Algernon Moncrief

About Algernon Moncrief

Independent Nationwide Public Pension Rights Blogger.

Judge, No “Persuasive Reason” Given that Colorado PERA COLA Benefit is Not a State Contract.

"Joshua Sharf is a fiscal policy analyst for the Independence Institute, a free market think tank in Denver."

From the Greeley Tribune article, October 29, 2014: "Sharf: Good and bad news for PERA in Colorado Supreme Court’s decision:

"The Colorado Supreme Court granted some good news to the state’s troubled public pensions last week by upholding a key part of an important 2010 reform law. In the process, though, the court may have made it more difficult to enact more meaningful reform down the road."

(See: http://coloradopols.com/diary/64487/the-colorado-supreme-court-politicians-in-black-robes-as-it-turns-out)

"Four years ago the Colorado Legislature adopted Senate Bill 1 to reform the state’s Public Employees Retirement Association. Among other changes, the bill lowered the cap on retirees’ annual cost-of-living adjustments from 3.5 percent to 2 percent. The court upheld this particular provision, which was designed to help reduce PERA’s future financial shortfall."

(Joshua, for the record the current long-term inflation assumption of the Colorado PERA pension system is 3.5%. Also, why is it surprising that when states break governmental contracts, this breach of contract improves a state's financial condition?)

"SB 1’s changes applied to current as well as future retirees. A group of current retirees, unhappy with having their cost of living capped, sued."

(Joshua, the Colorado PERA COLA benefit of the retiree plaintiffs in this case, Justus v. State, was already "capped" prior to the litigation of the case, Justus v. State. The COLA was "capped" in Colorado law at 3.5%. In this case, the Colorado Supreme Court ignored the existing evidence, ignored the findings of the Colorado Court of Appeals, and rendered judgment in the case without trial or discovery. This, in spite of an obligation of US courts to give "heightened scrutiny" to state attempts to escape their own financial obligations under the US Supreme Court case, US Trust.

Joshua, just as your mortgage rate might be "capped" at a fixed rate, perhaps 4%, the PERA COLA is a provision in a contract, here a Colorado statutory contract. As an organization that supports the US Constitution, I find it odd that the Independence Institute is so eager to see Colorado state contracts abrogated. The State of Colorado also contracts with corporations.)

"The plaintiffs had some reason for optimism. While it has long been held that states cannot create contractual obligations through Legislation, the Colorado Supreme Court had carved out an exception for public pensions in two decisions: McPhail (1959) and Bills (1961)."

(Joshua, I am happy that the Independence Institute acknowledges Colorado's long-standing on-point public pension case law. This reveals a level of sophistication that exceeds that of the Denver District Court's Judge Hyatt [recently retired] who conveniently failed to even mention Colorado's on-point public pension case law [Bills and McPhail] in the Denver District Court Decision in this case. For the record, this Denver District Court Decision was embraced by the Colorado Supreme Court in its political decision to take the contracted PERA COLA benefit.)

"The Justices drew a distinction between those cases and the current one, known by its lead plaintiff, Justus. The court decided that cost-of-living adjustments were not part of the core formula for determining benefits. They also recognized that the Legislature had changed the adjustments formula a number of times in the past. As a result, the majority ruled that the retirees had no reasonable expectation that a contract had been created."

(Joshua, you don't seem to be bothered by the fact that, in this Colorado Supreme Court Decision, one branch of Colorado state government has excused the debt of another branch of state government. As was noted in the Colorado Court of Appeals Decision in this case, the plaintiffs contested the diminishment of the value of their contracts, rather than a "change" in the contractual terms. "Changes" to the COLA that improve the benefit do not impair the contract. If your mortgage company unilaterally lowered your mortgage rate, you would suffer no harm.

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 asserted, 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, Colorado 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 also seen through the red herring if the court had carefully read the Court of Appeals Decision, or actually sought the truth in this case.

Does the Independence Institute support the Colorado Judicial Branch's use of a red herring in escaping state contractual obligations?

Joshua, are you aware that even Colorado PERA's lawyers have the "reasonable expectation" that the Colorado PERA COLA benefit is contractual? If Colorado PERA's lawyers have this expectation, why should Colorado PERA retirees not also have this expectation?

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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf)

"Coates noted that by framing the decision the way it did, the majority bought into the plaintiffs’ logic, and that there were elements of the plan that the Legislature would not be able to change without violating the Contracts Clause."

"Coates also believes the court failed to give a persuasive reason why the adjustments were exempt from the legislative contracting exception. Taken together, these two elements effectively leave areas of the plan concerning current retirees off-limits to the Legislature. Further, the court offers no guidance as to what those areas might be."

(Joshua, thank you for juxtaposing the opinion of Colorado Supreme Court Justice Coats with the opinion of politicians sitting on the Colorado Supreme Court.)

"Without such guidance, future legislatures will be less informed about what reforms will pass constitutional muster. They will be less likely to take on broad reforms unless and until drastic action is needed, and there is little margin for error."

(Joshua, if the Colorado Legislature actually desired information regarding Colorado PERA pension reforms that would pass constitutional muster, the Colorado Legislature would have sent an interrogatory to the Colorado Supreme Court with such queries in 2009. The Colorado PERA Board of Trustees, to their credit, took the position that such an interrogatory should be sent. The Leadership of the Colorado Legislature, inexplicably, opted against sending this interrogatory to the Supreme Court. This decision was, of course, made prior to the defendant's shift in their legal strategy from seeking a one-time breach of the COLA contract through "actuarial necessity," to pursuing elimination of this Colorado PERA contractual obligation in its entirety. The Colorado Legislature did not want guidance from the court in 2009.)

"By failing to lay out clear rules for what is permissible and what isn’t with respect to existing benefits, the Court’s ruling in Justus, celebrated for helping PERA’s finances right now, may end up making such a bleak scenario more likely in the future."

(Joshua, you do not seem so concerned with the "bleak scenario" of Colorado taxpayers paying billions of dollars in corporate welfare each year.  This corporate welfare is provided by the Colorado Legislature. Google "Colorado Tax Expenditure Report." The Colorado Legislature has directed these billions of dollars to corporate welfare in lieu of paying its public pension bills. This has gone on for more than a decade.)

http://www.greeleytribune.com/news/13574970-113/court-legislature-adjustments-pera

Colorado Unions Contribute to Court Ruling Striking Unionist Contractual Rights.

In 2010, public sector unions in Colorado supported a bill introduced at the Colorado Legislature, SB10-001, that diminished public pension rights previously deemed contractual under Colorado law, (see the cases Bills/McPhail.) The bill was challenged in court. Last week, after a long court battle, the Colorado Supreme Court reversed its long-standing precedent, ignored evidence (including the defendant's previous testimony admitting to the contract) and without trial or discovery ruled that public employees in Colorado have no contractual right to the contested public pension benefit. (That is, one branch of Colorado government conveniently found that another branch of Colorado government does not have to pay its debts.)  Of course, Colorado public employees have supported their Colorado PERA pension COLA benefit with their labor and contributions for many years. Now, thanks in part to many Colorado union officials, the labor and pension contributions of union members will now be used to alleviate the tax burden on wealthy Colorado residents, and provide even more Colorado corporate welfare. Thanks Colorado unions.

As we read on the Colorado PERA website:

“In Colorado, Senate Bill 1 passed with the support of the Colorado Coalition for Retirement Security, which brought together Friends of PERA (which includes PERA members and retirees), the Colorado Education Association, the Colorado School and Public Employees Retirement Association, AFSCME Colorado, the American Federation of Teachers Colorado, the Association of Colorado State Patrol Professionals, the Colorado Association of School Executives, and Colorado WINS.”

http://www.copera.org/pera/about/ask.htm

Union Official Condemns Pension Contract Breach (Including the Taking of COLA Benefits) in Rhode Island.

An article published by the group Think Progress today addresses state theft of public pension benefits, including the taking of pension COLA benefits, in Rhode Island.

"The changes 'completely screwed mid- and late-career workers,' said SEIU’s Adler. For someone with 20 years of public service under his belt and a decade to go before hitting retirement age, 'you’re losing 10 years of wage increases and 20-plus percent of whatever that final average salary [used for calculating pension payments] was going to be. So it’s an enormous reduction.'”

(Does is not seem counterintuitive that Colorado public sector unions supported the taking of Colorado PERA public pension benefits, in light of their parent organization's support for public pension contractual rights?)

“'Many folks take public sector jobs because they have good pensions and benefits, and in many cases they’re forgoing better pay in the private sector,' Adler said. 'That got thrown out the window on a dime." ". . . if you’re early in your career you have time to decide if this job is still worth it. But if you’re mid-career, you’re stuck.”

(Mid-career Colorado state and local government employees should take the time to thank their Colorado union leaders for supporting SB10-001.)

"The year before, Baker crunched state-level pension numbers and found that those multi-trillion-dollar shortfalls are 'less than 0.2 percent of projected gross state product over the next 30 years for most states,' and less than 0.5 percent of projected future economic output even in the states with the worst-funded pensions."

(Of course, this evidence was also ignored by the politicians on the Colorado Supreme Court. There never was a Colorado PERA pension "crisis," the actuarial funded ratio of the Colorado PERA pension system, at the time of the contract breach, was 69%. This figure is a few points away from the historical funded ratio of the Colorado PERA pension system.)

"Like basic financial management for any working-class person, maintaining a healthy pension system requires getting into good habits and sticking with them. States that fund their pensions appropriately rather than reneging on the obligations 'generally do it because that has been the practice in the state, but generally not because of state law,' according to SEIU’s Adler."

(As we have seen, the Colorado Legislature has not paid its Colorado PERA public pension bills since 2003. This is documented at saveperacola.com.)

"The weakness in pension funds from decades of underfunding by state governments needs to be addressed and there’s no reason not to start now, he said, but the radical revisions and abandoned retirement promises Raimondo and Arnold support are unnecessary."

"Pew has received 'up to $4,850,000' for its pension work from the Arnolds since 2012 according to the Arnold Foundation’s website."

(Note that a study from Pew was used to justify the taking of the Colorado PERA pension COLA benefit in the bill SB10-001. Also, let's not forget that this Pew study was highlighted in the original legal briefs in the case, Justus v. State.)

“'They depict us as big labor, billions of dollars,' he said, 'and the reality is that we are fighting desperately to maintain the rights of our members under a furious, multifaceted right-wing assault.'”

(I do not consider the many Colorado Democrats and union officials who supported SB10-001 to be "right wing.")

"Elsewhere, the innocuously-named Colorado Pension Project held a panel discussion of how pension rules influence teacher hiring and school performance. Panelists from Bellwether Education Partners, the National Council on Teacher Quality, and the New Teacher Project all argued that traditional pensions hurt school districts’ ability to attract the best teachers." "All three groups are funded by John and Laura Arnold, whose foundation has given them a total of nearly $7 million."

(Will Colorado public sector unions support elimination of the remaining two-thirds of the value of their member's public pensions? Too soon to tell.)

“'If you stiff your bondholders they won’t lend you money. So they have power. Workers, what are they going to do?' Adler asked. 'They’re powerless.'”

(When one recognizes that Colorado PERA retirees are confronted by a pension administrator controlling all of their assets, and spending those assets to eliminate pension member contractual rights, when one sees a Colorado Supreme Court in the pocket of the proponents of pension contract breach, the word "powerless" appears quite apt.)

Greg Smith on Colorado PERA pension benefits:

“His [Colorado PERA General Counsel Greg Smith's] briefing paper said 'there has never been a finding in Colorado that the state has reserved its power to make changes' in PERA's benefit structure.”

"The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member. That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan."

"Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem."

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/

Greg Smith, Colorado PERA’s former General Counsel told us in a Denver Post article from November 30, 2008: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”

Link: http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)

The complete article at Think Progress:

http://thinkprogress.org/economy/2014/10/28/3585128/arnold-pensions-retirement-manufactured-crisis/

The Colorado Supreme Court . . . “Politicians in Black Robes.” (As it turns out.)

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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

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."

Thomas Jefferson

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."

http://coloradopols.com/diary/58201/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."

http://coloradopols.com/diary/39311/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:

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984.)

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."

http://coloradopols.com/diary/44622/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.

NASRA:

“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.)

http://www.nasra.org/resources/COLA%20IB%20060512.pdf

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.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

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.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

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.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

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.

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

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."

http://coloradopols.com/diary/59115/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:

http://www.courts.state.co.us/Courts/Supreme_Court/Oral_Arguments/Index.cfm

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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

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.”

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

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.

State Courts Are Defending Public Pension COLA Contracts, (Including Colorado PERA Pension COLA Contracts.)

(Colorado, Montana, Arizona, New Jersey, Illinois, Rhode Island, Washington, California, Oregon.)

Contrary to the public pension contract breach propaganda du jour, state courts are upholding contractual rights to "automatic" public pension COLA benefits.

Lately, a few proponents of taking accrued pension COLA benefits from pensioners have been trying to plant (in politician's heads) the false meme that courts are just fine with breach of public pension COLA contractual obligations.  Everyone is doing it!  Jump on the bandwagon!

Well, I follow developments in U.S. public pension litigation more closely than most, and this claim struck me as ludicrous.  So, I decided to locate and examine the recent pension COLA decisions myself.

Readers should know that a well-oiled, well-funded, corporate public pension "crisis" noise machine exists in the U.S.  The aim of this machine is to divert attention from the $80 billion in corporate welfare that is given away by state and local governments in the U.S., and try to focus attention on public pension unfunded liabilities (underfunded by approximately $40 billion annually.)  If successful, this effort will help protect U.S. corporate welfare.

One such propaganda piece was recently produced by a university research center (receiving corporate financial support from Goldman Sachs no less.)  The paper's author is "surprised" that courts are "upholding" COLA cuts by state legislatures!  Oh my!  But, this "surprise" is unwarranted, as it is contradicted by reality.

In this article I provide excerpts from recent state court decisions in public pension COLA cases, as well as links to the cases.  A brief examination of recent state court decisions will quickly debunk the "courts are just fine with breach of COLA contracts" meme.  This article concludes by providing background information relating to "automatic" and "ad hoc" public pension COLA benefits in the United States.

In 2010, a number of Colorado politicians, state officials and Colorado union officials decided that they wanted to break the COLA contractual obligation in the Colorado PERA pension plan. Yes, Colorado public sector unions have advocated for a breach of the contracts of their retired union "brothers and sisters."  (Remember that retirees no longer pay union dues.  In my view, Colorado public sector unions have sullied the U.S. Labor Movement and exacerbated income inequality in the U.S.)

The hope of the proponents of breaking Colorado PERA public pension COLA contracts was that Colorado courts would not know the difference between "automatic" and "ad hoc" public pension COLAs.  Their hope was that Colorado courts would fail to discover this difference in types of public pension COLA benefits and sanction the desired Colorado PERA pension contract breach.  (Some of those who participated in this scheme to help Colorado governments escape legal debts were Colorado state employees.)

In 2010, these public sector and union officials colluded to break the contracts of Colorado PERA pensioners and attempted to "claw back" accrued Colorado PERA pension COLA benefits (an annual percentage increase in the PERA base benefit that is specified in Colorado law.)  Colorado PERA pensioners are suing the pension administrator, Colorado PERA, and the State of Colorado for the pension contract breach (Justus v. State.)

Public pension administration and jurisprudence are extremely complex subjects.  The proponents of the Colorado PERA pension contract breach have hoped to use this complexity to their advantage.  Statutory public pension COLA provisions may be "ad hoc" COLA benefits that may be legally adjusted by public pension plan sponsors, or "automatic" public pension COLA benefits that are part of public pension contractual obligations.  Any diminishment or impairment of an "automatic" public pension plan COLA benefit by a public pension plan sponsor (such as the State of Colorado or Colorado PERA) is constitutionally impermissible. 

In legal briefs that the proponents of breaking Colorado PERA COLA contractual obligations have filed in the case, Justus v. State, no mention is made of the existence of "ad hoc" and "automatic" public pension COLAs.  Why is that? 

Since 2010, a number of states have attempted to escape statutory "automatic" public pension COLA contractual obligations.  However, state courts are slowly, but surely, learning the distinction between contractual "auto COLAs" and "ad hoc COLAs."  State courts are discovering that "automatic" public pension COLAs are no less a contractual obligation of public pension plan sponsors than are public pension base benefits.  State courts are upholding the Rule of Law in the United States:

COLORADO

Colorado Court of Appeal's Decision in Justus v. State (October 11, 2012): “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.”

Colorado PERA officials in written testimony to the Joint Budget Committee (December 16, 2009): “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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

MONTANA

Montana District Court GABA (COLA) taking injunction (December 27, 2013):

"The legislative reduction of the GABA implicates a fundamental constitutional right and must be evaluated under the strict scrutiny standard, 'whereby the government must show that the law is narrowly tailored to serve a compelling government interest.'" 

"Montana law treats public employee pensions as contractual obligations."

http://www.mea-mft.org/Uploads/files/News%20Issues%20Actions/GABAorderTRS.pdf

ARIZONA

Arizona Supreme Court (February 20, 2014 Decision):

"After such vesting, '[the pension] contract cannot be unilaterally modified nor can one party to a contract alter its terms without the assent of the other party.'”

"Smith is inapposite.  Assuming the case was correctly decided, we note that it reflects the general principle that statutory provisions do not create contractual rights.  But statutorily established retirement benefits are an exception to this rule."

"We affirm the decision of the trial court."

http://www.irtaonline.org/documents/ArizonaPensionRuling.pdf

NEW JERSEY

New Jersey Appellate Court (June 26, 2014):

“'It is not the courts' role to run the pension systems,' Reisner wrote. 'Our responsibility is to interpret and apply the constitution in light of the evidence, and we will do so.'"

"Under settled law, for the state to be able to break the COLA contract, it must show at the trial court that the harm to retirees is not 'substantial,' that the government is breaking its agreement for a 'reasonable public purpose,' and that the freeze is related to 'appropriate governmental objectives.'

https://burypensions.files.wordpress.com/2014/06/berg-decision.pdf

ILLINOIS

Illinois Supreme Court Decision (July 3, 2014) in a recent decision finding that retiree health benefits are constitutionally protected as public pension benefits:

“Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.”

(Colorado Supreme Court: “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.” (Colorado Supreme Court in Taylor v. PERA, November 17, 1975.)

From the dissent of one Illinois Justice hearing the case:

“Stated otherwise, by its plain language, the pension protection clause prohibits legislative action that diminishes or impairs pension benefits by altering the terms of the contract governing the pension.”

http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

RHODE ISLAND

Rhode Island Superior Court (April 16, 2014):

"Upon retirement, under Rhode Island law, COLAs and pension benefits are one and the same, providing retirees with a vested interest in the benefits which may not be altered retroactively."

"Because there has been a bargained-for exchange, supported by consideration, this Court finds that there is an enforceable implied-in-fact contract between Plaintiffs and the State."

"Furthermore, our Supreme Court’s jurisprudence supports a finding that Plaintiffs possess protected contractual rights in receiving a pension and a COLA."

"Here, having retired, the Plaintiffs have fully performed.  A valid contract exists between Plaintiffs and the State, entitling Plaintiffs to their pension benefits."

http://www.courts.ri.gov/Courts/SuperiorCourt/DecisionsOrders/decisions/12-3166.pdf

WASHINGTON

Washington Superior Court for Thurston County (November 9, 2012):

"In 2011, the Legislature amended these statutes again and repealed the UCOLA for all active and retired members.  It did not offer a benefit in exchange for terminating the COLA."

"Two cases are dispositive to this Court, Jacoby and Navlet.  In each of those cases, our Supreme Court rejected employers' attempts to reserve the right to unilaterally withdraw vested retirement benefits."

"This Court must follow the binding precedent of Jacoby and Navlet.  Under that precedent, the State is prohibited from reserving the right to unilaterally terminate the UCOLA.  The UCOLA was vested because employees began work based, partially, on the promise of a UCOLA.  Further, the parties agree that the State did not offer any off-setting benefit when it terminated the UCOLA.  The State's actions therefore violated existing law and summary judgment to the employees is warranted as a matter of law."

http://arnoldfoundation.org/sites/default/files/courtDocs/WASHINGTON-WA-Education-Assn-et-al-v-State-Retirement-Systems-et-al-11-09-2012-Opinion.pdf

(My comment: Colorado PERA's former General Counsel and current Executive Director Greg Smith, August 17, 2005, Rocky Mountain News:

“His (Colorado PERA General Counsel Greg Smith) briefing paper said 'there has never been a finding in Colorado that the state has reserved its power to make changes' in PERA's benefit structure.”

"Smith said in his opinion that 'other (non-Colorado) courts have set a high burden to meet the necessity threshold.'"

"The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member.  That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan."

"Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem."

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/)

CALIFORNIA

California Superior Court, County of Santa Clara (San Jose), (December 19, 2013):

(My comment: Note that the City of San Jose, California, in its efforts to escape public pension COLA contractual obligations, did not try do deny that the public pension COLA benefit is a contractual obligation, as have Colorado politicians.  The City of San Jose argued for the right to be able to suspend the COLAs in an "emergency.")

"A public employee's pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment.  Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity (Betts)."

"Section 1510-A (COLAs) provides that, if the Council adopts a resolution declaring 'a fiscal and service level emergency,' the City may, for a period of up to five years, suspend all or part of the COLA payments due to all retirees."

"The City argues that Valdes supports the notion that vested rights can be suspended in an emergency.  There are several difficulties with this argument."

"In authorizing denial of benefits rather than mere deferral, Section 1510-A exceeds the scope of what Valdes contemplates as potentially allowable.  Accordingly, Section 1510-A is unlawful and invalid."

http://www.sanjoseca.gov/DocumentCenter/View/25332

OREGON

The Oregon COLA-taking legislation was enacted last Fall (2013.)  Under a provision of the bill that broke the pension COLA contract the legal challenge was sent directly to the Oregon Supreme Court.  Just nine years ago the Oregon Supreme Court addressed this question, the contractual nature of public pension COLA benefits (in 2005.)

From the Oregon Supreme Court Decision in Strunk v. PERB (March 8, 2005):

"We therefore conclude that the elimination of annual COLAs from the 'fixed' service retirement allowance, as set out in Oregon Laws 2003, chapter 67, section 10(3), is inconsistent with the legislature's promise set out in ORS 238.360(1) (2001)."

" . . . Strunk and Sartain petitioners are correct in their assertion that the provision of the 2003 PERS legislation that directs PERB to not apply annual COLAs to certain retired members' 'fixed' service retirement allowances breaches the contrary obligation of the PERS contract to do so; that provision also is declared void and of no effect."

http://scholar.google.com/scholar_case?case=3500629816084156134&q=strunk+v.+PERB+pension&hl=en&as_sdt=4006

What about the South Dakota and Minnesota COLA decisions?

The South Dakota and Minnesota legislatures both passed bills in recent years that reduced public pension COLA benefits.  The Defendants in the Colorado COLA case, Justus v. State, cited these state bills as examples of successful state legislation reducing pension COLA benefits.  But, in its 2012 Decision in the case Justus v. State, the Colorado Court of Appeals noted that public pension COLA benefits in South Dakota and Minnesota are in essence "ad hoc" COLAs.

Colorado Court of Appeals: "Lastly, defendants point to two decisions by trial courts in other jurisdictions that have rejected contentions that the legislature’s modification of public employee retirees’ COLA violates the Contract Clause.  Those cases, however, are distinguishable.  In Swanson, the court held that the plaintiffs did not have a contractual right to a specific statutory COLA formula.  But in that case the relevant statute required only the use of certain procedures (tied to the level of the pension fund’s investment returns) to calculate “whether an adjustment is payable,” on an annual basis.  It did not set forth a specific rate of increase.  Here (in Colorado), however, the COLA formula was never tied to the level of PERA funding until after sections 19 and 20 of Senate Bill 10-001 took effect.  Rather, the formula in effect immediately before the bill’s enactment provided for a specific rate: “[t]he cumulative increase applied to benefits paid . . . shall be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective after March 1, 2000.”  In Tice, the court considered a COLA statute providing that “‘all benefits except those depending on the member’s contributions shall be annually increased by the improvement factor.’”  The court concluded that the statute mandated only that a contribution must be increased by an unspecified amount, which the legislature was free to change.  Here, as noted, the prior (Colorado) COLA statute established not merely the payment of a COLA, but the payment of a specified percentage."

http://saveperacola.files.wordpress.com/2010/01/2012-10-11-judgment-reversed-and-case.pdf

NASRA:

"Minnesota is the sole state that protects pensions on the basis of 'promissory estoppel,' that is, public pensions are protected against reduction or other impairment only where an individual can show that he or she justifiably relied on the state’s promise of benefits and was harmed by the change."

http://www.nasra.org/Files/Articles/Buck1404.pdf

Some background materials on public pension COLAs:

NASRA:

"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.)

http://www.nasra.org/resources/COLA%20IB%20060512.pdf

NASRA:

"According to the Public Fund Survey, approximately three-fourths of pension plans sponsored by states and local governments provide some form of an automatic cost-of-living-adjustment (COLA), i.e., one that does not require specific approval of or action by the plan sponsor (the legislature or city council)."

http://www.nasra.org/cola

In 2001, the actuarial firm, Buck Consultants provided a report to the Legislative Audit Committee of the Colorado General Assembly.  In agreement with a recent statement of Colorado PERA employee Koren Holden, the 2001 Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic.”  The report also refers to PERA's “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”  The Buck Consultants report identifies the 3.5% PERA COLA as “automatic,” contrasting the PERA COLA with an “ad hoc” COLA “as approved by Legislature.”

http://www.nctr.org/pdf/coloradodcdbstudy.pdf

Koren Holden, Colorado PERA Project Manager, in Colorado PERA's on-line video series:

"This video describes the methods and assumptions used to calculate the net pension liability . . ."  "The projections should be based on the benefit terms and legal agreements existing as of the pension plan's fiscal year end."  "The benefits should also incorporate the effects of projected . . . automatic postemployment benefit increases such as the annual increase provided by Colorado PERA."  "In addition, ad hoc post-employment benefit changes should be included if they are considered to be essentially automatic. "

https://www.copera.org/pera/employer/gasbvideos.htm#CalcNPL

As we have seen, HB93-1324 struck the former “ad hoc” COLA language from Colorado law. The language stricken in the bill: “(2) Cost of living increases in retirement benefits and survivor benefits shall be made only upon approval by the general assembly."

GASB:

"Questions and Answers Governmental Accounting Standards Board."

"The intent of Statement 25, paragraph 36a, in distinguishing between automatic and ad hoc COLAs, is to REQUIRE (my emphasis) that actuaries include in the scope of their projections any COLAs that are CLEARLY AUTOMATIC (my emphasis) — that is, COLAs embedded in the plan for which there is NO DISCRETION (my emphasis) or condition as to timing or amount.  This criterion is intended to be strictly construed, as a basis for a minimum standard."

http://gasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827486295&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs

From the Governmental Accounting Standards Board website:

"New GASB Pension Statements to Bring about Major Improvements in Financial Reporting."

"Measuring the Pension Liability."

"Provisions for automatic cost-of-living adjustments (COLAs) and other automatic benefit changes (which generally are written into the pension benefit terms) will also continue to be included in projections.  On the other hand, ad hoc COLAs and other ad hoc benefit changes—which are made at the discretion of the government—will only be included in projections if they occur with such regularity that they are effectively automatic."

http://gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176160140567

August 2, 2010, (former Colorado Governor) 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.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

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.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

August 8, 2012, Douglas Greenfield: “The theory behind that is that a pension that has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.”  Greenfield participated in a panel discussion hosted by the National Conference of State Legislatures. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”

http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx

From the Colorado PERA “History of PERA Legislation” memorandum:

HB 00-1458 – "Established 3.5% compounded annual automatic COLA effective March 2001." "Prior to this date, the annual COLA equaled the lower of the actual inflation rate or annual 3.5% cumulative increases since retirement."

(My comment: Note Colorado PERA’s use of the word “automatic” to describe the COLA.)

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

From the December 31, 2000 PERA CAFR:

“The Board agreed to support legislation designed to encourage earlier retirement and reduce the state’s costs, provided that this legislation would also change PERA’s post-retirement adjustment to an automatic increase of 3.5 percent compounded annually and increase the contribution to PERA’s Health Care Trust Fund once PERA is fully funded.  Since House Bill 00-1458 included these provisions, the Board supported this bill.”

Keith Brainard, Research Director, National Association of State Retirement Administrators testifies before the a subcommittee of the U.S. House of Representatives (February 14, 2011):

“Only 30-40 years ago, most public plans were financed primarily on a pay-as-you-go basis.”

“Even after the most recent and unprecedented financial downturn, most state and local government pension trusts have plenty of assets to continue to pay promised benefits for years, and values already have rebounded sharply since the market low.” “The percentage of all state and local government spending on pensions has hovered around three percent during the last decade.”

http://judiciary.house.gov/hearings/pdf/Brainard02142011.pdf

NASRA COLA Issue Brief:

http://www.nasra.org/files/Issue%20Briefs/NASRACOLA%20Brief.pdf

Support the Rule of Law in Colorado at saveperacola.com.

Chief Justice (retired) New Hampshire Supreme Court: States Must Honor Public Pension Contracts.

"I grew up in a world where a deal was a deal.  If public retirement benefits are changed or withdrawn for employees already in the system, we will lose our ability to attract new employees to public jobs. Uncertainty is not our friend."

"Other states have addressed this concern by making changes prospectively; that is, only having them apply to employees who join the public work force after changes are adopted into law.  At least that puts people on notice and honors expectations."

"At the end of the day, I don't think it's fair or just to change the rules after the game begins.  New Hampshire is a special place where public commitments have meanings.  We should honor them."

"John Broderick Jr., a former chief justice of the New Hampshire Supreme Court, notes that the views expressed above are his own and not necessarily those of the University of New Hampshire Law School, where he serves as dean."

http://www.seacoastonline.com/articles/20140513-OPINION-405130358

Colorado PERA officials in written testimony to the Joint Budget Committee (December 16, 2009): “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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

Colorado Supreme Court, in Denver Police Pension and Relief Board, 1961:  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."

Colorado Court of Appeal's Decision in Justus v. State (October 11, 2012): “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.”

Support the Rule of Law in Colorado at saveperacola.com

Illinois Supreme Court Refuses to Let Politicians Gut Pensions. Will the Colorado PERA Contract Breach Survive?

Chicago Sun Times:

"A final note: For all those outraged with the (Illinois) Supreme Court Justices, save your fire.  Their job is to interpret the law and the Constitution."

An Illinois' teacher's response to this Chicago Sun Times editorial:

"The Court made clear that our Constitution still functions as a guide to civic behavior; that it is not merely an irksome obstruction around which to craft clever legislative end runs."

"For decades, we Illinois citizens have enjoyed cut-rate public services at least partially subsidized by the willful, cynical stiffing of pension funds.  Let’s fix our money problems without demonizing and punishing public sector citizens/retirees who have done their part, through many decades of teaching and protecting their neighbors, to make Illinois strong."

(My comment: On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s General Counsel Greg Smith blamed the Colorado General Assembly for the decline in PERA’s actuarial funded ratio: “We have not been paid what’s called the actuarially required contribution.” “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”

http://www.copera.org/pera/about/listeningtour.htm)

In 2010, Colorado state legislators passed a bill (SB10-001) breaking Colorado PERA pension contracts.  Since then, politically connected lawyers hired by Colorado PERA have struggled to create legal contrivances designed to support the Colorado Legislature's "end run" around those Colorado public pension contracts.

http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court

http://coloradopols.com/diary/59208/pressing-questions-relating-to-the-colorado-pera-public-pension-lawsuit-justus-v-state

On June 4, 2014, the Colorado Supreme Court heard oral arguments in the case addressing the Colorado PERA pension contract breach, Justus v. State.  A lawyer hired by Colorado PERA, and the Colorado Solicitor General presented their latest legal contrivance supporting the Colorado Legislature's planned "end run" around pension contracts.

The latest Colorado PERA contrivance is that, although the statutory language establishing the Colorado PERA "base benefit" and the Colorado PERA "COLA benefit" is identical, statutory language in another Part of the Colorado PERA statues supports the PERA "base benefit," but not the PERA "COLA benefit."  That Part of the PERA statutes sets forth choices for delivery of the lifetime PERA annuity and states that the PERA annuity is "paid for a lifetime."  Why are Colorado PERA's lawyers surprised that the statute setting forth options for payment of PERA benefits for a lifetime states that Colorado PERA pension benefits are "paid for a lifetime"?  They are lifetime annuities.

Why do Colorado PERA's lawyers believe that this language in the Part of the PERA statutes providing options for payment of the PERA annuity supports the PERA "base benefit," but not the PERA COLA benefit?  There is no basis for this claim.  It is purely a contrivance designed to allow Colorado state and local governments a means of escaping their legal debts.

Since the Colorado Court of Appeals has rejected the prior contrivances of Colorado PERA's lawyers in the case Justus v. State, the creativity of Colorado PERA's lawyers has been taxed.  The arguments of Colorado PERA's lawyers now desperately cling to gossamer threads.  (I am amazed that Colorado PERA pension members are forced to pay for the crafting of such legal contrivances out of their own trust funds.)

During the June 4, 2014 oral arguments Colorado PERA's lawyers presented the latest Colorado PERA legal contrivance:

"If you look at the language of the PERA statute . . . 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 . . . "  "The COLA statutes in Part 10 simply don't.  That language is conspicuously absent from the COLA statutes."

Apparently, Colorado PERA's lawyers are not troubled by the fact that this "durational language" is also "conspicuously absent" from the statute creating the PERA base benefit contract (Part 6) which they agree creates a contractual obligation.

Here is the response of the retiree's attorney Rosenblatt during the oral arguments:

"First of all, I want to disagree with my colleagues as to what creates the base contract, the base pension contract, it is 24-51-602, which reads, that members . . . SHALL upon written application and approval of the board, receive service retirement benefits pursuant to a benefit formula . . ."  "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."

It should be noted that the Colorado Supreme Court (like the Illinois Supreme Court) has determined that any ambiguity in public pension statutes shall be liberally construed in favor of the rights of the pension member (Endsley.)  This only makes sense.  What justice would there be in allowing state governments to casually break their contracts with public employees who have given thirty years of service?  Further, the U.S. Supreme Court has deemed that any attempt by a state government to escape its financial obligations shall receive heightened scrutiny.  No discovery or trial has yet occurred in this case, Justus v. State.

Colorado Law – Section 24-51-1002 (1), Colorado Revised Statutes, “ . . .the cumulative increase applied to benefits paid SHALL be recalculated annually as of March 1 and SHALL be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective . . .”

Under Colorado law, members of Colorado PERA who purchase PERA service credit SHALL receive Colorado PERA pension benefits in effect at the time of the purchase:

Colorado Law – Section 24-51-502 (3), Colorado Revised Statutes, “Service credit purchased by members . . . SHALL be subject to the benefit provisions in effect for the existing member contribution account.”)

Colorado Supreme Court (in the case, Bills):

“. . . until an employee has earned his retirement pay, or until the time arrives when he may retire, his retirement pay is but an inchoate right; but when the conditions are satisfied, at that time retirement pay becomes a vested right of which the person entitled thereto cannot be deprived; it is ripened into a full contractual obligation.”

Here is a link to the June 4, 2014 Colorado Supreme Court Oral Arguments in the Colorado PERA retiree lawsuit, Justus v. State:

http://www.courts.state.co.us/Courts/Supreme_Court/Oral_Arguments/Index.cfm

In 2010, when Colorado PERA and Colorado legislators began to plot the SB10-001 COLA taking they admitted that the COLA was a Colorado PERA contractual obligation (See comments of SB10-001 sponsor Senator Josh Penry.)  Their plan, at that time, was to admit to the contract, but argue that it was "actuarially necessary" to break the contract.

Today, their legal strategy is to deny the existence of the PERA COLA contractual obligation.  But, it's too late to change the legal strategy, they have already acknowledged their contractual obligations to pay the PERA COLA benefit.  Just as Colorado PERA administrators cannot retroactively take accrued PERA COLA benefits, they cannot retroactively change their legal strategy to take accrued PERA COLA benefits.

Thus, Colorado PERA's lawyers have a difficult task.  The evidence of the Colorado PERA COLA contract includes admissions of its existence by all parties.  There is no question that the PERA COLA is a contractual obligation.  The Colorado PERA COLA contractual relationship under discussion has been confirmed in written testimony provided by Colorado PERA's lawyers to the JBC in 2009, and by the sponsor of SB10-001, Senator Josh Penry, and by members of the Legislature during floor debate of SB10-001, and by PERA's representative Rob Gray at the inception of the "automatic" PERA COLA benefit (a Colorado PERA "liability,") and by PERA's current Executive Director in a public statement, and by PERA's hired actuaries.  Further, the contractual obligation is clear in Colorado PERA statutes, and it has been confirmed in a Colorado Attorney General's Opinion.  All involved parties agree, on the record, that the PERA COLA is a contractual obligation.  Colorado PERA's lawyers are currently trying to persuade the Colorado Supreme Court to don the blinders and ignore the many acknowledgements of the PERA COLA contract by Colorado PERA and state officials.  Their latest Clintonesque undertaking is to persuade the Colorado Supreme Court that "shall" does not mean "shall."  Colorado PERA's lawyers created this new contrivance to feed to the Colorado Supreme Court judges.  They hope the judges will swallow it whole and allow Colorado governments to engage in what is, in my opinion "theft."

In Colorado, public pension contracts are strongly supported in case law.  Colorado is one of the states in which courts follow the strict "California Rule" of public pension jurisprudence.  For 60 years, the Colorado Supreme Court has recognized the contractual public pension relationship, including the specific right to the pension "escalator" (COLA or ABI.)  This makes sense.  Otherwise, Colorado governments would be free to retroactively take the earnings of their employees.  Colorado governments would be free to include an "automatic" COLA provision in a public pension plan, force their employees to fund that COLA benefit, underfund their pension plan, and then take and use employee consideration supporting the COLA to pay off plan unfunded liabilities.

Newspapers editorialize on the recent Illinois Supreme Court Decision, Chicago Sun Times:

"By ruling that the subsidized health care benefits of retired state employees are protected by the Illinois Constitution, the court raised the unpleasant specter that there may be only one way out of the pension mess facing the state as well as local governments.  That is: come up with the money, no matter how painful."

"At every turn and in the strongest of language, the high court seemed to go out of its way to uphold the ironclad sanctity of the 1970 Illinois Constitution’s 'pension protection' clause for public employees."

Quoting from the Illinois Decision:

“Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.”

"Others noted Thursday’s ruling did not directly deal with the two main legal arguments raised in defense of the state’s pension-reform legislation.  One is that the state faces a financial emergency that allows it to do what it needs to protect the welfare of its citizens.  The other is that state employees are receiving 'consideration' for their reduced benefits in the form of lower contributions."

(My comment: Colorado PERA Board Trustee [and judge] Casebolt assured PERA retirees present at the August 11, 2009 Colorado PERA Denver “Listening Tour” meeting that: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

Link: http://www.copera.org/pera/about/listeningtour.htm)

http://www.suntimes.com/news/brown/28462666-452/supreme-court-throws-wet-rag-on-pension-plan.html#.U7rD7WcU8dc

From chicagobusiness.com:

"Cash-strapped government budget makers 'cannot write (the Illinois Constitution) to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve,' said a more restrained but equally decisive Illinois Senate President John Cullerton."

"The court ruled that retiree health insurance benefits for state workers mandated by the Legislature deserve the same level of protection as pensions, which according to the constitution 'cannot be diminished or impaired.'"

"'If the justices can read the pension clause of the constitution to protect health benefits, they certainly would use it to protect pension benefits,' former state Budget Director Steve Schnorf said."

(My comment: Colorado's state budget director, Henry Sobanet was "intimately involved" in crafting SB10-001, the 2010 Colorado PERA "COLA-taking" legislation.  Henry Sobanet has also worked as a "consultant," and a "policy advisor" for the business group "Colorado Concern" that supported the bill, SB10-001, with its hired lobbyists in 2010.  From the Colorado Association of School Boards: "Sobanet also served under former Gov. Bill Owens and was intimately involved in the crafting of SB 10-001, the bill passed in 2010 to shore up PERA."

http://www.casb.org/event/casb-annual-convention/saturday-sessions

Henry Sobanet's employment history includes: "Consultant: Colorado Concern, Economic and Policy Advisor: Colorado Concern, Director: Colorado Office of State Planning and Budgeting."

Link:
http://www.zoominfo.com/p/Henry-Sobanet/58878975)

Chicagobusiness.com:

"'This bodes very, very ill' for the pension cuts the Legislature approved for state workers, and for a similar set of trims Mayor Rahm Emanuel wants for his workforce, he added."

"Time after time, without finally resolving the issue, the court seemed to go out of its way to knock down any changes not agreed to by workers unions, and perhaps by each individual worker."

(My comment: Why do Colorado PERA administrators cite union support for the SB10-001 PERA pension contract breach?  These unions have no authority to relinquish the contractual rights of any individual Colorado PERA member.  Most PERA members do not belong to these unions.)

Chicagobusiness.com:

"But, said the court, 'In light of the constitutional debates, we have concluded that the (pension) provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.'"

"But, ruled the court, 'Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.'"

"So, the current 3 percent guaranteed annual COLA would appear to be here to stay."

"'Time and again we have urged legislators to respect the constitution they are sworn to uphold and to work together with us to develop fair and constitutional solutions,' AFSCME said in a statement."

"I wouldn't be at all surprised if House Speaker Michael Madigan revives his campaign to force local units of government, particularly school districts, to pick up pension costs that the state now pays."

(An online comment was made on this Chicagobusiness.com article: "The politicians that crafted this legislation knew all along they were going against the constitution.  They proceeded anyway thinking nobody would challenge it.")

http://www.chicagobusiness.com/article/20140704/BLOGS02/140709915

Chicago Tribune:

"The Supreme Court has come close to declaring that whatever retirement benefits were in place on THE FIRST DAY (my emphasis) of a worker's public job can't be reduced for however many decades he or she is alive."

(My comment: Here the Chicago Tribune refers to the "California Rule" of public pension jurisprudence.  Recall that Professor Amy Monahan in the article “Statutes as Contracts? The ‘California Rule’ and Its Impact on Public Pension Reform,” (Iowa Law Review article) expresses her surprise at the Denver District Court's initial decision in the case Justus v. State:

“The court’s ruling is surprising both because the court broke from the previously endorsed [by Colorado courts] California Rule, under which it is clear that detrimental changes to the benefits of current employees are only permissible where they are offset with comparable new advantages, and because the change at issue is one that 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.”

Public pension Legal Scholar Professor Amy Monahan in yet another law review:

"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.")

The Chicago Tribune cites language from the Illinois Supreme Court Decision:

"(W)e have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them."

http://www.chicagotribune.com/news/opinion/chi-health-care-pension-ruling-edit-20140703,0,2677793.story

On-line responses to the Chicago Tribune editorial:

"There is no public pension crisis.  States have the money to fully fund their pension obligations, but they would rather spend it on corporate subsidies.  U.S. public pensions face a 30-year shortfall of $1.38 trillion, or $46 billion dollars on a annual basis. This is dwarfed by the $80 billion a year states and cities spend on corporate subsidies."

"The war on public pensions is a distraction to prevent citizens from seeing the real cost of entitlement programs for corporations.  The money the states should have been contributing to pensions have been going to subsidize corporate tax breaks.  End the corporate tax breaks, and states will save $80 billion dollars a year.  That is almost double what they need to fulfill their pension obligations."

"The charge against public pensions is being lead by a former Enron trader.  His mission is two-fold.  Protect corporate entitlement programs and change public pensions from Defined Benefit (DB) to Defined Contribution (DC).  If he is successful in changing public pensions from DB to a DC model, Wall Street will rake in trillions in fees while all the risk falls upon public retirees."

"Write to your state representatives.  Let them know that you know the real problem is entitlement programs for corporations, and that these tax breaks have to end.  To read more about this subject, read David Sirota’s article: “The Plot Against Pensions”.

"Exactly, and that's the thing people don't talk about.  You can't compare public to private workers because private sector workers don't just have their 401(k)s, they have Social Security. Public workers have only their pensions to look to for retirement."

"Politicians failed to follow up on the terms of the contract and now the state wants to punish the employees.  I guess the Supreme Court of Illinois is good at interpreting a contract."

"Let's not paint with such a broad brush of blame, levels of government didn't cause this problem.  Elected officials who failed to do their job with integrity are to blame."

"This is progress.  The Court has ruled that it is not its responsibility to bail out the legislators, governors, aldermen, and mayors who got us into this mess.  Anybody waiting for the pension fairy to wave her magic wand is out of luck."

"Finally!  Back to you, lawmakers – see to it that all public pensions are fully funded – do your jobs!"

"It was the State of Illinois that chose not to allow state employees to be in Social Security.  That was because then the State would have been forced to make contributions and could not divert the payments to roads, welfare and other expenditures."

Chicago Sun Times;

"The Illinois Supreme Court on Thursday said loudly, clearly and ominously that public employee pension benefits in the state cannot be cut."

"That can mean only one thing: State and local lawmakers had better get working on a Plan B. Illinois needs alternatives to the state pension-reform law passed in December and to the Chicago pension-reform law passed in May."

"In this case, the justices ruled that subsidized health care for retired state employees is protected under the Illinois Constitution and can’t be cut, just like pension benefits."

"Just like pension benefits."

"No one ever thought a pension-reform law would breeze through the Supreme Court; the Constitution prohibits benefits from being 'diminished or impaired.'  State lawmakers took that into account in drafting the reform bill, looking high and low for ways to inoculate the bill constitutionally.  In the state worker bill, for example, employees will get a state funding guarantee and a reduction in their annual contributions in exchange for reduced benefits."

"A final note: For all those outraged with the Supreme Court justices, save your fire. Their job is to interpret the law and the Constitution."

http://www.suntimes.com/opinions/28456548-474/time-for-pension-reform-20.html#.U7rTUWcU8dc

A Teacher Responds to the Sun Times Editorial. 

Illinois blogger Glen Brown draws attention to a teacher's response to the Sun Times editorial in his blog post today.  Here are a few excerpts:

"Dear Editors:

"As a retired teacher, I resent the relentless and often cavalier attacks on my pension and its relationship with state government."

"Yes, the Illinois Supreme Court reiterated what has been crystal-clear all along.  Our teacher/public worker health benefits are a contractual obligation, freely entered into by all parties, enforceable by Constitutional law, and supported by the time-honored American values of ethics and fairness."

"The Court made clear that our Constitution still functions as a guide to civic behavior; that it is not merely an irksome obstruction around which to craft clever legislative end runs."

"In following your false premise to its (necessarily) illogical conclusions, your editorial staff has failed to struggle with the larger, more germane issue: Illinois has an antiquated and unsustainable tax structure.  Revenues are only remotely correlated with the demand for public services.  Corporations and wealthy individuals are offended by the idea that they should pay more because they have more."

"It’s time for ethics, fairness, and justice to take the floor in Springfield.  For decades, we Illinois citizens have enjoyed cut-rate public services at least partially subsidized by the willful, cynical stiffing of pension funds.  Let’s fix our money problems without demonizing and punishing public sector citizens/retirees who have done their part, through many decades of teaching and protecting their neighbors, to make Illinois strong."

Jane Artabasy

http://teacherpoetmusicianglenbrown.blogspot.com/

Support the Rule of Law in Colorado at saveperacola.com.

Illinois Supreme Court Affirms the “Cardinal Principle” of Public Pension Legal Rights.

Comments of an Illinois state retiree and former Marine on Illinois' pension contract breach:

"As I did when I volunteered as a United States Marine Corps service member, when I volunteered for state service, I relied on citizens to have my back.  While they seem to support my service in the U.S. Armed Forces, I’m dismayed that my state service is regarded with such enmity.  Had I known, I would have eschewed state employment for the increased immediate benefits of private sector employment.  Instead of relying on our representative democracy to adhere to the rule of law and keep the promises that were made during my 34 years of state employment, I would have obtained a job in the private sector, demanded and received a much larger salary for my educational level and job requirements . . ."

"I will never forget the abandonment that I’ve felt, nor will I forget the foolishness of my naive trust in the ultimate 'I’ve got your back' attitude of every one of us here in the greatest country on Earth."

Illinois Supreme Court, last Thursday:

“Moreover . . . to the extent there is any question as to legislative intent and the clarity of the language of a pension statute, it MUST (my emphasis) be liberally construed in favor of the rights of the pensioner.” (Prazen v. Schoop.)

"Finally, we point out again a fundamental principle noted at the outset of our discussion.  Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner." 

"Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems."

http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

Colorado Supreme Court:

“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.” (Colorado Supreme Court in Taylor v. PERA, November 17, 1975.)

http://scholar.google.com/scholar_case?case=11856628789716288634&q=Taylor+v.PERA&hl=en&as_sdt=2,6

Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the cardinal principle that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee." (August 14, 1984)

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984

For some reason, the Colorado Supreme Court's "cardinal principle" of Colorado public pension contractual rights has gone unnoticed in the current litigation of the Colorado public pension contractual rights case, Justus v. State.  (The State of Colorado and its pension-administering arm, Colorado PERA, are currently attempting to escape contractual obligations to pay for accrued COLA benefits in the PERA pension system.  That is, the State of Colorado does not want to pay its debts.)

Has this "cardinal principle" of Colorado public pension jurisprudence been abandoned?  If so, when did Colorado courts abandon this "cardinal principle"?  If a "cardinal principle" exists in an area of Colorado jurisprudence, should that "cardinal principle" not be a factor in court decisions in that area of jurisprudence? 

What is the typical lifespan of a Colorado Supreme Court "cardinal principle"?

(Keynes has noted, "There is nothing a government hates more than to be well-informed; for it makes the process of arriving at decisions much more complicated and difficult.")

On Thursday, the Illinois Supreme Court (in a case relating to retiree health benefits) confirmed that contractual public pension benefits in Illinois cannot be retroactively diminished or impaired.

The State of Illinois has some of the worst funded public pension systems in the nation.  Nevertheless, the Illinois Supreme Court will not let Illinois politicians off the hook for their past pension system mismanagement.  (If they allowed this, moral hazard would certainly be introduced into legislative pension management.)

The Illinois Legislature, like the Colorado Legislature, has not paid its full public pension bills (ARC) for many years, and like Colorado, Illinois has racked up its public pension debt.  Also, like many Colorado state legislators, a majority of Illinois state legislators want to escape state debts through breach of public pension contracts.

This recent Illinois Supreme Court decision was surprising to many in Illinois who were under the impression that Illinois' Speaker of the House Madigan, through political influence, had four of the members of the Illinois Supreme Court in his back pocket. 

MADIGAN: "Madigan sounds confident it (the Illinois pension contract breach) will work.  'I think that there will be at least four members of the Illinois Supreme Court that will approve the bill,' he said."

http://wuisnews.wordpress.com/2013/05/24/justice-no-pension-cuts-for-illinois-judges/
http://www.suntimes.com/19841734-418/analysis-madigan-pushes-pension-plan-unions-balk-senate-vote-uncertain.html#.U7cJ-2cU-14
https://will.illinois.edu/news/story/no-pension-cuts-for-illinois-judges

Part of the legal strategy in Illinois was exclusion of judges from the enacted pension contract breach.  (I don't know if Colorado legislators considered, and rejected, this tactic when plotting Colorado's attempt at a Colorado PERA pension contract breach in 2010.)

A few on-line comments on the Illinois Supreme Court Decision:

"If federal funds were used to pay part of any state employee’s salary and benefits, (this) might be grounds for a federal appeal case on impairment of contracts even if ISC were to rule in favor of SB1."

"I think we had to go through this exercise too, and I have to say that I’m gratified that the judiciary has proven itself independent of Madigan’s chilling statement of claiming to be able to get 4 on his side.  The fat lady is tuning up on SB1."

"Finally, it looks like the ISC decided they didn’t want to be made the scapegoat for the pension problems and decided to be clear about the General Assembly’s fault in the whole mess."

(My response: August 16, 2010, “Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. ‘The belief is that if the employer [the state] prevails, it will have been worth the political risk,’ Klausner says.  ‘And if they lose, they will be no worse off than before.’  Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the ‘bad guy’ if they overturn the law.”

http://www.governing.com/news/state/States-Test-Whether-Public-Pension-Benefits-Given-Can-Be-Taken-Away.html)

Illinois pension rights blogger Fred Klonskey:

"Yesterday’s Illinois Supreme Court decision is cause for celebration.  Six of the seven judges agreed that the pension protection clause of the state’s constitution meant what it said. Contractual pension benefits between the state and all government bodies in the state cannot be diminished or impaired."

"Legal opinions suggest that (Illinois gubernatorial candidate) Rauner’s plan would not pass constitutional muster based on yesterday’s 6-1 ruling."

"But it’s bad news for (Governor) Quinn as well.  Aside from his friend Justice Ann Burke (wife of Democratic Machine boss and alderman, Fast Eddie Burke), no member of the court agrees with his plan for pension theft."

http://preaprez.wordpress.com/

From ChicagoBusiness.com:

"Pension reform dealt blow by Illinois Supreme Court."

"Pension reform, RIP?"

"In a case with ominous implications for the state's pension reform law, the Illinois Supreme Court ruled today that the state constitution prevents any diminishment of health care benefits for retired state employees."

"According to the 6-1 decision, the pension protection clause — which says that retirement benefits are a contractual agreement that 'cannot be diminished or impaired' — applies to other retirement benefits, not just pensions.  That overrode the state's argument that its emergency powers, in dealing with its budget crisis, justified an increase in what retirees must pay for their health benefits."

“'This is a major victory for members of state retirement systems,' said John Fitzgerald, a partner at Chicago law firm Tabet DiVito & Rothstein LLC who represents retired state teachers and school administrators.  'I expect it will have a very significant effect on pending litigation' over the state's pension reform law.  'It means that the Illinois Supreme Court is giving the pension protection clause the broad and liberal interpretation that the drafters intended.'”

"In an opinion written Justice Charles Freeman, a Chicago Democrat, the court indicated that it would not take a deferential approach.  The court said any changes to a pension statute 'must be liberally construed in favor of the rights of the pensioner,' quoting one of its own opinions, written in 2013, that involved a dispute over early retirement between an electrical department supervisor and the downstate city of Peru."

(My comment: An earlier observation by Gino L. DiVito comes to mind: “ . . . a short-lived pension reform that is invalidated by court order after protracted litigation . . . would be a disservice to the taxpayers.”)

"In one key paragraph, the court rejected the idea that the state's budget crisis could justify a change in retiree benefits."

"'In the challenges to the overhaul of pensions for state workers and schoolteachers outside Chicago, the state has argued that changes in the cost of living allowance are not protected by the pension clause because they are not a core retirement benefit."

“'This definitely shuts down the argument that the COLA isn't part of the benefit,' said Amanda Kass, budget director and pension specialist at the Center for Tax and Budget Accountability, a nonprofit advocacy group in Chicago."

http://www.chicagobusiness.com/article/20140703/NEWS02/140709930/pension-reform-dealt-blow-by-illinois-supreme-court#

Illinois State Senator Chapin Rose:

"Again, I stress that this ruling related to the trial court’s decision to dismiss the healthcare case and the Supreme Court was ordering it to be reinstated.  Nonetheless that the fact that Court’s opinion was issued by a 6-1 majority of the Justices with such strong language protecting both healthcare and pension benefits gives us a very direct insight into how they view the core issue of statutorily diminished benefits itself.."

http://pension-vocabulary.blogspot.com/2014/07/supreme-court-of-illinois-backs-pension.html

From the Chicago Tribune:

"Supreme Court ruling signals trouble for state, Chicago."

"The Illinois Supreme Court ruled today that subsidized health care premiums for retired state employees are protected under the Illinois Constitution, signaling potential trouble for an overhaul of pension benefits that’s also being challenged in court."

"Retired workers sued, arguing the changes violated a provision in the state constitution that declares pension benefits 'shall not be diminished or impaired.'  Attorneys for the state argued the constitution did not specifically declare health care benefits were protected."

"In Thursday’s ruling, the justices argued 'there is nothing in the text of the Constitution that warrants such a limitation.'”

“'We conclude that the state’s provision of health insurance premium subsidies for retirees is a benefit of membership in a pension or retirement system within the meaning (of the Constitution) and therefore the General Assembly was precluded from diminishing or impairing that benefit,' justices wrote in their opinion."

"The same constitutional clause protecting pension benefits is at the heart of several lawsuits challenging broader pension changes lawmakers passed in December.  That measure reduces costs-of-living increases and raises retirement ages, among other changes."

"The high court did not settle that debate in the healthcare case today, but the language in the majority opinion seemed to support the contention that pension benefits cannot be reduced."

http://www.chicagotribune.com/news/local/breaking/chi-court-state-cant-cut-subsidies-for-retirees-health-care-premiums-20140703,0,6383829.story

From Forbes:

"Illinois Supreme Court Delivers Huge Fiscal Blow To Taxpayers."
(My comment: I would not describe a requirement that one pay one's debts as a "fiscal blow.")

"The Illinois Supreme Court issued an opinion this morning that is a godsend to retired public employees, but a huge blow to the state’s taxpayers and creditors.  The ruling concludes that retiree health insurance falls under the protection of the state’s constitutional non-impairment clause.  In addition to overturning the attempt to save state taxpayers money on retiree health insurance for public employees, the even bigger implication is what this may say about the constitutionality of the state’s recent pension overhaul."

"In December 2013, the state passed a controversial pension overhaul bill that was set to take effect earlier this week, but the implementation of which was delayed by a judicial stay, pending various constitutional challenges."

"Notably the court said today that: 'we have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them.'”

"This is as clear of a statement as I have seen on the subject.  Essentially, it says to the state that 'we do not care whether or not you have the money to pay for pensions and health care – you are required to pay them.'  Now it is up to our elected officials to figure out if and how we can afford to do this."

http://www.forbes.com/sites/jeffreybrown/2014/07/03/illinois-supreme-court-delivers-huge-fiscal-blow-to-taxpayers/

From Reuters:

"Christopher Mooney, director of the Illinois Institute of Government & Public Affairs at the University of Illinois, said before the ruling that a reversal of Nardulli's decision would indicate the pension reform law could be ruled unconstitutional."

"'If you can't do health insurance, you can't do pensions either,' Mooney said."

"The preamble to Illinois' pension reform law concludes that the state's fiscal problems cannot be solved without changes to the retirement system.  But Mooney said the argument is 'not going to fly' because the state could raise revenue rather than cut benefits."

(My comment: As we have seen, Colorado state and local governments currently give away thirteen percent of their revenue in the form of corporate welfare.)

"Judge John Belz, who is hearing the consolidated lawsuits, in May stopped the pension law from taking effect on June 1 until the challenges were resolved."

"Illinois has had the worst-funded pension system among all U.S. states after decades of skipping or skimping on pension payments."

http://www.reuters.com/article/2014/07/03/usa-illinois-retiree-healthcare-idUSL2N0PE10720140703

From Bloomberg:

"The Illinois Supreme Court, in a 6-1 decision today, ruled the health-insurance premium subsidies are pension benefits protected by the state’s constitution that can’t be diminished or impaired, as Illinois lawmakers tried to do with a 2012 law that let an administrator determine the level of contributions."

"Protection of pension benefits is the same provision in the Illinois constitution retirees are relying on in challenging Quinn’s plan to cut the pension shortfall with reductions in cost-of-living adjustments and increasing the retirement age for workers who are now 45 or younger."

"The ruling supports the argument that 'retirement security, including affordable health care and a modest pension, cannot be revoked by politicians,' Henry Bayer, executive director of the Illinois chapter of the American Federation of State, County and Municipal Employees, said in a statement."

http://www.bloomberg.com/news/2014-07-03/illinois-pension-reform-in-question-on-insurance-ruling.html

From Illinois Issues Blog:

"Kent Redfield, an emeritus professor at the University of Illinois Springfield, said that while the ruling pertains to a different case, the language used is clear. 'You could find some way to parse some of it, but it’s really, really difficult.  There’s no logical way to get to upholding Senate Bill 1 (the pension reform legislation) based on the clear content of this ruling and the way they’ve construed the pensions clause.'”

"Republican candidate for governor Bruce Rauner has advocated for moving employees’ future benefits to a system that looks more like a 401-K.  That plan would go even further than SB1, so it is unlikely that it would be upheld if SB 1 were rejected.  But it is possible that the court’s ruling might strengthen his case for offering a defined contribution plan to newly-hired employees."

http://illinoisissuesblog.blogspot.com/2014/07/options-for-pension-reform-plan-b-may.html

Excerpts from the July 3, 2014 Illinois Supreme Court Decision:

"Each of the complaints alleged that Public Act 97-695 violates the pension protection clause of the Illinois Constitution of 1970 (Ill. Const. 1970, art. XIII, § 5).  Two of the complaints alleged a violation of the contracts clause (Ill. Const. 1970, art. I, § 16), and one complaint alleged a violation of the separation of powers clause (Ill. Const. 1970, art. II, § 1)."

"The Kanerva v. Weems plaintiffs further claim that Public Act 97-695 violates the contracts clause of the Illinois Constitution (Ill. Const. 1970, art. I, § 16), which provides that '[n]o ex post facto law, or law impairing the obligation of contracts *** shall be passed.'”

"As to that subset of now-retired employees, they allege that the State promised participants in that program that they would receive free health insurance if they established at least 20 years of creditable service and that the subset of plaintiffs who took early retirement reasonably and detrimentally relied on the State’s promise by, among other things, retiring from state service AND MAKING CASH PAYMENTS TO OBTAIN ADDITIONAL SERVICE CREDITS (my emphasis).  That subset of plaintiffs claim that, under these circumstances, the State should not be permitted to renege on its promise and should be enjoined from withholding health insurance premiums from the annuity payments owed to the early retirees."

(My comment: Many Colorado PERA retirees have purchased service credit in the PERA pension system.  I believe that these separate public pension contracts have also been violated under SB10-001.  The Colorado PERA service credit statute requires that the benefits in place at the time of purchase of the service credit must be provided.)

"The complaint in the Bauer v. Weems case also challenges Public Act 97-695 on the ground that it constitutes an impermissible impairment of contract in violation of the contracts clause (Ill. Const. 1970, art. I, § 16)."

“Moreover . . . to the extent there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.” (Prazen v. Schoop.)

" . . . it is clear that if something qualifies as a benefit of the enforceable contractual relationship resulting from membership in one of the State’s pension or retirement systems, it cannot be diminished or impaired."

"Delegates were also mindful that in the past, appropriations to cover state pension obligations had 'been made a political football' and 'the party in power would just use the amount of the state contribution to help balance budgets,' jeopardizing the resources available to meet the State’s obligations to participants in its pension systems in the future."

"It does so, he explained, in order to protect 'public employees who are beginning to lose faith in the ability of the state and its political subdivisions to meet these benefit payments' and to address the 'insecurity on the part of the public employees [which] is really defeating the very purpose for which the retirement system was established."

"In light of the constitutional debates, we have concluded that the provision was aimed at protecting the right to receive the promised retirement benefits, not the adequacy of the funding to pay for them."

"Defendants observe that health care costs and benefits are governed by a different set of calculations than retirement annuities.  While that is unquestionably true, it is also legally irrelevant."

"Finally, we point out again a fundamental principle noted at the outset of our discussion.  Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.  This rule of construction applies with equal force to our interpretation of the pension protection provisions set forth in article XIII, section 5.  Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems."

From the dissent of one Justice hearing the case:

"Stated otherwise, by its plain language, the pension protection clause prohibits legislative action that diminishes or impairs pension benefits by altering the terms of the contract governing the pension."

"The pension protection clause protects pensions, not subsidized health care premiums."

http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

Statement of Illinois Senate President John Cullerton on the Illinois Supreme Court Decision:

"Today, the Illinois Supreme Court made it very clear that the Pension Clause means what it says."

"The Court cannot rewrite the Pension Clause to include restrictions and limitations that the drafters did not express and the citizens of Illinois did not approve."

"The Clause was aimed at protecting the right of public employees and retirees to receive their promised benefits and insulate those benefits from diminishment or impairment by the General Assembly."

"If the Court’s decision is predictive, the challenge of reforming our pension systems will remain."

Statement from AFSCME:

“'The Supreme Court ruled today that men and women who work to provide essential public services — protecting children from abuse, keeping criminals locked up, caring for the most vulnerable and more — can count on the Illinois Constitution to mean what it says,' AFSCME Council 31 executive director Henry Bayer said. 'Retirement security, including affordable health care and a modest pension, cannot be revoked by politicians."

“'Unions representing public employees and retirees have stood virtually alone against political and corporate-funded attacks on retirement security,' Bayer added.  'Time and again we have urged legislators to respect the constitution they are sworn to uphold, and to work together with us to develop fair and constitutional solutions to the state’s very real fiscal challenges.  We remain ready to work in good faith with anyone to do so.'”

Here are a few selected comments, from the many, that have been posted about the Supreme Court Decision at the Illinois political news site, Capitol Fax:

"Even though (Senate President) Cullerton’s plan was agreed to by a lot of people, it wasn’t in compliance with the contract clause or the pension clause.  It would have been found unconstitutional also, maybe just not with as many votes."

"Sounds like the Supreme Court decision for SB1 is embedded within this ruling. 'Finally, we point out again a fundamental principle noted at the outset of our discussion.  Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it must be liberally construed in favor of the rights of the pensioner.  This rule of construction applies with equal force to our interpretation of the pension protection provisions set forth in article XIII, section 5.  Accordingly, to the extent that there may be any remaining doubt regarding the meaning or effect of those provisions, we are obliged to resolve that doubt in favor of the members of the State’s public retirement systems."

"Keep in mind the Pension system does not need to be funded 90% like the legislature and Quinn have pushed for.  In fact most Pension Systems are not even close to that number."

(My comment: The proponents of SB10-001 in Colorado propose that their contract breach achieve an unnecessary standard of 100 percent PERA pension funding.  This level of funding has been achieved only twice in PERA's history.)

"This really shouldn’t be a surprise to anyone.  Don’t make promises you don’t intend on keeping."

Comments of an Illinois state retiree and former Marine:

"As I did when I volunteered as a United States Marine Corps service member, when I volunteered for state service, I relied on citizens to have my back.  While they seem to support my service in the U.S. Armed Forces, I’m dismayed that my state service is regarded with such enmity.  Had I known, I would have eschewed state employment for the increased immediate benefits of private sector employment.  Instead of relying on our representative democracy to adhere to the rule of law and keep the promises that were made during my 34 years of state employment, I would have obtained a job in the private sector, demanded and received a much larger salary for my educational level and job requirements . . ."

"I’m a veteran of the USMC, and I appreciate all the gratitude that I get for that service.  Is state service comparable?  Absolutely not.  I risked my life in service of my country as a Marine.  I never expected to be accorded the same level of appreciation for my service to the state, but I did expect our representatives, and by proxy of your vote for them, to keep their promises, whether they were constitutionally protected, or not."

"Instead, now I have been relegated to being one of 'them.'  Abandoned by many who feel that they have no stake in the malfeasance of their representatives, and who expect me, alone, to shoulder the burden of their incompetence."

"I’m a United States Marine.  I don’t give up.  And while I will always support the United States, I will never again support those who feel that any minor impairment of their financial condition takes precedence over the slow financial death of my family and I."

"I will never forget the abandonment that I’ve felt, nor will I forget the foolishness of my naive trust in the ultimate 'I’ve got your back' attitude of every one of us here in the greatest country on Earth."

"I’ll pass that on to my friends and family.  I’ll also recommend that anyone working for the state, get everything up front in wages and salary because, ultimately, you cannot trust that anyone 'has your back.'”

The following comment called to mind the fact that Colorado's public sector unions (our "union bosses") supported the 2010 Colorado PERA pension contract breach in SB10-001.  Pensioners no longer pay union dues:

"The problems of the state fiscal are not the problems of the pensioners.  Any 'Union Boss' negotiating any retreat or surrender is clueless at this point moving forward."

"'Where are Madigan’s 4 votes?': 'I’m sorry, but this is flat-out offensive to me.  Madigan owns no one on this court.  Anyone who knows any of these justices or follows the Court is fully aware of that."

"I’m not sure if state employees/retirees will ever be out of the spotlight that we never wanted to be in."

"Completely agree with you . . . We as retirees or current state employees never asked for all of this negative attention or to be blamed for the state’s fiscal problems when we in fact have never been the cause of the problem.  I have been a lifelong IL resident and also worry greatly about our state’s future, but please lay the blame for our current problems where it deserves to be and not on us retirees."

"Once the conditions of the contract are fulfilled, you can’t unilaterally change the contract terms retroactively."

"There are ways to legally change a contract retroactively, but it normally requires the agreement of BOTH parties to the contract, and it usually also requires a payment (or other valuable consideration) by one of the parties to the other party."

"Think of it like a fixed rate car loan or fixed rate mortgage, where the bank wants to change the terms of the deal after you’ve been paying on the loan for years.  Law says you can’t do it unless you have violated the terms of the loan (contract) that you signed."

"For those that are upset and make claims of unfairness to other citizens of the state, know that this a legal decision, and in my view the decision was proper.  If the state makes commitments, it needs to keep them.  If the constitution has plain-language protections, that’s how you read them. The pols have for too long pandered for votes and power with taxpayer money.  Now, maybe some of the pandering will be stopped."

"Thanks to AFSCME, IFT, and IEA for continuing to fight for public employees and retirees while other unions and many liberal Democratic legislators failed to do so."

(My comment: Again, in Colorado, public sector unions tossed their retired members under the bus and supported the breach of Colorado PERA pensioner contracts in 2010.  This act sullied the U.S. Labor Movement.)

"The terms going forward were already changed in 2011 … it’s called 'Tier 2'″.

"We may still be a land of laws… a big win for every citizen of Illinois."

"The court ruled that Healthcare is definitely a benefit of membership in the pension system. Certainly, current annuitants relied on that in making an irrevocable decision to retire.  I see no reason to assume that the AAI, which is much more related to the pension itself than is healthcare premiums, will not be ruled a pension benefit too."

"This is the correct decision.  It is also the Supreme Court declining to give the General Assembly a pass for years of mismanagement and the lack of political will to raise taxes."

(My comment: The historical mismanagement of the Colorado PERA pension system by Colorado state legislators and Colorado PERA trustees has been documented at the website, saveperacola.com and at ColoradoPols.com.)

"After reading Burke’s dissent, I think she would also vote against SB1, which would make a decision against it unanimous."

"The constitution can be changed, but the changes cannot be applied retroactively."

"Cullerton's deal is off the table.  The unions won’t budge after this ruling.  Woulda shoulda coulda."

"The contract is between the state and me, and the state and you, and the state and thousands of other individuals.  Cullerton, nor any other politician can negotiate with 'the unions' about the contract between the state and me.  I think the decision today clearly upholds those thousands of individual commitments.  None of which involves a union."

"It’s hard as a beneficiary to not cheer this ruling, but it’s equally hard as a citizen and taxpayer to not grieve for lost opportunity, or at least lost time."

"Now generally I am against tax increases of any kind regardless of income level.  But I am also a state employee and I didn’t start this fight.  The millionaires of the Chicago Civic Club started it.  So, a graduated tax on people like Rauner who want to buy the Governor’s office?  I would be happy to vote for that."

"I totally agree, but the supporters of SB1 used going through this exercise in futility as an excuse for passing these onerous bills in the first place.  They’ve received the ISC’s answer. They threw everything, including the kitchen sink, at the Supremes to see what would stick, and I would argue that very little, and most likely none of it will ultimately stick."

"Throughout all this, I’ve been an Illinois citizen and taxpayer.  As a member of that unfortunate club, it's time to get down to the business of properly funding the state’s priorities going forward. We’re in for some hurt brought to us by 60 years of political incompetence on both sides of the aisle.  But, as we were when this started, we’re all in this together, and equally so.  We better all get back to solving the state’s big problems in a constitutional way, and the sooner the better.  I’ll vote for any candidate that lays out an equitable plan to do so, and stops with the political hedging that both side’s politicians think they can get away with."

"These 'new tier' programs are the only ones that seem to constitutionally survive."

"All the State workers reading Cap Fax instead of doing their job… REJOICE!!!"

"SB1 is road kill that just got run over by a steamroller: 'Under settled Illinois law, where there is any question as to legislative intent and the clarity of the language of a pension statute, it MUST be liberally construed in favor of the rights of the pensioner.' (again, emphasis in caps.)"

"Haven’t prior S Ct cases indicated that one becomes a member of a pension system upon being hired (not just upon retirement) and that the terms of the system upon the date of hire can’t be diminished?  I thought so, and that this was why the Tier 2 class was structured as applying to those hired on or after that certain date."

"The bill is due, it’s not about how we can screw retirees and current workers anymore–it’s how do we pay them what they were promised and the Court has guaranteed."

"You become a member of a retirement system when you start paying into it."

"We’re going to have to have a sales tax on as many services as Indiana does.  What is it currently?  17 vs. 51 services?  We’re also going to have to pass the Fair graduated income tax."

"I was drawing a parallel with the various arguments Madiar presented in his pension analysis with what the ISC came down with here.  Yes, Eric (Madiar) never really addressed the issue of health care being protected, but he touched on all the relevant cases that the ISC touched on in this opinion.  To me, there is something like an 85% – 90% parallel."

(My comment: Senator Cullerton's legal aid Eric Madiar believes that Colorado's recent theft of fully-vested, accrued public pension COLA benefits is likely unconstitutional.  So, why did Cullerton going down that path in Illinois?  From “Public Pension Benefits Under Siege”:

“The adoption of the contractual approach by Colorado . . . however, make(s) it more likely that pension reform efforts (the COLA provisions of SB 10-001) will be found unconstitutional.”

A PDF of the Madiar paper is available on the website of the National Conference of State Legislatures at the following link:

http://www.ncsl.org/home/search-results.aspx?zoom_query=madiar%20public%20pensions)

"One could argue that Illinois, as a large progressive state, has had lower than expected taxes for its spending levels, since some of its 'revenue' (since 1939) was 'borrowed' from mandated (but unpaid) state pension fund contributions."

"It can’t be fixed by a constitutional amendment not due to ex post facto law limits (technically, that only applies to criminal laws), but due to the analogous 'impairment of contract' and due process considerations.  Same basic concept, but different legal doctrine categories."

"I’m glad the rule of law and plain language was upheld, but I expected more wiggle room; guess the ISC wanted to put this issue to bed once and not have to revisit it any time soon."

Link to Illinois Supreme Court Decision:
http://www.state.il.us/court/Opinions/SupremeCourt/2014/115811.pdf

Support the Rule of Law in Colorado at saveperacola.com.

The Colorado Judicial Branch is Not a Political Tool of the Colorado Legislative Branch.

The State of Colorado is currently attempting to escape its financial obligations through breach of contract.  The U.S. Supreme Court has directed appellate courts to give heightened scrutiny to attempts by state governments to escape their financial obligations.  Has this heightened scrutiny of the State of Colorado's attempt to break its contracts occurred?  To date, no trial, no discovery has occurred relating to the State of Colorado's attempt to escape its contractual obligations.

The sponsor of the 2010 bill that seeks to break Colorado state contracts admits the existence of the contract.  In 2009, lawyers for the Colorado state agency administering the contract admitted (in writing) the existence of the contract.  Indeed, the Colorado Court of Appeals, in 2012, confirmed the existence of the contract.  Yet, today, lawyers for the State of Colorado persist in arguing that the contract does not exist.

From the website of the Colorado Judicial Branch:

"The principle of judicial independence is central to a functioning democracy.  Essentially, this means that the courts are shielded from politics or any other force that could compromise its independence and institutional independence."

http://www.courts.state.co.us/Courts/Education/Independence.cfm

American Bar Association Standing Committee on Judicial Independence:

"Our time tested adherence to the Rule of Law and our system of justice is the envy of the world.  Maintaining this system as envisioned requires that we have a fair, impartial, and independent judiciary that enforces the Constitution and settles all disputes according to the rules.  All citizens, regardless of who they are or what they represent, have the right to a fair and impartial hearing.  And it is often the role of our courts to protect the unpopular or the minority.  Public trust and confidence in our courts will only be preserved for so long as we stay this course."

http://www.americanbar.org/content/dam/aba/administrative/judicial_independence/scji_chairs_message.authcheckdam.pdf

Statement of U.S. Supreme Court Justice Stephen G. Breyer, July 15, 2002:

"Independent judges, as my colleague Justice Ginsburg recently put it, do not act on behalf of particular persons, parties, or communities.  They serve no faction or constituency, and they must strive to do what is right in each individual case, even if the case in question should find the least popular person in America opposed by the most powerful government in the world."

http://www.supremecourt.gov/publicinfo/speeches/ncps_project.pdf

Senator Josh Penry, co-prime sponsor of the 2010 Colorado legislation breaking Colorado PERA pension contracts (SB10-001) acknowledges the existence of the Colorado PERA pension COLA contract, and states that the Colorado Legislature (the 61 member majority voting for the bill in 2010) seeks to break the contract.  Senator Josh Penry stated, during the legislative effort to break PERA pension contracts, that the Colorado Legislature was taking advantage of a "window of opportunity" to persuade Colorado courts to permit the PERA contract breach.  The SB10-001 bill sponsor has admitted (on videotape) that the proponents of the bill intended to expedite passage of the bill to ensure that it would become law before the release of pending investment performance figures for the Colorado PERA portfolio later in 2010.

Thus, the sponsor of SB10-001 admitted the intent of state legislative sponsors to manipulate Colorado courts through the timing of the legislation, SB10-001.  Senator Josh Penry knew that improved investment performance figures would be released by Colorado PERA administrators four months after the bill, SB10-001, was signed into law by Governor Bill Ritter.  Given the performance of equity markets in 2009, it was evident to all involved that Colorado PERA (and all other equity investors) would report significant portfolio gains for calendar year 2009 undermining any argument for the "actuarial necessity" of the legislative COLA taking.

In short, the sponsor of the Colorado public pension bill that is the subject of litigation, stated on videotape, that the Colorado PERA COLA benefit is a contractual obligation, and that short-term market volatility should be used to persuade Colorado courts to sanction the breach of state contracts.  However, Colorado PERA pensioners do not bear any market-risk under their contracts.  U.S. equity markets have risen approximately 140 percent from their 2009 low point.

In a videotaped discussion with Representative Mike May, (videocenter. denverpost.com) Senator Josh Penry, said ‘we can’t, can’t miss this window.’ And, . . . we have an opportunity to pass something that Republicans have long advocated, a significant increase in retirement age, which the PERA Board embraced, reigning in the cost of living increases . . ."

“Penry went on to say, ‘I think it is important to pass something because if you lose actuarial necessity, as you know, it becomes extremely difficult to increase retirement age.  You cannot change course and this year, when PERA’s investment numbers come out, their investment returns . . . numbers are going to be significant, like double, 15-16% investment return.  So that could change the specter of actuarial necessity.  We gotta’ do it this year or else these other structural changes won’t be possible.”

http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

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.
Adam Schrader: " . . . can (it) be cut, because it’s part of the contract, but has it been reviewed by the Attorney General?  Can you do this legally?  Can you take 3.5% guaranteed and move it down to what is it, 2%?  Can you do it?"

Senator Josh Penry:  "2%, yah, yah, we can.  I mean, 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 in this interview even the sponsor of the bill admits that the Colorado PERA COLA benefit is a contractual obligation of Colorado PERA-affiliated employers.)

Have Colorado courts given the required "heightened scrutiny" to the Colorado Legislature's 2010 attempt to escape state financial obligations?  Certainly the fact that the sponsor of SB10-001 acknowledges the Colorado PERA COLA contractual obligation would be observed by a Colorado court at trial.

Since 2009, Colorado politicians and pension administrators have employed many political tools in their attempt to break contracts to which the State of Colorado is a party.  They have used the assets of Colorado PERA pensioners in political, legal, and public relations campaigns to break the pensioner's contracts.  Apparently, many Colorado politicians would be happy to usurp the authority of Colorado courts, and render the Colorado Judicial Branch a mere political actor for the Colorado Legislative Branch.

This sentiment, using courts for political purposes, is at the heart of Colorado's 2010 bill that seeks to break Colorado PERA pension contracts.  As noted above, the co-prime sponsor of the SB10-001 State Senator Josh Penry, has stated the desire of the proponents of SB10-001 to use 2008 market volatility as "a window of opportunity" for the Colorado Legislature to claim "actuarial necessity" and escape state contractual obligations.  The co-prime sponsor of SB10-001 did not try to conceal the desire of the proponents of the bill to manipulate Colorado courts to achieve a legislative political goal, breach of state contracts.

But, it is not the role of state appellate courts to unquestioningly embrace constitutionally impermissible political objectives of state legislatures.  An appellate court in New Jersey made this clear in a decision just last week.

’It is not the courts’ role to run the pension systems,’ Reisner wrote.  ‘Our responsibility is to interpret and apply the constitution in light of the evidence, and we will do so.”  “’But to a very great extent, the strength of the pension systems rests on policy choices made by the other two branches of government, and on their political will to preserve the systems and satisfy prior commitments made to public employees and retirees.’”  “Under settled law, for the state to be able to break the COLA contract, it must show at the trial court that the harm to retirees is not ‘substantial,’ that the government is breaking its agreement for a ‘reasonable public purpose,’ and that the freeze is related to ‘appropriate governmental objectives.’”

In 2010, the Colorado Legislature enacted a bill (SB10-001) that took contracted public pension COLA benefits from pensioners who possess "fully-vested" contractual rights in the Colorado PERA pension system.  The U.S. Supreme Court has directed appellate courts to give heightened scrutiny to attempts by state governments to escape their own financial obligations.
The defendants in this lawsuit, Justus v. State, were granted summary judgment by Judge Hyatt of the Denver District Court in 2011 (prior to his retirement) in a Decision that failed to even mention Colorado case law that is clearly relevant to the case (Bills and McPhail.)  This Colorado case law was referenced in a Colorado Attorney General's Opinion addressing contractual public pension rights in Colorado.  This undeniably on-point Colorado case law was cited even by laymen, by persons with no legal training, as the Colorado Legislature began contemplating breach of state contracts in 2009.  Later, this Colorado case law was confirmed as dispositive in the case, Justus v. State, by the Colorado Court of Appeals.  Since the Denver District Court granted the defendants in the case summary judgment in 2011, there was no opportunity for the process of discovery in the case.

Where even a routine process of legal discovery has not yet occurred in litigation involving a state's attempt to escape financial obligations, can heightened scrutiny be said to have occurred? Can heightened scrutiny be claimed where summary judgment was granted in a decision with no mention of a state's on-point Colorado Supreme Court case law?  Can heightened scrutiny be said to have occurred where the complete recorded legislative history of a contractual obligation has received no judicial scrutiny?  As summary judgment was granted by the Denver District Court in this case in 2011, facts that are critical to supporting the constitutional rights of Colorado PERA pensioners have not been discovered or reviewed by Colorado courts.

There is no question that the Colorado PERA COLA benefit is a contractual obligation of Colorado PERA-affiliated employers.  Colorado PERA administrators and PERA's lawyers should end the charade.  The evidence of this contractual obligation is plain and conclusive to any person who can read and who spends a few minutes looking for it.

The statutory language creating the Colorado PERA COLA benefit is clear, and identical to the statutory language creating the Colorado PERA pension base benefit.  The legislative history establishing the Colorado PERA COLA benefit is clear.  Colorado PERA's lawyers have confirmed the "automatic" COLA contract (in written testimony to the Legislature.)  The bill sponsor has confirmed the existence of the PERA COLA contractual obligation.  The Colorado Court of Appeals has confirmed the PERA COLA contractual obligation.

The United States Supreme Court has determined that state attempts to escape their own financial obligations shall receive very little deference.  In 1977, the United States Supreme Court accepted an appeal of a decision of the New Jersey Supreme Court in the case, United States Trust Company of New York v New Jersey (U.S. Trust.)  From the U.S. Supreme Court decision in U.S. Trust:

"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."

(My comment: If one accepts the premise that additional Colorado state and local government resources are required to meet Colorado PERA contractual obligations, although these PERA obligations consume less than three percent of all Colorado state and local government revenues, it should be noted that the Colorado Legislature has not yet exercised its constitutional powers to refer a measure to Colorado voters seeking sufficient revenue to meet these Colorado PERA contractual obligations.)

U.S. Trust:

" . . . complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.  A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all."

" . . . a State cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors."

"But a State is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives.  Similarly, a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well."

http://scholar.google.com/scholar_case?case=15238053046927037053&q=U.S.+Trust&hl=en&as_sdt=4006

It is simply the case that Colorado politicians want to break the Colorado PERA statutory contract, and they want the Colorado Judicial Branch as their partner in the Colorado PERA pension contract breach.  Colorado politicians are asking that the Colorado Supreme Court ignore the Colorado Constitution, on-point Colorado case law, a Colorado Attorney General's Opinion, and U.S. Supreme Court precedent, all to help the politicians achieve a desired political outcome.

The question remains whether the Colorado Supreme Court, leading an independent branch of Colorado government, can possibly ignore clear, copious, widely available evidence establishing the PERA COLA benefit as a contractual obligation.  The Colorado Judicial Branch is not simply another political tool of the Colorado Legislative Branch.

For the Colorado Supreme Court to give heightened scrutiny to the State of Colorado's 2010 attempt to escape its financial obligations the court must, at a minimum, examine the complete legislative history of the Colorado PERA COLA benefit.  The legislative history of the PERA COLA benefit establishes, at the inception of the "automatic" PERA COLA benefit, that the COLA benefit is a contractual obligation of PERA-affiliated employers.

The legislative history of the Colorado PERA COLA benefit includes legislative testimony by Colorado PERA's representative Rob Gray that the PERA COLA benefit that the Legislature places 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."

The legislative history of the Colorado PERA COLA benefit makes it plain that, as confirmed in 2009 by Colorado PERA's lawyers and the sponsor of SB10-001, the PERA COLA benefit is a contractual obligation of the State of Colorado and other employers in the PERA pension system.

Rob Gray, 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.])

The plaintiffs in the case, Justus v. State, have informed the Colorado Supreme Court that the Colorado Legislature has failed to pay its public pension bills (actuarially required contributions,) that the PERA COLA is an "automatic" pension COLA benefit as opposed to an "ad hoc" pension COLA benefit, that discovery has not occurred in the case, and that the attempt by the State of Colorado to escape its financial obligations must receive heightened judicial scrutiny.

The Plaintiffs Amended Opening Brief (page 7) in the case Justus v. State, informs the Colorado Supreme Court that the Colorado Legislature has failed to pay actuarially required contributions to the Colorado PERA pension plan:

"However, the Legislature has continually kept contribution rates below the annual required contribution as determined by PERA’s actuaries.  In a March 2010 Report, the Pew Center on the States reported that Colorado contributed only 68.3% of its full actuarial required contribution over the past 10 years, and flagged it as one of ten 'lagging' states."

The Plaintiffs Amended Opening Brief (page 8) informs the Colorado Supreme Court that the Colorado PERA COLA is an "automatic" public pension COLA benefit, as opposed to an "ad hoc" public pension COLA benefit:

"In 1993, the Legislature amended this provision to make annual COLA increases granted on or after March 1, 1994 AUTOMATIC (my emphasis) and no longer dependent each year on approval by the legislature."

The Plaintiffs Amended Opening Brief (page 29) informs the Colorado Supreme Court of the U.S. Supreme Court's determination that state attempts to escape state contractual obligations shall receive heightened scrutiny, quoting U.S. Trust:

"A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contracts Clause would provide no protection at all."

From the Plaintiffs Opening Brief (page 31): “Requiring the petitioners to protect the future solvency of the pension system is an unconstitutional shifting of the state’s own burden.”

http://saveperacola.files.wordpress.com/2013/10/2013-10-24-plaintiff-petitioners_-amended-opening-brief1.pdf

From the Plaintiffs Reply Brief in the case, Justus v. State:

"As this case was decided on summary judgment, Defendants, as the moving parties, had the burden of establishing the non-existence of a genuine issue of material fact."

Page 9, "However, the current record is not the full record since discovery has not been completed."

Page 12, "Especially given that Defendants have the burden of proof, Retirees should at the very least be provided the opportunity to conduct full discovery and present evidence to the District Court that a 'more moderate course would serve [the Defendants’] purposes equally well.'"

Page 21, "In addition, Retirees should at the very least be entitled to conduct discovery on the State’s culpability in contributing to the funding deficits, and have a court determine whether it is reasonable for Retirees to now pay for the State’s conscious choice to fail to adequately fund PERA by keeping employer rates artificially low."

http://saveperacola.files.wordpress.com/2014/02/2014-01-10-petitioners-plaintiffs_-replybrief.pdf

The Colorado Judicial Branch exists to maintain rule of law in Colorado.  I do not believe that the Colorado Supreme Court might willfully ignore, or allow to be ignored, clear evidence of the contractual nature of the PERA COLA benefit (including the testimony of Colorado PERA's own lawyers) when that evidence is so readily and widely available.

For the Colorado Judicial Branch to allow the Colorado Legislative Branch to ignore Colorado public sector financial obligations based on a contrivance that the word "SHALL" means one thing in Part 6 of the PERA statutes, and another thing 23 pages later, in Part 10 of the PERA statutes would be a travesty of justice, rendering the Contract Clause meaningless.

Colorado PERA retirees insist that the Rule of Law in Colorado will not be abandoned at the whim of Colorado politicians.

New Jersey Appeals Court: Public Pension COLA Benefits Are Contractual Obligations.

From NJ.com:

"NJ court: Retired public workers have a contract right to cost-of-living adjustments."

"A state appeals court ruled today that New Jersey’s nearly 300,000 retired public workers have a contract right to yearly increases in their pension benefits, and those cost-of-living adjustments are part of the state’s benefits package."

"Today's ruling, Ouslander said, means 'those benefits cannot be withheld or denied unless the state establishes a basis to impair, i.e., break, the contract between it and pension members.'"

NJ.com citing the Appellate Court Decision:

“'It is not the courts' role to run the pension systems,' Reisner wrote.  'Our responsibility is to interpret and apply the constitution in light of the evidence, and we will do so."

“'But to a very great extent, the strength of the pension systems rests on policy choices made by the other two branches of government, and on their political will to preserve the systems and satisfy prior commitments made to public employees and retirees.'”

"Under settled law, for the state to be able to break the COLA contract, it must show at the trial court that the harm to retirees is not 'substantial,' that the government is breaking its agreement for a 'reasonable public purpose,' and that the freeze is related to 'appropriate governmental objectives.'"

http://www.nj.com/politics/index.ssf/2014/06/nj_court_retired_public_workers_have_a_contract_right_to_cost-of-living_adjustments.html

From an earlier NewJerseySpotlight.com article:

“'It’s one thing to change the rules in the middle of the game, it’s another to change the score after the game’s over, and that’s what the state did when it eliminated the COLAs,' said Charles Ouslander, one of the plaintiffs in the Berg case."

"'A reversal of Judge Hurd's decision by the appellate court would not only protect pensioners' contractual rights to receive their full pension benefits, but would also insure that the state keeps its contractual obligation to properly fund the pension system, based on the 2011 law signed by Governor Christie,' Ouslander added."

http://www.njspotlight.com/stories/14/05/12/74-billion-in-future-pension-payments-at-stake-in-lawsuit/?p=all

From NorthNewJersey.com:

"The court decided these payments constituted a contractual right, making it far more difficult for the Christie administration to argue that they can be suspended.  The case, which was brought by the unions, will now be heard again.  A lower court will decide whether the state’s decision to break the contract and stop paying the cost of living amounts was 'reasonable and necessary to serve an important public purpose.'  Over time, pension increases from cost of living increases can make up a substantial portion of a pension fund’s overall responsibility.  John Bury, an accountant who blogs about pensions, said that over the last two years, COLA payouts would have increased New Jersey's obligations by about $500 million."

http://www.northjersey.com/news/court-cost-of-living-increases-are-a-contractual-right-for-retired-nj-public-employees-on-pensions-1.1042085

An earlier article from the public pension blog of actuary John Bury:

“Now fast forward to Colorado 2010 where the state cut back COLAs and brought on this morass of litigation.  Would the Knicks be able to do the same thing to (the private sector contract of) Tom Riker . . .?  What if they wanted to spend that money for other purposes that they considered more significant and legitimate and it was reasonable and necessary to reduce his payments?  Could the Knicks get away with that?  And if they did would anyone ever sign another contract with them?  Then why should Colorado?”

http://burypensions.wordpress.com/2012/10/14/defining-whats-legal-for-colorado-retirees-and-tom-riker/#comment-4718

Link to New Jersey Appellate Court Decision:

https://burypensions.files.wordpress.com/2014/06/berg-decision.pdf

Excerpts from the New Jersey Appellate Court Decision:

"We reverse the grant of summary judgment in Berg and New Jersey Education Association v. Christie . . . and we remand Berg to the trial court for further proceedings required to address plaintiffs' Contract Clause claims under the New Jersey Constitution."

Cited by the Appellate Court:

"Beginning in the mid-1990's, a series of Executive and Legislative policy decisions — which the State later characterized as short-sighted — resulted in underfunding of the pension systems."

(My comment: The Colorado Legislature has not paid its full Colorado PERA pension system actuarially required contribution for the last twelve years.  Former Colorado PERA Executive Director Meredith Williams, February 23, 2012:

"We've had a significant problem over the years, in that . . . contributions, payments by [PERA] employers into PERA have been kind of the last thing in the budget building process, and we have not made the required payments.  Unfortunately, in our line of work, where we're involved in compounding shortfalls grow, particularly when the shortfalls continue year after year after year.")

New Jersey Appellate Court Decision:

"In 2011, however, the Legislature made significant changes to public employee pension and health care benefits, including the suspension of automatic COLAs for current and future retirees."

"In a press release accompanying the bill, the Governor stated that 'pension funds are considered to be adequately funded if their AVA funded ratio is at or above 80% [the federal standard for 'at-risk' funds.]"

(My comment: Note that in the 2010 Colorado bill taking the PERA pension COLA benefits of Colorado PERA pensioners, SB10-001, the Colorado Legislature proposes to take Colorado PERA pension benefits until a 100 percent actuarial funded ratio is achieved.  This lofty and unnecessary level of funding has occurred in only two fiscal years during Colorado PERA's 83 years of existence.

From: PERA Shareholders Meeting Fall 2006 document:

“Note that PERA was over 100% funded in only two years of our 75 year history.”

http://www.copera.org/pdf/Shareholder/ShareholderPresentation06.pdf.

The ratings firm Fitch Ratings deems public pension systems "adequately funded" at an 80 percent funded ratio.  Thus, the Colorado Legislature's bill, SB10-001, constitutes not simply a taking of contracted public pension benefits, but an outrageous taking of public pension benefits.

From, Meredith Williams, CAFR Summary to Members, 2002, December 5/21 (REV 6/03):

“PERA directs its efforts at keeping the funding ratio, [AFR, the ratio of actuarial assets to accrued liabilities] for the three divisional retirement funds at a minimum of 80 percent.  A funding ratio over 80 percent is considered good.”

http://www.copera.org/pdf/5/5-21-02.pdf

From, PERA Shareholders Meeting Presentation, Fall, 2005 document:

“Note that PERA’s funded status was lower 30 years ago than it is now.  You may recall that there was no perceived 'crisis' in PERA’s funded status in 1975.”

“What the PERA Board and staff would like is for the funded status curve to be flat or stable at around 80 percent.  Why?  Because not all benefits are due and payable today or tomorrow . . . PERA can weather the ups and downs in the markets.”

http://www.copera.org/pdf/Shareholder/ShareholderPresentation05.pdf)

New Jersey Appellate Court Decision:

"Plaintiffs alleged the suspension constituted a breach of express and implied contract (counts one and two), violated the Contract and Due Process Clauses of the Federal and State Constitutions (counts three, four, and six), and violated their state civil rights (count five)."

(My comment: Public pension legal scholar Professor Amy Monahan notes that the Denver District Court's initial decision in the case, Justus v. State, was surprising in light of Colorado public pension case precedent:

"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 Monahan on the public pension legal doctrine, the "California Rule" (embraced by Colorado courts):

“The (Denver District) court’s ruling is surprising both because the court broke from the previously endorsed California Rule, under which it is clear that detrimental changes to the benefits of current employees are only permissible where they are offset with comparable new advantages, and because the change at issue is one that 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.”

https://www.dropbox.com/s/cvzed3lmwt8t8v2/Understanding%20Pension%20Reform.pdf

Meredith Williams, Colorado PERA Executive Director: “The AG’s opinion states that when a PERA member retires and begins receiving pension benefits such member’s pension rights have fully vested and such pension benefits may not be reduced.”)

New Jersey Appellate Court Decision:

"There is no dispute that, at the current time, there are sufficient funds in the pension systems to pay COLAs to current retirees.  Moreover, pensions are neither funded by appropriations on a pay-as-you-go basis, in the way that COLAs used to be, nor is their payment contingent on the making of a current appropriation."

(My comment: Note that the Colorado Legislature struck the "ad hoc" PERA COLA language from Colorado law in 1993.  Since that time, the Colorado PERA pension statutes have provided an "automatic" pension COLA benefit that may not be diminished by the Legislature for pensioners who have fully-vested contracts.)

New Jersey Appellate Court Decision:

"During the years that the State skipped making its pension contributions, the pension systems continued paying COLAs to retirees.  In fact, in 2010, the State assured this court that the pension systems were capable of paying out benefits for the next thirty years, despite the State's failure to make its contributions to the funds."

(My comment: August 11, 2009, Colorado PERA Board Trustee Casebolt assures PERA retirees present at Colorado PERA Denver meeting of the PERA “Listening Tour”: “PERA faces no immediate danger of being unable to pay benefits, in fact, PERA can pay benefits for many years to come, based on our current funding and our benefit structure coupled with over $30 billion in assets, at present market value.”

http://www.copera.org/pera/about/listeningtour.htm.)

New Jersey Appellate Court Decision:

"Because pension legislation is remedial in nature, it should generally be liberally construed in favor of the employee."

(My comment: November 17, 1975, Colorado Supreme Court in Taylor v. PERA: “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.”

http://scholar.google.com/scholar_case?case=11856628789716288634&q=Taylor+v.PERA&hl=en&as_sdt=2,6

August 14, 1984 Colorado Attorney General Duane Woodard in an Opinion of the Attorney General: “In resolving this question, I am guided by the cardinal principle that ambiguities in statutes regulating pension and retirement funds are to be construed in favor of the employee"

http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984)

New Jersey Appellate Court Decision:

"During the May 20, 1996 hearing, a union-retained actuary explained the employees' concern that, as a result of skipping pension payments, the State would eventually find itself facing a need to make a much larger contribution in the future, would balk at such a large expenditure, and would instead try to cut benefits."

"Senator Inverso responded: I feel strongly that the same protections and rights that are accorded . . . under an ERISA [Employee Retirement Income Security Act] standard to people in the private sector, should be accorded to people in the public sector, the governmental sector; that once they have their pensions established as at a point in time with regard to vesting it, that you cannot go back retroactively and change what has been earned, what has been accrued, what has been vested in."

"In a recent case, the State conceded that retirees have a contractual right to the basic pension benefit they began receiving upon retirement."

(My comment: 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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf)

New Jersey Appellate Court Decision:

"As previously discussed, both opinions advised that N.J.S.A. 43:3B-9.5 created a contractual right to pension benefits, and hence the State could not diminish vested pension benefits unless it could satisfy the constitutional standards under which the State may impair the obligation of a contract."

(My comment: "Indeed, the National Association of State Retirement Administrators issued a recent study that showed that, on average, pension costs represent only about 3 percent of total state and local government expenditures. In Colorado, state and local government expenditures to fund retirement benefits totaled only 2.16 percent.”

http://www.copera.org/pera/about/issues.htm#42611.)

New Jersey Appellate Court Decision:

"As previously discussed, while COLAs were originally funded by annual appropriations, and could be denied if the Legislature failed to make an appropriation, N.J.S.A. 43:3B-5, that system was abandoned decades ago."

"Instead, through amendments adopted in the late 1980's and early 1990's, COLAs are funded in the same way that the regular pension benefits are funded, and COLAs are payable from each of the applicable pension funds."

(My comment: As we have seen, HB 93-1324 struck the former “ad hoc” COLA language from Colorado law. The language stricken in the bill: “(2) Cost of living increases in retirement benefits and survivor benefits shall be made only upon approval by the general assembly.”  This fact was recognized by the Colorado Court of Appeals.

The Ritter Administration on Colorado's "automatic" PERA COLA:

“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.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

New Jersey Appellate Court Decision:

"We conclude that the laws governing COLAs are part of the laws governing the retirement systems or funds."

"Clearly the Legislature was well aware that COLAs were part of the various pension benefit plans.  In fact, in discussing the various actuarial assumptions, Robert Baus, the State's actuarial consultant, observed that the inclusion of COLAs as a pre-funded part of the pension system, instead of as a separate pay-as-you-go item, was a critical issue: 'The methodology is not driving the funding of this system.  What is driving the funding of this system is the phasing in of the COLA.'"

(My comment: Recall that in 2001, Buck Consultants provided an actuarial report to the Legislative Audit Committee of the Colorado General Assembly.  The 2001 Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”  The Buck Consultants report identifies the 3.5% PERA COLA as “automatic,” contrasting the PERA COLA with an “ad hoc” COLA “as approved by Legislature.”

http://www.nctr.org/pdf/coloradodcdbstudy.pdf)

Cited by the New Jersey Appellate Court:

"'In contrast [to health benefits] the COLA [is] inseparably tied to the monthly retirement benefit as a means for maintaining the real value of that benefit.  It [cannot], therefore, be said to be ancillary to the benefit . . ."

"However, consistent with constitutional principles and common sense, we cannot blindly defer to the State's own evaluation of a law's reasonableness and necessity, lest political expediency replace objective fiscal evaluation."

The New Jersey Appellate Court cites the seminal case U.S. Trust:

"In applying this standard, however, complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.  A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  If a State could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all."

"On the other hand, plaintiffs contend that the State was partially responsible for the pension shortfall by skipping its pension contributions in prior years, and it should not be permitted to thus precipitate a pension crisis and then solve it at the expense of retirees.  Plaintiffs also argue that the State has taken contradictory positions about the health of the pension systems, assuring this court in N.J. Educ. Ass'n that the systems were sound enough to meet their obligations for the next thirty years despite the State's failure to make its contributions, and now telling us that 'the pension system is teetering on the brink of collapse.'"

(My comment: Colorado PERA Executive Director Greg Smith, August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” blames the Colorado General Assembly for the decline PERA’s actuarial funded ratio, “We have not been paid what’s called the actuarially required contribution.”  “We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”

http://www.copera.org/pera/about/listeningtour.htm)

New Jersey Appellate Court Decision:

" . . . because a contract-impairment claim presents 'a mixed question of fact and law,' N.J. Educ. Ass'n, supra, 412 N.J. Super. at 206 n.10, a remand is required to allow all sides to create a complete evidentiary record."

"In remanding, we end with these observations.  It is not the courts' role to run the pension systems.  Our responsibility is to interpret and apply the Constitution in light of the evidence, and we will do so.  But to a very great extent, the strength of the pension systems rests on policy choices made by the other two branches of government, and on their political will to preserve the systems and satisfy prior commitments made to public employees and retirees."

(My comment: “Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. ‘The belief is that if the employer [the state] prevails, it will have been worth the political risk,’ Klausner says.  ‘And if they lose, they will be no worse off than before.’  Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the ‘bad guy’ if they overturn the law.”

http://www.governing.com/news/state/States-Test-Whether-Public-Pension-Benefits-Given-Can-Be-Taken-Away.html

Link to New Jersey Appellate Court Decision:

https://burypensions.files.wordpress.com/2014/06/berg-decision.pdf

Support the rule of law in Colorado at saveperacola.com.

Alaska Legislature Pays Off $3 Billion in Public Pension Debt. Colorado Legislature Prefers Theft.

Think that the word "theft" is too strong to describe Colorado's public pension taking in 2010?

Here's a definition from Law.com:

"Theft: the generic term for all crimes in which a person intentionally and fraudulently takes personal property of another without permission or consent and with the intent to convert it to the taker's use."

Let's see if the term "theft" appropriately describes the Colorado Legislature's attempt to "claw back" public pension benefits.

Colorado's public pension theft in 2010 was a taking of "property," (accrued Colorado PERA public pension COLA benefits,) and it was "intentional," (premeditated, beginning in early 2009.)  Colorado PERA pensioners did not "consent" to the taking of their property (they told the legislators in testimony on the "COLA-theft bill" in 2010 that they would sue to recover their property.)  And, the property taken was "converted" to the "use" of the State of Colorado (money was freed up for the politician's favorite discretionary programs, and to add to Colorado's billions of dollars in corporate welfare payments.)  In my view, the word "theft" fits the bill perfectly.

Colorado residents, do you hold your home state in high esteem?  Consider it to be exceptional?  While the State of Colorado engages in theft, the State of Alaska honors its debts.

The Alaska Legislature has unanimously adopted a bill to pay down the state's public pension contractual obligations.  Alaska Governor Parnell recently signed the bill.  (Colorado state legislators see theft as the more politically appropriate means of addressing their accumulated Colorado PERA pension debt.)

Lawyers for the State of Colorado and its pension-administering arm, Colorado PERA, are currently trying to persuade the Colorado Supreme Court to support legislative theft of accrued, earned, contracted Colorado PERA public pension benefits in our state.

See this article:
http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court

My guess is that the Colorado Supreme Court will render a decision in Colorado's public pension COLA lawsuit, Justus v. State, within the next three months.  Then, we will know if unabashed, premeditated governmental theft is constitutionally permissible in our state (and under the U.S. Constitution.)

The State of Colorado is attempting to escape its contractual obligations in the Colorado PERA pension system.  Colorado PERA pensions are a substitute for Social Security.  Under federal (IRC) law, public pension systems must have "definitely determinable" benefits in order to remain "qualified" public pension plans.  If a state legislature can take back public pension benefits that have already been earned in a public pension system, how is it possible that the public pension system has "definitely determinable" benefits?

The Colorado PERA pension COLA benefit is a statutory "automatic" public pension COLA benefit that cannot legally be reduced for pensioners who have fully-vested contracts.  The COLA benefits of PERA pensioners have already been earned under their PERA statutory contracts.  Statutory "ad hoc" public pension COLAs can be reduced for current retirees.  (The Colorado Legislature struck the "ad hoc" statutory pension COLA language from Colorado law in 1993.)

In 2010, a group of 27 lobbyists hired by self-interested parties persuaded a slim majority of Colorado legislators to vote for their PERA pension theft scheme.  In 2010, the Colorado  Legislature passed the bill, SB10-001, retroactively taking contracted Colorado PERA pension COLA benefits from PERA pensioners.  The PERA pensioners sued the state and the resultant lawsuit, Justus v. State, is now before the Colorado Supreme Court.

Colorado PERA's lawyers have testified to the Colorado Legislature that the PERA COLA is a Colorado PERA contractual obligation.  The Colorado Court of Appeals has confirmed the PERA COLA benefit as a Colorado PERA contractual obligation.  Yet, Colorado PERA's Executive Director Greg Smith continues to argue that the PERA "COLA-theft" bill, SB10-001, is a "model" for other states.  Theft to escape public pension contracts, theft to inflate away state public pension debts, theft taking earned compensation from elderly pensioners to minimize future state taxes . . . this is a "model" for other states.  Welcome to Colorado.

From Alaska's KTUU:

"Parnell Signs Pension Funding Bill."

"'It takes $3 billion out of our budget reserves and moves it to the pension trust funds, $2 billion to the teacher retirement system and $1 billion going to the public employees retirement system,' Parnell said at a press conference."

"The governor said by paying a large sum of money up front, it will drop the yearly payments into the system, saving taxpayers more money in the long run."

(My comment: As we have seen, the Colorado Legislature has not paid its full Colorado PERA pension bills for the last twelve years [ARC] and, accordingly, has racked up its PERA pension debt.  It now seeks to escape that debt through breach of contract.)

KTUU:

"'Today, we're helping approximately 120,000 retirees. Those are Alaskans, they are beneficiaries, and dependents, teachers, firefighters, state employees and municipal employees,' said Representative Cathy Munoz (R-Juneau)."

"It takes the burden off of our kids and grandkids to pay this debt that is owed.  It is a burden that we will make good on, but it takes that obligation off of future generations of Alaskans."

(My comment: In Colorado, many politicians prefer to remove burdens from future taxpayers through simple theft.)

http://www.ktuu.com/news/news/parnell-signs-pension-funding-bill/26624530

From Alaska station KTOO:

"Surrounded by dozens of public employees in the atrium of Juneau’s State Office Building, Gov. Sean Parnell on Monday signed legislation transferring $3 billion from state savings into Alaska’s public employee pension systems."

"Like many state and local governments across the country, Alaska’s pension shortfall is the result of years of neglect and bad financial advice.  Even as the estimated amount of future payments to retired public employees has grown, state and municipal officials opted to put minimal amounts into retirement systems."

"The cash infusion cuts the long-term projected deficit for the Alaska Public Employee Retirement System and Teachers’ Retirement System to an estimated $9 billion.  It also reduces the amount of future annual payments into the systems, which Parnell said is the single biggest cost driver of the state’s operating budget."

(My comment: Public pension debts are paid off over up to 70 years.  Public pension systems never have to pay off all of their accrued debts as they exist in perpetuity.  Public pension systems are well-funded at 80 percent funded ratios according to rating agencies.  Over the last nine decades, the Colorado PERA pension system has had all of its debts paid off in only two fiscal years.  Colorado PERA's pension obligations consume less than 3 percent of all Colorado state and local government revenues.  Is this "burden" worth scrapping the Colorado Constitution?  Is it worth all of the deceit we have seen from Colorado PERA officials?)

KTOO:

"Alaska communities backed the pension infusion plan.  Juneau Assemblywoman Karen Crane is president of the Alaska Municipal League, a group that lobbies the state and federal governments on behalf of cities and boroughs."

http://www.ktoo.org/2014/06/23/gov-parnell-signs-3-billion-perstrs-infusion-bill/

(My comment: In Colorado, our association of cities, [the Colorado Municipal League, CML] sat back and watched as Colorado state legislators passed a bill to break Colorado PERA public pension contracts in 2010.  Why wouldn't they?  If Colorado state legislators are successful in breaking Colorado PERA public pension contracts, then Colorado municipalities [CML members] in the PERA pension system escape billions of dollars of debt.  If successful, the SB10-001 scheme will free up even more Colorado taxpayer resources that these communities can give away to corporations, or use to further lower taxes.)

Note that Colorado governments currently give away thirteen percent of Colorado's public sector resources to corporations, yet simultaneously plead poverty before the Colorado Supreme Court. Colorado governments have given away billions of dollars to corporations, yet have the temerity to argue that they are unable to meet their contractual PERA pension obligations.  Thirteen percent of Colorado's public sector resources are given away to corporations:

http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html#CO

http://www.nytimes.com/interactive/2012/12/01/us/government-incentives.html

Huffington Post:

"State and local subsidies to corporations: An excellent New York Times study by Louise Story calculated that state and local government provide at least $80 billion in subsidies to corporations."

"Amazon, Microsoft, Prudential, Boeing and casino companies in Colorado and New Jersey received well over $200 million each."

http://www.huffingtonpost.com/bill-quigley/ten-examples-of-welfare-for-the-rich-and-corporations_b_4589188.html)

Support the rule of law in Colorado at saveperacola.com.

Colorado PERA’s Koren Holden Admits PERA Pension COLA Benefit (Subject of Lawsuit) is “Automatic.”

Colorado PERA's Koren Holden has identified the Colorado PERA pension COLA benefit as an "automatic" public pension COLA benefit in an on-line Colorado PERA video.  Koren Holden: "This video describes the methods and assumptions used to calculate the net (PERA) pension liability . . ."  "The benefits should also incorporate the effects of projected . . . AUTOMATIC (my emphasis) postemployment benefit increases such as the annual increase provided by Colorado PERA."

http://www.copera.org/pera/employer/gasbvideos.htm#CalcNPL

Koren Holden, is a "Colorado PERA Project Manager."  She is also PERA's "Manager, DPS Benefit Plan Services," and a member of the Colorado PERA "GASB Work Group" charged with educating Colorado PERA-affiliated employers regarding new GASB reporting requirements.  She is a member of the "Conference of Consulting Actuaries," and a former consulting actuary for Buck Consultants (1986 to 2007.)

(Recall that in 2001, Buck Consultants provided an actuarial report to the Legislative Audit Committee of the Colorado General Assembly.  In agreement with Koren Holden's statement, the 2001 Buck Consultants report clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”  The Buck Consultants report identifies the 3.5% PERA COLA as “automatic,” contrasting the PERA COLA with an “ad hoc” COLA “as approved by Legislature.”

http://www.nctr.org/pdf/coloradodcdbstudy.pdf)

First, we should congratulate Koren Holden for speaking openly and honestly.  There must certainly be considerable pressure within the state agency Colorado PERA to conform with state legislative and Colorado PERA Board goals regarding the PERA COLA's legal status and the implementation of SB10-001.  There must certainly be pressure to protect highly compensated pension administration positions through silence.  I expect that Colorado PERA's history of mismanagement has unfortunately required years of guarded speech by Colorado PERA pension administrators (e.g., the Bill Owens service credit "fire sale," twelve years of failing to pay PERA's pension bills [ARC], portfolio losses resulting from past alternative investment allocation, legislative allocation of $700 million to pay off local government pension debt while ignoring its own contracted PERA debt, legislative provision of billions of dollars of corporate welfare, "tax expenditures," in lieu of meeting state and local contractual PERA obligations, etc.)

Koren Holden's statement might be problematic for Colorado PERA's lawyers since Colorado PERA is currently attempting to persuade Colorado courts that the PERA COLA benefit is an "ad hoc" pension COLA benefit.  (Of course, the Colorado PERA COLA benefit is a documented "automatic" public pension COLA.)  However, if Colorado PERA's lawyers successfully deceive Colorado courts regarding the legal status of the PERA COLA, then the State of Colorado and many Colorado local governments will escape their legal debts.  In that case, Colorado PERA pensioners will pay off Colorado governmental debts and relinquish their retirement security.  (In this new millennium, governmental officials in the United States are apparently confronted by no ethical or moral constraints regarding the abrogation of their contractual obligations.)

So, what precisely is Koren Holden communicating when she describes the Colorado PERA COLA benefit (postemployment benefit increase) as "automatic" in this on-line Colorado PERA video?  I see three possible interpretations of Koren Holden's position, all of which conflict with recent arguments of Colorado PERA's attorneys before the Colorado Supreme Court.

First, it may be the case that Koren Holden is communicating that the Colorado PERA pension COLA benefit was an "automatic" PERA COLA benefit prior to the enactment of SB10-001, and that the PERA COLA remains an "automatic" PERA COLA benefit after enactment of the bill.  If this is her intent, then her position conflicts with the position of Colorado PERA's lawyers who are currently attempting to persuade the Colorado Supreme Court that the PERA COLA has always been an "ad hoc" public pension COLA benefit (in spite of conflicting opinions of past Colorado PERA administrators and PERA's actuaries.)   A fully-vested automatic public pension COLA benefit cannot be diminished under the Contract Clause.  An automatic public pension COLA benefit has the identical legal status as a public pension "base benefit," regardless of the contrivances of lawyers paid to help governmental clients escape their debts.

The second possibility is that Koren Holden (a GASB regulation expert) is communicating that the PERA COLA was an "ad hoc" public pension COLA prior to the enactment of SB10-001, but is now an "automatic" public pension COLA benefit.  If this is her intent, then her position conflicts with the position of Colorado PERA's lawyers, since Colorado PERA's lawyers want the Colorado Supreme Court to erroneously believe that the PERA COLA has always been an "ad hoc" COLA benefit.

A third possibility is that the 2010 Colorado bill taking the contracted Colorado PERA COLA benefit (SB10-001) does not even enter the equation for Koren Holden.  It may be that, as a public pension administrator with extensive actuarial experience she has always known that, since 1993 when the Colorado Legislature removed the "ad hoc" PERA pension COLA language from Colorado law, the PERA COLA has manifestly been an "automatic" pension COLA benefit.  (Accordingly, the automatic PERA COLA has been used in calculations of PERA liabilities.)

As we have seen, HB93-1324 struck the former “ad hoc” COLA language from Colorado law. The language stricken in the bill: “(2) Cost of living increases in retirement benefits and survivor benefits shall be made only upon approval by the general assembly."

Readers should note that Colorado PERA official Koren Holden's identification of the "automatic" Colorado PERA pension COLA benefit agrees with the statements of Colorado PERA's Executive Director Greg Smith:  "The attorney general's opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.” 
Link:
http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly

Koren Holden's statement regarding the "automatic" Colorado PERA pension COLA benefit also agrees with the testimony of Colorado PERA administrators to the Colorado Legislature's Joint Budget Committee.  Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “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.”
Link:
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf 

Koren Holden's statement regarding the "automatic" Colorado PERA pension COLA benefit also agrees with the legislative history of the PERA COLA benefit and the characterization of the "automatic" PERA COLA benefit at its inception by former Colorado PERA Director of Government Relations Rob Gray (March 24, 1993.)

Rob Gray, 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.])

The federal public pension regulatory agency (GASB) requires that "automatic" public pension COLA benefits be incorporated into actuarial reports for public pension systems that provide "automatic" public pension COLA benefits.  Indeed, actuarial reports relating to the Colorado PERA pension system (and Colorado PERA's CAFRs) have incorporated the "automatic" Colorado PERA COLA benefit as an actuarial assumption for the Colorado PERA pension plan.

From the Governmental Accounting Standards Board website:

"Guide to Implementation of GASB Statements 25, 26, and 27 on Pension Reporting and Disclosure by State and Local Government Plans and Employers."

"Questions and Answers Governmental Accounting Standards Board."

"The intent of Statement 25, paragraph 36a, in distinguishing between automatic and ad hoc COLAs, is to REQUIRE (my emphasis) that actuaries include in the scope of their projections any COLAs that are CLEARLY AUTOMATIC (my emphasis) — that is, COLAs embedded in the plan for which there is NO DISCRETION (my emphasis) or condition as to timing or amount.  This criterion is intended to be strictly construed, as a basis for a minimum standard."

http://gasb.org/cs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1175827486295&blobheader=application/pdf&blobcol=urldata&blobtable=MungoBlobs

From the Governmental Accounting Standards Board website:

"New GASB Pension Statements to Bring about Major Improvements in Financial Reporting."

"Measuring the Pension Liability."

"Provisions for automatic cost-of-living adjustments (COLAs) and other automatic benefit changes (which generally are written into the pension benefit terms) will also continue to be included in projections.  On the other hand, ad hoc COLAs and other ad hoc benefit changes—which are made at the discretion of the government—will only be included in projections if they occur with such regularity that they are effectively automatic."

http://gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176160140567

Colorado PERA retirees are suing the State of Colorado and Colorado PERA over the breach of their pension "COLA" contracts in 2010.  The Colorado Legislature would like to have the power to eliminate the contracted inflation protection in the PERA pension in order to inflate away the debts of Colorado state and local governments.  In effect, these politicians want elderly Colorado pensioners to pay off pension debts that the Colorado Legislature has accumulated due to their failure to pay the complete PERA pension bill for the last twelve years (ARC.)

Colorado PERA and the State of Colorado seek to retroactively alter contractual terms outside of bankruptcy.  (Note that state governments cannot petition a court for bankruptcy under federal law.)  Colorado PERA's lawyers ask that the Colorado Supreme Court excuse the historical mismanagement of the PERA pension system by Colorado politicians and PERA trustees.  In an attempt to defend the taking of this contracted pension benefit, Colorado PERA's lawyers are trying to persuade the Colorado Supreme Court that the PERA COLA benefit is an "ad hoc" pension benefit that can be retroactively diminished by employers in the Colorado PERA pension system.

Of course, such retroactive reduction of a contractual pension obligation is unconstitutional on its face.  As we have seen, the Colorado PERA COLA benefit is a documented "automatic" pension COLA benefit that cannot be retroactively taken under the Contract Clause.  The fact that the PERA COLA benefit is an "automatic" pension COLA has been confirmed in writing by Colorado PERA pension administrators and by Colorado PERA's own actuaries.

Recall that, in 2010, Governor Bill Ritter signed the bill taking the PERA COLA into law (SB10-001.)  The Ritter Administration (in a letter to the federal pension regulator GASB) wrote:

“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.”

http://www.nirsonline.org/storage/nirs/documents/Lessons%20Learned/final_june_29_report_lessonsfromwellfundedpublicpensions1.pdf

August 8, 2012, Douglas Greenfield: “The theory behind that is that a pension that has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.”  Greenfield participated in a panel discussion hosted by the National Conference of State Legislatures. The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”

http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx

Colorado PERA pensioners, who have fully-vested public pension contracts, have completed their obligations under their PERA contracts.  Their labor and contributions have been exchanged for defined Colorado PERA pension benefits including a "base benefit" and a contracted annual benefit increase, "COLA."

In 2009 and 2010, when Colorado state legislators and Colorado PERA trustees decided to attempt to break the pension contracts of Colorado PERA pensioners, absolutely no consideration was given to the position in which the attempted contract breach would place Colorado PERA's professional administrators.

I am confident that, in 2009, as the various lobbyists for Colorado PERA employers contemplated a PERA pension COLA taking, as they began to shop for a legal memorandum to support the planned PERA COLA taking (i.e., the Dubofsky product), as they designed the political and legal campaigns for the COLA taking with the Leadership of the Colorado Legislature, the fact that Colorado PERA's professional pension administrators would, in future, be placed in a rather uncomfortable position never crossed their minds. 

The Colorado PERA pension system has more than 200 employees.  These employees are bound by codes of ethics.  They understand public pension administration and contractual rights.  I am sure that many of these employees regret the fact that the institution of Colorado PERA has been further tarnished by the actions of trustees and politicians in 2009 and 2010.  Surely, it was difficult for many Colorado PERA employees to remain silent.  But, speaking the truth might have cost them their careers.

Historically (prior to the ongoing attempt for a PERA COLA contract breach) many Colorado PERA officials defended public pension contractual rights.  The comments of Colorado PERA's Dennis Gatlin on October 28, 2004 in the Silver and Gold Record come to mind.  At the time, Dennis Gatlin noted that Colorado state legislators had, in earlier years, argued that the Colorado PERA pension system was "too well-funded" when the funded ratio of the pension system was at an 87 percent funded ratio (AFR.)  Colorado PERA Field Education Services Division Director Dennis Gatlin stated: “PERA’s funding ratio was at 87 percent (in 1985) and legislators claimed that the association was ‘too well-funded.’  In 1970, the ratio was 54 percent, he added.  According to Gatlin, PERA has been overfunded, when its assets equaled more than its liabilities, only twice in its 73-year history, in 1999 and 2000."  It should be noted that the Colorado Legislature and Colorado PERA Trustees broke PERA pension contracts when the pension system was at a 69 percent funded ratio (AFR) and that they seek to breach Colorado PERA pension COLA contractual obligations (through SB10-001) until a 100 percent PERA system funded ratio (AFR) is achieved.  In 2009, if they were going to attempt a PERA contract breach, they wanted to "go big."

Lawyers for Colorado PERA and the State of Colorado are currently attempting to persuade the Colorado Supreme Court that the Colorado PERA pension COLA benefit is an "ad hoc" pension COLA that can legally be reduced for PERA retirees who have fully-vested public pension contracts.  The fact that a Colorado PERA official exposes, openly and on the record, that the PERA COLA benefit is an "automatic" COLA benefit must not be welcome. 

Colorado PERACOLA BCOLA Benefits.

In 1987, the Colorado General Assembly enacted a statute providing that pension COLA increases shall be awarded by the General Assembly on an “ad hoc” basis.  In 1993, the General Assembly repealed that explicit language in the Colorado PERA statutes, rendering PERA pension COLA benefits “automatic” COLA benefits.  Only a dozen or so states in the country retain public pension COLA benefits that are awarded on an “ad hoc” basis.

The past adoption of an “automatic” PERA pension COLA benefit by the Colorado General Assembly was recognized in the recent Decision of the Colorado Court of Appeals in the case, Justus v. State.  The 1987 statutory provision (that was removed from Colorado law), stated that COLA benefit increases “shall be made only upon approval by the General Assembly.”  On page 28 of the Colorado Court of Appeals Decision the court notes that the repeal of the “ad hoc” language in the PERA statutes evinces the General Assembly’s intent to commit to providing the pension COLA benefits called for in PERA statutes.  Naturally, the "automatic" PERA COLA has been subsequently included in actuarial calculations for the PERA pension plan.

It is clear that Colorado PERA COLA benefits are contractual and “automatic.”  Colorado PERA COLA benefits are benefits that have been earned by PERA retirees, in an identical fashion to the PERA “base benefit,” and they are to be paid by the pension plan Colorado PERA without the need for “approval” by any governmental entity.  The COLA is part of the contract.  The Colorado Court of Appeals recognized the definition of the term “automatic” in its decision as “not subject to the General Assembly’s approval each year.”

I imagine that few Colorado PERA pension administrators are happy to now work for one of the few pension systems in the United States that are attempting a pension contract breach.  Many of these Colorado PERA employees have worked in public pension administration for decades and were forced to witness (up close) deception, immorality, and violation of professional pension administration ethics during the 2009/2010 campaign to abrogate Colorado PERA COLA contractual obligations.

The statement of Colorado PERA administrator Koren Holden addressed above is from educational materials produced by Colorado PERA for Colorado PERA-affiliated employers regarding new GASB public pension regulations.  Colorado PERA has provided, on its website, videos and slides explaining the new GASB regulations.

Colorado PERA's Information for Colorado PERA-affiliated Employers on the New GASB Reporting Requirements.

"New GASB Rules Will Impact Colorado PERA and Colorado PERA Employers."

Colorado PERA:

"The new Statements relate to accounting and financial reporting issues and how pension costs and obligations are measured and reported in audited external financial reports."

"GASB has adopted a formal definition of a liability for purposes of governmental financial reporting, known as the Net Pension Liability, which now will show on participating employers’ balance sheets."

"It is important to note that these new reporting requirements will not necessarily reflect the financial condition of a governmental entity because a pension liability cannot be made immediately due and payable.  In an instance where there might be a surplus attributable to the pension plan, the assets belong to the employees, not to the governmental employer and cannot be used for any purpose other than to pay retirement distributions to employees once they are eligible to receive them."

Karl Greve, Chief Financial Officer, Colorado PERA makes available a slide presentation on PERA's website providing an "Overview of GASB Pension Statements" for Colorado PERA employers.  From the slides:

"Pensions are part of the employee/employer exchange."  "Pension plans are part of total compensation."  "Employer incurs a pension obligation as a result of employment exchange."  "Pension expense should be recognized in period services are provided."

"Employer is primarily responsible for the unfunded pension obligation."

"Report the net pension liability based on PERA's actuarial assumptions."

The slides include a chart of PERA's historical funding status that has been recalculated (from earlier versions) to present only "market-based" funded ratios, that is, the chart considers simply the market value of Colorado PERA pension assets, rather than their actuarial value (as employed in SB10-001.)  Colorado PERA has historically (prior to the 2010 PERA COLA contract breach attempt) assessed the financial condition of the pension plan based on the plan's "actuarial funded ratio."

Link to slides:
https://www.copera.org/pdf/Misc/GASBOverviewSlides.pdf

Colorado PERA's website also includes two videos of Karl Greve, Chief Financial Officer, Colorado PERA addressing the change in GASB regulations.  Karl Greve in Video #1:

"Anything that has not yet been fully funded is the employer's liability."  "So, if you look at Colorado PERA, we have a large liability."

(The PERA unfunded liability): "is what GASB has said is the primary responsibility of the employer."

"PERA is really five different defined benefit pension plans."

"Essentially, the total pension liability is the present value of future benefit payments to PERA members for service accrued through the measurement date."

"GASB 68 requires extensive note disclosures. . ."

"The disclosures will have to include a description of benefits."

"GASB 68 requires additional disclosures of the actuarial assumptions and the source of those assumptions used to calculate the total pension liability."

"Employers will also have to disclose . . .  a description of  any changes in assumptions or benefit changes."

"You can also contact the GASB work team . . . "

https://www.copera.org/pera/employer/gasbvideos.htm#Overview

Karl Greve in the Colorado PERA Video #2:

"The key here is that all participating employers in a cost-sharing plan share the total benefit obligation of the pension plan."

https://www.copera.org/pera/employer/gasbvideos.htm#PensionPlanTypes

(My comment: The purpose of these Colorado PERA on-line materials is to ensure that Colorado PERA-affiliated employers are well-informed.  Thus, it struck me as odd that Karl Greve fails to mention in the videos that the legal status of Colorado PERA pension benefits, and thus the pension liability of PERA-affiliated employers is subject to ongoing litigation.  Should PERA employers be ignorant of litigation impacting system liabilities?)

More slides from Colorado PERA's website:

"Calculating the Collective Net Pension Liability, GASB Statement #68, Employer Educational Video Series."

"Projections of benefit payments required to be based on the benefit terms and legal agreements existing at the pension plan's fiscal year end."

"Incorporate the effects of projected . . . automatic post-employment benefit changes."

"Ad hoc post-employment benefit changes if they are considered to be substantively automatic."

https://www.copera.org/pdf/Misc/GASBCalculatingNPL.pdf 

Koren Holden, Colorado PERA Project Manager, in Colorado PERA's on-line video series:

"This video describes the methods and assumptions used to calculate the net pension liability . . ."

"The projections should be based on the benefit terms and legal agreements existing as of the pension plan's fiscal year end."

"The benefits should also incorporate the effects of projected . . . automatic post-employment benefit increases such as the annual increase provided by Colorado PERA."

"In addition, ad hoc post-employment benefit changes should be included if they are considered to be essentially automatic. "

https://www.copera.org/pera/employer/gasbvideos.htm#CalcNPL

From the Colorado PERA website:

GASB Q&A: "GASB is an independent, non-profit, non-governmental regulatory body charged with setting authoritative standards of accounting and financial reporting for state and local governments."

"GASB now will require, for purposes of governmental financial reporting, that a proportionate share of the total net pension liability (unfunded liability) of the pension trust fund at PERA be shown on the face of each employer’s financial statements."

"Is this liability due and payable immediately?"

"A. No, the net pension liability is unlike any of the other liabilities reported on an employer’s balance sheet, in that it is not immediately due, nor can it be paid off under any accelerated schedule.  Contribution rates are set in statute.  As a result, an employer would not be able to remit payment, in addition to their statutory contribution amount, for their proportionate share of the net pension liability in order to remove this liability from their financial statements."

"Employer contribution rates are set by the Colorado Legislature through the statutes that govern PERA."

(My comment: Of course, to be completely above board, Colorado PERA's administrators should inform Colorado PERA-affiliated employers that, for the last twelve years, these statutorily set Colorado PERA contribution rates have been insufficient to meet the actuarially determined obligations of the PERA pension plan.  The Legislature has underfunded the plan for many years.  Colorado PERA-affiliated employers should know that the Colorado Legislature has failed to pay the PERA pension system ARC for the last twelve years and now seeks to shift that governmental debt onto PERA pensioners.

Even Colorado state legislators must be informed that paying a contribution rate set in statute as a result of political considerations is not the equivalent of making the actuarially required contribution for the pension system.  Many have no idea.  Colorado PERA administrators, stop the manipulation.)

Colorado PERA's website:

"The financial crisis of 2008 resulted in a 26 percent reduction in PERA’s investment portfolio, which brought into question the sustainability of the system."

(My comment: Since that time equity markets have more than doubled.  Also, the DJIA fell 23 percent in one day [on Black Monday in 1987] and there was no talk of breaking PERA pension contracts.  Breach of Colorado PERA pension contracts was not a political goal at the time, in 1987.  Colorado PERA pensioners, in any event, bear no market risk under their pension contracts.  Note that in the 1970s many U.S. public pension systems operated on a "pay-as-you-go" basis.  They met their contractual obligations out of current revenues.  Also note that the funded ratio [AFR] at the time of the PERA COLA taking was 69 percent, not far from the historical average funded ratio of the PERA pension plan.)

Colorado PERA's website:

"In response, the PERA Board of Trustees engaged stakeholders throughout Colorado to gather input in the development of a comprehensive set of pension reforms."

(My comment: What Colorado PERA means by "engaging stakeholders" is that the scheme to take contracted PERA COLA benefits was developed with lobbyists for entities acting in their own financial interests, specifically, lobbyists for Colorado state and local governments, and for public sector unions that no longer represent retirees.)

Colorado PERA's website:

"The General Assembly, with bipartisan support, enacted Senate Bill 10-001, which was the first such public pension reform enacted in the nation in response to the financial crisis of 2008 and has been a model used by other systems."

(My comment: Ninety-five percent of all legislation enacted by the Colorado Legislature has "bi-partisan support."  Unconstitutional legislation is no less unconstitutional because legislators belonging to separate political parties voted for that unconstitutional legislation.  Where has this Colorado PERA pension benefit theft model been adopted?  Cases cited by PERA's lawyers have been found to be distinguishable by Colorado courts.  Public pension COLA-takings in the U.S. have been struck down [e.g., Arizona, San Jose, Florida] or are subject to injunctions [e.g., Illinois, Montana.]

PERA's website:

"Ninety percent of the cost of these changes is borne by PERA members and retirees."

(My comment: Compare this statement on PERA's website with the earlier comment of PERA's administrators above emphasizing that PERA's unfunded liability is the responsibility of PERA employers, not employees.  Colorado PERA administrators, which is it?) 

Support the rule of law in Colorado at saveperacola.com.  Colorado is better than breach of contract.

Pressing Questions in the Colorado PERA Public Pension Lawsuit, Justus v. State.

Colorado law: The Colorado PERA base benefit "shall" be paid, the Colorado PERA COLA benefit "shall" be paid.  The challenge for Colorado PERA's lawyers?  Make that plain statutory language appear to be ambiguous.  If Colorado PERA's lawyers are successful, the State of Colorado can pay off state debts using money forcibly taken from elderly Colorado pensioners.  Coloradans, this is your state government in action.  (Some of your state employees are thick into this scheme.)

If the State of Colorado Can Successfully "Claw Back" PERA Pension COLA Benefits, Does the Colorado PERA Pension Remain a Qualified Plan Under Federal Law?

Have Colorado PERA pension administrators reported to federal IRS regulators that the Colorado PERA pension COLA benefit is an "automatic" pension COLA benefit?  Colorado PERA, as a federally qualified pension plan, must have "definitely determinable" benefits under federal law.  If Colorado PERA administrators have reported an "automatic" PERA COLA benefit to federal regulators, how can they now claim that the PERA COLA is an "ad hoc" pension COLA that they can legally diminish?  Colorado PERA members and retirees want the truth.

Note that the U.S. military pension system currently has a ZERO percent funding ratio.  Military pension benefits in the United States are paid from current revenues.  Why do we see no attempts to break military pension contracts?  If we believe the arguments of Colorado PERA officials, military pensions should now be in a state of complete chaos and collapse.  Recall that Colorado PERA officials sought to break PERA pension contracts when the actuarial funding ratio of the pension system was at 69 percent.

Colorado law is clear that the Colorado PERA pension COLA benefit constitutes state debt.  Colorado PERA's lawyers, in past legislative testimony, have confirmed the fact.  But, for the moment let's entertain the possibility that the statutes creating Colorado PERA pension benefits are, as Colorado PERA's lawyers contrive, "ambiguous."

In that event, Colorado PERA's campaign to take earned, contracted, accrued pension benefits from old people must overcome yet another hurdle, namely the Colorado Supreme Court's "cardinal principle" that any ambiguities in Colorado public pension statutes are to be construed in favor of the employee.

This long-standing "cardinal principle" of the Colorado Supreme Court makes sense.  After all, Colorado PERA pensioners have relied on their PERA contracts and planned their lives around those contracts.  They have given decades of labor and pension contributions in exchange for their contracted retirement annuities.  Colorado law should (rightly) give the benefit of any doubt to workers who have given their lives in public service.  Has the Colorado Supreme Court abandoned this "cardinal principle"?  If so, when did this happen?

“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:
http://www.coloradoattorneygeneral.gov/ag_opinions/1984/no_84_14_ag_alpha_no_pa_pe_aganf_august_14_1984.)

My hope is that, in the coming decades, Colorado elected officials will honor state debts, and responsibly manage public pensions in our state.  Toward that end, I believe that Colorado courts should require that public pension management decisions by pension plan sponsors and elected officials in Colorado conform with the contractual obligations of those plan sponsors.  A relaxation of constitutional strictures on Colorado state legislators will not contribute to responsible management of the Colorado PERA pension system in the future.  In this article, I present a number of questions relating to the Colorado public pension lawsuit, Justus v. State, that I believe, if answered, will contribute to the responsible, professional management of Colorado public pension systems.

I encourage Colorado public pension trustees, active and retired public pension members, pension plan sponsors, pension administrators, Colorado elected officials, public pension plan attorneys, and Colorado courts to consider these questions. 

(Readers unfamiliar with the legal issues addressed in the public pension case, Justus v. State, should first visit the website, saveperacola.com for background, and also read the recent article at this link:
http://coloradopols.com/diary/59115/colorado-pera-pensioners-expose-deception-by-pera-lawyers-at-the-colorado-supreme-court)

Last week, Colorado PERA's lawyers, in oral arguments before the Colorado Supreme Court, tried to persuade the Court that Colorado law is ambiguous relating to the state's contractual obligation to pay the PERA pension COLA benefit.  Let's take a closer look at their argument.  First, note that Part 6 of the Colorado PERA statutes creates the PERA "base benefit" contract (Defendants in the case agree that this Part creates a contractual obligation.)  Part 8 of the PERA statutes sets forth options for payment of the contracted PERA annuity.  Part 10 of the PERA statutes creates the PERA (annual benefit increase) COLA contract.

During the recent oral arguments in this case, Justus v. State, Colorado PERA's lawyers argued that language in Part 8 of the PERA statutes supports Part 6, but does not support Part 10.  Their argument seems quite arbitrary and contrived to me.  All of these Parts fall under the "PERA Article," Article 51 of the Colorado statutes.

Are PERA's lawyers surprised that Part 8 which provides options for payment of the contracted life-time PERA annuity includes the language "payable for life"?  Why is this surprising?  The PERA annuity contract is a life-time annuity.

Why has the testimony of Colorado PERA's lawyers to the Colorado Legislature's Joint Budget Committee (JBC) confirming the PERA COLA benefit as a PERA contractual obligation that cannot be diminished not come up in this case?  This testimony would surely be recognized if PERA pensioners were granted the right to make their case at trial.  Thus, PERA's lawyers argue in their legal briefs that PERA retirees (the plaintiffs) should be denied their right to a trial.

In effect, Colorado PERA officials argue that the Colorado Constitution's Contract Clause should be violated because Colorado politicians want to break it.  Plaintiffs should be denied a trial because a trial would hamper the ability of Colorado politicians to use retiree assets to pay state debts and state and local government labor costs.  I ask, why should Colorado PERA retirees not have an opportunity to plead their case before a jury?

The testimony by Colorado PERA's lawyers to the JBC makes it clear that the PERA COLA is an "automatic" public pension COLA benefit.  When PERA's lawyers gave this testimony in 2009, they did NOT testify to the JBC that the PERA COLA is a contractual obligation that can be reduced to ZERO as PERA's lawyers contend, they testified that the PERA COLA "cannot be decreased."

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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

Again, Part 8 of the Colorado PERA statutes sets forth options for payment of the contracted annuity.  At retirement, under Part 8, a PERA member who has met all of the statutory requirements to receive the PERA pension may choose to have that pension paid for just her life, or she may choose to receive a smaller pension payment for herself and a beneficiary.  Is it the expectation of PERA's lawyers that this Part 8 should have been drafted in a way such that the options for payment of the life-time PERA annuity income stream makes no mention of payment of that income stream for the life-time of the PERA retiree?

In my view, Colorado PERA's lawyers will go to great lengths and employ every imaginable contrivance that might help Colorado PERA-affiliated employers escape their legal debts.  In my view, Colorado PERA officials and Colorado politicians will stop at nothing to deceive the courts and the public, to force Colorado PERA retirees to relinquish their contractual rights and pay off the legal debts of Colorado PERA employers.  In effect, Colorado politicians seek to force elderly pensioners to pay labor costs for the State of Colorado and Colorado local governments.  In my view, Colorado state employees at the state agency, Colorado PERA, and Colorado politicians are engaging in immoral and unconstitutional acts.

Part 8 of the Colorado PERA statutes necessarily includes the language "payable for life," because it sets forth PERA annuity payment options that are "payable for life," for either the retiree, or a reduced amount for the retiree and one-half for a beneficiary at retiree death, or a further reduced amount for the retiree and an equal annuity income stream at the retiree's death.

The Colorado PERA COLA benefit is simply a contracted annual increase for which retirees have provided consideration (years of labor and contributions.)  If the PERA COLA is not supported by consideration provided by Colorado PERA members and retirees, then how is the COLA benefit supported?  By PERA-affiliated employers exclusively?  If this is true, why do the PERA statutes not set forth a mechanism for PERA employers' exclusive support of the PERA COLA benefit?

I ask, if Colorado PERA retirees have supported their PERA COLA benefit with consideration, and fulfilled their obligations under their contracts, why should they not receive their PERA COLA benefit?  Just to free up more Colorado public resources to add to the billions of dollars that Colorado politicians already give to corporations?  (For more on that, see Colorado's "tax expenditure" reports.) 

Under Colorado statutes, the PERA COLA benefit "shall" be paid, and the PERA base benefit "shall" be paid.  But, apart from the statutes, I believe that the PERA COLA benefit is a contractual obligation under an "implied contract."  All of the conditions of an implied contract have been met.  If I am correct, what relevance does the question of whether the Part 6 PERA base benefit contract language "SHALL" is supported by Part 8 language and whether this Part 8 language also supports the Part 10 PERA COLA contract?  Under an implied pension contract the exchange transaction has been completed, consideration has been exchanged for a benefit, deferred compensation.

More Questions Regarding the Colorado State Government Campaign to Escape its Legal Debts.

I ask, why did the Colorado Legislature and Governor Ritter fail to submit an interrogatory to the Colorado Supreme Court in 2009 seeking guidance on constitutionally permissible pension reforms?  Why did they choose this court battle?  As we have seen, to their credit, the Colorado PERA Board of Trustees encouraged the Legislature and the Governor to submit an interrogatory to the Colorado Supreme Court in 2009.  Indeed, even the press (the Denver Post) in an editorial, implored the Colorado Legislature and Governor Ritter to submit an interrogatory.  Why have Colorado politicians forced many elderly people in the state to unnecessarily suffer through years of hell in their retirements simply because Colorado state legislators did not feel inclined to ask the Colorado Supreme Court for legal guidance in 2009?  Answer: Because they are "politicians" who were pushed by lobbyists.

Regarding "Automatic" Public Pension COLAs versus "Ad Hoc" Public Pension COLAs.

Have the Justices of the Colorado Supreme Court noticed that the question of "automatic" Colorado PERA pension COLA benefits versus "ad hoc" PERA pension COLAs has remained unmentioned by the Defendants in this case?  Why has this matter received so little attention in the case?  "Automatic" and "ad hoc" pension COLA benefits are basic structural elements of public pension systems in the United States.  The Colorado PERA pension COLA benefit is a documented "automatic" pension COLA benefit.

In my opinion, Colorado PERA's lawyers have taken their argumentation relating to the PERA COLA benefit to the farthest reaches of plausibility . . . without naming it, it now appears that Colorado PERA's lawyers seek to somehow retroactively transform the existing "automatic" PERA COLA benefit into an "ad hoc" PERA COLA benefit.  Colorado PERA's lawyers seek this PERA COLA metamorphosis in order that Colorado PERA-affiliated employers might (incredibly) meet their future "PERA COLA contractual obligations" by paying a ZERO COLA.

But, as PERA officials have confirmed many times, the PERA COLA is indeed an "automatic" public pension COLA, as opposed to an "ad hoc" pension COLA.

Colorado PERA's lawyers have apparently forgotten that the "ad hoc" PERA COLA statutory language previously existing in Colorado law was removed from the Colorado PERA statutes some years ago.  However, this fact did not escape the attention of the Colorado Court of Appeals.

As we have seen, HB 93-1324 struck the former “ad hoc” COLA language from Colorado law. The language stricken in the bill: “(2) Cost of living increases in retirement benefits and survivor benefits shall be made only upon approval by the general assembly."

The legal status of the Colorado PERA COLA benefit as an "automatic" pension COLA benefit has been confirmed in writing by Colorado PERA officials and Colorado PERA's actuaries many times.  I have published the references, by PERA officials and PERA's hired actuaries, to the "automatic" PERA COLA over the years, and I will reproduce a complete list of these references upon request.  A few particularly notable references to the Colorado PERA "automatic" pension COLA are found in the 2001 PERA Buck Consultants actuarial report, and in PERA's publication "History of Colorado PERA Legislation."

If Colorado PERA officials and lawyers want the PERA COLA to be an "ad hoc" COLA they should accept that the PERA COLA can only be (legally) transformed into an "ad hoc" COLA on a PROSPECTIVE basis, for PERA benefits that have not yet been accrued. 

Colorado PERA's administrators are quite familiar with the concept of "tiers" of public pension benefits, and the fact that tiers of public pension benefits are created to avoid unconstitutional, retroactive legislation and takings of accrued pension benefits.  Accrued PERA COLA benefits cannot be taken by the Colorado Legislature under the Contract Clause.  Indeed, Colorado PERA trustees supported the creation of a new tier of PERA COLA benefits in 2004 for just that reason.

Here are a few examples of documentation of the Colorado PERA "automatic" pension COLA:

From the December 31, 2000 PERA CAFR: “The Board agreed to support legislation designed to encourage earlier retirement and reduce the state’s costs, provided that this legislation would also change PERA’s post-retirement adjustment to an AUTOMATIC (my emphasis) increase of 3.5 percent compounded annually and increase the contribution to PERA’s Health Care Trust Fund once PERA is fully funded.  Since House Bill 00-1458 included these provisions, the Board supported this bill.”

Note that the November 20, 2001, Buck Consultants study commissioned by the Colorado State Auditor, pursuant to SB 01-149, clearly identifies the Colorado PERA 3.5 percent COLA as an “automatic” public pension COLA, refers to “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”  Significantly, the Buck report identifies the 3.5% PERA COLA as “automatic” and contrasts it with an “ad hoc” COLA “as approved by Legislature.”  Why would Colorado PERA administrators argue that the PERA COLA benefit, identified as "automatic" by PERA's own actuaries, is now an "ad hoc" COLA?  Answer: To escape their contractual obligations.

The Buck report is available here:

http://www.nctr.org/pdf/coloradodcdbstudy.pdf

Colorado PERA administrators clearly know the difference between an "ad hoc" pension COLA and an "automatic" pension COLA.  Here are a few examples from Colorado PERA's publication "History of Colorado PERA Legislation":

HB 75-1364 – Improved AD HOC (my emphasis) post-retirement benefit increases.

SB 69-144, SB 69-311, HB 69-1230, and HB 69-1247 – New annual post-retirement increase (COLA) adopted provided maximum 1.5% per year, in addition to AD HOC (my emphasis) COLA increases that were based on the year in which the retirement benefit had begun.  Link:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

Why did the Denver District Court Grant Summary Judgment in a Case Regarding the State of Colorado's Contractual Obligations?

In the Denver District Court Decision, Judge Hyatt noted that: "Summary judgment is a drastic remedy and should not be granted unless it is apparent that no genuine issue of material fact exists."  The Colorado Court of Appeals identified issues of material fact when sending the case to trial.  The Colorado Court of Appeals, in its Decision in this case, found that no determination has been made on several factual matters, for example, whether the SB10-001 impairment was "substantial" or "served a significant and legitimate public purpose (actuarial and funding considerations.")  If the law and the facts are clear in this case, Justus v. State, and the Denver District Court was correct in taking the extreme action of granting summary judgment, why has the case proceeded to the Court of Appeals (reversing the District Court) and now arrived at the Colorado Supreme Court?  Note that the U.S. Supreme Court has ruled that state governments shall receive very little deference in attempts to escape state contractual obligations.

Colorado's Statutory Double Standard on Public Pension Contracts – SB12-149.

The Colorado Legislature has demonstrated that it is capable of adopting prospective pension reforms.  As we have seen, the Colorado Legislature created a new tier of PERA COLA benefits in 2004 (a prospective, legal, pension reform.)  In 2012, the Colorado Legislature enacted prospective pension reform for Colorado county governments ("arms" of Colorado state government.)  The 2012 bill, SB12-149, honored existing retiree pension contracts and accrued benefits in those Colorado pension systems.  Why should a statutory double standard on public pension contractual rights exist in Colorado law?  Why should Colorado law honor accrued pension benefits in some pension plans, but permit retroactive takings of accrued benefits in other pension plans?

Language from SB12-149:

“(3) ANY MODIFICATION PURSUANT TO SUBSECTION (2) OF THIS SECTION SHALL NOT ADVERSELY AFFECT VESTED BENEFITS ALREADY ACCRUED BY MEMBERS OF SUCH DEFINED BENEFIT PLAN OR SYSTEM, INCLUDING, BUT NOT LIMITED TO, THE PENSION BENEFITS OF RETIRED MEMBERS OR MEMBERS ELIGIBLE TO RETIRE AS OF THE EFFECTIVE DATE OF THE MODIFICATION, UNLESS OTHERWISE PERMITTED UNDER OR REQUIRED BY COLORADO OR FEDERAL LAW.”

State Legislatures Across the Country Have Adopted Legal, Prospective Pension Reforms.

Colorado is a wealthy state, with low state debt, a vibrant economy, and low taxes.  I ask, why should Colorado be among the handful of states that are attempting retroactive pension "reform" when the Colorado Legislature has not yet exhausted all prospective pension reform options?  For example, a prospective reduction of the PERA pension "multiplier" for PERA benefits not yet accrued?

Was this reform (prospective multiplier reduction) "priced" by Colorado PERA's actuaries in 2009?  We don't know.  We do not have this information because Colorado PERA's hired lobbyists (in a bill at the end of the 2009 legislative session) arranged that the entire PERA public pension reform debate (unlike other state legislatures) be conducted behind closed doors.  (Perhaps the self-interested parties pushing the SB10-001 taking did not want this particular pension reform option to be priced.)

Why should Colorado PERA retirees relinquish their contractual rights and property before the Colorado Legislature has even acted to refer a measure to Colorado voters seeking sufficient revenue to meet state contractual obligations?

To what extent could the PERA trust funds be bolstered with purely prospective pension reforms?  Should public sector contractual rights and property be relinquished before this question is answered at trial?  Were all potential prospective PERA pension reforms considered during the private lobbyist discussion of "reform" options prior to the adoption of SB10-001?

Why is it that all public pension systems in the United States have managed their pension systems with purely prospective legislation (with the exception of a handful of legislative contract breach attempts) but the Colorado PERA pension system purportedly must be managed with legislation that is retrospective under the Colorado Constitution?

Colorado PERA, a Qualified Plan for Tax Purposes Under Federal Law?

According to Colorado PERA officials, the PERA pension plan is a “qualified plan” under federal IRS regulations: “Colorado PERA is a qualified retirement plan that can substitute for Social Security, as required by law.”

https://www.copera.org/PDF/8/8-324.pdf

“PERA is a qualified retirement plan under the Internal Revenue Code Section 401(a).  As a defined benefit plan, PERA benefits are guaranteed based on a benefit formula that is set by law.”

https://www.copera.org/pdf/5/5-115.pdf

“In 1951, public employers could join Social Security; the Colorado Legislature decided to continue the PERA program instead of joining Social Security.”

http://class.ccaurora.edu/fiscal/PERA_Choice.pdf

Yet, under IRS regulations, a public pension plan must have “definitely determinable benefits” in order to pass muster as an IRS “qualified plan.”

Denver attorney Cindy Birley (a person I consider to be a champion of prospective public pension reform in Colorado) addressed this requirement for qualification of public pension plans at the Legislature’s Senate Finance Committee hearing on the bill SB12-149, on March 13, 2012:

Cindy Birley:

“Generally, you would not change people who have already retired . . .”.

“There may be an issue with what we would call ‘definitely determinable benefits,’ and this is a tax code concept.”

“The . . . Internal Revenue Code requires for a defined benefit plan that your benefit be . . .  ‘definitely determinable’.”

“So a benefit that fluctuated based on your funding, it may be difficult to change that unless it’s somehow a cost-of-living adjustment that’s done more on an ad hoc basis.”

“Because, it may not qualify as a defined benefit plan.’

“We could adjust benefits for future retirees as long as it still meets Internal Revenue Code requirements.”

“It still has to pass muster as a DB plan.”

Since the Colorado General Assembly has clawed back “definitely determinable” Colorado PERA pension COLA benefits from PERA retirees in 2010, and retrospectively altered this pension COLA benefit, how can the “automatic” PERA COLA benefit still be characterized as a “definitely determinable” public pension benefit?

IRS attorneys write that a qualified “governmental plan” must have “definitely determinable benefits”:

“Definitely Determinable Benefits/Written Plan Document Section 401(a)(25) provides that the actuarial assumptions used to calculate participants’ benefits must be specified in the plan.”

“A pension plan within the meaning of section 401(a) is a plan established and maintained by an employer primarily to provide systematically for the payment of definitely determinable benefits to his employees over a period of years, usually for life, after retirement. (§1.401-1(b)(1)(i)).”

The Colorado Legislature Gives Away Billions of Taxpayer Dollars to Corporations, But Pleads Poverty Before the Colorado Supreme Court.

Why should funding of the Colorado Legislature's enacted non-contractual "tax expenditures" take precedence over the contractual rights of Colorado public sector workers?  (The Colorado Legislature relinquishes literally billions of dollars in Colorado taxpayer resources to corporations [See Colorado Department of Revenue "Tax Expenditure" reports.])  Why should retired Colorado public workers be asked to surrender their compensation and contractual rights before the Legislature (or Colorado voters via a referred measure) are asked to reign in Colorado's corporate tax exemptions and subsidies?

Colorado's Tax Expenditure Report:

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251847897557&ssbinary=true

More pressing questions regarding the breach of Colorado PERA pension contracts:

Why should Colorado PERA retirees relinquish their property and contractual rights to cover state debts created as a result of Governor Bill Owens' PERA "service credit fire sale"?  Or, Colorado PERA Board of Trustees investment errors (particularly costly alternative investment allocation errors)?  Colorado PERA retirees are part of a DEFINED benefit plan and bear no market risk under their contracts.  Why should Colorado PERA retirees bear the cost of Executive and Legislative Branch mismanagement that has cost the PERA trust funds billions of dollars, and reduced PERA's funding ratio over the years?

Why should elderly Colorado residents give up their security in retirement to pay for past mismanagement of the Colorado PERA pension system by politicians, PERA trustees, and PERA administrators?  Because, in the words of former Colorado PERA Executive Director Meredith Williams, "it just makes things easier.”  It isn't so easy for pensioners watching the State of Colorado break their contracts.

Here’s the link to Meredith's comment:
http://www.leg.state.co.us/Clics/clics2010a/commsumm.nsf/b4a3962433b52fa787256e5f00670a71/84960fa73d53e222872576c600712e80/$FILE/10HseFin0210AttachG.pdf

Why should Colorado PERA retirees relinquish their property and contractual rights to cover state pension debts that have accumulated due to the Legislature's failure to pay the full PERA pension actuarially required contributions?  Or, state pension debts that have accumulated due to the acquiescence of Colorado state legislators to proposals from local government lobbyists to pay off $700 million in Colorado local government pension debt?  (That is, local government debt that is NOT the contractual obligation of the State of Colorado, as confirmed by the Dan Slack of the FPPA.) 

Why should the Colorado Supreme Court place its blessing on such irresponsible legislative action?

If past legislative mismanagement (as documented at saveperacola.com) of the PERA pension system is excused by Colorado courts, what incentive will future elected state legislators have to set aside their political aspirations and responsibly meet the public pension contractual obligations of PERA employers?

Colorado PERA's Use of Beneficiary Assets to Pay the Legal Costs of an Attempt to Take More Beneficiary Assets.

Is it appropriate for a Colorado public pension system to use the property (trust funds) that belong to vested members of the pension system for lobbying, public relations and legal services in attempts to take even more property from those same vested members?  This activity may fall within the letter of the law, but it is, without question, immoral as hell.

What Obligation Do Colorado Elected Officials Have to Uphold the Colorado Constitution?

Where is the bar set for Legislative breach of contracts to which the State of Colorado is a party? Should a Colorado legislator's oath of office to uphold the Colorado Constitution be devoid of meaning?  To what extent are Colorado governments actually restrained by the Colorado Constitution's contract provisions?  Rather than requiring a higher level of scrutiny for Colorado governments seeking to escape their own contracts, should the Colorado Supreme Court lower the bar for breach of contract by Colorado governments?

Are the contractual rights of Colorado public sector workers afforded a respect under Colorado law that is equivalent to the respect afforded to private or corporate contractual rights under Colorado law?

Why did Colorado PERA's lobbyists take the 2009 PERA pension reform debate outside of the normal, open legislative process through an amendment to legislation at the end of the 2009 legislative session?

Colorado's TABOR Amendment recognizes public pension obligations as district debt.  Should the Colorado Legislature be allowed to freely abandon district debt?  Has the TABOR Amendment relaxed any of the constraints of the Contract Clause on the actions of Colorado governments?

What would be the impact of converting any Colorado PERA pension benefit from a contractual obligation to a gratuity?  What incentive would Colorado state legislators (who have failed to responsibly fund the Colorado PERA pension system for the last twelve years) have to responsibly manage their contractual obligations going forward?

What impact would conversion of PERA benefits to gratuities have on the ability of Colorado governmental employers to attract workers in the future?  What worker will agree to provide labor to her employer for compensation to be determined after the fact by her employer?

What role has political influence played in the legislative decision to attempt a taking of the PERA COLA benefit and in litigation of the case, Justus v. State?

What percentage of future Colorado public sector revenues will be required to meet Colorado PERA contractual obligations?  Under current law, what percentage of future Colorado public sector revenues will Colorado governments give away in the form of "tax expenditures"?  (We don't know because there has been no fact-finding in this case.)

Was the State of Colorado, tenth wealthiest in the nation (by a recent assessment) insolvent at the time of the taking of the PERA COLA benefit?  Pursuant to Colorado PERA Executive Director Greg Smith's description of his own legal research in the Rocky Mountain News, Colorado PERA public pension benefits MAY only potentially be impaired in cases where public pension systems are devoid of assets.  Has Greg Smith changed his legal analysis?  If so, why? At the time of the Colorado PERA COLA contract breach the PERA pension system had a funding ratio (AFR) of 69 percent.

Support the rule of law in Colorado at saveperacola.com.  Colorado is better than breach of contract.

My Opinion: Colorado PERA Pensioners Expose Deception by PERA Lawyers at the Colorado Supreme Court.

(Note: This is a corrected version of an earlier version of this article in which I mistakenly attributed a comment by Justice Hobbs to Justice Hood.)

For five years now, truly shameless Colorado PERA officials have employed deception in their attempt to take money from elderly pensioners in our state.  In my opinion, the deception continued this week in the chambers of the Colorado Supreme Court.

Why do Colorado PERA administrators, trustees and lawyers feel that they must deceive in order to make their case in Justus v. State?  (A case, it should be noted, that has never gone before a jury for fact-finding.)  Is this a normal and expected appellate strategy?  As a layman, I find it extremely disturbing.

Is it appropriate that Colorado state employees engage in deception in the course of their official duties?  Do we really want Colorado state government to rest on a foundation of deception? 
If Colorado politicians and PERA administrators are successful in their efforts to force Colorado PERA pensioners to payoff accrued state debts will honest Colorado taxpayers be satisfied with the result?  How many Coloradans actually want the State of Colorado to break its contracts?

Whether or not the 2010 Colorado PERA contract breach is ultimately successful, a record of Colorado PERA's attempts at deception must be readily available to the public for posterity.  Colorado voters and future elected officials must have easy access to the record of the SB10-001 taking.  In my opinion, the moral underpinnings of Colorado state government are being written in this bill, SB10-001.  If the State of Colorado can freely abrogate its contracts, all parties contracting with Colorado state government in the future should be fully informed of the fact.

I write this article to set the record straight, and to expose the deception of Colorado PERA officials and certain Colorado politicians.  In the article, I highlight statements made during the June 4, 2014 oral arguments before the Colorado Supreme Court in the Colorado PERA retiree COLA lawsuit, Justus v. State.

If the State of Colorado (one of the wealthiest states in the nation) is indeed facing a financial "crisis" that would justify breach of state contracts, why would the Colorado Supreme Court allow the Executive and Legislative branches of Colorado state government to redress that financial "crisis" by asking retired public sector workers to relinquish their earned benefits, their deferred compensation?  Earned benefits, I might add, that replace Social Security for these retirees.

Why would the Colorado Supreme Court agree to take money from retired workers, yet fail to ask corporations to relinquish any of the billions of dollars worth of unearned, non-contracted tax exemptions and subsidies they regularly receive from the Colorado Legislature?

Why would the Colorado Supreme Court allow the state agency Colorado PERA to avoid paying its contracted annuity COLA payments, but require private sector insurance companies to continue to pay contracted annuity COLA payments?

Here is a link to the June 4, 2014 Colorado Supreme Court Oral Arguments in the Colorado PERA retiree lawsuit, Justus v. State:

http://www.courts.state.co.us/Courts/Supreme_Court/Oral_Arguments/Index.cfm

An earlier article addressing Colorado PERA's attempts to deceive the Colorado Supreme Court:

http://coloradopols.com/diary/18952/colorado-pera-attempts-to-decieve-the-colorado-supreme-court

Three attorneys who participated in the Colorado Supreme Court oral arguments on June 4, 2014:

Richard Rosenblatt, represented Colorado PERA retirees.  Sean Connelly, represented Colorado PERA, and Colorado Solicitor General Dan Domenico, represented the State of Colorado.  Rosenblatt was up first at the one-hour hearing, followed by Connelly and Domenico.  Richard Rosenblatt concluded the oral arguments with a brief rebuttal.

MY VIEW: COLORADO PERA'S DECEPTION AT THE COLORADO SUPREME COURT ORAL ARGUMENTS . . . A RED HERRING.

At 31 minutes into the June 4, 2014 oral arguments Attorney Sean Connelly, representing Colorado PERA, throws what I see as a new PERA deception at the wall to see if it will stick, Sean Connelly's comments:

"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."

(My comment: 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 (which PERA's lawyers would have the Supreme Court believe creates the PERA base benefit contract) 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 provision in Colorado PERA law providing the contracted Colorado PERA 3.5 percent COLA benefit [prior to its retroactive alteration by SB10-001] read:

Colorado Law – Section 24-51-1002 (1), Colorado Revised Statutes, “ . . .the cumulative increase applied to benefits paid SHALL be recalculated annually as of March 1 and SHALL be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective . . .”

Under Colorado law, members of Colorado PERA who purchase PERA service credit SHALL receive Colorado PERA pension benefits in effect at the time of the purchase:

Colorado Law – Section 24-51-502 (3), Colorado Revised Statutes, “Service credit purchased by members . . . SHALL be subject to the benefit provisions in effect for the existing member contribution account.”)

In oral arguments, PERA's lawyers imply that the PERA base benefit contract is formed in Part 8 of the PERA statutes, a Part that addresses options for payment of the PERA base benefit, rather than in Part 6 that establishes the base benefit itself.  I see this as a weak attempt to persuade the Justices that the language creating the PERA base benefit somehow differs from the language creating the COLA contract.  It doesn't, both "shall" be paid under the PERA statutes.

Note that the Defendants in this case agree with Judge Hyatt's ruling (before his retirement) at the District Court.  Note also that Judge Hyatt found that the PERA base benefit contract was formed in Sections 602 and 603 of the PERA statutes rather than in Part 8 as the Defendants now choose to argue before the Supreme Court.  Note that Judge Hyatt made no mention of Part 8 of the PERA statutes relating to annuity payment options when he identified the PERA base benefit as a contractual obligation in his Decision.

Judge Hyatt found that the PERA base benefit contract exists based on the identical language, "shall," that creates the PERA COLA benefit.  Judge Hyatt's position conflicts with the Defendant's latest claim. 

From Judge Hyatt's Decision, June 29, 2011, page 2:

"When a member retires, their monthly base benefit is calculated using the member’s age at retirement, years of service, and their highest average salary (which also has its own calculation). C.R.S. § 24-51-602-603 (2010)."

At approximately 46 minutes into the June 4, 2014 oral arguments, Colorado Solicitor General Dan Domenico repeats what I see as Sean Connelly's earlier attempt to mislead the Colorado Supreme Court to believe that the statutory language creating the PERA base benefit contract differs from the statutory language creating the PERA COLA benefit, Dan Domenico:

"If you compare the language of the base benefit . . . in Parts 6, 7, ad 8 of the PERA statutes, that includes language of entitlement, durational language, this is what you get for life."

"The COLA statutes in Part 10 simply don't.  That language is conspicuously absent from the COLA statutes."

(My comment: Apparently Domenico is not troubled by the fact that this durational language is also "conspicuously absent" from the statute creating the PERA base benefit contract.)

Dan Domenico:

"So, as a matter of statutory interpretation it's simply a different treatment by the Legislature of the cost-of-living benefit versus the base benefit."

(My comment: In my opinion, this statement is glaring, shameless deception of the Colorado Supreme Court. The language is identical.)

Dan Domenico:

"The base benefit is an individualized assessment . . . it's about you and what you have put in, you should get it back."  "The cost-of-living formula is not about you, it's about external economic factors, including inflation and the health of PERA."

(My comment: This Domenico statement is, in my opinion, manufactured from whole cloth.  PERA member contributions support the PERA COLA benefit AND the base benefit.  Colorado PERA's actuaries have incorporated the 3.5 percent COLA into actuarial reporting on the plan.  PERA-affiliated employers do not make a separate contribution to support the PERA COLA benefit.)

DOMENICO GETS IT WRONG ON THE EXISTENCE OF "TIERS" OF THE PERA COLA.

Next Dan Domenico makes a statement that betrays either ignorance of PERA's legislative history or more deception in my opinion:

"It would be a very strange system if we had a system that said, well this group of people's cost-of-living should be adjusted differently than this other." 

(My comment: As I listened to this Domenico statement my first thought was that he is ignorant of the legislative history of Colorado PERA pension benefits.  The "very strange system" he objects to is indeed present reality.  It is in current Colorado PERA law. 

Thankfully, the PERA retiree's attorney recognized the lack of knowledge of PERA's legislative history [or deception] and corrected it at the end of the June 4, 2014 oral arguments.

From the Colorado PERA Publication "History of Colorado PERA Legislation":

"2004

SB04-132 – new members hired effective 7/1/05, eligible for early retirement [not unreduced retirement] at age 50 with 30 years of service, and the COLA would equal the lesser of 3% annually, or the actual CPI change."

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251603807998&ssbinary=true

For new PERA members, SB04-132 created a new PERA COLA of the lesser of 3% or inflation, from the 2004 Digest of Bills:

“For any person who becomes a member of the association on or after July 1, 2005, specifies: . . . That the annual increase applied to benefits shall be the lesser of 3% or the increase in the consumer price index.”

From Section 9 of SB 04-132:

24-51-1002. Annual percentages to be used. (1) (a.5) (I) NOTWITHSTANDING SUBSECTION (1) OF THIS SECTION, THE INCREASE APPLIED TO BENEFITS OF PERSONS WHO BECOME MEMBERS ON OR AFTER JULY 1, 2005, AND WERE NOT MEMBERS, INACTIVE MEMBERS, OR RETIREES ON JULY 1, 2005, SHALL BE THE LESSER OF THREE PERCENT OR THE ACTUAL INCREASE, AS CALCULATED BY THE UNITED STATES DEPARTMENT OF LABOR, IN THE NATIONAL CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS DURING THE CALENDAR YEAR PRECEDING THE INCREASE IN THE BENEFIT.

[Note that the language “THE INCREASE SHALL BE” is used in the bill by the bill’s drafter to indicate an “automatic” COLA.  Some years ago the Legislature struck the "ad hoc" language relating to the PERA COLA from Colorado law.]

From the SB04-132 Fiscal Note:

“for any person, except a state trooper, who becomes a PERA member after July 1, 2005 . . . specifies that the annual increase in benefits shall be the lesser of 3.0% or the actual increase in the National Consumer Index for Urban Wage Earners and Clerical Workers during the calendar year preceding the benefit increase.”

Discussion of SB04-132 [from the Minutes of the PERA Board of Trustees, March 19, 2004]:

https://www.copera.org/pdf/Board/Minutes/2004/Minutes3-04.pdf

"Mr. Gray then updated the Board regarding SB04-132.  Mr. Gray stated that Senator Ken Arnold would like to get SB04-132 moving again to ensure that it is can be [sic] considered in a timely enough manner by the full Senate and the House of Representatives.  Mr. Gray then requested direction from the Board regarding their view on including additional legislative proposals approved by the Board including, for members hired on or after July 1, 2005, no full retirement benefits at age 50 with 30 years of service, and annual post-retirement benefits of 3 percent or the actual change in the consumer price index, whichever is lower, as well as the reallocation of 0.08 percent of salary of future employer contributions to the PERA pension trust fund rather than to the PERA Health Care Trust Fund.  Board discussion ensued regarding the consequences of including these elements in SB04-132. 

At the conclusion of the discussion, James Casebolt, Board Chair, expressed that consensus among the Board was for staff to continue negotiations with the Governor's Office regarding the defined contribution legislation.  Mr. Casebolt also stated that the Board would provide staff with the latitude to include the three aforementioned provisions in SB04-132, if necessary.")

Back to excerpts from the oral arguments, Dan Domenico:

"I think the plaintiffs concede that saving PERA, trying to get it back to being actuarially sound, is in fact a legitimate public purpose."

(My comment: Note that the funding ratio [AFR] of the Colorado PERA pension system was 69 percent at the time of the PERA COLA taking.  The PERA system was actuarially sound at the time of the taking.  In the 1970s, many public pension systems in the United State operated on a "pay-as-you-go" basis, that is, the systems had zero percent funded ratios, yet they continued to meet their contractual obligations.  Further, it is not the responsibility of Colorado PERA members and retirees to bail out Colorado state government, to pay for the state's decade-long failure to meet its ARC obligations, and its past mismanagement of the PERA pension system, such as the Bill Owens "service credit fire sale.")

Question from a Colorado Supreme Court Justice at 56 minutes into the oral arguments:

"Mr. Domenico, tell me, just very quickly again why you think, what the principal difference is between why the PERA benefits themselves are contractual, and the COLA is not contractual."

Dan Domenico:

"The key difference is the statutory construction difference.  Part 10 does not include the durational language that says you're entitled to this for life."

"It simply says, while this statute is in effect, here's how we calculate the benefit."

"The base in Part 8, especially 801, says you're entitled to this benefit for life."

(My comment: Of course, I see this as further deception of the Colorado Supreme Court.  The language creating the base benefit contract and the COLA contract is the same, "SHALL."  I cannot believe that Colorado PERA's lawyers have embraced such a transparent deception.)

PERA retiree attorney Rosenblatt comments in rebuttal at the conclusion of the oral arguments (57 minutes into the oral arguments):

"First of all, I want to disagree with my colleagues as to what creates the base contract, the base pension contract, it is 24-51-602, which reads, that members . . . SHALL upon written application and approval of the board, receive service retirement benefits pursuant to a benefit formula . . ."

Richard Rosenblatt:

"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."

Attorney Rosenblatt continues:

"As far as Justice Boatright's question concerning . . . have there been any changes to the detriment, since 1994, which is when the class that we have begins, there's been no change to the detriment of any current retiree."

"In 2005, contrary to what the Solicitor General said, they decided to change treating everyone identically with the COLA."

"In 2005, and it was based on a recommendation from the (Treasurer's PERA) Commission, and in our belief, based on the McPhail/Bills analysis that Attorney General Salazar had followed, they said in 2005, for future retirees, not for current retirees, but for future retirees, it's going to be a different COLA formula."

"So, already they had created a different COLA formula, for post-2005, people fully-vested after 2005, than for people fully-vested before."

"So, the idea that it was identical is just not correct."

"We believe that this court should continue as it did in Peterson to follow McPhail and Bills and apply the fully-vested COLA right."

On June 4, the periodical Chalkbeat covered the Colorado Supreme Court oral arguments in Justus v. State:

http://co.chalkbeat.org/2014/06/04/supreme-court-hears-both-sides-on-pension-fight/#.U5CSWWcU-15

From Chalkbeat:

"The size of future checks for thousands of retired teachers and other civil servants is now in the hands of five Colorado Supreme Court justices."

"The court heard an hour of oral arguments Wednesday morning in the case of Justus v. State, a lawsuit that challenges reductions in retiree cost-of-living payments by the Public Employees’ Retirement Association (PERA)."

"A 2010 law (Senate Bill 10-001), eliminated payments associated with cost of living that year and cut retirees’ annual benefit increases from 3.5 percent to 2 percent starting in 2011.  Future increases could drop below 2 percent under certain conditions.  (While the increases are commonly referred to as cost of living raises, they aren’t pegged to inflation or consumer prices.)"

"When the lawsuit was filed, plaintiffs estimated the COLA reduction could cost the typical retiree more than $165,000 over 20 years."

"The legal issue before the supreme court is whether retirees have a contractual right to the 3.5 percent COLA."

"Lawyers for each side presented starkly opposing views to the high court on Wednesday."

"The COLA 'is part and parcel of the pension,' said Richard Rosenblatt, who represents the retirees who filed the original suit.  A retiree’s main pension benefit together with the COLA 'clearly is a contract.'”

"But Sean Connelly, representing PERA, argued, 'There is no contractual right to a COLA fixed at a certain point.'  He urged the justices to overturn the Court of Appeals and accept the trial court’s dismissal of the case."

"Both Connelly and Solicitor General Dan Domenico, representing the state, noted that COLA payments have fluctuated several times over the last few decades, and that those changes have applied to retirees."

(My comment: "fluctuation" is not the issue, impairment is the issue.  An improvement of the PERA contract does not breach the contract, only a retroactive reduction of the COLA impairs the contract.)

Chalkbeat:

"Four of the five justices asked questions during the arguments, but their queries didn’t hint at any clear leanings on the case."

"The case originally was filed within days of SB10-001 becoming law.  A district court judge ruled in 2011 that the state and PERA could reduce the payments.  But the Colorado Court of Appeals ruled in 2012 that pensioners do have a contractual right to the COLA in effect at the time of retirement but gave the state a possible out.  The appeals court concluded the courts 'must still determine whether any impairment of the right is substantial and, if so, whether the reduction was reasonable and necessary to serve a significant and legitimate public purpose.'”

"There are no set deadlines for the court to rule on a case after oral arguments.  In a recent big public policy case, the Lobato v. State school funding suit, the court ruled a little less than three months after arguments were held."

"Chief Justice Nancy Rice announced that Justices Allison Eid and Monica Marquez would not be participating in Justus v. State. Justices typically don’t announce why they’re not participating."

(My comment: Justice Hood did not recuse himself in this case, Justus v. State, in spite of his past association with an attorney who worked on the case [Mark Gruseskin,] and although he was recused or removed in Colorado's Moreno "redistricting" case due to his past association with the attorney Grueskin who worked on the Moreno case.)

The Code of Judicial Conduct:

“A judge should disclose on the record information that the judge believes the parties or their lawyers might reasonably consider relevant to a possible motion for disqualification, even if the judge believes there is no basis for disqualification.”

Is the rationale for Justice Hood’s recusal or removal in the Moreno case public information?  Why would Justice Hood recuse himself in one case due a former association with case attorney Mark Grueskin, but not in another case due to a former association with case attorney Mark Grueskin?

MORE EXCERPTS FROM THE ORAL ARGUMENTS IN JUSTUS v. STATE:

Attorney Richard Rosenblatt began the oral arguments by noting that the taking of the contracted PERA COLA benefit was "per se" unreasonable.  He commented extensively on Colorado's primary on-point public pension case law, Bills, McPhail and Peterson.  He said that the Bills case dealt with a "limited vested" pension right and applied a "reasonable and necessary defense."  He said that the State of Colorado cannot impair a fully-vested public pension contractual right under the Contract Clause.  Rosenblatt stated that the Defendants believe that another case, DeWitt, changed the legal test for acceptable contract breach set forth in Bills and McPhail.  He commented on an important U.S. Supreme Court contract case, U.S. Trust (decided in 1977) and he noted that eleven years later, in 1988, the Colorado Supreme Court held that a fully vested public pension contractual right could not be impaired in its own Peterson case.

PERA retiree attorney Rosenblatt said that the State of Colorado must fulfill its end of the PERA pension bargain.  He noted that current workers in the Colorado PERA pension system have the right to leave that employment, and that they are not forced to live under the terms of their contracts with PERA.  Colorado PERA retirees on the other hand have completed the contribution of money and labor, constituting their consideration under the PERA pension contract. 

Richard Rosenblatt noted that an opinion of the Colorado Attorney General, supporting contractual public pension rights, agrees with the analysis in McPhail, Bills and Peterson.  He commented on the work of the Colorado Treasurer's Commission, that studied Colorado PERA public pension benefits a decade ago, and that found that the benefits of current PERA retirees could not be impaired.

(For the record, an August 17, 2005, press report of the Colorado Treasurer's Commission to Strengthen and Secure PERA:

Colorado Assistant Attorney General Heidi Dineen, Rocky Mountain News [in a four part series]: "'Everyone agrees you certainly can make changes for people you haven’t even hired yet,' said Heidi Dineen, a state assistant attorney general retained to explore the issue for the Commission to Strengthen and Secure PERA. 'On the other side of the spectrum is pensioners, getting their pension checks, you cannot take that away.'"

"[Colorado PERA General Counsel Greg] Smith said in his opinion that ‘other [non-Colorado] courts have set a high burden to meet the necessity threshold.'"

“His [Colorado PERA General Counsel Greg Smith's] briefing paper said 'there has never been a finding in Colorado that the state has reserved its power to make changes' in PERA's benefit structure.”

"The PERA board, however, relying on a legal opinion by General Counsel Greg Smith, thinks benefits cannot be cut for any active PERA member.  That means not just current retirees and workers who are eligible to retire but the brand-new employee who has put less than a year of contributions into the plan."

"Smith argued, however, that there is no precedent for declaring an actuarial emergency unless a pension fund has a serious cash liquidity problem."

http://m.rockymountainnews.com/news/2005/aug/17/span-classdeeplinksredpart-four-the-pera-puzzle/

Greg Smith, Colorado PERA’s General Counsel told us in a Denver Post article from November 30, 2008: “The attorney general’s opinion seems clear that fully vested employees — those retired or with enough years of service to retire — cannot see any benefits reduced, including cost-of-living adjustments.”
Link: http://www.denverpost.com/news/ci_11105271#ixzz0eEZGoxly)

Back to coverage of the Colorado Supreme Court oral arguments:

Attorney Rosenblatt also noted that Colorado PERA, in a 2008 publication, stated its agreement that the fully-vested pension benefits of PERA retirees could not be legally impaired.  Attorney Rosenblatt informed the Colorado Supreme Court that the PERA COLA "is not a free-standing benefit."  He said that the COLA is part of the pension benefit, "it's intertwined."

He noted that the COLA is simply a method by which the pension benefit retains its value over time.  He said that Colorado PERA retirees have relied on their accrued COLA benefits in planning their retirements and the remainder of their lives.

Transcribed excerpts from the oral arguments;

A question from Colorado Supreme Court Justice (Hobbs):

"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?"

(My comment: There are many problems with this statement/ question from Justice Hobbs, 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, obviously, 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, 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 is not at issue here.  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 taking of the Colorado PERA COLA benefit in perspective: [54.5% to 105.2%] – 40-year range of the Colorado PERA actuarial funding ratio [AFR], [source, Colorado PERA.]; 78% – average PERA AFR over the 40-year period; 68.9% – PERA AFR at time of the taking of the contracted 3.5 % COLA benefit; 9.1% – difference between the PERA AFR at time of COLA taking and the 40-year average PERA AFR; 11.1% – difference between PERA AFR at the time of the COLA taking and an 80% AFR level considered “well-funded” by Fitch Ratings; 72% – average AFR at the end of 2009 for 57 state retirement systems reporting to Wilshire Associates; 3.1% – difference between the Colorado PERA AFR and Wilshire Associates average AFR for 57 state retirement systems at time of PERA COLA taking; 2.16 – percent of Colorado state and local government spending dedicated to public pension support in 2008 [Census Bureau, NASRA]; 2.89 – average percent of state and local government spending dedicated to public pension support among the states in 2008; 5.55 – highest percent of state and local government spending dedicated to public pension support among the states in 2008 [Nevada]; #32 – Colorado 2008 rank among the states in taxpayer support for public pensions; [For the entire decade of the 1970s the PERA AFR was lower than it was at the time of the taking of the contracted COLA, yet there was no campaign to breach retiree pension contracts.]

It is the responsibility of the Colorado Supreme Court to determine if payment of the PERA COLA benefit is a contractual obligation of Colorado PERA, not to use other people's money to pay the labor costs of Colorado state and local governments.

I was surprised at Justice Hobbs' statement in the oral arguments:

"To me, you're arguing for a divestment of legislative authority here . . ."  I ask, is it appropriate for an appellate judge to state a position in a case prior to deliberations in the case?  [Particularly, in a case where the plaintiffs have had no opportunity to present the facts of the case to a jury?  The facts of the case have not yet been discovered.]

From his comments, it sounds like Justice Hobbs has already made up his mind that there is no contract for the PERA COLA benefit.  It sounds this way because, if the PERA COLA is a contractual obligation, there is no such claimed "divestment of legislative authority."  The Legislature has no authority to violate the Contract Clause.)

Attorney Rosenblatt's response to this question posed by Colorado Supreme Court Justice Hobbs:

"Because, for this particular right, just like the base pension, there is a contract that provides that they will continue it, that they were promised this."

"We're talking about people who have fulfilled their end of the bargain, have left, they're gone, they're retired.  They have now completed their career.  They did everything they were asked to do under their contract with the state."

"There's nothing in the Legislature that guarantees anyone a pay raise every year during the term of their employment, not even these retirees when they were employed."  "But, there is something there that guarantees them a base pension under a certain formula, and a COLA."

(My comment: August 8, 2012, Douglas Greenfield: “The theory behind that is that a pension that has a COLA is the equivalent of a fixed pension . . . that you could just have a higher fixed pension and no COLA . . . and is just a method by which you are providing the benefit.”  Greenfield participated in a panel discussion on hosted by the National Conference of State Legislatures.  The panel discussion was titled: “How Much Can States Change Existing Retirement Policy?”

http://www.ncsl.org/issues-research/labor/how-much-can-states-change-existing-retirement.aspx)

Question from a Supreme Court Justice:

"A number of times you've talked about promises, and then sometimes you've talked about fulfilling a bargain."  "Do you think for purposes of the Contract Clause, there is a difference between something that in normal contract terms we would distinguish as promissory estoppel, or relying to your detriment on a promise, from actually being a contract in which there is an exchange of promises?  And the reason I ask that is because the argument pegs the COLA to the point at which retirement occurs, is that more implicitly an argument that the COLA should not be allowed to be changed after that point, because the employee has relied to his detriment in choosing to retire at that level, rather than promising to give something up in exchange for the promise?"

Attorney Rosenblatt's response:

"Well, we hadn't made the promissory estoppel argument, as a detrimental reliance argument, but I will say that in McPhail and Bills they . . . talked about, as fully-vested, you have fulfilled all of the conditions of the promise, they then found it contractual because of the mandatory language . . . they found a contract, the contract is 'you shall receive this escalator clause.'  'You shall be entitled to it' is the exact language."

(My comment: Colorado has traditionally followed the contractual "California Rule" of public pension jurisprudence.)

Question from a Colorado Supreme Court Justice:

"So, can the worker, the employee, be said to have given something in exchange to the state, in order to receive that retirement benefit?"

Richard Rosenblatt:

"Every contract has consideration, and the consideration that the employee gave was X number of years . . . of service, and X amount of contributions toward the plan, that's their consideration."

(My comment: August 2, 2010, Ritter Administration Letter to GASB on contractual public pension obligations:

“COSC agrees that an obligation exists since the government entity has entered into a duty, contract, or promise to provide compensation in the form of benefit payments during retirement; and furthermore, we agree that this obligation is a present obligation to the extent that the benefits owed have already been earned through past services, and are legally enforceable once vesting provisions have been met.”

“Because the exchange transaction which gave rise to this present obligation was made between the employer and the employee who is also a member of the pension plan, a reduction in member benefits [such as COLAs], or an increase in required employee contributions both serve to change the net economic benefit to the employee that was entered into at the time of the exchange transaction agreement.”

“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.”

http://www.gasb.org/cs/ContentServer?site=GASB&c=Document_C&pagename=GASB%2FDocument_C%2FGASBDocumentPage&cid=1176157387791)

Question from a Colorado Supreme Court Justice:

"You haven't talked much about the DeWitt case, and your opponents take the position that DeWitt really is the case that controls.  What's your position with respect to that?"

Richard Rosenblatt:

"Let's be clear, DeWitt involved an insurance contract, it wasn't (a case) where the state is a contracting party."

"DeWitt didn't enunciate a new test on the overarching issue, it simply articulated for the first time in this court, what the three parts of determining . . . that applying U.S. Trust."

"DeWitt is not new law.  DeWitt is just applying what's been the long-term law of the state and of the United States Supreme Court."

At 27 minutes into the oral arguments Sean Connelly representing Colorado PERA began his commentary.  He started with the second question (of three issues) facing the court, whether plaintiffs have their claimed contractual right to the PERA COLA benefit.

Sean Connelly said that the defendants support the finding of a contractual right to the COLA in the Bills and McPhail cases.

Sean Connelly:

"In evaluating whether the contract right exists, the court is to begin with the presumption that Legislatures, in Justice Hobbs words, do not divest themselves of the power to respond to changed circumstances in the future."

(My comment: This statement by Sean Connelly, regarding divesting legislative authority calls to mind a recent Florida court decision in a public pension case:  “This court cannot set aside its constitutional obligations because a budget crisis exists in the state of Florida.  To do so would be in direct contravention of this court’s oath to follow the law.”  “To find otherwise would mean that a contract with our state government has no meaning.”  “Courts, though, 'sit to determine questions on stormy as well as calm days,' and the Constitution was upheld during the Great Depression.”)

Sean Connelly:

"Based on the language and surrounding circumstances (in Bills and McPhail) the court properly held that the pension and the right to the escalation there, was a vested right that could not be impaired, absent sufficient justification."

"The vested benefit under PERA is the right to the initial monthly benefit, and not, we submit, the right to the annual increases under a specific formula."

(My comment: 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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf)

Question from a Colorado Supreme Court Justice at 30 minutes into the oral arguments:

"Is DeWitt consistent or inconsistent with Bills and McPhail?"

Sean Connelly:

"I think that it's consistent with the result.  It's consistent with the result of everything else.  In our view, under Bills and McPhail the result would be exactly the same that there was a protected benefit and there was no overriding justification that could have justified that impairment."

"Where there might be some tension with it, is when can that right be impaired?"

(My comment: Sean Connelly notes that the position of the City of Denver in Bills/McPhail was that the pension was a mere "gratuity."  The Colorado Constitution includes an anti-gratuity clause, therefore the PERA COLA cannot be a gratuity.)

Question from a Colorado Supreme Court Justice:

"Do you think that tension exists or has to be resolved in this case?"

Sean Connelly:

"I don't think it has to be resolved."  "I think the dispositive issue here can be 'is there a contract right to a COLA fixed in formula.'"

"I'd like to argue further why there is no contract right."

Sean Connelly at 34 minutes into the oral arguments:

"DeWitt, as Mr. Rosenblatt points out, was a private contract, but it cited U.S. Trust which was a public contract, and the Supreme Court and this court historically have not distinguished between private and public contracts."

(My comment: In 1977, the U.S. Supreme Court [in U.S. Trust Co, 431 U.S.] clarified that state attempts to impair their own contracts, ESPECIALLY FINANCIAL OBLIGATIONS, were subject to greater scrutiny and very little deference because the STATE'S SELF-INTEREST IS AT STAKE.  As the court bluntly stated:
“A governmental entity can always find a use for extra money, especially when taxes do not have to be raised.  If a state could reduce its financial obligations whenever it wanted to spend the money for what it regarded as an important public purpose, the Contract Clause would provide no protection at all . . . Thus, a state cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors.")

Sean Connelly:

"This is economic legislation and there is no basis . . . for straightjacketing the Legislature from changing to, changed circumstances."

"These are specifically the kinds of decisions that must be left to a Legislature if they can make the showing of reasonableness and necessity as to the need for impairing any contract."

(My comment: The Legislature, the state, and PERA have not made any showing of reasonableness and necessity due to the fact that this case has never gone to trial.  I hasten to add that Colorado PERA's attorneys have expressed their desire that the case not go to trial.)

Question from a Colorado Supreme Court Justice to Sean Connelly:

"So your position is that it's the rate increase that is not a contract, not whether the COLA is a contract?"

Sean Connelly:

"Yes, that is my position, that's my position if that's the only question presented here."

(My comment: Pause for a moment and consider just how ludicrous this statement is.  Sean Connelly argues that the PERA COLA benefit is a contractual obligation, yet it may legally be reduced to ZERO.  In accordance with his view of contractual obligations Connelly should have no problem with Colorado PERA paying him one dollar for his legal services under his employment contract.  If Connelly's contract requires that he be paid $50,000 for his legal services, the fact that the contract specifies this amount of compensation is apparently of no relevance to Sean Connelly.  He would be happy with one dollar, and consider himself to have been provided "compensation" under his contract.)

Question from a Colorado Supreme Court Justice at 40 minutes:

"The contract here includes an adjustable COLA that the Legislature sets, it can go down or up, but when that is done for that particular increment of a monthly paycheck then it becomes part of a contract."

Sean Connelly:

"Certainly current workers are contributing more, working longer, and retiring ultimately with less than any of these current plaintiffs."

"Even when there is a state contract being impaired, this is still economic legislation."

"In this case, the state was acting to respond to a crisis and at the end of the day the PERA fund is more healthy now because more money is being put into it."

(My comment: Sean Connelly's statement that current workers are working longer for their PERA benefits, in my opinion, misleads the Supreme Court.  In 2010, SB10-001 did not increase the years of service needed by current workers to qualify for a PERA pension benefit.  How can he possibly not know this?

Also, we have seen that the Colorado Legislature is the author of the downturn in Colorado PERA's financial condition, due to a failure to pay the pension system's ARC for a decade, and the preference of politicians to use state resources for discretionary purposes such as corporate welfare.  Finally, it is obvious that when the State of Colorado escapes its contractual financial obligations, it has more money.) 

Colorado Solicitor General Dan Domenico representing Governor Hickenlooper and the State of Colorado began his comments at 44 minutes into the oral arguments:

"The plaintiff's case is wrong . . . as a matter of the purposes and functions of a COLA, a cost-of-living adjustment."

(My comment: Dan Domenico apparently lacks an understanding of the history of the PERA COLA benefit.  When the PERA COLA benefit was created, PERA officials took the position that the 3.5 percent COLA rate would approximate PERA's long-term expectations of inflation.

March 24, 1993 (1:32 PM – 2:28 PM)

Rob Gray, Director of Government Relations, Colorado PERA:

“The (CPI up to) 3.5 percent increase is a reasonable level.”  “It will probably come close to what the long-term inflation rate is.”

Rob Gray, 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.])

Support the rule of law in Colorado at saveperacola.com.

Anticipating Colorado PERA’s Next Deception: ADC Supersedes the ARC.

Task Force of Local and State Government National Associations in 2013:

"The most important step for local and state governments to take is to base their pension funding policy on an actuarially determined contribution (ADC)."

http://icma.org/en/icma/knowledge_network/documents/kn/Document/305118/Pension_Funding_Guide_Brief

Public pension retirees in most states can rely on the trustees of their pension plan, or the administrators of their plan to defend their contractual pension rights.  Since Colorado PERA trustees and administrators are thick into the attempt to take the property of Colorado PERA retirees through the 2010 Colorado bill, SB10-001, Colorado PERA retirees must defend their own rights and property in the courts.

Given the track record of attempted deception by Colorado PERA officials (deception of PERA annuitants and Colorado courts) during PERA's political and legal campaigns to escape PERA contractual pension obligations we can expect that Colorado PERA officials will also attempt to use coming changes in federal public pension accounting standards to obfuscate and mislead.

Colorado PERA's lawyers and administrators are grasping at straws in developing arguments to support the breach of PERA pension COLA contractual obligations desired by their client, accordingly it is only prudent that we expect Colorado PERA officials to use the ongoing change in federal public pension accounting emphasis as a vehicle for further deception.  That is, another "straw" Colorado PERA's lawyers will reach for.

The federal public pension regulatory agency, GASB, has changed its accounting standards relating to the reporting of public pension liabilities.  This rule change is currently being implemented by pension plans in the United States.  Rather than employing its traditional emphasis on pension funding (i.e., the ARC, "actuarially required contribution") the federal public pension regulatory agency, GASB, has issued new rules that will emphasize the reporting of "net public pension liabilities" by public pension systems such as Colorado PERA.

Over the last few decades the public pension ARC metric has served as the primary means of measuring public pension plan funding discipline, i.e., the extent to which a pension system's plan sponsors are responsibly contributing to pension trust funds in amounts sufficient to meet the plan's contractual obligations over time.  As we have seen, the Colorado PERA pension system has skipped out on paying its full public pension bills (ARC) for the last twelve years.

To "fill the gap" in the development of public pension funding plans that will be created by GASB's new rules, a group of state and local government national associations has recommended that the metric ADC ("Actuarially Determined Contribution") replace the former pension funding metric ARC ("Actuarially Required Contribution.")

In 2013, the Task Force recommended that the "ADC" Supersede the "ARC" in public pension plan funding:

ADC: "Actuarially Determined Contribution."
ARC: "Actuarially Required Contribution."

In light of the level of deceit that we have seen from Colorado PERA officials in the last five years, I fully expect Colorado PERA's lawyers to attempt to use GASB's change of funding discipline emphasis as a cover for the failure of PERA plan sponsors to meet their pension obligations over the last twelve years.

Their argument may be along the lines of "Well, GASB has apparently found that the ARC is not important, so it doesn't matter that the Colorado PERA pension system has not paid the PERA system ARC (bills) for twelve years."  As we have seen, both Colorado PERA Executive Director Greg Smith and former Executive Director Meredith Williams have (when caught off-script) condemned the Colorado Legislature's failure to pay its pension bills over the last decade.

In this article I highlight some of Colorado PERA's previous deceit, explain my rationale for expecting Colorado PERA officials to embrace this new line of deception, and later in the article provide background information regarding the GASB rule change and the Task Force recommendation of the ADC.

COLORADO PERA'S ONGOING ATTEMPTS TO DECEIVE:

Why should we expect Colorado PERA administrators and lawyers to also use the GASB rule change in yet another attempt to deceive?  In the next few pages I will provide examples of deception from the PERA political campaign to take the PERA COLA benefit, and examples of PERA deception in a PERA Supreme Court brief.  Rest assured that where Colorado PERA officials see a chance to deceive, they will seize upon it.

Here are a few examples of Colorado PERA deception that occurred during PERA's political campaign to break PERA pension contracts in 2009/2010: PERA's deceptive "2/2/2" marketing campaign (under this marketing scheme PERA employers relinquish only a fraction of a percent of future revenues, while PERA retirees relinquish a third or more of the value of their pension contracts); the failure of PERA officials to note that the PERA COLA is an "automatic" public pension COLA benefit, as opposed to an "ad hoc" benefit; and attempts by PERA officials to exaggerate the decline in the funding ratio of the Colorado PERA pension system by replacing the "actuarial funding ratio" that Colorado PERA officials have used historically (this is the funding ratio in SB10-001) with a "market-based" funding ratio.

I also see deception in Colorado Legislative Leadership's failure to submit an interrogatory to the Colorado Supreme Court in 2009, in Legislative Leadership's acquiescence to the scheme to "outsource" legislative debate of public pension policy in 2009, and in the subsequent failure of Legislative Leadership to appoint an interim study committee to examine PROSPECTIVE, legal pension reform options in 2009.  I see deception in the lack of public and PERA annuitant access to the consideration, recommendation and pricing of PERA "reform" options in 2009.

I see deception in the list of 28 reform options that was distributed by PERA officials during their "Listening Tour."  Only two of the options listed required those who actually owe the PERA pension debt to pay their debts.

I believe that PERA's intent to deceive resulted in an initial decision of the Denver District Court that failed to even mention Colorado's long-standing public pension case law, Bills and McPhail.

In 2012, I wrote an article that exposes many of the deceptions of Colorado PERA administrators and lawyers in a PERA Supreme Court brief including: deceptions relating to: the "reasonable expectations" of Colorado PERA retirees; the false claim that the taking of the COLA was "the last option," while the taking was certainly premeditated; the false claim that PERA retirees have a contractual right to the PERA "base benefit (but, not to the PERA COLA benefit) while both are set forth in identical language in Colorado statutes; Colorado PERA's attempts to mislead regarding Colorado public pension case precedent; attempts to mislead regarding "irreducible" versus "unchangeable" pension COLAs; the deference courts give to state governments seeking to escape their own contractual obligations; claimed support of retirees for the breach of their own pension contracts; the need for a 100 percent funded ratio in SB10-001 when an 80 percent funding ratio for public pensions is considered to be "well-funded"; the implication in PERA publications that current employees must work longer under SB10-001 (they don't); the implication that when courts uphold the law in Colorado and protect the Constitution, the courts threaten public pension funding status; the fear mongering that Colorado PERA could "run out of money," while many public pension systems have operated on a "pay-as-you-go" basis as recently as the 1970s (a 2006 Federal Reserve paper, by Ronald A Wirtz, notes that public pension funded ratios in the 50 to 60 percent range were typical in the 1970s); the many "market-based" versus "actuarial funding ratio" deceptions; and finally the ridiculous assertion of Colorado PERA's attorneys that this case is "not about the right to COLAs."

Recall that in their publications Colorado PERA officials note that "actuarial funded ratios” in the 60's do not constitute a "crisis":

Colorado PERA Update – [Spring 2006 – page 4]: “See that PERA’s [actuarial] funded status was lower [61.5 percent] 30 years ago than what it is now. You may recall that there was no perceived “crisis” in PERA’s funded status in 1975.”

Colorado PERA News Archive for 2004: PERA's [actuarial] funded level was below 60 percent in 1970, and there was not a perceived crisis in PERA’s financial health.”

A more complete analysis of deception in the Colorado Supreme Court PERA brief is available here:

http://coloradopols.com/diary/18952/colorado-pera-attempts-to-decieve-the-colorado-supreme-court

Here are a few examples of how Colorado PERA attempts to mislead in their Colorado PERA Supreme Court Brief, an excerpt from the Colorado PERA brief:

“Plaintiffs could have no reasonable expectation that ever-changing COLA formulas would freeze, for the first time, when they retired.”

(My comment: PERA attorneys, EVEN YOUR CLIENT HAS THESE EXPECTATIONS . . . THAT THE COLA BENEFIT IS AN ENFORCEABLE PUBLIC CONTRACT!  If Colorado PERA, your client, has these expectations, why should PERA pensioners not also have these expectations?  Colorado PERA attorneys, please take a minute to read the words of your client provided in testimony to the General Assembly’s Joint Budget Committee.  Your client put it in writing that PERA pensioners have a contractual right to their COLA benefits.  Colorado PERA administrators believe that PERA pensioners have such a contractual right . . . that belief goes beyond a “reasonable expectation.”

Colorado PERA in a written document, to the Colorado General Assembly’s Joint Budget Committee on December 16, 2009 states that the PERA COLA benefit IS a contractual obligation of PERA, “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.”

Link:
http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf)

From the Colorado PERA Supreme Court Brief:

“But this mandatory language bound the PERA administrator while the statutes were in effect-not future legislatures.”

(My comment: Colorado PERA attorneys, your client doesn’t believe your argument that the statutes only bind the “pension administrator.”  Your client has testified that the General Assembly cannot decrease the contracted COLA . . . THAT THE GENERAL ASSEMBLY IS BOUND, not the "pension administrator."  Did this not come up in your meetings with your client?  Your client’s testimony is on the record, it has been recorded at the Legislature.  It is not going to simply disappear.)

From the Colorado PERA Supreme Court Brief:

“The General Assembly considered readjusting the COLA for retirees as the last option, only after it became evident that no other viable contribution and benefit changes could prevent the pension fund from running out of money.”

(My comment: First we should note that: "In the 1970s, it was not uncommon for state and local governments to fund their pensions on a pay-as-you-go basis."  [Pension Funding: A Guide for Elected Officials, Report from the Pension Funding Task Force 2013.]

http://www.nasact.org/washington/downloads/announcements/03_13_Pension_Funding_Guide.pdf

In the 1970's it was not uncommon for U.S. public pension systems to be as PERA's lawyers write "out of money," and yet still meeting their contractual obligations out of current revenues.  Greg Smith has been quoted stating that, in accordance with his legal briefs, actuarial necessity [which in any event applies only to pension benefits that are partially vested] only occurs when pension plans have no assets.  Further, state governments cannot petition a court for bankruptcy under federal law.

Colorado PERA attorneys, if the taking of the PERA COLA benefit was the "last option," why was the Colorado PERA Board of Trustees shopping for a legal opinion (Dubofsky) to justify the COLA taking in early 2009, before the purported consideration of PERA "reform" options even began?  As you know, I believe that the General Assembly reduced the contracted PERA COLA benefit from retirees [thus breaking pensioner contracts] as a FIRST OPTION.  I believe that the General Assembly created a façade of deliberation to mask a predetermined attempt to break the PERA pension COLA contractual obligation.  Dozens of viable “less drastic” alternatives to pension contract breach, that were ignored by Colorado PERA administrators, have been documented.)

From the Colorado PERA Supreme Court Brief:

“The (District) court held: ‘While Plaintiffs unarguably have a contractual right to their PERA pension itself . . .’

(My comment: As I have noted previously, I am curious as to how the Denver District Court arrived at this conclusion that “plaintiffs unarguably have a contractual right to their PERA pension itself” without citing either the McPhail or Bills cases in its decision?  On what authority did the Denver District Court base this determination?  Was it pulled out of thin air?)

In the Colorado PERA Supreme Court Brief, PERA’s attorneys write in regard to the pension cases McPhail and Bills: “Those dated cases are distinguishable.”

(My comment:  Let’s get this straight for the record: Colorado PERA’s attorneys believe that the Colorado Supreme Court decisions in McPhail and Bills that address the contractual nature [under the COLORADO constitution’s Contract Clause] of post-retirement benefit increases for retired public employees who have vested rights in Colorado public pensions are “distinguishable,” and that the Supreme Court should not rely on their own authority.

Instead, Colorado PERA’s attorneys argue that the Colorado Supreme Court should rely on a case [DeWitt] that addressed a “statutory revocation of a testator’s former wife’s interest in a life insurance policy” based on FEDERAL Contract Clause authority, a case in no manner involving “vested rights to employee benefits,” a case concerning the “retroactive application of a Uniform Probate Code provision which automatically revoked the designation of a divorced spouse as a life insurance beneficiary.”  Got it?)

THE RECOMMENDED "ACTUARIALLY DETERMINED CONTRIBUTION" (ADC):

The Pension Funding Task Force recommends that the ADC "fill the gap" in funding guidance left by GASB's latest rule change.

On its website, the International City/County Managers Association (ICMA) has a page relating to public pension funding.

http://icma.org/en/icma/priorities/public_policy/policy_priorities/pension_funding

This page includes a link to the publication: Pension Funding: A Guide for Elected Officials published by a Task Force of local and state government national associations.

A few excerpts from the ICMA page:

"The Task Force also released, Pension Funding: A Guide for Elected Officials, with its recommendations for pension funding policies.  The Pension Funding Task Force recommends that governments retain an actuarially determined annual required contribution (ARC) for budgeting, policy, and planning purposes.  The new GASB accounting standards no longer address pension funding and require local governments to report Net Pension Liability."

"Members of the task force include: ICMA, the National Governors Association, National Conference of State Legislatures, The Council of State Governments, National Association of Counties, National League of Cities, U.S. Conference of Mayors, National Association of State Auditors, Comptrollers and Treasurers; Government Finance Officers Association; National Association of State Retirement Administrators and the National Council on Teacher Retirement."

(Note that former Colorado PERA Executive Director Meredith Williams is now leading the National Council on Teacher Retirement.)

"ICMA and the Pension Funding Task Force recommend that state and local governments adopt a pension  funding policy that is based on an actuarially determined annual required contribution.  The policy should address three core elements: (1) actuarial cost method; (2) asset smoothing; and (3) amortization policy."
The ICMA highlights a few well-run public pension systems:  "Some pension plans have remained better funded than others in the aftermath of the economic downturn.  Here are three well-funded pension plans and their characteristics: City of Kalamazoo, Michigan Employees’ Retirement System, Illinois Municipal Retirement Fund, Denver Employees Retirement Plan."

http://icma.org/en/icma/priorities/public_policy/policy_priorities/pension_funding

Chicago Tribune on the Illinois Municipal Retirement Fund:

"'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."

"'We know that winter comes every year, and we have to plan for downturns.  We always remember that we're in this for the long term.'"

"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.'"

http://articles.chicagotribune.com/2014-05-18/opinion/ct-oped-zorn-0518-20140517_1_pension-crisis-state-pension-pension-changes

THE PUBLIC PENSION FUNDING GUIDE:

Below, I provide a few excerpts from the public pension funding guide:

"In the 1970s, it was not uncommon for state and local governments to fund their pensions on a pay-as-you-go basis."
(Pension Funding: A Guide for Elected Officials, Report from the Pension Funding Task Force 2013.)

http://www.nasact.org/washington/downloads/announcements/03_13_Pension_Funding_Guide.pdf

"This guide provides key facts about public pension plans, why it is essential to have a pension funding policy, a brief overview of the new GASB standards, and which issues state and local officials need to address.  The guide also offers guidance for policy makers to use when developing their pension plan’s funding policy."

"Paying the full ARC has been an important measure of whether or not a pension plan is on track to fund its pension promises."

"This is a significant change for government employers because the ARC historically served as a guide for policy mak¬ers, employees, bond rating agencies and the public to determine whether pension obligations were being appropriately funded."

"Because the GASB’s new standards focus entirely on how state and local governments should account for pension liabilities and no longer focus on how employers fund the costs of benefits or calculate their ARC, a new source of guidance is needed."

Filling the Gap in Funding Guidance:

"To help fill that gap, the national associations representing local and state governments established a Pension Funding Task Force (Task Force) to develop policy guidelines."

"The 'Big 7' (National Governors Association, National Conference of State Legislatures, Council of State Governments, National Association of Counties, National League of Cities, U.S. Conference of Mayors, and the International City/County Management Association) and the Government Finance Officers Association established a pension funding task force in 2012.  The National Association of State Auditors, Comptrollers and Treasurers; the National Association of State Retirement Administrators; and the National Council on Teacher Retirement also serve on it.  The Center for State and Local Government Excellence is the convening organization for the Task Force."

"The Task Force has monitored the work of the actuarial community and the rating agencies, as well as considered recommendations from their own organizations to develop guidelines for funding standards and practices and to identify methods for voluntary compliance with these standards and practices."

"A sound pension funding policy should address at least the following three core elements of pension funding in a manner consistent with the policy objectives: Actuarial cost method; Asset smoothing method; and Amortization policy."

"The actuarially determined ARC, the parameters for determining the ARC, and the percentage of the ARC the employer actually paid should be disclosed and reassessed periodically to be sure that they remain effective."

"The most important step for local and state governments to take is to base their pension funding policy on an actuarially determined contribution (ADC).  The ADC should be obtained on an annual or biannual basis."

http://icma.org/en/icma/knowledge_network/documents/kn/Document/305118/Pension_Funding_Guide_Brief

Support public pension contractual rights at saveperacola.com.

Tennessee Legislature Models Responsible Public Pension Management for Colorado PERA and the Colorado Legislature.

In Colorado, the reward for a lifetime of public sector service is a retirement spent in litigation to force your former employer to meet its contractual obligations, and in countering that employer's deception.  Welcome to Corruptible Colorado.

Although residents of the State of Tennessee lack the wealth and high incomes of Colorado residents, they have confidence that their state government will act responsibly and honor its contracted debts.

The table at the link below reveals that the State of Colorado had the 13th highest per capita income in the nation in 2012 (I have seen reports of Colorado ranking tenth in the nation in per capita income) while the State of Tennessee ranks 34th in the nation in per capita income.

http://bber.unm.edu/econ/us-pci.htm

Thus, we have this situation in which one of the poorer states in the nation is demonstrating for one of the richer states in the nation how to pay state bills, honor state debts, and responsibly manage a public pension system.

The Tennessee Legislature has recently enacted a bill that requires governmental sponsors of public pension plans in the state to pay their pension bills on time.  As we have seen, the Colorado Legislature has failed to pay its full public pension bills ("actuarially required contributions," ARC) for the last twelve years and has accordingly racked up an impressive public debt.  Under the terms of its new legislation, the Tennessee Legislature will now insist on payment of public pension ARCs by pension plan sponsors in Tennessee, while the Colorado Legislature continues in its attempt to break Colorado PERA public pension contracts and "clawback" compensation that has already been earned by Colorado PERA pensioners.

It is apparent that something is rotten in the State of Colorado, and that a backroom "deal" was "cut" by Colorado politicians, Colorado PERA officials, and lobbyists in 2009 to pay off state debts with money taken from elderly pensioners.

In 2009, a group of Colorado PERA officials, some Colorado politicians, special interest groups acting in their own financial interest, and lobbyists all sat in a backroom and plotted to break Colorado PERA pension contracts through deception.  They accomplished this by taking the pension reform debate outside of the normal, open legislative process (having their lobbyists place this language into a bill at the end of the 2009 session) by running a statewide campaign to break Colorado PERA pension contracts (that was intended to demonstrate the support of Colorado PERA pensioners for the breach of their own pension contracts) and by assembling a team of 27 lobbyists to push the contract breach proposal on sitting state legislators.  Like it or not Coloradans, this is your state government in action.

The bill breaking Colorado PERA pensioner contracts was signed into law by Governor Ritter in 2010.  Naturally, Colorado PERA retirees sued to prevent the use of their property to keep taxes low in Colorado, and to free up public funds for politician's favorite programs (including annual gifts of billions of dollars in corporate welfare.)

Since current Colorado PERA pension administrators are complicit in underfunding the PERA pension plan, mismanagement of the pension plan, and in the attempted breach of Colorado PERA plan sponsors' contractual obligations, the burden of defending contractual public pension rights in Colorado falls on the shoulders of Colorado PERA pensioners.

Now that the Colorado PERA retiree lawsuit, Justus v. State, has arrived at the Colorado Supreme Court, the Colorado Legislature and its pension administration arm, Colorado PERA ask the court to bless their breach of pension contracts.  Further, the State and PERA ask that the Colorado Supreme Court go so far as to deny Colorado PERA retirees their right to a jury trial, since a trial would expose Colorado PERA's legacy of pension mismanagement.

In the past, Colorado PERA pension administrators have made numerous statements (and have written and cited legal briefs supporting Colorado public pension contracts.)  Prior to agreeing to the "deal" to break PERA pension contracts, PERA officials admitted to pension mismanagement:

March 11, 2009:

Colorado PERA officials place blame on the Colorado General Assembly for creating the latest PERA financial downturn: “Other notable factors (for the downturn in PERA’s fiscal position) include employers not contributing the actuarially determined contribution rates, the sale of purchased service credit at rates below actuarial costs, and the raising of benefits in the late 1990’s coupled with decreasing employer contributions.”

http://www.kentlambert.com/Files/PERA_Response_Pt_1.pdf

Even after agreeing to the deal to attempt the PERA COLA contract breach, Colorado PERA officials admitted that the PERA COLA was their contractual obligation:

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.”

http://www.kentlambert.com/Files/PERA_JBC_Hearing_Responses-12-16-2009_Final.pdf

Over the course of the last twelve years, Colorado PERA pension administrators like former Executive Director Meredith Williams and current Executive Director Greg Smith could have acted responsibly by regularly and emphatically insisting that the Colorado Legislature pay its public pension bills to meet state contractual obligations.  Instead, Greg Smith and Meredith Williams held their tongues.  They allowed members of the Colorado Legislature to labor under the delusion that simply establishing insufficient Colorado PERA contribution rates in statute was the equivalent of actually meeting the pension system's obligations under existing PERA pension contracts.

Greg Smith and Meredith Williams sat back and said nothing as Colorado state legislators systematically underfunded the PERA pension system, driving the pension system's funding ratio down from 105 percent in 2001 to 69 percent in 2009.

Only on rare occasions have we heard Greg Smith or Meredith Williams mention the public pension "ARC" in public, Meredith Williams' comments on February 23, 2012 to the Colorado House Finance Committee (relating to the Legislature's historical underfunding of its PERA pension obligations, i.e., the failure of the Legislature to ensure payment of the ARC through appropriate  statutory contribution rates, or supplemental appropriations):

"We've had a significant problem over the years, in that . . . contributions, payments by (PERA) employers into PERA have been kind of the last thing in the budget building process, and we have not made the required payments.  Unfortunately, in our line of work, where we're involved in compounding shortfalls grow, particularly when the shortfalls continue year after year after year."

In 2009, in an unusual off-script moment, Colorado PERA's former General Counsel (and current Executive Director) Greg Smith condemned the Colorado General Assembly's failure to meet PERA pension system ARC obligations.  Greg Smith's moment of candor occurred prior to legislative enactment of the 2010 PERA COLA contract breach in SB10-001.  On August 11, 2009, at the Denver meeting of the Colorado PERA “Listening Tour” Colorado PERA’s General Counsel Greg Smith blamed the Colorado General Assembly for the decline PERA’s actuarial funded ratio:

We have not been paid what’s called the actuarially required contribution.” "We’ve not been receiving that full contribution in any of our divisions for many years . . . seven years to be specific.”

http://www.copera.org/pera/about/listeningtour.htm

Having failed to lead, having failed to take responsibility, having participated in the mismanagement of the Colorado PERA pension system, these Colorado PERA officials now seek to cover their tracks through breach of public pension contracts.  In 2010, rather than acting as professional public pension administrators, they endorsed a scheme advocated by self-interested groups and lobbyists to rectify a tradition of pension mismanagement by the Colorado Legislature and the Colorado PERA Board of Trustees.  They suggested that other U.S. pension systems follow their example of contract breach.

Having shirked their duty, Greg Smith and Meredith Williams decided to compound their errors by agreeing to go along with this scheme to take money (fully-vested PERA pension benefits) from elderly Colorado pensioners.  Going forward, Colorado residents, voters, judges, and elected officials should know the character of the state we live in.  Colorado state employees will shirk responsibility for their past mismanagement, they will misrepresent, and they will hire attorneys to attempt to deceive courts in legal briefs.  They will deceive in order to maintain Colorado's political status quo through which billions of dollars in state and local government resources are sent to corporations via tax exemptions and subsidies.

Shortly after SB10-001 (the bill breaking Colorado PERA pension contracts) was signed into law by Governor Ritter, Meredith Williams began a search for a new job.  He failed to land a position for which he was a finalist in Texas, and ultimately escaped the mess he helped create in Colorado when he found work in California.  Apparently, he wanted no part of the aftermath of this Colorado PERA self-inflicted legal fiasco.

The Tennessee Legislation, (from chattanoogan.com):

"Governor Bill Haslam has signed into law a bill that officials said is designed to assure Tennessee local government entities fully pay the annual payment to their public employee pension plans in order to protect the financial stability of local governments and to protect workers’ pensions."

"The legislation, called the first of its kind in the nation, was sponsored by Senate Majority Leader Mark Norris (R-Collierville) and Rep. Steve McManus (R-Memphis) and written by state Treasurer David Lillard, Jr."

"The new law, called the Public Employee Defined Benefit Financial Security Act of 2014, will require all local government entities that operate pension plans in Tennessee to pay the payments recommended by their actuaries each year.  These payments, formerly known as the Annual Required Contribution or ARC, are the amount of money actuaries determine is needed to annually fund in a financially-sound manner the benefits provided by public pension plans."

"Under the new law, local government entities that have not been paying 100 percent of their ARC will have six years to gradually ramp up their yearly payments.  If local government entities fail to pay 100 percent of the ARC after that phase-in period, the state will have the authority to withhold money it provides to those governments and use it to make the required payments."

"Previously-existing law had long required that the approximately 500 local government entities in the Tennessee Consolidated Retirement System, or TCRS, pay 100 percent of the yearly ARC. Local government entities in TCRS have also long been subject to possible state intercept of funds if they failed to pay 100 percent on the ARC.  As a result, TCRS is ranked by various organizations as having one of the best funded pension plans in the nation.  This legislation simply applies these best practices to local government pension plans that are not already in TCRS."

“'Each year that a local government doesn’t fully fund its ARC, it creates a liability that will eventually have to be paid,' said Representative McManus, the bill’s House sponsor.  'Those liabilities add up over time.  And when the costs of providing those pensions come due, it can create a tremendous burden for future generations of taxpayers if the pension plans have been underfunded for years.'”

“'A local government that fails to pay 100 percent of its ARC each year is like a runner with a shorter stride than the people he is racing against,' Treasurer Lillard said.  'With each stride, the runner falls farther and farther behind the competition.  For local governments not funding annual pension payments, it is the taxpayers who ultimately lose.'”

“'This legislation is something all states should consider,' said Charles E.F. Millard, managing director, head of pension relations for Citigroup and a former director of the United States Pension Guaranty Corporation.  'The health of public pensions depends upon their investment returns and plan structures, of course.  But the key determinant of the health of our public plans is whether the public employer makes its full annual contribution.  If everyone did this, public pensions would be far healthier than they are today.”

“'From a credit standpoint, we have always viewed full funding of the ARC as a positive and important element of a government’s liability management,' said John Sugden, a senior director at Standard & Poor’s Ratings Services."

John Sugden quoted in the Gazette Telegraph:

"You're capturing at a potentially low point.  We're going to see the market strengthen.  We've seen these numbers fluctuate over time.  Back in 1975, it was 51 percent, and with the market boom in the '90s, it was 100 percent or close to that."

http://gazette.com/future-of-colorado-retirement-plan-in-doubt/article/1504970

Back to Chattanoogan.com:

“'Tennessee has a well-deserved reputation as one of the best financially managed states in the nation,' Treasurer Lillard said.  'This landmark legislation continues that proud tradition by applying a common sense approach to local government pension funding.'”

"The Public Employee Defined Benefit Financial Security Act of 2014 is Public Chapter 990, which may be viewed at

http://www.tn.gov/sos/acts/108/pub/pc0990.pdf."

http://www.chattanoogan.com/2014/5/28/277432/Haslam-Signs-Local-Government-Pension.aspx

A few excerpts from the Tennessee legislation:

"For the purposes of this section, 'Actuarially determined contribution (ADC), formerly known as the 'actuarially required contribution' means the actuarially determined annual required contribution that incorporates both the normal cost of benefits and the amortization of the pension plan's unfunded accrued liability."

"Each political subdivision shall develop a funding policy for financing the obligations under the pension plan.  Such funding policy shall be legally adopted and approved through a resolution by the political subdivision's chief legislative body or governing body."

"For political subdivision employees hired on or after the effective date of this act, the political subdivision may freeze, suspend or modify benefits, employee contributions, plan terms and design on a prospective basis.  The provision in the foregoing sentence does not affect any judicial precedents or statutory law as they apply to employees who were employed prior to the effective date of this act."

(My comment: Note that the Tennessee Legislature intends to permit PROSPECTIVE changes to the accrual of public pension benefits in their state.  Oddly, after having adopted retrospective legislation, taking accrued benefits from retirees in the Colorado PERA pension system in 2010, two years later the Colorado Legislature adopted SB12-149 honoring the accrued pension benefits of retirees in Colorado county government pension systems.  So, if you happen to be a retiree in certain county government pensions in Colorado, your pension contract is honored.  On the other hand, if you are a Colorado PERA retiree in Colorado, your pension contract has been abrogated.  A constitutional double standard on public pension contracts is now enshrined in Colorado law.)

Back to the Tennessee legislation:

"The accrued benefits earned prior to any adjustment pursuant to subsection (a)(1) above shall remain an enforceable right and may not be reduced without the written consent of the political subdivision employee . . ."

From Bloomberg.com:

"Keith Brainard, director of research in Georgetown, Texas, at the National Association of State Retirement Administrators, said he hadn’t heard of a measure like the Tennessee proposal that includes a provision for the state to intercept tax dollars to support pension funds outside of its control."

"The bill was championed by Treasurer David Lillard, a former county commissioner who said he understands the pressure on local governments to use pension contributions to patch budget holes."

"The hallmark of just about every distressed pension plan in the country is that they at one time or another reduced their annual payments,' Lillard said."

"The combined funding ratio for those plans was 65 percent, where an 80 percent level is considered optimal for funds to be able to pay future claims.  In comparison, the 18 systems that paid their full amount were 80 percent funded, and the three state plans were 89 percent to 96 percent funded."

"'We always believe in local control in our cities,' said (Tennessee Municipal League) Executive Director Margaret Mahery. 'But I guess, just like all of us, sometimes we maybe needed a little push.'”

(My comment: Note that officials of the Colorado Municipal League [CML] did nothing to prevent the Colorado Legislature from abrogating the pension contracts to which CML member Colorado municipalities were parties.  Colorado municipalities believed that they had the opportunity to erase billions of dollars of their debts in 2010.)

An on-line comment posted on the Bloomberg article:

"A pension plan is not largesse, but deferred compensation, thus the failure to pay an agreed pension, where the employee has contributed their agreed share, is constructively a theft of wages.  Operationally, failure to make scheduled contributions to a pension plan is extorting a zero interest rate loan from the plan.  Almost all of the loudly trumpeted municipal/state pension shortfalls are due to the failure of the trustee to compel the employer to contribute their agreed funding."

http://www.bloomberg.com/news/2014-04-14/memphis-pension-blues-foretold-with-tennessee-bill-muni-credit.html

(My comment: Colorado PERA Board trustees and PERA administrators your culpability in creating this legal fiasco is widely recognized.)

From commercialappeal.com:

"Norris’ bill gives governments like Memphis that haven’t been paying their ARC five years to steadily increase their funding until they do so.  Because the five-year clock starts after June 30, 2015, they would actually have six years."

"Lillard, the treasurer, said he and his staff drafted the bill that Norris is introducing.  Last month the treasurer’s office produced a report that reviewed 31 public pension plans statewide that are not part of the Tennessee Consolidated Retirement System.  Of those 31, only 13 paid less than their ARC in 2012."

(My comment: Colorado Treasurer Walker Stapleton seems happy to go along with the Colorado "COLA-theft" plan [SB10-001] to address Colorado PERA unfunded pension liabilities.)

"Norris said he would ask a joint House and Senate group called the Council on Pensions and Insurance to make a recommendation on his proposed bill on Feb. 10."

(My comment: Note again, the Tennessee Legislature debated public pension policy out in the sunlight, while Colorado PERA's lobbyists pushed this 2009/2010 Colorado PERA pension policy "debate" into the shadows.)

http://www.commercialappeal.com/news/2014/feb/03/proposed-tennessee-law-would-mandate-full-of/

Excerpts from the Tennessee State Treasurer's pension report, "Treasury Department State of Tennessee Report to the Legislative Council on Pensions and Insurance," January 27, 2014:

"The Governmental Accounting Standards Board in 2012 acted to abolish the concept of the ARC, and effective for fiscal years beginning after June 15,2014, no longer requires governmental employers to report an actuarially determined annual required contribution in their financial reports.  The new GASB standards will no longer set the parameters within which an employer's ARC must be calculated.  The Government Finance Officers Association (GFOA) and other professional finance organizations have adopted positions calling for governments to adopt a funding policy based on an actuarially determined annual funding amount."

"Thus, the TCRS and also each Tennessee local government with a defined benefit pension plan should adopt a written pension funding policy based on an actuarially determined annual contribution."

"The GASB also required inclusion of a liability entry in financial statements for the net pension liability.  For governments who underfund the annual contribution, a blended discount rate must be used to determine net pension liability, resulting in a significantly higher liability entry and pension expense."

"Accordingly, Senate Bill 2079 and House Bill 2037 have been introduced and will be heard by the Legislative Council on Pensions and Insurance on Monday, February 3, 2014, at 1:00 PM CST in Legislative Plaza Hearing Room LP 29, when a presentation will be made by the Tennessee Treasury Department.  These proceedings will be webcast and may be viewed at
http://wapp.capitol.tn.gov/apps/livevideo/. and will be archived for subsequent viewing."

"The chief legislative body of a local government or other participating local government entity must pass a resolution to participate in TCRS.  The resolution provides the terms of participation (prior service, COLA, formula, etc.).  The resolution also provides that the local government is financially responsible for the pension cost, including administrative cost and investment cost, associated with their employees and retirees."

"Under the law governing the participation of local governments in TCRS, if a local government does not pay its annual ARC payment, the Commissioner of Finance and Administration has the right to intercept any state-shared taxes that are otherwise apportioned to the local government. These intercepted funds are utilized to pay the required ARC payment."

"Current Tennessee law requires annual payment of the ARC for state employees, inclusion in the budget by the Department of Education and appropriation by the General Assembly of the state portion of funding for the Basic Education Program allotted for contributions to the retirement system for the benefit of teachers."

"GASB statements 25 and 27 formerly provided a direct linkage between 'pension funding' and 'pension expense' within certain parameters.  These two statements provided the foundation for the concept of the Annual Required Contribution (ARC), also often referred to as actuarially required contributions.  Six different actuarial methodologies were permitted which an employer may utilize in calculating the ARC."

"In June 2012, GASB statements 67 (pension plan financial statement) and 68 (employer financial statement) were finalized that superseded statements 25 and 27 as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements."

"Pension plans must begin reporting under the new standards for fiscal years beginning after June 15, 2013.  For all government pension plans, the fiscal year 2013-14 financial statements must be produced in accordance with the new GASB 67 statement.  Employers must begin reporting information on their financial statements under the new standards for fiscal years beginning after June 15, 2014."

"Now, there will be a separation of 'accounting for pension expense' from 'pension funding.' There will no longer be an ARC defined by GASB.  Pension plans that have been using the ARC under parameters prescribed by GASB as their funding policy will now need to establish a pension funding policy.  The result of these changes in accounting standards means the amount recorded as pension expense for a fiscal year will be different than how a pension plan is funded. There will probably be significant volatility from year to year in the amount recorded as pension expense under the new standards."

"The plan must calculate 'Net Pension Liability' (i.e., which strongly correlates to unfunded pension liabilities) based on market value of assets.  Previously, it was permitted to use an asset smoothing method."

"Net Pension Liability will be recorded as a long term debt (liability) on the employer's financial statement.  Previously, these liabilities were not an entry on the balance sheet but were depicted in the notes to the financial statement."

"In 2013 Fitch Ratings issued a report comparing the debt obligations, including pension debt, among the 50 states.  Tennessee has the high distinction of having the lowest overall state general obligation debt and unfunded state pension liabilities as a percentage of personal income."

"Standard and Poor's issued a report in 2013 titled A Bumpy Road Lies Ahead for U.S. Public Pension Funded Levels.  This report reviews the funding levels of pensions for the 50 states."

"Failure to pay annually when due the full actuarially required contribution is in effect underfunding the pension plan.  The amount that is not funded increases the unfunded accrued liabilities of the plan.  Further, the pension plan will not have the under-funded amount available to invest, thereby resulting in lost earnings opportunity."

"The funding for a pension plan assumes that 100% of the ARC will be paid annually, and further assumes that those contributions will be invested to earn at least the assumed rate of return for the pension plan.  Thus, the failure to pay 100% of the ARC can quickly lead to a serious underfunding of the pension plan.  Chronic underfunding of the ARC will eventually make the pension plan financially unstable.  Nationwide, multiple severely underfunded pension plans that are now financially unstable are examples of the failure to pay annual funding requirements."

"Under GASB Statements 67 and 68, the governmental entity is required to include on its balance sheet a liability entry that reflects the net pension liability of the pension plan.  The net pension liability correlates strongly to the unfunded accrued liabilities of the plan.  When the ARC is funded at less than 100%, the unfunded portion will increase the unfunded accrued liabilities and also the net pension liabilities of the pension plan.  This underfunding along with the requirement that a lower blended discount rate be used by pension plans that fail to fully fund the annual contribution will substantially increase the liability entry for net pension liability on the balance sheet of the governmental entity."

"Delaying pension funding by underfunding the ARC will likely be very expensive to the local government entity.  It costs an additional $435,000 to delay a one million dollar pension payment for five years assuming an earnings rate of 7.5%.  This is a 43.6% increase in the amount to be paid.  The pension cost more than doubles by delaying a payment by 10 years.  A $1 million pension cost becomes $2.06 million if delayed 10 years.  See Attachment 2 that illustrates the cost of delaying employer pension contributions."

"GASB noted in its release accompanying Statement No. 68 that pension contribution issues are public policy matters.  Indeed, leading finance professional organizations, including the Government Finance Officers Association have adopted positions calling for governments to adopt a funding policy based on an actuarially determined annual funding amount."

(My comment: The Tennessee Treasurer's Report [Attachment 2] reveals that the cost of delaying public pension plan actuarially required contributions [with an assumed 7.5 percent return assumption] for a 12-year period [the Colorado Legislature began underfunding the PERA pension system 12 years ago] is a premium of 138.2 percent of the skipped pension contribution."  The Colorado Legislature has racked up billions of dollars in debt due to this 138.2 percent cost of PERA pension contribution deferment.  The Colorado Legislature and Colorado PERA officials now seek to push this debt onto PERA pensioner's shoulders.)

http://s3.amazonaws.com/s3.documentcloud.org/documents/1012837/pension-report.pdf

Support public pension contractual rights and the rule of law in Colorado at saveperacola.com.