March 06, 2013 01:21 PM UTC

Lobbying for the 2010 Colorado PERA Debt Shift . . . an Easy Target, an Easy Fix.

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• by: PolDancer

The State of Colorado and many Colorado local governments require that their workers participate in a public pension system, Colorado PERA. Every month, these workers (as a condition of employment) pay into the Colorado PERA pension. In exchange for the worker’s labor and contributions to the pension over the course of their careers, the employers assume a contractual obligation to pay the workers a defined financial benefit in retirement. This contractual obligation is Colorado’s public pension debt.

The public pension debt is a legal obligation of the pension system, Colorado PERA and PERA’s affiliated state and local government employers, but the PERA-affiliated employers have decided that they do not want to pay their debts. So, in 2010, PERA employers conspired to try and escape their debts with a contrivance. First, they claim that one aspect of the pension debt they owe is not actually their contractual obligation . . . annual PERA retiree cost-of-living adjustments (COLA). However, establishing this claim is complicated by the fact that Colorado PERA officials, and Colorado courts have maintained for decades (before PERA hit upon this contrivance) that the COLA benefit is indeed their contractual public pension obligation. How could it be otherwise? If the PERA COLA benefits were not a contractual obligation they would necessarily be a “gift” for the private benefit of a few, and thus illegal under Colorado’s Constitution.

The COLA benefit is part of a Colorado PERA member’s earned, accrued, deferred compensation under the Colorado PERA pension system. In my opinion, when we hear Colorado PERA officials make the (convenient) argument that the COLA benefit is not contractual, we are hearing self-serving fiction. Colorado PERA officials and the sponsors of SB10-001 have acknowledged many times that, under the provisions of their bill SB10-001, the organizations that legally owe the debt (the PERA employers) contribute only ten percent of the cost of the solution the bill proposes. Funny how it worked out that way!

Second, Colorado PERA and its affiliated employers claim that, even if the COLA benefit IS their contractual obligation, they were forced to repudiate it in 2010 since Colorado PERA’s volatile pension assets were diminished in the most recent U.S. stock market decline (that is, prior to the market’s doubling.) The legal term for the argument Colorado PERA officials are trying to make is “actuarial necessity.” The argument they make is that the breach of the Colorado PERA pensioner’s COLA contracts was “actuarially necessary.” However, Colorado PERA and its affiliated governmental employers had many other legal, “less drastic,” prospective pension reform options available. It was just “easier” for them to push the debt off onto Colorado PERA retirees.

“When the PERA representatives (including Executive Director Meredith Williams) were asked by a member of the (Senate Finance) committee why in view of the fact that PERA had only been funded at 100 percent for about seven of the past thirty years (my comment, actually two of the last forty years), it was necessary now. The answer was ‘it just makes things easier.’”

Here’s the link:

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

In my opinion, Colorado PERA officials believed that PERA retirees would not aggressively defend their contractual pension rights. After all, many of the retirees are elderly, preoccupied, uninformed, sick, in hospital . . . unrepresented at the Colorado Capitol. In short, an easy target . . . an easy fix.

The proponents of the bill, SB10-001, advance the “actuarial necessity” argument in spite of the fact that the Colorado General Assembly is primarily responsible for the decline in the PERA pension assets (trust funds.) The Colorado General Assembly has enacted public policies that brought about the decline in the PERA trust funds. In the last decade, the Colorado General Assembly has failed to make its required contributions to the pension (according to Colorado PERA officials and Colorado PERA’s own actuaries). The Colorado General Assembly also enacted policies that drove up the PERA pension debt. Now, we see the author of the most recent downturn in the value of Colorado PERA’s assets attempting to compensate for past pension mismanagement with a debt shift. I’m confident that, prior to seeking public office, Colorado legislators who supported SB10-001, believed they would be “different.” They would not be the stereotypical “politician” . . . cutting ethical corners for “the easy fix.” But, how has it turned out?

So, the proponents of the bill, SB10-001 pursue an easy means by which they can escape their debts, i.e., “actuarial necessity,” but how can they make the case for “actuarial necessity” when Colorado PERA’s Executive Director maintains that there is no legal basis for applying “actuarial necessity” to the facts of the recent downturn in Colorado PERA’s assets?

Press reports document that the legal research of Colorado PERA’s Executive Director (formerly General Counsel), Greg Smith has found that “actuarial necessity” occurs only when public pension plans are so broke that they cannot pay current retiree benefits. On February 21, 2004, Rocky Mountain News journalist David Milstead reported Greg Smith’s description of his legal research as follows:

“PERA general counsel Greg Smith said his research shows that actuarial emergencies occur only when a pension plan does not have the cash to pay current benefits, and that’s not the case with PERA, since the plan has $29 billion in assets and a constant stream of investment income that helps cover benefit costs.”

Greg Smith elaborates:

“In fact, Colorado has one of the only cases in the union that actually found a cut in benefits was acceptable due to actuarial necessity.” “And, in that case, what the court found was, well, since the system was completely out of money, had no money, it was paying its benefits out of current contributions with no reserves, out of current operating capital.”

Link:

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

Further, Colorado PERA officials have assured us on many occasions that they DO have plenty of cash on hand to pay PERA retiree benefits for decades to come. Here is just one example (from the August 11, 2009 Colorado PERA Denver “Listening Tour”):

Colorado PERA Board Trustee Casebolt assured PERA retirees present at the 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.”

Prior to moving forward with the SB10-001 debt shift scheme, did Greg Smith inform all of the members of the SB10-001 lobbying troop that he was the author of legal research that found “actuarial necessity” applicable only when public pension plans are completely out of money and unable to pay current retiree benefits? In my opinion, this was pretty important information for the SB10-001 lobbyists to have.

Last September, I posted a list of lobbyists who supported the bill, SB10-001. I took that list of SB10-001 lobbyists from a secondary source rather than directly from the website of the Colorado Secretary of State (SOS). That list included the names of 17 statehouse lobbyists who supported the enactment of SB10-001. Well, I should have just gone to the official source of the information, the SOS website. Yesterday, I checked the lobbying records on the SOS website and learned that there were actually 27 lobbyists reporting that they supported SB10-001 . . . the number of SB10-001 lobbyists is blossoming like a 2013 Colorado PERA portfolio!

This number of lobbyists, 27, constitutes one SB10-001 lobbyist for every four members of the Colorado General Assembly. That is pretty thorough coverage. In 2009, Colorado PERA and its affiliates knew that it would take an overwhelming lobbying force, a lobbying juggernaut, to overcome opposition to breaking state contracts. Even with 27 lobbyists, they just barely managed to pull it off. A switch of just three votes in the Colorado House and SB10-001 would have died on the vine. This narrow “victory” demonstrates the reluctance of many Colorado legislators to break state contracts, in particular the reluctance of legislators who stated in legislative debate, “We should not break state contracts.”

Of the 27 SB10-001 lobbyists, it appears that six of the lobbyists were paid directly by Colorado PERA. Fifteen lobbyists represented the educational establishment. Two represented Boulder County. Two represented Colorado Concern (a business organization), and two represented the Special District Association of Colorado.

Of the 27 SB10-001 lobbyists, it looks like 25 represent Colorado PERA or Colorado PERA-affiliated employers. Remember, Colorado PERA-affiliated employers are the organizations that actually owe the Colorado PERA pension debt. Note that Colorado PERA retirees have fully-vested public pension contractual rights. Under their statutory public pension contracts the Colorado PERA pension debt is the obligation of Colorado state and local governments. This debt is not the legal obligation of Colorado PERA retirees.

A 2009 article in the publication “State Bill Colorado,” addressed the initial recruitment of the PERA lobbying troop:

“PERA is ‘obviously gearing up for some heavy-duty lobbying, one observer noted. The agency has hired two lobbyists from the firm Colorado Communique, Collon Kennedy and Steve Adams, former president of the Colorado AFL-CIO. The pension system also has hired Mary Alice Mandarich, a well-connected Democratic lobbyist who formerly was chief of staff for Senate Democrats and who worked on campaigns for former Senate President Joan Fitz-Gerald, former Gov. Roy Romer and gubernatorial candidate Gail Schoettler. Coalition members have their own lobbyists, and the well-staffed higher education lobby is sure to be involved in this issue as well.” “All that lobbying power will be focused on 100 legislators . . .”

Link:

http://statebillnews.com/2009/10/pera-woes-loom-large-for-education/

A Colorado PERA Board member has disclosed that the Colorado PERA Board of Directors allocates up to $400,000 of the PERA member’s trust fund assets each year for the purposes of lobbying. Is $400,000 for lobbying a good investment on the part of the PERA Board? Perhaps some members of the Colorado General Assembly are swayed by such aggressive lobbying. Representative Jack Pommer, Chairman of the Colorado Legislature’s Joint Budget Committee, and co-sponsor of SB10-001 told us, in a moment of candor, “we react to the people who lobby the hardest.” He made this statement on April 30, 2010, (during the same legislative session at which he supported the breach of Colorado PERA pensioner contracts.) Rep. Pommer’s statement is available at this link:

http://www.cochamber.com/legislative/pdf/CACI%20Capitol%20Report_April%2030.htm#Pommer

In my opinion, if Colorado PERA is going to use their member’s trust fund assets to pay for lobbyists, those assets should be used to protect the rights of the PERA members and retirees, and not to break their pension contracts.

For the record, I place most of the blame for this SB10-001 “pension reform” legal fiasco on Colorado PERA officials and the boards of directors of PERA-affiliated employers. The 27 lobbyists received their marching orders from the boards of directors . . . lobbyists, try to use this latest market downturn as an excuse to cut our debt!

In my opinion, the Colorado PERA-affiliated employers didn’t see much downside risk. If Colorado courts sanction the breach of Colorado PERA retiree contracts, their future pension obligations will be slashed. If Colorado courts strike down the bill, SB10-001, their legal pension obligations will be unaltered, and the Colorado courts will be “the bad guys.” What’s to lose?

The 27 SB10-001 Lobbyists:

1. Michael Beasley – Colorado PERA – supporting
5280 Strategies (Beasley) – Colorado PERA – supporting
2. Beth C. Minahan – Colorado PERA – supporting
3. Collon Kennedy – Colorado PERA – supporting
4. Steve Adams – Colorado PERA – supporting
Colorado Communique, Inc. (Minahan, Kennedy, Adams) – Colorado PERA – supporting
5. Mary Alice Mandarich – Colorado PERA – supporting
6. Roberta Robinette – Colorado PERA – supporting
7. Aponte and Busam – Pikes Peak Education Alliance – supporting
8. Edward Bowditch – Jefferson County School District – supporting
9. Bruce Caughey – Colorado Association of School Executives – supporting
10. Antoinette Salazar – Colorado Association of School Executives – supporting
11. Jane Urschel – Colorado Association of School Boards – supporting
12. Julie George – Colorado Association of School Boards – supporting
13. Dan Daly – Colorado Education Association – supporting
14. Soloman Malick – American Federation of Teachers Colorado – supporting
15. Amy Redfern – Pikes Peak Education Alliance – supporting
16. Anthony Salazar – Colorado Education Association – supporting
17. Julie Whitacre – Colorado Education Association – supporting
18. Karen Wick – Colorado Education Association –supporting
19. Paula Stephenson – Colorado Rural Schools Caucus – supporting
20. Megan Davis – Boulder County – supporting
21. Mark Ruzzin – Boulder County – (former Boulder Mayor) supporting
22. Tanya Kelly-Bowry – Boulder Valley School District – supporting
TKB Consulting, LLC (Bowry) – Boulder Valley School District – supporting
23. Terry Campbell – Association of Colorado State Patrol Professionals – supporting
24. Evan Goulding – Special District Association of Colorado
25. Ann Terry – Special District Association of Colorado ((http://www.sdaco.org/, “SDA has nearly 1,300 special district members and over 150 associate members.”) – supporting
26. Peter Kirchhof – Colorado Concern – supporting
27. Janice Sinden – Colorado Concern – supporting – (http://www.coloradoconcern.com/, Colorado Concern is a business organization. Denver Mayor Hancock has selected Janice Sinden to be his Chief of Staff.)

Link to the Colorado Secretary of State’s Directory of Lobbyists by Bill for SB10-001:

http://www.sos.state.co.us/lobby/SubjectSearchResults.do?&cmd=passgo&pi1=1

Other organizations that supported SB 10-001 are not represented in the list of lobbyists above. Colorado PERA Executive Director (at the time) Meredith Williams recorded the names of these organizations on Colorado PERA’s 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

Attention active and retired Colorado PERA members! Check in over at saveperacola.com. They could use your help in defending your PERA pension contracts. Their efforts are preventing your PERA pension contract from becoming worthless. If the State of Colorado succeeds in breaking your pension contract once, you can bet your bottom dollar that they will do it again . . . and again. (The Legislature won't stop until they have also confiscated that bottom dollar.)  Yes, we are in the Wild West, but this does not mean we relinquish our rights under the U.S. Constitution! Contribute to the legal defense of our public pension contracts! And, “Friend” Save Pera Cola on Facebook!