Kerr’s bill to shore up PERA moves to state Senate
DENVER – A bill to shore up Colorado’s Public Employees Retirement Association – PERA – is headed to the governor’s office after Tuesday’s bipartisan 36-29 vote in the House, where it was sponsored by Rep. Andy Kerr, D-Lakewood.
Senate Bill 1 authorizes several stop-gap measures to stem the depletion of PERA funds and is expected help the fund avoid insolvency in the near term.
More than 400,000 state, school and local government employees in Colorado participate in the retirement program, including delaying retirement for current employees who are not yet vested in PERA.
The bill also reduces PERA’s Cost of Living Adjustment to reflect the Consumer Price Index, but guarantees a 2 percent increase for all retirees, active and inactive participants after one year. The bill also would call on employers will be asked to contribute an additional 2 % (1.5% for schools) and employees will be asked to contribute an additional 2% until the fund is solvent.
“This bill represents the necessary work that needs to be done to protect the retirement future of Colorado employees. Even in these tough partisan times we can come together in a bipartisan manner and do what’s right for PERA retirees,” Kerr said.
The bill was sponsored in the Senate by President Brandon Schaffer, D-Longmont, and Minority Leader Josh Penry, R-Grand Junction.
House Bill 1, introduced by freshman Rep. Max Tyler, D-Lakewood, cleared its final vote in the House last week and moves on to the state Senate.
The bill, which would require large Colorado utilities to increase power generated by use of renewable sources.
Tyler’s bill would increase the mandated requirement – the state’s Energy Standard – from 20 percent to 30 percent by 2020. That would require nearly a third of the power generated by utilities such as Xcel to come from sources such as solar and wind, in the next 10 years.
“This bill represents a huge step forward into the future of renewable energy usage and sets a precedent for Colorado and other states to become less dependent on fossil fuels,” Tyler said “The benefit of renewable energy forms is that they occur naturally:Colorado is not lacking in sunshine, for instance.”
Colorado voters approved the Renewable Energy Standard in 2004 with the passage of Amendment 37, which set a goal of 10 percent by 2015. That standard was doubled and the deadline extended to 2020 by the state legislature in 2007.
State Sen. Mike Kopp, a Republican who represents south Lakewood as part of his south Jeffco Senate District 22, will introduce his “Blueprint for a leaner Government” in the Senate.
“It seeks to streamline and eliminate wasteful bureaucracies so that government costs taxpayers less money in these recessionary times,” according to Kopp.
The measure would create two bipartisan study groups. One would examine “all bureaucratic state functions” to determine which are necessary and which duties could be either eliminated or farmed out to the private sector. A second group that would include business owners would examine regulatory duties of state agencies, compiling a list of regulations that are “outmoded, wasteful and top-heavy,” according to Kopp.
Other bills introduced by Lakewood state legislators:
Tyler – HB 1001, HB 1050, HB 1077
State Rep. Andy Kerr (D-Dist. 23) – HB 1040, HB 1164
State Rep. Jim Kerr (R-Dist.28) – HB 1011, HB 1085, HB 1118, HB 1150, HB 1153
State Rep. Ken Summers (R-Dist 22) – HB 1091, HB 1157
State Sen. Betty Boyd (D-Dist. 21) – SB 006, SB 010, SB 020, SB 056, SB 068, SB 097.
INFORMING THE PERA DEBATE – WE MUST STEAL CONTRACTED RETIREE BENEFITS “BECAUSE THAT’S WHERE THE MONEY IS.”
Just prior to passing the PERA COLA theft bill (SB 1) on third and final reading the Colorado House debated a bill relating to the rights of Colorado rafting companies to float down rivers across private property. Many House members were in high dudgeon over the potential violation of property rights (of landowners along the river) that could occur under the bill. I’m certain that the irony of these concerns was not lost on PERA retirees waiting for final action on the next bill on the agenda, SB1. Immediately following debate on the river rafting bill House members voted to support SB1 and the theft of hundreds of thousands of dollars from each PERA retiree in the state. I cannot imagine a clearer and more egregious violation of property rights than the theft of contracted retirement benefits from PERA retirees. All Colorado retirees, and others who defend property rights, must immediately contact the Governor at (303) 866-2471 and request that he veto SB1.
During the 2010 legislative session, PERA spent lavishly on lobbyists. These lobbying expenditures, permitting the employment of (10 to 12?) lobbyists paid off for PERA. The PERA lobbyists succeeded in persuading the Legislature to adopt a bill that is amoral, illegal and will ultimately be found unconstitutional by a state or federal court. Throughout the floor and committee debates on SB1 the members displayed an ignorance of, or intentional disregard for, the case law addressing state defined benefit pension plans. They failed to conduct the due diligence expected of a representative body . . . by thoroughly investigating the legality of the SB1’s provisions and the current actuarial status PERA’s trust funds. The legislators ignored the 22 percent jump in equity markets in 2009 (S&P). Spoonfed by the PERA lobbyists, they displayed a cavalier attitude toward the legal rights of PERA retirees, and swallowed whole without question the assertions of PERA’s CEO and its chief legal counsel. Watch these debates and draw your own conclusions. Archived video of the debates on SB1 in the House and Senate may be viewed on the Colorado Channel website. The consideration of SB1 has been a sad commentary on the state of Colorado’s legislative branch. Without question, it is now a branch of government controlled by lobbyists. However; PERA is about to discover that the ultimate rule of law is beyond the reach and manipulative efforts of its troop of lobbyists. The taxpayers of Colorado will waste millions of dollars attempting to defend a prima facie unconstitutional bill. Below I present a summary of the legislative debate on SB1 and a collection of statements by members of the General Assembly documenting their knowledge of the illegality of the bill. They were warned repeatedly by persons testifying before committees, and by their own members, that SB1 is unconstitutional.
During debate of SB1 on Second Reading in the House the members appeared to be unaware that PERA’s trust funds grew by “north of 15 percent” in 2009 according to PERA’s general counsel. This growth increased the PERA portfolio value by more than $5 billion in the last year. This information was provided during the House Finance hearing on the bill. Incorrect figures were routinely cited during the House second reading discussion. The recovery of PERA’s funded status in 2009 makes it clear that an actuarial necessity does not exist. Members of the House warned of the coming litigation. Members voted down an amendment to require a study of PERA reforms by an interim study committee of the Legislature.
Here are some of the comments from House Second Reading that I thought were significant:
Rep. Lambert: “I have heard from my constituents, as many of you have, that this proposal will breach retiree’s contracts.”
Rep. Swalm: “We’re breaking new territory in this state by trying to reduce the COLA.” “We’re probably going to get a lawsuit out of that.” “If we cut the 3.5 percent COLA there will be a lawsuit.”
Rep. J. Kerr: “There’s nothing irresponsible about gathering more information.”
Below is a summary of the debate in the House Finance Committee on Senate Bill 1 on February 10.
Greg Smith, PERA’s Chief Legal Counsel, testified to the House Finance Committee that PERA’s return on its trust funds for 2009 “will be well north of 15 percent.” So, how is it then that PERA continues to claim that there is an actuarial necessity? At this point PERA’s trust funds are clearly back into their historical funded range, which has averaged 77 percent for the last 40 years. In this time period, the PERA funded ratio fluctuated between 55 percent and 105 percent. The funded ratio was around 70 percent even before last year’s 15 percent gain, which I expect to be quite a bit higher when the final number comes out in June. In 2009, the S&P was up 22 percent. At many times during its history PERA’s funded ratio was well below its current level, and yet the PERA Board and the General Assembly saw no need to act.
Greg Smith again testified that the pension is a protected contract. Everyone in the world agrees that this is the case, PERA officials, opponents of SB 1, and proponents of SB 1. However, Smith again erroneously argued that the COLA can be changed because it is not part of the retiree contract. He refuses to see that the COLA (annual benefit increase) is set forth in Colorado law with the same force, status and weight as is the base benefit. Only tortured legal reasoning, and wishful thinking, has lead him to his conclusion.
Colorado’s COLA (and those of 36 other states) are “automatic COLAs” as opposed to “ad hoc COLAs” (which exist in about a dozen states and can be periodically altered.) Colorado’s COLA of 3.5 percent is guaranteed in statute in an identical fashion to the base retirement benefit itself. PERA has put it in writing over the years that the COLA “is guaranteed”. These documents will go to the lawyers.
Greg Smith does not seem to understand that actuarial necessity (even if it existed) does not permit the alteration of retiree benefits. With the 15 percent + returns in 2009 there is no doubt now that actuarial necessity does not exist. Why has PERA not updated its charts to reflect this new information? Did they expect the Legislature to act in ignorance? Indeed that was their hope, and their goal was achieved.
Again, PERA refused to release its claimed legal opinion at the House Finance hearing permitting it to break the retiree contract. The committee did not request the legal opinion, nor did they state a desire to have an interrogatory from the Supreme Court prior to moving the bill forward. It’s “damn the torpedoes” out here in the West!
The House Finance Committee did not conduct due diligence. They acted without legal advice and without an independent or current assessment of the status of the PERA trust funds. PERA will not reveal the current funded level of the trust funds.
Greg Smith said that they cannot “fix” PERA without taking the retiree’s COLA. Well then, how is it that every other state in the nation has addressed its state pension shortfall without breaking contracts and seizing retiree COLAs? Why are we so special here in Colorado?
Greg Smith should accept that states cannot legislate away a debt for work that was completed in the past. He should accept that states cannot avoid their contractual obligations simply because they prefer to spend resources on alternative public services or obligations.
During the House Finance hearing one opponent of the bill even read Greg Smith’s own words back to him from a 2008 Denver Post article saying that a COLA seizure would be illegal. No reaction.
Dr. Poulson (of the Independence Institute) noted that it is nonsense for the Legislature to believe that there is only one solution to improving PERA’s funded status. On numerous occasions the Legislature received a menu of pension reform options that are being studied and implemented by dozens of other states. These options can be viewed at this link to a PDF on the Vermont Treasurer’s website (GRS Pension Insight):
http://www.vermonttreasurer.gov/sites/treasurer/files/pdf/retirement-ll/GRS_Pesnio__Insight2009_10.pdf
It was revealing that the Chairman of the House Finance Committee, Rep. Judd, concluded the House Finance hearing by saying that the Legislature is forced to try and illegally seize retiree COLAs, “because that’s where the money is.” Pathetic.
Rep. Swalm noted that PERA and Colorado have the distinction of being the first in the nation to attempt to break retiree pension contracts. He called it “blazing new ground.”
Rep. Gerou asked the committee why there has been no interim study committee of the PERA issue as there was with the Pinnacol insurance company. This would have been due diligence.
Rep. Kagan noted that high inflation in the future will tremendously burden retirees without the COLA.
Meredith Williams told committee members that the Colorado Legislature is the only one in the country addressing pension reform. He said this to a committee that just a few weeks before had a briefing from a national pension expert on reform efforts that are occurring in at least half of the states. Incredible.
Meredith Williams said that PERA “looked at every option” in pension reform. How do we know that? Much of the PERA Board’s discussions occurred in executive session. Did they look at PCOPs? Did they consider the myriad of reforms that are being enacted in other states? Should we just trust him? Rep. Kagan seemed to believe that these reform efforts are not occurring across the nation. It seems he has not read the NCSL summary of 2009 state pension reform legislation.
Rep. Gerou said that it is a disservice to the state to rush a bill through when the committee knows that it will go to litigation, and said “what we are doing to the retirees is wrong.”
Rep. Delgroso said that it is “tough for him to tell people that he is going to break their contract.”
Some important statements were made during debate on SB1 on the Senate floor.
Senator Harvey, “We have made a commitment. We have a contract with current retirees. That is already in place.” “Reforms should be made for new hires.” “We do not have that commitment to new hires.”
Senator Spence, “The bill places an unfair burden on retirees.”
Senator Scheffel, “We are breaching our promises to existing retirees.”
Senator Lundberg, “This bill is a deal that was cut before this body met.”
During debate of SB1 in the Senate Finance Committee it was amusing to hear even the proponents testify that the state has historically underfunded the pension plan (Kirsht) and argue that the employees do have a contractual relationship with the state (Andersen.) Also, the proponent Daly refused to state that actuarial necessity exists and another proponent testified that inflation could quickly wipe out a PERA retirement.
For more information on this topic and to support the coming legal challenge visit saveperacola.com, e-mail SavePERACOLA@gmail.com or punch “”Informing the PERA Debate” into Google.
The eloquence of the Colorado Supreme Court:
Denver Police Pension and Relief Board, Colorado Supreme Court, 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.”