, Senator Penry acknowledged the existence of the Colorado PERA COLA contractual obligation, and admitted that the COLA contract breach was intentional, by design using recent market volatility to escape contractual obligations and bring about a long-desired retrospective reduction of PERA member pension benefits.
Transcript of remarks by Senator Josh Penry, R-Fruita, (appearing on "Your Show," Channel 20 with Channel 9 News (KUSA-TV) host Adam Schrager on January 10, 2010 at 10:30 a.m.
Senator Josh Penry: ". . . 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 . . ." "So what the courts have said from a legal standpoint, as long as there is actuarial necessity, as long as there is a bona fide emergency, it is okay."
Note that "actuarial necessity" was never established by the Defendants in this case. The Colorado Judiciary refused to grant a trial or discovery in the case. The inconvenient voices of the politically weak plaintiffs were silenced by the Colorado Judiciary.
If you read no further, by this point, the stench of Colorado government corruption has certainly reached your nostrils. A mob of Colorado residents wanted this state contract broken, the Colorado Supreme Court ignored constitutional law, and its own precedent, to satisfy that mob. In the minds of Colorado Supreme Court justices, "heightened scrutiny" of state attempts to escape financial obligations means no trial, no discovery and endorsement of a District Court opinion that fails to even mention on-point Colorado case law. Such practices are better suited to countries like Somalia, North Korea, or Libya. (Another government, Argentina, is currently attempting to escape its legal debts.)
In US Trust, the United States Supreme Court determined that state attempts to escape their own financial obligations shall receive heightened scrutiny and very little deference: "Any financial obligation could be regarded in theory as a relinquishment of the State's spending power, since money spent to repay debts is not available for other purposes. Similarly, the taxing power may have to be exercised if debts are to be repaid. Notwithstanding these effects, the Court has regularly held that the States are bound by their debt contracts."
Gradually, my worldview is adjusting to accommodate the reality of government in Colorado. Our "Justices" of the Colorado Supreme Court are quite happy to don their robes, sit in the 400 million dollar Ralph Carr "Justice" Center (courtesy of the Colorado Legislative Branch,) ignore evidence, and ignore precedent . . . all to please the partisans who installed them.
I believe that, if alive today, Ralph Carr would be appalled at the manner in which this century's Colorado Supreme Court casually discards the constitutional rights of the weak. If alive today, Ralph Carr would be embarrassed to see his name on this building, a monument to deceit, a monument to oligarchy.
The Denver Post: "From its grand glass atrium to the gold leaf in the lettering above the Supreme Court, Colorado's new Ralph L. Carr Justice Center was designed to impress. But visitors will need security clearance or an escort to see the $1,300 wood serving carts with silver trays sitting in Supreme Court Justice Michael Bender's reception room. In the judicial chambers, there are credenzas with antique brass hardware that cost $2,375 each. One octagonal tray table cost more than $7,200." ($2,200 chairs with “scrolling knuckles and fluted legs," $5,000 judicial desks, $4,800 leather sofas, $800 end tables, $1,600 side tables, $5,900 coffee tables.)
As an aside, the 2008 state bill that authorized construction of the Ralph Carr "Justice" Center was sponsored by Colorado Senators Shaffer and Penry, and signed into law by Colorado Governor Ritter. Ironically, the 2010 state bill that authorized the breach of Colorado state and local government contracts with elderly Colorado pensioners was also sponsored by Colorado Senators Shaffer and Penry, and signed into law by Colorado Governor Ritter.
In sanctioning the 2010 breach of Colorado state and local government contracts with the state's elderly public pensioners, the Colorado Supreme Court secures for Colorado corporations the billions of taxpayer dollars that are annually directed to corporate welfare in our state. The Colorado Supreme Court ensures that Colorado politicians will not be forced to ask Colorado's wealthy to pay more in order to honor public sector contracts. Acting in the financial interests of the State of Colorado, the Colorado Supreme Court has erased billions of dollars of the state's legal debts. Surrounded by opulence as they are, the "Justices" of the Colorado Supreme Court act to protect the interests of Colorado's corporations and wealthy. The tenth wealthiest state in the nation is free to break its contracts.
What are the implications of all this for government in Colorado? Perhaps one conclusion that should be drawn is that those interest groups seeking to influence Colorado courts meet with success. It is a worthwhile strategy. Political advocacy groups act prudently in devoting resources to partisan control over the Colorado Supreme Court. Partisans controlling the court may periodically call in favors for high priority litigation. The Colorado Supreme Court has demonstrated a willingness to accommodate, even where the Colorado Constitution must be disregarded, Supreme Court precedent must be ignored, and the force of government must to be used to seize property.
Many readers of this article retain their faith in the independence, integrity, and impartiality of the Colorado Supreme Court. I empathize with such innocence, as I myself held that view for decades. But, I invite such readers to examine the evidence compiled by Colorado's pensioners over the course of a five-year battle to defend their constitutional property rights. The evidence is available at the website saveperacola.com, and is now ubiquitous on the internet.
This evidence, in the case Justus v. State, was brushed aside by the Colorado Supreme Court. I have confidence that, having reviewed the evidence, many readers will, as I have, abandon the myth of an independent Colorado Judiciary.
On October 20, 2014, the Colorado Supreme Court released a Decision granting the State of Colorado the authority to "claw back" accrued, earned, contracted Colorado PERA public pension benefits from pensioners in the state. By enacting the retrospective legislation that broke Colorado PERA pension contractual obligations in 2010, Colorado state legislators forced a relatively small, weak group of Colorado residents to bear the burdens of all Colorado taxpayers. (Politicians do not enjoy asking voters for new revenues. This is not in their self-interest.) By adopting this legislation, SB10-001, the politicians of the Colorado Legislature were asking the politicians of the Colorado Supreme Court for a political favor.
The comment below was offered in regard to the Denver Post article reporting the Colorado Supreme Court's decision in the case, Justus v. State:
"Of course, courts make political decisions. Why do politicians and interest groups fight so hard to get appointees nominated? Democrats have done very well to pack the CSC (Colorado Supreme Court) with left-leaning judges. Most decisions are not controversial so political leanings do not have an impact. In major cases, however, political leanings of judges have a huge impact. I do not doubt that judges can find some justification for politically based decisions."
"Perhaps in a parallel universe, politics would not influence court decisions on controversial cases. Unfortunately, we do not live in this ideal universe."
Does Colorado government exist, in large part, for the benefit of the wealthy and corporations? In Colorado, moneyed interests and political parties stack the Colorado Supreme Court with judges who support their political or commercial interests. Moneyed interests have hired more than 500 lobbyists who, at the Colorado Legislature, pursue the transfer of public resources to corporate masters. The Colorado Legislature regularly diverts many billions of taxpayer dollars to "moneyed interests" in the form of corporate welfare (Google: "Colorado Tax Expenditure Report.)
Simultaneously, the Colorado Legislature fails to pay its Colorado PERA public pension bills (annual actuarially required contributions, "ARC.") The Colorado Legislature has failed to pay the PERA pension ARC for a decade. In effect, the Colorado Legislature diverts public funds from meeting state and local government contractual obligations to middle class workers in order to free up resources for discretionary gifts to Colorado corporations. Rather than ending the giveaway to Colorado corporations, in 2010, the Colorado Legislature opted for outright, unabashed theft from elderly pensioners in the state.
"I hope we shall crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country."
The idea that the State of Colorado would abrogate a state contract with a corporation is inconceivable. The breach of a Colorado state contract with a retired school teacher or a snowplow driver is, apparently, to be expected.
In any event, the legacy of the Colorado Supreme Court is now fixed. Rather that serving Justice, or the Rule of Law, the Colorado Supreme Court is unquestionably a political actor serving political ends. Rather than protecting the weakest in American society, the members of the Colorado Supreme Court congratulate themselves on their service to moneyed interests. The Colorado Supreme Court is emblematic of our Gilded Age 2.0. Ultimately, in retirement, these Colorado judges will slap backs with the moneyed interests on a golf course. A life well-lived.
Below I provide an outline of the historical mismanagement of the Colorado PERA pension system:
In 1992, Colorado voters adopted a statewide constitutional tax and spending limitation measure called "TABOR." This TABOR amendment has constrained public sector spending in Colorado, slowing the growth of state government. The pressure on state spending from the TABOR amendment contributed to state legislative diversion of resources from contractual public pension obligations to non-contractual discretionary spending. Thus, the 1992 adoption of constitutional fiscal constraints by Colorado voters has contributed to the campaign to violate the Contract Clause of the Colorado Constitution in 2010. In sanctioning the breach of Colorado PERA pension contracts the Colorado Supreme Court has tacitly empowered these 1992 voters to violate the Colorado Constitution's contract provisions. The Colorado Supreme Court has authorized retrospective legislation, and effectively granted the voters of Colorado the power to contravene the Contract Clause of the United States Constitution.
In 2002, the Colorado Legislature began its habit of failing to pay annual Colorado PERA pension system bills (the ARC.) Rather than legally reducing benefits in the Colorado PERA pension system through PROSPECTIVE benefit reductions (for example, a prospective reduction of the pension multiplier, that is, lowering the rate at which PERA benefits accrue going forward) the Colorado Legislature continued to rack up the Colorado PERA pension debt.
Notably, later, in 2012, the Colorado Legislature did indeed adopt PROSPECTIVE (legal) pension reform legislation for pension systems operated by certain Colorado county governments (arms of the state.) Thus, we have both prospective pension reform on the books in Colorado for certain public employees, AND retroactive pension "reform" for certain other public employees.
While failing to pay its public pension bills for a decade, as noted above, the Colorado Legislature chose to regularly give away billions of dollars in revenue through corporate and business subsidies, exemptions and grants sought by lobbyists. This river of corporate welfare flows unabated today.
Although they are fiduciaries for the pension system, Colorado PERA officials and trustees historically failed to request that the Colorado Legislature actually pay its public pension bills (ARC.) On the other hand, current and retired workers in the PERA pension system have never failed to make their contributions or supply the labor due under their contractual relationship with PERA employers.
Further, former Colorado Governor Bill Owens persuaded (pressured?) the Colorado PERA Board to sell service credit in the pension system at less than its full actuarial cost. He did this in order to prompt older, more "expensive" state and local government employees to retire and thus reduce public sector labor costs. (This is documented.) This action essentially shifted labor costs from Colorado state and local governments to the PERA pension system. It also increased the eventual unfunded liabilities of the PERA pension system by billions of dollars. Notably, the Colorado PERA Board of Trustees supported this "Bill Owens Fire Sale" unanimously.
Also contributing to the underfunding of the PERA pension system has been a 20-year diversion of state revenue by the Colorado Legislature (a total of $700 million sought by local government lobbyists) to pay off legacy pension debt in pensions that are the responsibility of Colorado local governments (Old Hire Fire and Police pension debt.) This $700 million was allocated for public pension debt that is not the contractual obligation of the State of Colorado. In many of these years, the Colorado Legislature failed to make its own full ARC payment (i.e., pay its PERA bills) for pensions that ARE INDEED the contractual obligation of the State of Colorado.
Since the costs of this history of Colorado PERA and state legislative mismanagement were beginning to accumulate, in 2009, Colorado PERA administrators, trustees, public sector unions, interested lawyers and 27 lobbyists representing financially interested parties colluded to reduce the unfunded liabilities of the PERA pension system by breaking contracts with Colorado PERA retirees (the taking of the COLA benefit represents 90 percent of the "savings" in SB10-001.)
The effort to break Colorado PERA pension contracts was initiated, in part, by Colorado public sector unions trying to free up money for union member salary increases, and the union's Democratic allies seeking greater funding for state and local discretionary programs.
It should be acknowledged that a few Colorado Democrat state legislators, notably Representatives Weissman, Primavera, and Pace refused to go along with the scheme to break Colorado PERA pension contracts. The scheme was supported by a few Republican state legislators, but the bulk of Republican legislators condemned the proposed PERA contract breach during floor debate on SB10-001.
At the outset, Colorado public sector union proponents of SB10-001 sought only to establish "actuarial necessity" for a one-time breach of the COLA contract. Colorado public sector unions did not want the PERA COLA contract right permanently discarded. The proponents of SB10-001 admitted to the existence of the contractual obligation. It is ironic that ultimately, the Colorado Supreme Court decided to scrap the PERA COLA contractual obligation in its entirety. By failing to uniformly defend the contractual rights of their active and retired members, Colorado public sector union officials initiated the drastic devaluation of their member's contracts. Thus, members of Colorado public sector unions will now, in effect, provide years of uncompensated labor to Colorado state and local governments as a result of the decisions of their union leaders. Unions in other states support the contractual pension rights of their members, including retired union members. This in itself is very unusual, for a public sector union to agree to break the contracts of the union's retired members. (Retired union members no longer pay union dues.)
Strangely, the proponents of SB10-001 chose to attempt the Colorado PERA pension contract breach in a year during which PERA's funded ratio was at a 69 percent level, just a few points below its historical average funding ratio. The intentional legislative underfunding of the PERA pension system is largely responsible for the slow decline in PERA's funded ratio. Yet, the proponents of SB10-001 claimed that this actuarial funding ratio was a "crisis" necessitating the breach of contract. Colorado PERA's actuarial funded ratio has been as low as 53 percent in the 1970s, but no "crisis' was observed back then, since there was no political campaign to break pension contracts in those years.
Colorado PERA pensioners, while defending their contractual rights, highlighted the fact that the PERA pension system was in line with its historical average funding ratio during and after the contract breach in SB10-001. The wide recognition of this fact may have induced the shift in legal strategy on the part of Colorado PERA's lawyers from an "actuarial necessity" defense to simple denial of the existence of the PERA COLA contract. But, the record of admissions of the existence of the PERA COLA contract by Colorado PERA's lawyers proved problematic for this new line of defense.
In legal briefs filed in the case, Justus v. State, Colorado PERA's lawyers attempted to deceive Colorado courts by replacing the "actuarial funding ratio" that PERA has used historically (and that is used in SB10-001) with a "market-based" funding ratio that makes PERA's financial condition appear to be worse than it is.
The Colorado PERA pensioner lawsuit filed after SB10-001 was signed by Governor Ritter, Justus v. State, worked its way from the Denver District Court, where a judge decided that PERA pensioners have no contractual right to their PERA COLA benefit (oddly, without mentioning Colorado's on-point public pension case law) to the Colorado Court of Appeals (that read the case law, and reversed the Denver District Court.) The Court of Appeals found that Colorado's on-point public pension case law was "dispositive," unquestionably establishing the contractual right of PERA pensioners to their COLA benefits.
The Colorado Supreme Court ignored all of this widely available evidence and reversed the decision of the Colorado Court of Appeals. Having sanctioned a breach of Colorado PERA pension contracts, the Colorado Supreme Court has incentivized the Colorado Legislature to continue underfunding of the pension system. I am astounded that governments in the United States will go to such great lengths, and engage in such deception, in order to escape their debts. Sadly, in the United States, corruption remains endemic, and some US governmental entities successfully violate the US Constitution.
Colorado Supreme Court, in Colorado Springs Firefighters v. Colorado Springs, 1989: "Rights which accrue under a pension plan are contractual obligations . . . entitlement to annual pension payment increases is also statutorily determined. These statutory provisions have established a defined benefit contributory pension system in which most public employees are required to participate . . . . . By making these contributions, employees obtain a limited vesting of pension rights, which ripen into vested pension rights upon attainment of the respective eligibility requirements."
The Colorado Supreme Court, in Denver Police Pension and Relief Board, 1961, agreed that public pension rights are a contractual obligation of plan sponsors: “When conditions are satisfied for retirement . . . . "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." "Whether it be in the field of sports or in the halls of the legislature it is not consonant with American traditions of fairness and justice to change the ground rules in the middle of the game."
THE OCTOBER 20, 2014 COLORADO SUPREME COURT DECISION IN JUSTUS v. STATE.
At a minimum, participants in the Colorado PERA public pension system have an "implied-in-fact" contract protecting the retirement benefits that were seized by the State of Colorado in 2010. These Colorado public employees have exchanged their labor and pension contributions over decades for a defined benefit in retirement. Their labor and contributions supported the contracted annual increase in their pension "base benefit."
It should be noted that a member of the court, Colorado Supreme Court Justice Hood, opted against recusal in the case, Justus v. State, in spite of his past professional association with an attorney who worked on the case, and although he was recused or removed in Colorado's Moreno "redistricting" case due to his past association with that attorney (who also worked on the Moreno case.)
“They need to avoid sitting on cases if even a whiff of bias can be detected.”
Sandra Day O'Connor
See the article: "Should Colorado Supreme Court Justice William Hood Recuse Himself in the Colorado PERA Pension COLA Lawsuit."
Note that, in 2009, the Colorado PERA Board of Trustees hired a judicially connected former Colorado Supreme Court Justice (rather than a public pension attorney) to write an opinion justifying the PERA COLA contract breach.
See the article: Jean Dubofsky: One of a “Dwindling Breed of Unabashed Liberals."
Note that Colorado Supreme Court Justice Hobbs delivered the opinion of the court in the case, Justus v. State. In oral arguments in the case on June 4, 2014, Justice Hobbs stated his preconceived opinion of the merits of the case:
"To me, you're arguing for a divestment of legislative authority here, there are plenty of people right now who didn't get raises the past ten years because of the economy, that are contracted with by the State of Colorado. Right? When they took those jobs and continue those jobs they would have expected hopefully, a cost-of-living adjustment, there's no guarantee to that, even for present employees, so why should that be with respect to the prospective argument that you're making that the Legislature is somehow divested of the authority to make these decisions, particularly when they have to do with the fiscal integrity of the whole system?"
There are many problems with this statement/question from Colorado Supreme Court Justice Hobbs in oral arguments, including its presumptions, and the lack of understanding it betrays. First, there is no proposed divestment of legislative authority. The Legislature does not have the authority to violate the constitutional Contract Clause. Second, it is obvious that governmental employees have no contractual right to receive a raise each year. Colorado PERA retirees in accordance with on-point Colorado case law, a Colorado Attorney General's opinion, clear Colorado statutes, legislative intent, the report of the Colorado Treasurer's Commission to Strengthen PERA, Colorado PERA's publications, press accounts of Colorado PERA Executive Director Greg Smith's legal briefs, Greg Smith's statements in the press, and Colorado PERA attorney's testimony to the Colorado Joint Budget Committee, INDEED HAVE a contractual right to their accrued PERA COLA benefits. Third, taking accrued public pension benefits is retroactive and retrospective under the Colorado Constitution, rather than prospective. Fourth, the fiscal integrity of the Colorado PERA pension system was not at issue. At the time of the PERA COLA contract breach in 2010, PERA's [actuarial funded ratio] stood at 69 percent, approximately the funding ratio of major U.S. public pension systems at the time.
The sponsors of the bill, SB10-001, bragged that 90 percent of the costs of the bill's reforms were to be borne by the elderly. Note that these elderly Colorado residents had little representation at the Colorado Legislature, and were thus an easy mark. The administrators and trustees of the Colorado PERA pension system control the assets in the PERA trust fund that is the property of the PERA pension system. These administrators and trustees spent PERA trust fund assets that belong, in part, to PERA retirees on a legal, lobbying, and public relations campaign to break the retiree's public pension contracts.
As noted above, in the months prior to the enactment of SB10-001 lawyers for the organization Colorado PERA admitted in testimony before the Legislature that the PERA COLA benefit was a contractual obligation. Even Colorado PERA's own lawyers held the expectation that the PERA "COLA" was a contractual obligation. They argued that "actuarial necessity" would be required before the contract could be broken. In spite of the public record, as the lawsuit progressed, PERA's lawyers changed their legal strategy, and began to deny the existence of the PERA COLA contractual obligation.
For the record, the Colorado Supreme Court ignored its own "cardinal principle" (Endsley) that any ambiguities in Colorado public pension statutes shall be decided in favor of the public employee.
“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.” Ten years later, this Colorado Supreme Court determination was cited by then-Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the CARDINAL PRINCIPLE (my emphasis) that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee. Link:
The Colorado Supreme Court has ruled that the Colorado PERA COLA benefit is a "gratuity," in violation of the anti-gratuity clause of the Colorado Constitution.
Marcucci [of the National Association of Public Pension Attorneys]: “Does your jurisdiction have an anti-gratuity clause in its constitution? If so, then almost by default there needs to be a contract component to pension benefits.” The Colorado Constitution's "anti-gratuity" clause: Article 5, Section 34 of the Colorado Constitution prohibits the Colorado General Assembly from using public funds “for benevolent purposes to any person.” If the PERA COLA is a gratuity, it is unconstitutional.
The Colorado Supreme Court argues against the existence of the PERA COLA contract due to a lack of "durational" language in statute. But, it should be noted that the PERA "base benefit" itself has no such "durational" language. It follows that, according to the Colorado Supreme Court's logic, that the entirety of the Colorado PERA pension is a gratuity, and that Colorado public sector workers have exchanged 30 years of labor and pension contributions for nothing. Under the October 20, 2014 Decision, Colorado PERA members will now work each day for compensation, a portion of which, their employers will determine after the fact.
The Colorado Supreme Court has decided that Colorado governments are free to deceive their employees, offer a future defined public pension benefit, an annuity, in exchange for a public employee's labor and money in the present, and then renege on the contractual arrangement.
If this Colorado Supreme Court decision is allowed to stand, necessarily, the Rule of Law in Colorado is indeed a myth. If this decision stands, only a fool would choose to accept employment with a Colorado PERA-affiliated employer, that is a Colorado state or local government. This case must be brought before the U.S. Supreme Court.
Here is some of the most damning evidence in this case, evidence ignored by the Colorado Judiciary. At the inception of the "automatic" PERA COLA, a Colorado PERA representative confirms that the COLA is a Colorado PERA "liability," that PERA members may rely on in making the decision to retire. A member of the Colorado Legislature describes the PERA COLA as "guaranteed," "now and in the future."
Rob Gray, a Colorado PERA representative, 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.])
See the article: "The Top Ten: Damning Evidence in the Colorado PERA Retiree Lawsuit, Justus v. State."
(Note that the current long-term inflation assumption of the Colorado PERA Board of Trustees is 3.5 percent.)
Below, I provide comments on portions of the Colorado Supreme Court Decision in Justus v. State, a Decision replete with glaring ignorance of public pension administration, factual and logical errors.
It should be noted that the October 20, 2014 Colorado Supreme Court Decision makes no mention of the legal distinction between "ad hoc" and "automatic" public pension COLA benefits.
“The Governmental Accounting Standards Board (GASB) requires public pension plans to disclose assumptions regarding COLAs, including whether the COLA is automatic or ad hoc, and to include the cost of COLAs in projections of pension benefit payments.”
(My comment: Thus, it should be a simple matter to locate a public pension plan’s characterization of its statutory COLA benefit.)
August 2, 2010, Ritter Administration Letter to GASB on contractual public pension obligations:
“The criteria suggested as the basis for differentiating these COLAs [automatic] versus ad-hoc COLAs is the statutes that exist as of the date of the employer’s financial statements.”
“The essential difference between an automatic COLA and an ad hoc COLA is the legal requirement; with this core difference there is no way for the two not to be substantively different. The legal difference in this instance is critical to the determination of whether the government is unable to avoid the surrender of resources to meet the obligation.”
The 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.”
Where in the court's Decision is the court's contract analysis for the exchange transaction that occurs in the Colorado PERA public pension plan?
Colorado Supreme Court Decision, Page 3 – "The stated goal of SB10-001 was to make "modifications to [PERA] necessary to reach a one hundred percent funded ratio within the next thirty years."
It is not the responsibility of Colorado PERA members to relinquish contractual rights in order to compensate for past legislative underfunding of the pension system. It should also be noted that the US credit rating agency: “Fitch generally considers pensions with funded ratios 80% and above to be well-funded.”
Colorado Supreme Court Decision, Page 3 – The court writes: "To address economic conditions and projections demonstrating a severely underfunded plan . . ."
As noted above, the Colorado Legislature has failed to make the actuarially required contribution to the Colorado PERA pension system since 2003. Why does the Colorado Supreme Court expect Colorado PERA pensioners whose contractual rights have fully vested to remedy past legislative mismanagement of the pension fund?
Colorado Supreme Court Decision, Page 5 – The court writes: "Justus specifically argues that the contractual right to an unchangeable COLA first arose with the1994 amendment when the legislature amended the provision making COLA increases “automatic” rather than dependent on the legislature’s approval each year, and that the 2001 amendment guaranteed said “automatic” increase by 3.5% each year. This argument is inherently contradictory as the 2001 amendment would be considered an impermissible alteration if the court were to find that the legislature established a COLA formula contract in 1994."
This statement most clearly demonstrates the abysmal ignorance of the Colorado Supreme Court in this case. The 2001 amendment was constitutionally permissible as it improved the PERA COLA benefit. Colorado PERA members were not harmed by the change.
Did the Colorado Supreme Court justices even bother to read the Decision of the Colorado Court of Appeals? The Colorado Court of Appeals noted in its Decision that “plaintiffs contend that they have a reasonable expectation of an IRREDUCIBLE (not, as defendants assert, an UNCHANGEABLE) COLA benefit. Colorado Court of Appeals: “Therefore, we direct the district court to consider whether there has been a substantial impairment with that in mind.”
(Instead of acknowledging up front that the plaintiffs in the case Justus v. State were contesting the provisions of SB10-001 that REDUCED the PERA retiree COLA benefit, the defendants in the case [PERA and the State of Colorado] employed a “red herring,” claiming that the plaintiffs were arguing that the COLA benefit could not be legally “adjusted,” that it was UNCHANGEABLE. Colorado PERA’s deception worked on the lower court, the District Court, but the Colorado Court of Appeals, in their Decision saw through this red herring. Perhaps the Colorado Supreme Court would have seen through the red herring if the court had carefully read the Court of Appeals Decision.)
Colorado Supreme Court Decision, Page 7 – The court writes: "The COLA formulas have been amended numerous times . . ."
Colorado Supreme Court Decision, Page 11 – The court writes: – "We undertook certiorari review to address whether retirees have a contractual right to a particular COLA formula for life, without change . . ."
Again, the legal question is "irreducible," rather than "unchangeable." The Colorado Supreme Court missed or ignored this distinction.
Colorado Supreme Court Decision, Page 10 – The court writes: "The district court found that retirees had no reasonable expectation of receiving the benefit of a particular COLA for life, given the number of times the legislature has amended the COLA formulas. In doing so, it observed that none of the legislature’s varied COLA formulas have ever contained durational language."
Here the Colorado Supreme Court relies on a Denver District Court Decision that failed to even mention Colorado's on-point public pension case law. A Decision that has been thoroughly discredited by the Colorado Court of Appeals.
As documented above, Colorado PERA's own attorneys have the "reasonable expectation" that the PERA COLA is a contractual obligation. If Colorado PERA's attorneys have this expectation, why should the relatively unsophisticated Colorado PERA retiree not also have this expectation?
Amendments to the PERA COLA formula are constitutionally permissible if they are improvements to the PERA COLA formula and impair no vested pension rights.
Note that the word "SHALL" is used in Colorado law to create both the contractual right to the PERA COLA benefit and the contractual right to the PERA "base benefit." Yet, the District Court found an unquestionable contractual right to the PERA "base benefit." "Durational" language is absent from both sections of Colorado law.
Colorado Supreme Court Decision, Page 11 – "We hold that the PERA legislation did not establish any contract between PERA and its members entitling them to the specific COLA formula in place on the date each became eligible for retirement or retires."
The PERA COLA benefit is not merely supported by contributions from PERA employers. It is also supported by PERA member contributions. If PERA members have supported the PERA COLA contract with their contributions and labor they are entitled to that benefit, at a minimum, as part of an "implied-in-fact" contract. Colorado PERA's lawyers state the existence of the contract in legislative testimony, a public record unexamined by the Colorado Supreme Court.
Colorado Supreme Court Decision, Page 13 – "To determine whether the legislature intended to bind itself contractually, we examine both the language of the statute itself and the circumstances surrounding its enactment or amendment."
The statute uses identical language to establish the Colorado PERA COLA benefit and the Colorado PERA "base benefit."
The legislative history of the Colorado PERA COLA benefit makes it plain that, as asserted in 2009 by Colorado PERA's lawyers and the sponsor of SB10-001, Senator Josh Penry, that the PERA COLA benefit is a contractual obligation of the State of Colorado and other employers in the PERA pension system.
As noted earlier, Colorado PERA's representative Rob Gray provided testimony at the inception of the automatic PERA COLA that the PERA COLA benefit that the Legislature was placing into Colorado law is a "permanent" pension benefit, that PERA pensioners can rely on the pension benefit in retirement, that the PERA COLA is a "liability" of the Colorado PERA pension system, and that the permanent PERA COLA created "adds to the unfunded liabilities" of the PERA pension system. Indeed, a member of the House Finance Committee at the legislative hearing creating the "automatic" PERA COLA benefit described the PERA COLA as "guaranteed," "now and in the future."
Colorado Supreme Court Decision, Page 15 – "By its very nature a statutory cost of living adjustment is a periodic exercise of legislative discretion that takes account of changing economic conditions in the state and/or nation."
This is a demonstrably false statement. It provides further proof that the Colorado Supreme Court issued its Decision in utter ignorance of public pension administration. Some public pension COLAs are "ad hoc," some are "automatic." The 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.”
Colorado Supreme Court Decision, Page 16 – "By its very name, adjustments to the formula necessarily imply fluctuation with changes in the cost of living and CPI."
This statement evidences further, mind-boggling ignorance on the part of the Colorado Supreme Court. For the record, the Colorado PERA "COLA" benefit is described in Colorado statute as an "annual benefit increase," rather than as a "cost-of-living increase."
I wonder, with this Decision, has the Colorado Supreme Court authorized Colorado insurance companies that have entered into contracts to provide annuities with COLA provisions to ignore those contracted COLA provisions?
Colorado Supreme Court Decision, Page 17 – " . . . we conclude that there is no contract right to the COLA."
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.” The sponsor of SB10-001 agreed with Colorado PERA's lawyers. I find this to be particularly relevant and interesting legislative history.
Colorado Supreme Court Decision, Page 18 – " . . . we observe no contractual or durational language stating or suggesting a clear legislative intent to bind itself, in perpetuity, to paying PERA members a specific COLA formula."
"We afford significance to the legislature’s use of durational language in the description of the pension benefit owed to retirees, in contrast to the fluctuating COLA formula which is evidenced by the legislative history.
This question of "durational language" was addressed in oral arguments. At 31 minutes into the June 4, 2014 oral arguments Attorney Sean Connelly, representing Colorado PERA, stated:
"If you look at the language of the PERA statute, in 801.1, Section 801.1, of the PERA statutes, says that the monthly benefit is payable for the lifetime of the beneficiary."
"COLAs are instated in Part 10 of the PERA statutes, specifically in Sections 1001, 1002, 1003 and those were the parts that were amended in SB10-001 in 2010."
Contrary to Sean Connelly's argument, the statutory language creating the PERA COLA contract and the PERA base benefit is identical . . . both benefits "SHALL" be paid to annuitants. Colorado PERA's attorneys agree that the PERA statutes create a contract for the PERA base benefit.
Articles of Colorado law are divided into "parts" and "sections." As plaintiff's attorney Richard Rosenblatt points out in his concluding remarks at the June 4, 2014 oral arguments, Part 8 of the PERA statutes is not the portion of the PERA statutes that creates the contract for the PERA base benefit. The contract for the base benefit is created in Section 24-51-602, located in Part 6 of the PERA statutes, a Part that is titled "Service Retirement." Section 602 is titled "Service retirement eligibility," it addresses eligibility for service retirement benefits in the PERA pension plan that are a contractual obligation of PERA and PERA-affiliated employers. Section 602 provides that: "Members . . . SHALL, upon written application and approval of the board, receive service retirement benefits pursuant to the benefit formula . . ."
This Colorado PERA statutory language creating the PERA "base benefit" contract is identical to the PERA statutory language creating the PERA COLA benefit contract. Colorado PERA's lawyers would have us and the Colorado Supreme Court believe otherwise.
Part 8 of the PERA statutes simply implements Part 6 of the PERA statutes. Part 8 of the PERA statutes addresses "Benefit Options" for payment of the service retirement benefit offered under the PERA pension contract. The Part 8 payment options for this PERA annuity are: single life, joint life with one-half payable to a cobeneficiary at death of the retiree, and joint life with the same benefit payable to a cobeneficiary at death of the retiree.
Under the PERA statutory construction, Part 8 addressing PERA annuity payout options rightly follows Part 6 which addresses eligibility for the PERA retirement benefit itself. Section 602 provides that the qualified PERA retiree SHALL receive the base benefit. Part 8 provides choices for the payout of the benefit.
Why would PERA's lawyers state or imply that the contract for the PERA base pension benefit is created in the section of PERA law that addresses retiree choices for the method of payout of the total contracted PERA benefit, rather than in the section that addresses PERA member eligibility for the PERA annuity itself? In my opinion, deception.
The attorney for the plaintiffs, Richard Rosenblatt, responded:
"So, it's 'SHALL RECEIVE' is the language that creates the contract for the base pension, which they (defendant's attorneys) agree is a contract."
"And, the COLA statute says "SHALL," uses the same mandatory language."
"The durational language that they speak of is under a section that sets forth options for payment of lesser amounts if the retiree wants the benefit to cover the life of a spouse."
"The actual creation of the (base benefit) contract is based on the mandatory language 'SHALL RECEIVE" in 24-51-602 and I would submit that the mandatory language is the same as the mandatory language in the COLA."
See the article: "My Opinion: Colorado PERA Pensioners Expose Deception by PERA Lawyers at the Colorado Supreme Court."
Here is a link to the June 4, 2014 Colorado Supreme Court Oral Arguments in the Colorado PERA retiree lawsuit, Justus v. State:
Colorado Supreme Court Decision, Page 19 – "Although sections 24-51-1001(1) and -1002(2) use the word “shall,” that mandatory language is directed at the PERA administrator, not the legislature."
If the Justices of the Colorado Supreme Court actually believe this statement, they are obligated to explain the fact that Colorado PERA's lawyers have testified (on the legislative record) to the existence of the PERA COLA contract.
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.”
Colorado Supreme Court Decision, Page 20 – "In further examining intent, we accept the district court’s finding that the legislature did not create a contract right to a COLA in the 1994 COLA amendment because the 1993 legislative history indicated that no member of the General Assembly expressed intent to create an unchangeable COLA from that date forward."
The Colorado Supreme Court is also incorrect on this point. In preventing this case from going to trial, and relying on a flawed Denver District Court decision, the Colorado Supreme Court is necessarily ignorant of key evidence in the case. The recording of this 1993 legislative hearing includes a member of the Colorado General Assembly describing the PERA COLA under consideration as "guaranteed," "now and in the future." At this legislative committee hearing a Colorado PERA representative, Rob Gray, confirmed that the PERA COLA being placed in Colorado law was a Colorado PERA "liability," that PERA members may rely on in making the decision to retire."
Professor Amy Monahan: "The (Denver District) court’s ruling 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." (Professor Amy Monahan is the preeminent legal scholar in the United States on public pension contracts. "Amy Monahan is a professor and the Solly Robbins Distinguished Research Fellow at the University of Minnesota Law School.")
Colorado Supreme Court Decision, Page 22 – "Retirees therefore could not have reasonably expected that the state’s provision of any given COLA was a statutory contract protected from change by the Contract Clauses of the U.S. and Colorado Constitutions.
Given that Colorado PERA's own lawyers have this expectation, and have provided legislative testimony to that effect, why should Colorado PERA retirees not also have that same expectation?
Colorado Supreme Court Decision, Page 22 – " . . . we have determined that retirees have no property right in a particular COLA."
This outcome is rightly laid at the doorstep of Colorado's public sector unions that supported SB10-001.
October 11, 2012, Colorado Court of Appeals 2012 decision in 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.”
In its Decision, the Colorado Court of Appeals cited (and reproduced a finding from) the case Hayden v. Hayden: “COLA increases are as much a part of the pension as the amounts initially established by the pension system on retirement,” i.e. the “base benefit.”
Also, for the record I provide selected statements from the Concurrence in this case by Justice Coats, Page 3 -
"By the same token, however, by merely distinguishing these COLA provisions, it (the Supreme Court Decision) fails to directly address the court of appeals’ rationale or otherwise account for our post-McPhail and Bills characterizations of those cases, as a direct result of which the court of appeals considered itself bound to find a contract."
Page 5 – " . . . I believe some explanation why the court of appeals’ reading was incorrect and some guidance concerning the continued vitality of these cases is called for."
Page 6 – "While it may be true that the statutes in this case, unlike the city charter in McPhail, do not contain language of entitlement or duration, such words are, in any event, not language of contract and would indicate nothing about an intent to contract, even if they had been included."
Page 6 - ". . . the majority in my view not only fails to rebut the court of appeals’ rationale but actually undercuts the presumption against contracting by legislative bodies as well."
Page 8 – " . . . can be judicially recognized to exist only in the face of an unmistakable indication of legislative intent to contract, which I consider to be wholly absent from the COLA statutes at issue in this case."
If the Colorado Judicial Branch had permitted this case to actually go to trial, the fact that even attorneys for the defendant in the case, Colorado PERA, have found an unmistakable indication of legislative intent to contract in the COLA statutes would have been recognized by one or more Colorado courts.
Colorado PERA retirees and active members, in spite of this political decision on the part of the Colorado Supreme Court, the contract right to accrued Colorado PERA COLA benefits manifestly exists.
Colorado PERA pensioners know the truth. Employees of Colorado's Judicial Branch now know the truth. Judges on the Colorado Court of Appeals know the truth. Colorado lawyers know the truth. It is simply the case that, at this particular time in history, Colorado politicians on and off the Colorado Supreme Court refuse to meet Colorado PERA contractual obligations.
This case should be appealed to the United States Supreme Court, and for the time being, the ridiculous pretense of the law serving justice in Colorado should end.