Bipartisan PERA fix quietly signed by Governor

By Marianne Goodland
THE COLORADO STATESMAN

After more than a month of contentious hearings and debate, the controversial bill to shore up the Public Employees’ Retirement Association is now law. Gov. Bill Ritter Tuesday quietly signed Senate Bill 1 in a brief ceremony that was attended by a handful of elected officials but was not open to the public.

Among those attending Tuesday’s signing was House Assistant Majority Leader Andy Kerr, D-Lakewood, the bill’s House sponsor; Senate President Brandon Shaffer, D-Longmont, one of the bill’s Senate sponsors; State Treasurer Cary Kennedy and Speaker of the House Terrance Carroll, D-Denver. The other Senate sponsor of SB 1, Senate Minority Leader Josh Penry, R-Grand Junction, was in hearings and not available for the signing.

Denver District Court lawsuit filed Friday to overturn SB 1

On Feb. 26, the group known as SavePERACOLA.com filed a lawsuit in Denver District Court to overturn SB 1. According to a press release from a Pittsburgh, PA-based law firm, the suit charges that the law is unconstitutional “because it impairs the retirees’ contractual rights to receive pension benefits at the level promised” when employees retired or were eligible to do so.

The lawsuit seeks class-action status, according to Gary Justus, the named plaintiff in the case.

“This lawsuit is about the state complying with its own Constitution,” Justus said in the news release. “The General Assembly is trying to correct its past mistakes on the backs of the retirees.”

At issue is the change in the cost of living adjustment, or COLA. Under SB 1, which was signed by Gov. Bill Ritter on Feb. 23, the COLA would be eliminated for 2010 and capped at 2 percent beginning in 2011. The lead plaintiffs, which also include retiree Kathleen Hancock, cite a 2004 opinion from then-Attorney General Ken Salazar which stated that when a PERA members retires and starts receiving benefits, the pension “becomes a vested contractual obligation of the pension program that is not subject to unilateral change of any type by the General Assembly.

The group is represented by Stember Feinstin Doyle & Payne LLC of Pittsburgh, PA and Richard Rosenblatt and Associates LLC of Greenwood Village. The Stember group has worked on numerous class-action lawsuits regarding retirement benefits in both the public and private sector.

Friday afternoon, PERA issued a statement saying they had not yet been officially served with the lawsuit and could not comment, but the statement also noted that PERA policy is not to comment on matters in litigation.

While Republicans and Democrats have been battling along party lines for the past month over budget and tax bills, SB 1 was cited by its sponsors as a model of bipartisanship that they hoped would set the tone for the 2010 legislative session.

SB 1 was tagged by Shaffer as his top legislative priority for 2010, in part for its bipartisan sponsorship. And in his remarks to the Senate on Jan. 13, Penry said reforming PERA would show how Republicans and Democrats could work on bills that showed their common values. “This one ain’t going to be fun, but in this case, real reform is what real leadership requires,” Penry said, pleading with his Republican colleagues to support changes to PERA that he said they have been seeking for years.

SB 1 pledges to restore the troubled public pension plan to full financial health within 30 years. At the end of 2009, PERA had about $33 billion in assets to pay $57 billion in liabilities, and could go broke in as little as 26 years.

Under SB 1, the 3.5 percent cost of living increase (COLA) that was due to go into effect with the March 31 benefit check will instead be eliminated. Beginning in 2011, the COLA will drop to the lower of 2 percent or indexed based on the Consumer Price Index for Urban Wage Earners (CPI-W). The COLA also could drop to zero if PERA experiences a negative investment return year.

The bill also requires PERA employers in all divisions except the school division to increase contributions by 2 percent of payroll beginning in 2013. The current contribution by PERA employees also would increase by 2 percent. School division employers would contribute 1.5 percent beginning in 2013; school division employees would contribute 2.5 percent in order to gain an earlier retirement at age 58.

The plan makes changes in the employee’s required age at retirement. Most current public employees would have to wait until age 55 to retire, with at least 30 years of service. Public employees hired after Jan. 1, 2011, would have to reach age 58 with 30 years of service before being eligible for benefits. After Jan. 1, 2017, that age requirement would increase to 60 years.

SB 1 passed the Senate on Feb. 1 on a 25-10 vote, with four Republicans voting with all 21 Democrats, and passed the House on Feb. 16 on a 36-29 vote, drawing three Republican votes along 32 of the House’s 37 Democrats and Rep. Kathleen Curry, U-Gunnison.

Hearings on SB 1 drew testimony from dozens of PERA retirees who protested the COLA elimination and they believed changes to retirees’ benefits would not survive legal challenges. The bill was amended in the Senate to gain the support of a coalition of public employee unions and organizations and other stakeholders. However, retirees and other opponents of the PERA plan have threatened to sue, and The Statesman learned this week that the group known as SavePERACOLA is currently interviewing attorneys for that purpose. The group’s leaders sent a fundraising e-mail to members this week, announcing they would seek class action status for the lawsuit that would challenge the law on the elimination of the COLA in 2010 and its reduction after that.

Jeremiah Attridge, a PERA member and employee of the Department of Labor and Employment, said this week he and other members of HandOffMyPERA may be attending the March 16 Democratic caucuses to personally “thank” the Democratic legislators who voted for SB 1.

In signing SB 1, Ritter said Colorado is “the first state in the country to pass legislation that really addresses public employee pension concerns.”

The legislation “represents the best of Colorado politics,” Kennedy said, citing the work of Republicans, Democrats, the governor and PERA to “protect the retirement security of thousands of people across Colorado as well as making sure we don’t push obligations onto the taxpayers. This is a real victory for Democratic and Republican leadership.”

While the bill marks significant changes to PERA beginning in 2010, more changes to PERA are likely and could take place as soon as 2011. PERA has committed to reviewing a “means-tested COLA” during the next year, an issue brought up by several witnesses during the hearings. They raised concerns that low-income retirees who don’t get a cost-of-living adjustment in 2010 and a lower one after that would be pushed below the poverty line in five to seven years if inflation exceeded the COLA adjustment. PERA General Counsel Greg Smith said PERA has made a commitment to analyze the means-tested COLA and what it would cost before the next legislative session. He noted that very few public pension plans have cost-of-living adjustments and some pension plans do a means-tested adjustment, although not on an annual basis.

Tuesday’s low-key ceremony was not announced beforehand, although members of the press attended after finding out about the signing from a source outside the governor’s office.

“This has been a tough process,” Kerr told The Statesman Tuesday, in response to questions about the low-key signing. “We’re not celebrating the fact that we’re making these very tough choices.” In a newsletter sent Tuesday to constituents Kerr said the changes made to PERA did not place the whole burden squarely on any one group of stakeholders and that the changes were “fair, modest and necessary.”

Marianne@coloradostatesman.com