October 31, 2007
The Honorable Sara Gagliardi
Colorado Representative
Subject: Proposed PERA Iranian divestment bill
Dear Representative Gagliardi:
As a Friend of PERA, PERA Ambassador, and retired State of Colorado employee, I am requesting that you vote against any further divestment bills placed before the Colorado Legislature in the upcoming session. I also request that you use any influence you have with others in the legislative body to help defeat this and similar proposed legislation.
After much careful deliberation, PERA supported the Sudan divestiture bill, in spite of heavy misgivings about both its potential for a major impact to the financial condition of the PERA trust funds and the appropriateness of states making foreign policy decisions which PERA feels rightly belong within the federal government. Because the Colorado Legislature indicated this bill addressed a unique circumstance, Sudanese genocide, and would contain language prohibiting further encroachment upon PERA’s investment decisions, PERA agreed to support this one piece of legislation. The Legislature was unwilling to help PERA in any way with the significant expense involved in identifying the affected investments or compensate for any losses resulting from forced sale at what could be the “wrong” time.
As to the Legislature’s promise that this was strictly a one-time thing, many of us as individuals said, “Yeah, right.” It appears we were right, because here we are again – this time, the “evil” country is Iran.
The issue here is PERA’s fiduciary responsibility to its beneficiaries. PERA is required as a trust administrator to manage the funds to achieve the strongest possible return on investments for the benefit of the retired and current employees. With these interferences by the Legislature into PERA’s investment decisions, the Legislature is forcing a situation upon PERA that is not placed upon any other pension fund administrators within the state. This interference places our pension funds at an unacceptable risk level for compliance expenses and eroded investment return that other trust administrators do not have hanging over their decisions.
If PERA is continually being bombarded with burdens not placed on any other pension administrators, then forced to absorb all the costs associated with complying with this legislation, as PERA was compelled to do with the Sudanese legislation last year, then obviously the under-funding of the PERA pension fund can be further eroded, not by PERA’s mismanagement, but by legislative interference and meddling. When all these dominoes fall, of course, we read the wildly inflammatory and untruthful articles in the papers damning PERA as “incompetent to administer” the trust funds, and we hear our Legislators screaming about PERA’s “failure to properly manage” the pension funds entrusted to their care.
Deposits made to PERA by the State, as the employer, are not “public funds.” They are placed into the PERA trust fund to provide retired employees their pension. The employee’s withheld dollars are also transferred to that trust. PERA is required to invest those funds in a manner that ensures those pensions will be there for the employees upon their retirement from State service. Moreover, many employees have used their personal savings or borrowed funds to purchase additional service time to be certain their pension will be adequate to meet their future needs. This proposed legislation equates to me entrusting my pension fund administrator with my funds to further enhance my own retirement, and the Legislature telling my pension administrators that they may not invest my money in my best interests, but in accordance with their own political agenda. My pension administrator is unfairly saddled with a burden that other pension fund trust administrators do not have. Consequently, because of this burden upon my pension administrator (and not on other administrators), my investment may suffer inferior returns and excessive compliance expenses, eroding my pension and retirement security in a way that singles out PERA to advance a political agenda while ignoring their fiduciary responsibility to me, the client.
I, personally, do not buy any products manufactured in a number of countries, because their governments perpetuate horrific human rights abuses and won’t enact or enforce laws to stop the abuses. This is my choice; however, I do not try to impose my beliefs upon others. I certainly do not expect the Legislature to enact laws to further my political agenda, and I do not feel the Legislature has any business interfering with my money to support their own political agendas.
A number of things happened under the previous administration, which were detrimental to PERA and the pension plan. Specifically:
PERA was so well funded a few years ago (i.e. making a great return on investments) that the Legislature decreased the State’s employer share of contributions during a period when the State was searching everywhere for cash to seize or avoid paying out. On top of that, the administration decided they wanted to “make it easier for our valued employees who are 50 years of age or older to retire early,” so they removed penalties associated with early retirement that had been in place for many years. PERA reminded the administration that from time to time there were lean years, and they felt the contribution rates should not be lowered, especially since the State of Colorado already pays a smaller employer share toward employee retirement plans than most similar plans in this region. I personally remember very well PERA’s strenuous objection to the early retirement incentives. PERA warned repeatedly that this would have a HUGE impact on the pension funding levels. Did anyone on the Hill listen to PERA’s managers? No, they did not. They blandly reassured PERA that very few employees would “take advantage” of the offer. Unfortunately, their wisdom was wrong. State employees saw the handwriting on the wall, and knew very well that the administration did not want them in the State work force any longer; they knew they were wearing “targets on their backs.” By the hundreds and then the thousands, employees fifty years of age or more began retiring from their State careers, buying whatever time they still needed in order to leave with dignity rather than being forced out by those who were determined that the older, usually higher-paid employees would leave, one way or another. This, of course, led to the “sky is falling” travesty over PERA’s “seriously under funded” scenario, which did not result from the actions of PERA’s management. It resulted from these interferences and meddling by an administration with an agenda they were determined to pursue, regardless of cost to the employees, retirees, and PERA’s outstanding managers. Former Governor Dick Lamm served on the investigative committee and at one point observed that when he was Governor, the funding ratio was lower than the one they were currently investigating, and said that nobody seemed to feel we had an under-funding problem then, so why did they feel that way now. Once again, PERA leadership worked to arrive at a compromise solution, exercising tact and diplomacy while doing their absolute best to continue to represent their clients assertively.
It is time to call a halt to all of this interference with money that is NOT public money, and let PERA management act as they always have, in the best interests of the employees and retirees of the State of Colorado work force.
If you would like to speak with me personally, my home telephone number is
xxxxxxxxxxx. I also would be willing to meet with you to discuss this issue.
Yours truly,
