Archive for the ‘colorado’ Category

Don’t Ask the State to Confiscate Water Rights

Posted on: June 15th, 2012 by admin 1 Comment

IP-8-2012 (June 2012)
Author: J. Craig Green

PDF of full Issue Paper
Scribd version of full Issue Paper

In next November’s election, voters may be asked to destroy Colorado’s 160-year-old system of water rights. A pair of ballot proposals, for which signatures are currently being collected, would essentially confiscate the water rights of cities, water districts, farmers, and ranchers by making them subordinate to the whims of any Colorado citizen who complains to a court about their legal status.

The Colorado Constitution has always recognized water as a public resource, but has also made it subject to claims for private uses. Under the Constitution, water rights can be claimed for beneficial purposes such as irrigation, domestic and city uses, among many others. Farmers and breweries can own water rights, as can cities.

However, the authors of this year’s proposed ballot initiatives #3 and #45 want to eliminate Colorado’s constitutional language which recognizes long-established private and public claims to water, including those established long before Colorado became a state.

Federal Pay Freeze Should Precede a Larger Fiscal Conversation

Posted on: December 16th, 2010 by admin

by Barry Fagin

As a long-time, hard-working federal employee who gives up a lot to work where he does, I have just one thing to say about the proposed federal employee pay freeze. I think it’s a terrific idea.

Well, maybe not exactly terrific, particularly if you think about how little difference it would actually make. But symbolic gestures can matter in politics. If this one lays the groundwork for something that’s actually important, then I’m all for it.

To get an idea of how utterly insignificant a federal pay freeze would be, take a look at the numbers fro 2008, the most current data available. For that year, the federal government payroll was about 15 billion dollars. During that same year, the Bush administration’s budget spent 2.9 trillion dollars.

Let’s suppose a pay freeze would save 10% of payroll costs, a figure that errs generously on the side of money saved. The fraction of spending reduced would have been 1.5 billion out of 2.9 trillion, a whopping one half of one tenth of one percent of all federal outlays. And let’s not forget this is 2-year-old data. Bush was the biggest spender since LBJ, but when it comes to red ink Obama and the until-recently-Democratic Congress make Bush look like a piker.

Hooray for the courage of Washington D.C! Through the miracle of bipartisan consensus, they boldly solved one half of one tenth of one percent of our spending problem. For our next trick, we’re going to treat drug addiction by flooding the streets with crack that’s only 99.95 percent pure.

Given that a pay freeze wouldn’t actually accomplish anything tangible, what about the intangible? How would a national government pay freeze work as a symbolic gesture? That’s a tougher question. Particularly since it’s hard to know what a pay freeze would actually mean.

Federal employee compensation is determined by the classification of your position and the “step” within that classification. It’s complicated to explain in a column, but basically your “step” goes up by one every year. Your salary is determined by a table released by the Office of Personnel Management. Look up your classification and your step in the table (with some non-trivial adjustments based on where you live), and that’s your salary. Period.

While in theory you could be denied a step increase, there are tremendous barriers in place to make sure that doesn’t happen. I suppose out of two and a half million Federal employees, somebody somewhere gets denied a step increase every once in a while, but in over 16 years of government work I’ve never heard of it.

This means that it’s easy to argue that federal salaries are “frozen” when they really aren’t. I’m guessing that a “freeze” would mean the OPM salary table would be held constant for one year. But we would still get step increases. Even though it would mean less of an increase than we were accustomed to, in the language of Washington that still counts as a “cut”. Compared to some employees in the private sector who might actually make less money from year to year, or who could lose their jobs through no fault of their own, I think that’s really insulting.

Don’t get me wrong, I could always use more money. I have two kids in college; my tuition payments are two and a half times my mortgage. Clearly I’m insane; I should be living in a much bigger house and sending my kids to cheaper schools.

But so be it. It’s a personal decision, and if my cash flow gets further pinched it’s my responsibility to deal with it.

But I think I speak for many federal employees when I say that if our salaries do get “frozen”, whatever that means, it would mean a lot more if it started a larger, much more substantive national conversation. Something that attempted to build consensus on cutting entitlements and spending in a substantive, across-the-board way. Something that truly held out realistic hopes for restoring fiscal sanity and long-term prosperity to America.

After all, we wouldn’t work for our country if we wanted anything less.

This article originally appeared in the Colorado Springs Gazette, December 8, 2010.

The Citizens’ Budget

Posted on: November 23rd, 2010 by jlongo

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The report provides an overview of the structure, timing and size of the State budget. We speak to how the problems originated and how things have gone wrong in recent years. The Citizens’ Budget includes legislative, constitutional, and policy recommendations to close the looming state budget gap – without raising taxes – and move Colorado towards sustainable government for good. Use this Citizens’ Budget link for the full document.

Why Colorado Should Shift to a Defined Contribution Retiree Health Plan

Posted on: September 28th, 2010 by admin

By Barry W. Poulson, Ph.D.

Colorado taxpayers are on the hook for more than $1 billion in unfunded liabilities incurred in the defined benefit retiree health plan administered by the Public Employee Retirement Association (PERA). An additional $79 million in unfunded liabilities was incurred in 2008, reflecting both a rapid growth in retiree benefits and losses in the assets held in the Health Care Trust Fund. Prospects are for continued volatility and deterioration in the funding status of PERA’s retiree health plan.

It’s time for the state to move from a defined benefit retiree health plan to a defined contribution plan. Here’s why.

The $1 billion in unfunded liabilities in the Health Care Trust Fund would not be such a looming fiscal crisis if there was some prospect that the liabilities could be paid off within 30 years to meet Government Accounting Standards Board (GASB) standards. But due to flawed actuarial assumptions used by PERA, the funding status in the Health Care Trust fund is actually worse than reported.

A four year smoothing technique is used to estimate the actuarial value of assets in the plan. This means that some, but not all of the decrease in the market value of assets in 2008 is reflected in the actuarial value of assets for that year. The loss in the market values of assets in more recent years is, of course, not reflected in the actuarial value of assets in 2008. These losses in the market values of assets in the plan will be reflected in the actuarial value of assets over the next four years. Thus, even with recovery in the stock market we are likely to see an increase in unfunded liabilities in the plan over the next four years.

Another flaw is to assume an 8.5 percent rate of return on assets in these plans. Because PERA assumes such an unrealistically high rate of return, they engage in a risky investment strategy, with 70 percent or more of assets in equities. The actual rate of return on assets in these plans has been zero or negative over the past decade. The best economic analysis of public sector pension and health plans, such as PERA, suggests that a more realistic rate of return on assets that is about half or less than that actually assumed by PERA.

The fatal flaw in defined benefit retiree health plans such as PERA’s is moral hazard. The reality is that politicians have promised retiree health benefits they can’t pay for. They offer public sector retirees generous health benefits as an alternative to better compensation because the cost of retiree health benefits is deferred to future generations. Public sector employee unions encourage this because it is less likely to generate taxpayer resistance than higher compensation which must be funded from current revenue.

Most private sector employers have either eliminated defined benefit retiree health plans, or replaced them with defined contribution plans. While most state and local governments have not eliminated health plans for their retirees, they have enacted a number of reforms to reduce the cost of those plans, including replacing defined benefit plans with defined contribution plans.

The Colorado Legislature should replace PERA’s retiree health plan with a defined contribution plan. In the recent Independence Institute study, “How to Save a Billion Dollars in Other Post-Employment Benefit Costs,” we estimate that in the short run this reform would reduce the employer annual required contribution to the plan from $72.6 million to $29.0 million. The annual required contribution from the state would be reduced from $24.6 million to $14.5 million, a savings of $10.1 million.

More importantly, this reform would reduce the accrued actuarial liabilities in the plan, and enable the state to pay off the $1 billion in unfunded liabilities over a 30 year period.

Dr. Barry W. Poulson is a Senior Fellow at the Independence Institute. The study referenced in this article may be found at How to Save a Billion Dollars in Other Post-Employment Benefit Costs.