May 12, 2014 10:36 AM UTC
Legislature Ratchets Up Corporate Welfare in 2014 . . . Continues to Ignore Contracted Colorado PERA Debts.
1 Comments- by: PolDancer
As we have seen, the Colorado Legislature has not met its full public pension obligations since 2003, and now seeks to shift the resultant, accumulated state debt onto public pensioners.
These pensioners bear no "market risk" under their state public pension contracts, yet the Colorado Legislature is attempting to retroactively alter the pensioners' contracts, imposing "market risk" on them. The Colorado Legislature intends to break Colorado PERA pension contracts, after having granted tens of billions of dollars in corporate welfare in recent decades. In 2014, the Colorado Legislature continues its addiction to corporate welfare, giving away more millions in state revenues, while its lawyers argue poverty before the Colorado Supreme Court.
The article at the link below includes a table identifying skipped Colorado PERA public pension payments, i.e., the "Colorado PERA ARC deficiency" over the last decade. The Colorado PERA ARC deficiency itself now total billions of dollars.
http://coloradopols.com/diary/47980/colorado-wins-a-proponent-of-colorado-pera-pension-contract-breach-condemns-the-legislatures-failure-to-pay-its-pera-pension-bills
The most recent Colorado PERA financial report (last summer's CAFR) reveals that the Colorado Legislature also failed to pay its public pension bills in 2012. Page 35 of this Colorado PERA CAFR (Financial Section) for calendar year 2012, published June 25, 2013, identifies the most recent PERA ARC deficiency:
"In 2012, the actual contributions, as set in statute, were $143.4 million less than the ARC as calculated by the actuaries."
Link to 2013 Colorado PERA CAFR:
https://www.copera.org/pdf/5/5-20-12.pdf
Two rare instances have been recorded in which Colorado PERA's current and former Executive Directors have condemned the Colorado Legislature's failure to pay the PERA pension system's actuarially required contributions (ARC.) Below, I provide Colorado PERA Executive Director Meredith Williams' comments on February 23, 2012 to the Colorado House Finance Committee (relating to the Legislature's historical under-funding 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 erstwhile 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 driven down the funding ratio of the Colorado PERA pension system by opting to habitually give away needed state revenue to corporations, and by adopting myopic public policy to serve special interests, the Colorado Legislature now asks the Colorado Supreme Court to bless this history of legislative mismanagement, and to shift accrued state debts through breach of contract.
The Governor of the State of Colorado agrees that the state must meet its contractual obligations, and must not seize the property of Colorado citizens. Here we have Colorado Governor Hickenlooper aggressively defending the property rights of owners of oil and gas resources:
“Whether it’s local government or state government, I don’t think government should come in and snatch somebody’s property.” . . .
http://www.gjsentinel.com/news/articles/fractious-issue-of-fracking-may-reach-voters/
According to our Governor, Colorado local governments and the state government should not take the property of Colorado residents. Where is his defense of the property rights of Colorado PERA pensioners who are parties to fully-vested contracts with the State of Colorado?
The State of Colorado and its public pension administration arm, Colorado PERA, have argued in their legal briefs that the state is confronted by a financial crisis of such proportions that contracts to which the state is a party (Colorado PERA public pension contracts) must be broken. But, this claim begs the question. "If the State of Colorado is faced by such a financial 'crisis,' why does the Colorado Legislature continue to give away state tax resources?"
A recent article in the Denver Business Journal reports that the Colorado General Assembly, at its recently concluded 2014 legislative session, continues to add to the billions of state tax dollars annually awarded in corporate subsidies, exemptions, and credits. Some of the Colorado General Assembly's billions of dollars in "tax expenditures" obviously have more merit than others. Yet all state legislative tax expenditures are without question, discretionary. Colorado state legislators are not compelled to give away state resources through "tax expenditures." Attorneys defending the State of Colorado in the Colorado PERA retiree lawsuit, Justus v. State, cannot logically or legitimately argue in court that the State of Colorado is forced to abrogate state contracts due to financial stress while the Colorado Legislature continues to voluntarily forego revenue. Unlike legislative adoption of "tax expenditures," state public pension contractual obligations are not discretionary on the part of the Colorado General Assembly.
A recent article posted at the Colorado political blog Coloradopols.com explores the profusion of business subsidies that have been enacted by the Colorado Legislature:
http://coloradopols.com/diary/57319/colorado-pera-pension-contracts-versus-colorado-corporate-welfare
An article in the Denver Business Journal covers the Colorado Legislature's newly adopted corporate welfare bills for the recently concluded 2014 legislative session:
"Colorado Legislature passes 11 business tax-credit bills. But why?"
“'There’s been a lot of tax credits this year. It’s certainly not sustainable to keep adding them at this pace to the budget,' said Senate President Morgan Carroll, D-Aurora."
The new 2014 Colorado state tax credits include:
"A tax credit for people who invest in early-stage advanced-industry companies." "An expansion of a state tax credit for relocating and expanding companies that hire at least 20 people." "A business personal property tax credit for businesses with $15,000 or less of equipment." "A tax credit for companies that clean and redevelop contaminated brownfield sites." "A sales and use tax exemption for equipment used in space flight." "A sales and use tax exemption for equipment used to produce biogas." "A sales and use tax exemption on equipment used for parts of on-demand aircraft." "An income-tax credit for low-emission and alternative-fuel vehicles."
"Not all Republicans are big fans of the tax credits, however. Senate Minority Leader Bill Cadman, R-Colorado Springs, said he believes that businesses would prefer that the state government simply cut regulations and get out of their way rather than try to become 'the author of marketplace success by pushing tax credits that everybody pays for.'”
(My comment: The corporate lobbyists who championed these new Colorado state tax credits at the 2014 session beg to differ with Senator Cadman. The lobbyists have no problem with the Legislature becoming the author of the marketplace success of their corporate employers. The fact that "everybody" pays for the lobbyists' employer's success is not problematic for corporate lobbyists, it is by design.)
http://www.bizjournals.com/denver/blog/capitol_business/2014/05/coloradolegislature-passes-11-business-tax-credit.html
Colorado PERA retirees who are defending their "fully-vested" public pension contracts before the Colorado Supreme Court should examine closely the following publication of the Colorado Department of Revenue, the "Colorado Tax Profile and Expenditure Report, 2012."
This state publication (link below) provides a simple means of isolating Colorado's multi-billion dollar "corporate welfare" tax expenditures.
A few excerpts from the publication:
"This report is to include information identifying and describing tax expenditures administered by the Department, estimates of the identified tax expenditures, the Colorado Tax Profile Study (CTPS), and the Colorado Statistics of Income (SOI) reports."
”Although this study will present the latest data available, 2009 data will be used for purposes of tabulating a grand total of annual tax expenditures."
"Actual data from Colorado returns were used to determine the revenue impact of fuel, cigarette and tobacco, income and severance tax deductions and credits, to the extent the information was available from the forms. However, retailers are not required to provide the level of information on sales tax returns necessary to report the impact of the numerous exemptions and deductions. In the case of sales tax exemptions, various sources of data at the state and national level including census and other industry-related reports were used to develop an estimate of the exemption or deduction."
(My comment: According to this report of the Colorado Department of Revenue, total Colorado subsidies, credits and exemptions in 2012 exceeded $2.7 billion. Severance tax exemptions and credits alone exceeded $200 million that year.)
http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251847897557&ssbinary=true
It is apparent that the State of Colorado (the 10th wealthiest state in the nation) and Colorado local governments face no financial "crisis" that warrants breach of Colorado PERA pension contracts.
The recorded legislative history of the Colorado PERA pension COLA benefit makes it clear that the PERA COLA benefit is a contractual obligation of PERA-affiliated employers, that the COLA benefit is "permanent," that PERA workers and retirees may "rely" on the offer of the COLA benefit in exchange for their labor and contributions, that it is an "automatic" pension COLA benefit and a Colorado PERA "liability," and that the PERA COLA benefit is "guaranteed, now and in the future":
March 24, 1993 (1:32 PM – 2:28 PM)
Rob Gray, Director of Government Relations, Colorado PERA 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.])
It is time for the State of Colorado and its pension agency, Colorado PERA, to give up the charade that Colorado PERA-affiliated employers are unable to meet their contractual obligations to elderly Colorado PERA pensioners. These PERA pensioners have given their lives in public service, they trusted their employers and their union representatives, and were rewarded with betrayal through deception and self-serving in 2010.
Colorado PERA pensioners accepted the offer of their Colorado PERA employers for "defined" compensation in exchange for their labor. They relied on this offer when they planned their retirements. They expect that their contracts will be honored. Support public pension contractual rights at saveperacola.com. Help restore the rule of law in our state.
The stock market is reaching new heights and the collective investor community is exuberant … so I expect PERA investments to post double digit gains for 2014, perhaps in excess of 15%. Hopefully this will weaken the case for a retiree contract breach. There was a giddiness during the last legislative session in regards to more revenue to spend … party time indeed … the Republicans getting more business tax credits and the Democrats getting a tax credit for child care expenses (HB14-1072).
http://bellpolicy.org/content/hb14-1072-income-tax-credit-child-care-expenses-1