Colorado Watchdog | CO: Lawmakers battle secret pension issue

Rae Ann McNeilly, Executive Director for Taxpayers United for America, was quoted in an article by Colorado Watchdog on the lack of transparency in the state pension system.

Public employee pension data is so secret in Colorado that even State Treasurer Walker Stapleton was denied access when he wanted to evaluate a pension fund’s long-term viability.

So Stapleton sued the Public Employees’ Retirement Association  when it refused to divulge information on the top 20 percent of the earners — all former state employees.  A judge sided with PERA in April.

Stapleton has continued to fight in an appellate court and has garnered support from some in the Legislature who want to see the law changed.

The treasurer is still in the appeals process and will continue to fight for greater transparency,” Stapleton spokesman Michael Fortney told Colorado Watchdog. “Transparency is a good thing, (and) right now the treasurer is focused on his ongoing lawsuit to release important financial data.”

PERA does not disclose how much money specific pensioners receive. It is one of about 18 states that keep some — or all — of that information secret. PERA maintains it is simply abiding by state law.

“Colorado State statutes require that information contained in all individual PERA member and benefit recipient records be kept confidential,” PERA said in a statement.

When asked specifically what harm there is in making beneficiary information public, particularly when it’s funded in part by taxpayer dollars, a PERA official refused to discuss the issue other to say in an email that, “as a statutory plan, PERA must adhere to state law.

“The fact is that 80 percent of the dollars in the PERA trust fund come from the investment market and from member contributions — not taxpayers,” PERA spokeswoman Katie Kaufmanis said.

Colorado state Sen. Kent Lambert, a Republican on the Senate Appropriations and Joint Budget committees, has introduced bills aiming to increase transparency of PERA but the measures did not pass the Legislature. He said he plans to introduce similar bills in the upcoming session.

“I think there’s ample evidence that the system is far less solvent than it needs to be,” Lambert said. “I’d say the primary issue has been on the lavish amount of payoffs they have had for retirees that is unsustainable. They’ve fudged the numbers a bit for the annual rate of return … which makes it appear as if it’s more solvent” than it is.

What may force the issue of more transparency this year is that Democratic Gov.John Hickenlooper wants to look at a cost-of-living adjustment increase or some sort of salary increase for state workers.

“What I’ve been maintaining for a long time is that, under the law, if we’re looking at increasing salaries, we need to look at total compensation,” Lambert said.

This means the Legislature needs access to PERA information. That, “in combination with the fact that the Legislature and even the state treasurer as the chief financial officer of the state is not allowed access and oversight to the actual numbers,” is reason for concern, Lambert said.

Transparency helps rein in costs and ensures practices such as double-dipping are curbed.

“Double dipping” occurs when a retired public employee collects a pension while also collecting a paycheck by working a new job in the public sector. Although some action has been taken to curb double dipping, there is little to no chance, politically, that the legal practice to be eliminated anytime soon.

“The shroud of secrecy is by design — it’s to keep people from knowing,” saidRae Ann McNeilly, executive director of Taxpayers United of America. “The double dipping is a problem, but the biggest problem with the whole pension thing is, you’re paying so many people for so many years not to work. Mathematically, at any given time, if someone’s allowed to retire at 50 or 55 and the life expectancy is 85, you’re paying a pension of 35 years.

“At any given moment, you’re paying three people for the same job,” McNeilly added.

Barry Poulson, professor emeritus at the University of Colorado at Boulder,studied PERA while serving on a state commission and found that its secrecy prohibits reform of any kind.

“Everyone who’s ever tried to critically valuate their (PERA) program finds it difficult to find information,” Poulson said.  “We did take a close look at double dipping and we certainly found evidence of extensive double dipping … evidence at the local level, especially.”

The commission found many teachers, for example, who took retirement and were hired back as administrators or teachers. The practice was particularly prevalent at the University of Colorado. While there were restrictions for how much individuals could work in their post-retirement jobs and still collect their pensions, Poulson said, “it certainly was a big problem financially and imposed a significant burden on public-sector employers who ended up paying these bills.”

How big is the double-dipping problem?

This lack of information and transparency makes it impossible to determine just how prevalent a problem double dipping is in Colorado. A recent Colorado Watchdog investigation identified 36 double dippers benefiting both from theFire and Police Pension Association of Colorado and PERA.

“There’s this huge protection from the public, even the public employees’ whose job it is to know and understand,” McNeilly said. “This should put red flags all over the place as to what are they hiding? That’s key. That’s what we need to drill down on and drive home. … This is the complicated issue and this is how the pension scam has perpetuated for so many years.”

But ironically the Secretary of State’s Office disagrees on this point and says double dipping is no longer a huge issue because the state has laws to curb that practice.

SB 10-1, enacted during in 2010 by the Colorado General Assembly, now limits the number of days and hours a PERA retiree may work for a PERA employer. For most retirees this is 110 days, or 720 hours in a calendar year.

“PERA retirees are not limited if they work for an employer that is not affiliated with PERA,” Kaufmanis, the PERA spokewoman, said.

SB10-1 also aims to eliminate PERA’s unfunded liability in 30 years. PERA claims $23.5 billion of its $60.7 billion liabilities are unfunded. Lawsuits challenging the constitutionality of SB10-1, particularly on reduced cost-of-living-adjustment from 3.5 percent to 2 percent, are pending.

Many argue that if some want to return to work after spending such a large portion of their life as a public servant of sorts, they should be able to earn that pension and extra money if tooling around in the garage during retirement isn’t their thing. Others maintain that taxpayers still would be paying the salary of that person doing the post-retirement job, if it wasn’t a working retiree in that position. But double-dipping opponents say it’s more a moral issue.

“You’re a single employer paying a single employee. If the employee continues to work then they should relinquish their pension,” McNeilly said. “Is it legal? Perhaps so. Is it ethical? I think not. It doesn’t take a genius to say this isn’t fair to the taxpayers.”

While many pension-system critics lament the existence of double dipping, they agree it’s not the worst offender when it comes to reasons why Colorado’s pension system is in such dire straits.

“I think there are other ploys that public employees use that would be much more costly (than double dipping), like piling up their salary in the last years and using that as a base as their benefit,” Poulson said. “I think we need to address those problems — if for nothing else for equity — to bring public employees in line with private employees and benefits. And it in some ways would reduce costs … but those are Band-Aid solutions.”

PERA is one of the most underfunded pension plans in the country and will go bankrupt someday, Poulson charged.  Reform laws have little chances of getting through the Legislature because the Democrats control both houses, he said.

“One would hope that down the line, we see both Democrats and Republicans … take a look at this and say ‘this is not something we can continue and afford.’ But that’s sort of wishful thinking at the moment,” Poulson said.

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