EDITORIAL: Debt and Taxes… and a New County Courthouse, Part One
On Tuesday morning, June 16, a handsome gentleman settled himself at the table, facing the Archuleta Board of County Commissioners (BOCC), and began to talk about Colorado politics.
I didn’t recognize this person, but judging from his tone, and the remarks he was sharing with the BOCC, I understood that he must be someone from the state government — and probably, someone fairly high up in the state government. In fact (as I found out when I asked for his business card at the conclusion of his chat with the BOCC) the handsome gentleman turned out to be Colorado Treasurer Walker R. Stapleton.
Mr. Stapleton explained that he was touring the state and meeting with various community leaders, to share ideas and hear what people were thinking out in the hinterlands. (Perhaps he was politicking as well.)
As a politician who deals mainly with financial matters, Mr. Stapleton shared quite a few insights into the state of the Colorado economy. At one point, for example, County Commissioner Clifford Lucero asked him to address the solvency problems facing the Public Employees Retirement Association (PERA) pension system.
Stapleton has been an outspoken critic of PERA and has repeatedly questioned the pension’s long-term solvency.
Mr. Stapleton responded to Commissioner Lucero:
“By 2017, every school district in the state of Colorado is going to have to contribute 20 percent of their school budget, just into the pension system. And that doesn’t even account for the teacher contribution to the pension system which is about 7 or 8 percent.
“If you compare those contributions — 27 to 28 percent — structurally, and compare to the private sector, you’ve created a retirement system that’s four to five times more expensive than a comparable plan in the private sector. There’s no way the state should be in the business of doing that, from an economic standpoint.”
PERA doesn’t serve only the state’s public school teachers, however. Members of PERA include employees of more than 500 Colorado agencies, including employees of state government, many university and college employees, judges, employees of certain cities and towns, Colorado State Troopers, and the employees of other public entities.
According to the PERA website, public school teachers were contributing 8 percent of their salary to PERA beginning January 1, 2015. Additionally, school districts were contributing 18.35 percent. Which makes it appear that over 26 percent of a school district’s staffing budget is being paid to PERA. More than a quarter of the staffing budget, that is to say.
Colorado state employee wages are subject to the very same contribution rates. And the employer rates are scheduled to increase each year through at least 2018.
A new study, released the Laura and John Arnold Foundation this past Monday, says that PERA is in serious jeopardy if the system doesn’t address a 30-year, $26 billion insolvency issue. The report was penned by retirement security experts Josh McGee and Michelle Welch, and makes the claim that PERA is only 61 percent funded. A 2010 Colorado law that purported to address the insolvency issue — SB10-001 — didn’t go nearly far enough to fix what ails the pension system, says the report.
“Although legislators made an effort to fix the problem through the passage of Senate Bill 1, which included retiree benefit cuts and increased statutory contribution rates, these actions have failed to provide relief in the near term,” the study says. “Even more concerning is the fact that the pension system remains particularly vulnerable to market downturns, meaning that the debt, which now totals at least $25 billion, will likely continue to grow.”
“As I went around the state and talked to school board members and school superintendents that were members of [PERA], what I heard, almost to a person, was “the biggest cost driver of our school district budget is unsustainable, mandatory contributions to the pension system, that keep going up year after year after year. And some districts have responded to that by taking money out of present-day teacher pay and using it on the back end to fill mandatory contributions to the pension system. And that, to me, is unsustainable.”
The issue of the retirement system is not a simple one. But it clearly demonstrates how a financial scheme that seemed perfectly reasonable and workable in 1931 can become an oppressive dinosaur 84 years later, when the culture and demographics of Colorado have changed significantly.
But the debt that concerns the taxpayers of Archuleta County — at this moment in time — is probably not the underfunded debt of the PERA system. Rather, the debt that concerns us most is the debt that our three County Commissioners are currently preparing to place upon our shoulders, without asking our opinion on the matter… and without asking our permission, either.
I’m talking here about the $25 million debt to pay for new County offices.
If our three County Commissioners — Michael Whiting, Clifford Lucero and Steve Wadley — follow the trail they appear to be blazing at the moment, we taxpayers will have no say in the matter. But we will be handed the bill, to pay for the next … how many years?
As judging from this page included on Treasurer Stapleton’s government website, it looks like one of the Colorado Treasurer’s jobs is to help county governments create debt, as conveniently as possible.
We are listening to Commissioner Clifford Lucero, at the Tuesday morning meeting, address some comments to Mr. Stapleton.
“You asked what our issues were, and our biggest issue right now is our courthouse. We have major problem with our courthouse, and it looks like we’re going to have to rebuild, or locate another facility. And we’re in the process of doing that — finding the right place to build a courthouse and a justice center and a new jail. That’s one of our biggest issues. It’s huge.”
We then heard County Administrator Bentley Henderson, also addressing Mr. Stapleton.
“You mentioned the structuring of the Certificates of Participation. Is there somebody in your office who is a resource for that?”
Commissioner Lucero chimed in: “That was my next question.”
“Absolutely. Yep. And that’s one of the things — that’s one of the interesting things that we’ve heard about on this trip, which has been productive. Which is, that counties feel that the restrictions and regulations on making investments are so tight — that they are getting quarter-percent returns, that they are not able to get what they’d like to, in investment returns.
“At the state, we’re fixed-income bond investors. At the state level, we have access to a wider pool of investments. So an idea has been raised about how, potentially, we could pool some county treasurer money at the state level, in order to enhance the investment returns without increasing the risk.
“Because for smaller and more rural counties in western Colorado, that’s something that could make a huge amount of difference.”
If you listen here to Mr. Stapleton’s response — referring to returns on investments for small, rural counties — you could be left with the impression that the financial tool Administrator Henderson and Commissioner Lucero had asked about was some type of investment that would provide taxpayers with a healthy return on their tax money.
In fact, however, the item our Commissioner and County Administrator were asking about — the so-called Certificate of Participation — is a clever financial tool designed by the banking industry to allow government boards to put taxpayers deeply in debt, without needing to ask the taxpayers’ approval.
A clever financial tool. But is it an ethical one?