Archive for category Colorado Politics

No On Amendment 71

This year, one of the more controversial ballot measures is a proposed State Constitutional amendment to limit State Constitutional Amendments.  It has some superficial appeal: In some years past, a fair number of amendments have passed, and the State Constitution is supposed to be a foundational document, not just a compilation of what some people in a given year think are cool ideas. This year, a number of out-of-state environmental groups tried and failed to get anti-energy initiatives on the ballot, and Amendment 71 is in large part a response by the energy industry to that effort.

The measure has three main parts:

  • New amendments would require 55% to pass
  • Petitioners would need 2% of the registered voters in each State Senate district
  • Old amendments would still only require 50% for repeal

While US State Constitutions have never been held in the same reverence as the US Constitution, I’m open to the idea that it’s too easy to get bad ideas on the ballot, and that in a given bad year, some of those ideas will end up being enshrined there.  Certainly an ongoing government-by-plebiscite is a dangerous way to govern.

But Amendment 71 is a bad idea whose time has not yet come.

Political power is a zero-sum game.  In theory, the citizens of Colorado have a number of options for checking the power of the state government.  They have the right to overturn laws at the ballot box.  They have the right to put new laws onto the ballot.  And they have the right to put Constitutional amendments on the ballot.

As will be the case, the state legislature has systematically moved to negate those checks.  Citizens may overturn only those laws that are not deemed to be for the public peace, health, and safety.  As a result, the legislature routinely adds the so-called “Safety Clause” to even mundane measures, in order to protect them.

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Colorado also has no hold-harmless period for citizen-initiated statutory changes.  In effect, the state legislature can immediately overturn any statutory change with a simple majority vote.  Constitutional amendments, on the other hand, require a 2/3 vote in each house to be placed on the ballot for repeal.  This may explain why the Constitutional route is so popular.

But by considering this (potential) problem in isolation, the proponents are demonstrating political tunnel vision.

Amendment 71 would make it harder to rein in the state legislature, while doing nothing to prevent the legislature from imposing its will on the people.  It does nothing to limit the abuse of the Safety Clause, and it does nothing to create a hold-harmless period for citizen-initiated statutory changes.  It represents a staggering net shift in power towards those interests who have existing money and organizational ability to get measures on the ballot, and away from the citizenry’s ability to limit legislative power.

I know some of the people involved on the pro-71 side, and I don’t question their sincerity, only their judgment.  In 2008, when I was running for State House of Representatives, then-State Senator Greg Brophy and I met up at an issues forum sponsored by Hadassah.  On the ballot was Referendum O, a measure to tighten up the process for amending the State Constitution.  Greg was in favor then, and I opposed it, so while he’s a paid spokesman for the A71 group now, he comes by his support honestly, and is hardly “bought” as some have suggested.

But Greg, of all people, should know from his own experience how flawed his arguments are.  The State Constitution is no guarantor of our rights at all when the State or US Supreme Court willingly interprets it to benefit a political agenda.

Consider the 2013 gun law recalls.  Two Democrats – from what were drawn as safe Democratic seats – were recalled over the 2013 bills and replaced by Republicans.  A third from a competitive seat was at risk until she resigned to make sure that a Democrat could succeed her.

And yet.  After that, after the Democrats won back those seats and still lost control of the State Senate, after they nearly lost control of the State House, the laws remain on the books, and have survived court challenges.  The Democrats are bound and determined to ignore clear signals from the electorate that they’re on the wrong side of this issue, and have simply no real incentive not to pursue further changes as their electoral majorities allow.

Brophy himself declared from the well of the Senate, “I will not obey this law!”  That alone showed that he understood that the guarantor of our rights is not the Constitution or the courts but ourselves.

Much of the appeal on behalf of Amendment 71 has come to rural Republican voters, who rightly feel targeted by a number of bad Constitutional initiatives put on the ballot by Boulder and Denver liberals.  The argument is that, with the State Senate signature distribution requirement, they’ll be able to block bad ideas at the signature-gathering stage.  But when A71 proponents failed to meet their own standard, they didn’t fall short in the rural districts.  It was in some of the liberal college districts in Ft. Collins and Boulder, who have more registered voters and thus a higher signature threshold.  In all likelihood, A71 would do more to let those districts block ideas desired by the rest of the state than to keep them from imposing their bad ideas on us.

In a year when the Democrats have an excellent shot at taking back the State Senate, giving them control of the whole legislature and the governorship, it’s a terrible idea to limit the citizens’ potential checks on that government.


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Is The Right Finally Getting Smart About Ballot Measures?

Maybe they are.

Watching the Rangers-Blue Jays game the other night, I saw a commercial against Colorado’s Amendment 72, an initiative to amend the state Constitution to raise the tobacco tax from 84 cents a pack to $2.59 a pack.

The main stated argument in favor is that such a high tax will reduce underage smoking, and the money is supposed to go to programs to do that, along with a wish-list of other tangentially-related health expenditures, such as money for hospitals and student loan relief for rural doctors.

What was striking was that the language was almost identical to a radio ad I had heard earlier in the week opposing California’s Proposition 56, which would raise its cigarette tax from $0.87 to $2.87.  The tax-raisers in California are evidently using the same arguments as the ones here in Colorado.

It may be that the Right is finally figuring out that it needs a national effort to combat state-level bad ideas.  Since the language used in the anti-referendum ads was so similar, I can only assume that they were a coordinated response.  Given the electoral environment in both Colorado and California, I’m not optimistic about defeating these taxes in either states, but I hope that they don’t take the wrong lessons from it and give up.

Coordination is nothing new for nationwide liberal interest groups.  They routinely find promising states to run similar legislation or ballot initiatives in, coordinating their efforts nationally, and running similar ad campaigns.  (For instance, former New York Mayor Michael Bloomberg is running spots in favor of a 1-cent soda taxes in both San Francisco and Oakland this year.)  Then, having established bona fides, they move onto other states.  California and Colorado are both targeted for tobacco tax increases because they’ve “fallen behind” other states in how much they let their non-smokers translate their feelings of moral superiority over smokers into action.

Historically, they’ve relied on conservative state-level think tanks and political groups not to realize that any given initiative or legislation wasn’t unique to their state.

In recent years, the right has gotten wise to this strategy, although it’s been somewhat ineffective in countering it.  As out-of-state funding is almost always unpopular, the Left has countered efforts to highlight that by filtering contributions through its networks of state and local PACs and issue committees.  When I worked at, one of the mantras among the state editors was, “If it’s happening in your state, it’s happening in other states.”  This helped give us the incentive to write certain stories, but getting people to read them and connect them to what was not yet going on locally was another matter.

In addition, when more conservative-minded groups such as ALEC or the State Policy Network of state-level policy groups have tried the same thing, they’ve been attacked as conspiracies by the left, and their sponsors and donors have been the targets of hate campaigns.

I found the arguments opposed to the tax compelling.  Both Colorado and California have already diverted alleged anti-tobacco money to other purposes, and in any event, after the first year, you never really know how much money is “supposed” to go to these programs, anyway, so any tax increase really becomes an excuse for the state spend on whatever it likes (and more importantly to the politicians, whomever it likes).  This was the logic that helped defeat a large general income tax increase back in 2013, although cigarette smokers are always an attractive target for tax increases.

Although I don’t smoke, don’t use tobacco, and despite being from Virginia, never have, I think I’ll vote against giving the government more money to spend.

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Podcast #2 – BLM Road Closures

Marjorie Haun has been doing yeoman work following the story of the BLM land closures.  In this podcast, I talk to some of the players – a business-owner whose customers will find themselves with less road to ride; an activist who’s working the legal side; and a member of the Mesa County Board of Commissioners who filed a protest.

In the story, we reference the BLM’s Resource Management Plan.  You can find the map of it here.

And a copy of the form letter protest denial can be found here.

Marjorie has filed two stories on the planned closures, one in May, one in September.



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Podcast Experiment

One of my fondest desires has been to produce a This American Life or RadioLab, only for free-market and conservative ideas.  Thanks to Stacy Petty, I’ve actually been given a chance to do this.

In one of his own podcast interviews, Dan Carlin of Hardcore History fame says that his goal has been to produce, for radio, a long-form edition of what a newspaper column would look like.  That’s kind of what I’m aiming for here, as well.  Edited, polished, but also using the illustrative and mood-setting background sound that radio give you, but newspapers don’t.

It’s unclear exactly what the format will be going forward, but here’s the first attempt, discussing PERA, the forthcoming State Auditor’s report on an early warning system, and small planes.  It runs 10:30, but I’m hoping to bring future editions in at exactly 10:00.



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Call Western Union

“If you want to send a message, call Western Union.” – Samuel Goldwyn

Much if not all of the Trump boomlet is fueled by a frustration with and distrust of a party establishment that seems not only cozy with progressives, but comfortable with progressivism.  Articles by both Reihan Salam and Glenn Reynolds have made this point, and it’s one that Mark Steyn has talked about.  Americans are happy to play politics between the 40-yard-lines.  Given a perpetual choice between 49-yard-lines, though, they rebel.

The problem is that this rebellion isn’t necessarily coherent, and is usually destructive.  In 1968, Democrats sent a message to Lyndon Johnson, and got Richard Nixon elected.  In 1992, Republicans sent a message to George H.W. Bush in the form of Pat Buchanan, and got Bill Clinton elected.

A close analogy is here in Colorado in the 2010 governor’s race.  Unpopular incumbent Democrat Bill Ritter decided not to run for re-election amid rumors of personal scandal.  The Republicans, with festering dissatisfaction at the “establishment” after losing marquee statewide races in 2004, 2006, and 2008, had a choice between stalwart conservative, but presumed establishment favorite, Rep. Scott McInnis of Glenwood Springs, and unknown, blank-slate, self-professed Tea Party businessman Dan Maes.  When fellow Republicans satisfied a personal vendetta by leaking allegations of plagiarism just before the primary election, many Republicans registered their complaints by either not voting for McInnis or voting for Maes, who squeaked by with a major upset win.

The other factor was a widespread, small-l libertarian-fueled distrust and honestly hatred of the party officials and party officialdom.  I was at Denver party breakfasts in 2008 when Dick Wadhams was raked over the coals by the Ron Paul people, and that resentfulness has percolated (and been stoked by the large-l Libertarians) ever since.  It certainly was around in 2010.

Maes, frankly, had no business being the nominee, and no business being a statewide candidate.  He had no idea what he was doing, no interest, apparently, in the nuts and bolts of an active campaign, no willingness to spend endless hours on the phone raising money.   And the Republican party blew as good an opportunity as we ever had in the Tea Party year of 2010 to reassert control over state government.

The current national dynamics eerily and scarily resemble those of 2010 here in Colorado.  Candidates actually capable of uniting the various factions of the party, or bringing a unique and valuable message, are getting shut out of the process because it’s All Trump All The Time.

While I remain convinced that there’s no way on God’s green earth the party will actually nominate Donald Trump as its presidential candidate, he’s sucking oxygen from as deep and talented a field as I’ve seen in my lifetime at the national level.

That depth, by the way, is also in large part the result of a 20-year effort to grow the party at the state legislative level.  It’s meant letting each state party find its way and find horses for courses, as the saying goes.  That’s resulted in Republican government in states as diverse as Michigan and Alabama, but it’s also meant that those state parties differ much more from each other than they might once have.  The only person capable of uniting a national party is a presidential candidate, and the nominating process is a means of having the debate to decide where we want to go nationally.

A political party is a coalition of diverse interests, but there are elements outside the party who can’t stand that fact, and would be perfectly delighted to see the national party dissolve into factional bickering and resentfulness.  There’s absolutely no good reason to let that happen, or to nominate less than our best this year.

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Colorado to Pay for Drunken Artists Colonies

In what has to be one of the worst misappropriations of public funds since that study about why lesbians are fat, Colorado is going to sponsor “affordable housing” (sic) for artists in rural communities:

Gov. John Hickenlooper announced the plan Monday at an artists’ community in Loveland. The governor says that the state will help sponsor a $50 million plan to create artist housing in nine rural communities, starting with Trinidad.

Why should Denver have all the bad public art?

The housing will have income caps. Artists who qualify for housing can’t make more than 60 percent of their area’s median income.

Well, at least we have some standards.

Private foundations are joining the effort. A state spokeswoman says it’s not clear how much of the $50 million will be paid by the government.

How about $0?  Does $0 work for you?

The program will have a generous definition of “artist.” The program will accept architects, filmmakers – even beer and liquor makers.

Gotta get those creative juices flowing somehow.

The argument we hear from the Democrats all the time is, “We need to have a conversation about what we want the government to do, and then fund it appropriately.” This is the sort of nonsense you get when you start from that end of the deal.  Of course when you start by asking, “What is it you want?” you end up with a wish list like me in a book store.  The phrasing completely hides the fact that you’re actually making choices – either about what the government will do with its limited resources, or with what you can do with your own.

Try ph
rasing it differently: “We need to decide how much we really want to pay for government, and then use that money appropriately.”  Aha, now it’s clear that there’s only so much money to go around, and if you want to spend your own money on this sort of thing, you’ll be paying for it before you fund your food, your mortgage, your kids’ education, and your retirement.

Naturally, the Democrats hate that part of the conversation, so much so that they try, every step of the way, not to let you have it.  They want to have the “What do you want us to do for you?” part of the discussion, and then, once you’ve committed to buying Pierre the Failed Art Student his rent and bitters, tell you how much it costs.  And when you decide maybe your dental bill is more important, they want to insist that, no, we’ve already decided that IPAs for Pierre are in the budget, and it’s no fair going back on that and changing the deal on poor Pierre, once he’s pulled up stakes and moved to Ouray.

It’s the main reason they hate TABOR so much.  Unless it’s a really good budget year, and the government just happens to have money sitting around burning a hole in its pocket, TABOR makes them actually ask you whether or not you want to pay for Pierre’s studio loft.

The next time someone comes up with a harebrained idea like this, the first question should be: “Instead of what?”

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As Colorado’s Pensions Add Risk, California Seeks to Reduce It

Even as Colorado’s state public pensions seek to add risk to their portfolio, California CalPERS is seeking to reduce risk and volatility in its own plan.  In doing so, it sends up a flare for other pension plans.  It also confirms one of the key assertions of defined benefit plan critics: the aggressive return assumptions, combined with permissive discount rate assertions, in US public pension plans incentivize those plans to chase those returns, and add risk in doing so.

In a piece I wrote back in March for Watchdog Arena, I noted that Colorado PERA’s Board of Trustees had voted to shift several percentage points of investment from stocks and bonds into riskier alternative assets and real estate.  This portfolio isn’t necessarily out of line with the majority of US public pension asset allocations, but it does represent adding risk – and therefore volatility – in an attempt to increase returns.

Yesterday, Pensions and Investments reported that CalPERS is looking at reducing its expected 7.5% rate of return to as low as 6.5%.  Doing so, the plan says, would allow it to shift its investments out of stocks and alternative assets into more predictable, less volatile bonds.

“It is essential that we do this,” said California Controller Betty T. Yee in an interview with P&I. Ms. Yee added that if CalPERS does not reduce volatility, it could jeopardize its ability to pay retirees in the future….

Ms. Eason said lowering the rate of return would also enable officials to build a portfolio less vulnerable to market swings. The current 7.5% rate of return has a 12% volatility rate. Reducing the rate to 7%, as one scenario does, would translate to a 10% volatility rate. A 6.5% rate of return would equate to a volatility level of 8.5%, she said.

In doing so, CalPERS doesn’t implicitly accept the critics’ assertions – it explicitly accepts them.  They would lower the expected rate of return specifically so they could “safely” move assets into less risky (albeit less remunerative) investments.  Public pension officials in the US have long denied a linkage between the two, so it will be interesting to see how they react to this admission.

By most measures, CalPERS is better funded that Colorado PERA, although not particularly well-funded.  It admits to a funding level of 77%, compared to PERA’s claimed funding level of 62%.  These claims both discount the pension liabilities at 7.5%, the assumed rate of return.  Lowering CalPERS’s expected rate of return to 6.5% would, correspondingly, lower its funded level by lowering its discount rate.  A study by State Budget Solutions, however, using the states’ cost of borrowing as the discount rate, placed the funding levels at 39% and 32%, respectively.

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PERA’s 2014 CAFR – Situation Normal…

Colorado PERA released its 2014 Comprehensive Annual Financial Report on Tuesday, and there were no real surprises, which isn’t to say it was particularly good news for the state’s retirees, government employees, or taxpayers.  For the most part, it showed more of what we already knew: a system in trouble, and unlikely to earn its way out of that trouble any time soon, if ever.

The rate of return on investment was 5.7%, which is 1.8% short of the expected rate of return of 7.5%.  PERA will no doubt point to the fact that it met the benchmark return, but all that means is that the funds weren’t grossly mismanaged.  The net result is that the unfunded liability, as acknowledged by PERA, climbed from $23.3 billion to $24.6 billion.

In reality, the future liability should be discounted not at the expected rate of return – an accounting gimmick that is only available to US public pensions – but by the borrowing cost of the governments involved.  In this case, that would mean a discount rate of about 4.5%.  Running that out 15 years, we end up with an eye-popping unfunded liability of $60 billion.  A 30-year window raises it to an almost unimaginable $116 billion.  That’s the unfunded liability – the promises made for which we have no money.

Overall, the funding levels fell to 64.2% from 65.2%, but the two biggest funds are much worse off than that.  The State Fund’s funding level slipped to 59.8%, the School Fund to 62.8%.  These calculations are done using the market value of the assets, rather than the smoothed actuarial value, as they have in the past.  That actually makes the funding levels look better, as the investments age out the miserable 2011 investment year, but it gets the direction right, and funds can only spend and invest actual dollars, not smoothed ones.

The amortization periods – how long it would take to get to full funding – also ballooned to 45 years for the State Fund, and 48 years for the School fund, after accounting for the future increases in the AED and SAED supplemental payments.  PERA rightly points out that these numbers don’t account for the decrease in benefits for future hires, which probably shorten the amortization periods by a few years.

I’ll have a lot more to say about this, but the short version is that there’s nothing to be cheerful about here.  PERA will claim that everything is still on track to be fully-funded decades hence, but then, PERA always thinks nothing’s wrong right up until the point that they come to the legislature for more money.

Photo Credit: Todd Shepherd & Complete Colorado

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Media 101

When the PERA Pension Obligation Bond story was in its death throes, the Denver Post was writing a story about the political, rather than the financial angle, of the bill and its failure in committee.  Treasurer Walker Stapleton had testified in favor of the bill in the House Finance Committee, although most of his testimony was of a technical nature.

At the time Post reporter John Frank called me, I had not yet heard Stapleton’s comments on the Mike Rosen Show, where he appeared to try to walk back his support for the bill.  There’s no reason to rehash the controversy here, and that’s not the point of the post.

The point is this: Franks paraphrased what Stapleton had said, and asked me to comment on his on-air statements. I asked him to quote them to me.  He quoted to me a couple of sentences, and I was brought up short.  But this was a radio talk show, and Mike Rosen is one of the best interviewers around.  The actual on-air back-and-forth was much longer than that.

So I paused, said that, even though I had just asked him to quote Stapleton to me, I really would need to hear the whole thing before I could comment. And I went on to say something Franks probably already knew – that there were legislators without pension funding expertise who had probably been swayed by Walker’s support, and by the fact that the Republican Treasurer, Democrat Governor, and “impartial” PERA Board were all in favor of the deal.

Later, after thinking about it, I came back with what I expressed as a possible interpretation of what Frank had quoted me, didn’t offer an opinion on it, and suggested he go back and listen to the whole interview with that idea in mind.

Reporters often count on people liking to talk, and liking to talk to reporters specifically, because they may get to see their names in print.  But you don’t have to answer a question if you don’t want to, and you don’t have to offer an opinion when the only information you’re getting is from the reporter.

I doubt Frank was purposely trying to do a hatchet job on Walker, but there was no reason to fall into the trap of trying to offer an opinion based on an interpretation of one small piece of the story.

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PERA’s Pension Obligation Bonds Are a Bad Idea

This is an extended version of the OpEd that appeared in the Greeley Tribune.

Last week, Colorado legislators considered – and rejected – a plan of dubious legality to shore up the state’s public pensions.

The result of a difficult three-way negotiation among Governor Hickenlooper, Treasurer Stapleton, and PERA, the plan would have circumvented the state Constitution’s limits against issuing general obligation debt without a vote of the people, for gains that would have been largely illusory.

Worse, the changes could have encouraged future legislatures to repeat mistakes that put teachers’ and state employees’ retirements at risk in the first place, while making real reforms more difficult.

HB15-1388 would have authorized the State Treasurer to direct the Colorado Housing and Finance Authority (CHFA) to issue up to $10 billion in bonds on the state’s credit. The proceeds would have been deposited into PERA’s State and School funds, and invested with the rest of PERA’s assets. The investment returns theoretically would shorten PERA’s time to full funding.

The bonds’ interest was to be funded by the supplemental payments that the state and school districts pay into PERA (the AED and SAED), with PERA paying back the principal when the bonds matured.  The AED and SAED payments are taxpayer contributions established in 2004 and 2006 to stabilize PERA’s finances.  They are escalating percentages of employee salaries.

The complex web of relationships was needed to avoid state constitutional limits on issuing debt. The bill’s language laid out the legal arguments for why the restrictions didn’t apply. Supporters claimed they were revenue bonds that would not obligate general tax dollars, and purported that CHFA is not a state agency.

Passing the buck to the courts, HB 1388 would have required a binding judicial ruling certifying the scheme’s legality before the bonds could have been issued.

Make no mistake: The debt would have been on the state’s credit, and shown up on the state’s balance sheet. These are not revenue bonds; they would have been funded only by general tax revenue.

Whether or not the game of hide-the-pea satisfied the courts, it violated the spirit and purpose of constitutional provisions designed to prevent the legislature from indebting citizens into a long-term fiscal bind. The many state bankruptcies of the 1840s were still fresh in the people’s minds in 1876, when the Constitution was drafted. Those concerns are no less valid now.

The bonds wouldn’t have shown up in PERA’s financial report, except in the footnotes. With no single, authoritative document laying out the full financial picture associated with funding the state’s public pensions, PERA would look better-funded than it was.

Risk-averse legislators could have justified avoiding the difficult decisions needed to provide real retirement security for Colorado’s teachers and state employees. Future legislatures might have been tempted to repeat the mistakes that put that security at risk in the first place. While a full legal analysis awaits, tying the AED and the SAED explicitly to a bonded debt might have complicated any attempts at more sustainable reform.

A comprehensive study by the Center for Retirement Research found that the misuse and mistiming of pension obligation bonds have punished numerous states and municipalities over the last 20 years. The Government Finance Officers Association recommends against their use.

To their credit, the bill’s architects studied past failures and tried to mitigate the risks to Colorado and its schools. The annual interest on the bonds could have been no larger than two-thirds of each year’s anticipated AED and SAED, with a minimum 2 percent spread between the bond interest rate and PERA’s anticipated rate of return. Statutory contributions to PERA – inadequate though they are – would have remained intact, and bond proceeds would have been unavailable for diversion to other spending.

Still, the deal entailed significant risk. Proponents misleadingly argued that it refinanced 7.5 percent debt at 4.5 percent. In an actual refinance, the original obligation is paid off. Here, the pension obligation would have remained, with Colorado taking on additional debt.

Even PERA’s claim that its current debt should be discounted at 7.5 percent is based on an accounting gimmick only available to US public pensions – and no other pensions in the world.  (Not coincidentally, without the discipline of correct accounting, US public pensions are also the worst-funded public pensions in the world.)

As contractual promises, they should be discounted at the same interest rate as the bonds.  PERA would just be adding 4.5 percent debt to the true 4.5 percent debt of its current contractual obligations, improving its situation only marginally.

The proposal’s safeguards would not have changed the fact that proponents were seeking to close the funding gap by taking on additional debt and risk.

While the governor and the treasurer are to be credited for taking PERA’s underfunding seriously, HB 1388 was the wrong answer to the problem.

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