Legislators should disclose and divest to avoid PERA conflict of interest

John Andrews, former Senate President and now a fellow of the Claremont Institute, today called on Senate President Joan Fitz-Gerald and Speaker of the House Andrew Romanoff to encourage full disclosure of all 100 legislators' PERA membership status -- followed by divestiture into a non-PERA pension plan -- as an assurance for arm's-length handling of PERA reform bills awaiting Senate action soon. Steps must be taken to assure the public there will be no self-dealing on proposals to shore up the deficit-ridden state pension system "at this time of ethics charges and shaken public confidence," Andrews said in a letter to Fitz-Gerald and Romanoff (see full text of letter below).

State Rep. Dave Schultheis, R-Colorado Springs, accompanied Andrews at a state capitol press conference and urged that the House address the question of disclosure and divestiture before it takes any further action on PERA bills.

Claremont Institute financial analyst Jim Schwartz told the press conference that PERA's troubles are similar to major insurance company failures he has studied in the recent past. PERA's own projections for meeting its future obligations to retirees show only a level of 5% to 21% certainty, Schwartz said.

-------------------------------------------------------------------------- Text of John Andrews' letter to legislative leaders

CLAREMONT INSTITUTE For the Study of Statesmanship and Political Philosophy State Relations Office , Denver

March 14, 2006

Rep. Andrew Romanoff, Speaker of the House Sen. Joan Fitz-Gerald, President of the Senate State Capitol Denver CO 80203

Dear Mr. Speaker and Mme. President:

I am concerned, as I know you are, that our state employee pension plan, PERA, is $13 billion in deficit and might require $400 million or more per year in extra funding, starting now, to become solvent again. Colorado taxpayers simply can’t afford that kind of bailout. It would eat up more than half of the new money from Referendum C.

In that context, important PERA reform legislation is before the state House and Senate this year. The two of you as leaders, and all of your colleagues as legislators, face huge decisions about some combination of reduced pension benefits and increased pension contributions, to get PERA out of the red.

Citizens need to know that all members of the General Assembly are acting for the public interest, not for self-interest, when casting their votes on PERA bills. You have an opportunity to lead strongly and lead by example in this regard. Two steps are needed:

1. Support full disclosure by every legislator of his or her PERA membership status and amount of PERA financial stake.

2. Support divestiture by all legislators of their personal ownership interest in this troubled pension plan for which they are making new rules.

When the Claremont Institute recently asked all 100 legislators for a personal PERA disclosure, 83 members ignored the request. Only one Democrat and 16 Republicans responded to our survey. I don’t think that’s the message our General Assembly wants to be sending out, at this time of ethics charges and shaken public confidence.

State law requires all members of the General Assembly to make annual full disclosure of their investments, business interests, and property holdings (CRS 24-6-202). Isn’t PERA disclosure at least within the spirit of that law?

In addition, the rules require any member to abstain from voting on bills where he or she has “an immediate personal or financial interest” (House Rule 21c, Senate Rule 17c). Aren’t the current PERA bills at least with the spirit of those rules, as far as a PERA member’s vote is concerned?

The most far-reaching PERA reform proposal of 2006, HB-1083, was killed in the House Business Affairs and Labor Committee on Feb. 8. On the 11-2 vote to postpone indefinitely, what was the financial self-interest of each committee member? For the most part, we don’t know.

The Senate Committee on State, Veterans, and Military Affairs will soon take up the Governor’s tough PERA reform plan, SB-162, and the PERA board’s own, less aggressive plan, SB-174. In that committee, chaired by ethics reform advocate Sen. Tupa and on which Sen. Fitz-Gerald herself is a member, what is each legislator’s financial self-interest? Again, with only a few exceptions, we don’t know.

These committee situations in both houses, as well as the eventual floor vote on one or more PERA reform bills before adjournment in May – not to mention the possibility of a special session being called this summer, if the untenable PERA status quo isn’t addressed this spring – point to the necessity for immediate personal PERA disclosure by all legislators.

Disclosure alone is not enough, however. Divestiture is also called for.

How can a legislature mostly composed of pension-plan account owners be relied upon to make sound, impartial changes – perhaps involving shared sacrifice for all PERA members – in the pension benefit and contribution formulas which caused the existing massive deficit? The answer, with no disrespect to yourselves or any of the individuals involved, is that they cannot be relied on to do this. It defies human nature.

The clear, clean remedy, the solution that will put the General Assembly above reproach, is to provide and require alternative pension arrangements outside PERA for all 100 members immediately.

A non-PERA, defined-contribution option for legislators’ retirement has been available for several years. I opted for it myself shortly after entering the Senate in 1999. My PERA votes thereafter, while perhaps not always the best, were always free of calculation about a personal bottom line. Shouldn’t every state Senator and Representative have – and be seen to have – the same unmixed motives on their PERA votes? Appearances, remember, count for a lot with the public, particularly at this stormy time.

I therefore call on you, Mr. Speaker and Mme. President, to grant late-bill status for a legislators’ PERA divestiture bill that could be taken up ahead of SB-162, SB-174, and any other PERA reform legislation.

It’s been a difficult year at the Capitol. All of us who cherish the institution of the Colorado General Assembly, whether Democrats or Republicans, current members or former members, must feel a special obligation to help restore public confidence, trust, and esteem for the integrity of the legislative process and the ethical honor of members. These two steps on the PERA issue, disclosure and divestiture, can advance that goal and should be taken at once.

Thank you for your consideration.

Sincerely, JOHN ANDREWS Colorado Fellow, Claremont Institute Former Senate President --------------------------------------------------------------------------- CLAREMONT INSTITUTE Survey of Legislators’ PERA Membership March 2006

All legislators were surveyed. The only replies are marked Yes or No.


Bacon, Bob Brophy, Greg Dyer, Jim Entz, Lewis -- YES Evans, John Fitz-Gerald, Joan Gordon, Ken Groff, Peter Grossman, Dan Hagedorn, Bob Hanna, Deanna Isgar, Jim Johnson, Steve -- NO Jones, Ed Keller, Maryanne Kester, Ken Lamborn, Doug -- YES May, Ron McElhany, Andy -- YES Mitchell, Shawn Owen, David Sandoval, Paula Shaffer, Brandon Spence, Nancy -- NO Takis, Stephanie Tapia, Abel Taylor, Jack Teck, Ronald -- NO Tochtrop, Lois Traylor, Kiki -- NO Tupa, Ron Veiga, Jennifer Wiens, Tom Williams, Suzanne Windels, Sue


Balmer, David -- NO Benefield, Debbie Berens, Bill Borodkin, Alice Boyd, Betty Buescher, Bernie Butcher, Dorothy Cadman, Bill Carroll, Morgan Carroll, Terrance Cerbo, Mike Clapp, Lauri Cloer, Mark Coleman, Fran -- NO Crane, Bill -- NO Curry, Kathleen Decker, Richard Frangas, Jerry Gallegos, Rafael Garcia, Michael Gardner, Cory -- NO Green, Gwyn Hall, Dale Harvey, Ted Hefley, Lynn Hodge, Mary Hoppe, Diane -- NO Jahn, Cheri Judd, Joel Kerr, James King, Keith

Knoedler, Matt Larson, Mark Lindstrom, Gary Liston, Larry -- YES Lundberg, Kevin -- NO Madden, Alice Marshall, Rosemary Massey, Tom May, Mike -- NO McCluskey, Bob McFadyen, Buffie McGihon, Anne McKinley, Wes Merrifield, Michael Paccione, Angela Penry, Joshua -- NO Plant, Tom Pommer, Jack Ragsdale, Ann Riesberg, Jim Romanoff, Andrew Rose, Ray Schultheis, David -- NO Solano, Judy Soper, John Stafford, Debbie Stengel, Joseph Sullivan, James Todd, Nancy Vigil, Valentin Weissmann, Paul Welker, Jim – NO White, Al Witwer, Rob