Hickenlooper Admits: Amendment 66 Money Can Go To PERA

This post was originally published on Watchdog Wire Colorado (“Gov. Hickenlooper Admits: Districts Can Use Amendment 66 Money For PERA“).

 

From the beginning, one of the key concerns surrounding Amendment 66 has been its prospective use to backfill the state’s public pension obligations, rather than aid Colorado students in the classrooms.

It’s a serious worry for Amendment 66 supporters- they even produced a video on this point, claiming that, “There is only one way to read Amendment 66 when it comes to where the new money goes” (visible at 1:38).

PERA’s own website references a Grand Junction Sentinel editorial denying the charge:

“Or, as the group pushing the ballot amendment states on its website, money that will be raised by Amendment 66, ‘is constitutionally and statutorily prohibited from ever being used directly to fund PERA.'”

But that one word, “directly,” is a loophole that even Governor Hickenlooper won’t climb through, and as a result, undercuts this entire claim by proponents.

A Revealing Question

As a result of my membership on the Jewish Community Relations Council of Colorado, I received an invitation to an event on October 8 in support of Amendment 66, hosted by Cherry Hills Village residents David and Laura Merage.  The Merages are prominent entrepreneurs and founders of the David and Laura Merage Foundation, which counts education among its primary missions.  Gov. John Hickenlooper was a featured speaker and gave some remarks regarding Amendment 66 to the crowd of about 40 people, followed by a question and answer session. I took this opportunity to ask the Governor for clarification on PERA funding. The following is an audio file and transcript of our exchange:

Gov. Hickenlooper: Anything else? What else?

Sharf: OK, so a question about the PERA. So, you had said that it can’t be used to backfill PERA, which is certainly true at the state level.

Gov. Hickenlooper: Yep

Sharf: Well, once the money gets to the districts…now, under SB1, which was supposed to be the fix for PERA, the districts were supposed to split – there was a lot more money going into PERA, there was some increases, some supplemental payments, that were going to go into PERA.

Gov. Hickenlooper: Right

Sharf: And, the districts were supposed to split that increase with the employees, with the unions.

Gov. Hickenlooper: Yep

Sharf: But with the exception maybe of Adams, they haven’t really. Overwhelmingly…

Gov. Hickenlooper: I’m not sure that that’s right –

Sharf: Well, Greg Smith –

Gov. Hickenlooper: They have not split it, they’ve just swallowed it.

Sharf: Right, that’s what I mean, is that they’ve basically just swallowed it.

Gov. Hickenlooper: Well, if you want to fix that, if that’s what’s happening, then we can’t legislate that. There’s a certain amount of money that goes into the districts, and that is the way our education system is structured. If you want to fix that, put it up on our website, how much of that money the district is spending on PERA. And I guarantee you the parents will go nuts.

Sharf: But do you need the tax increase to put it up on the website?

Gov. Hickenlooper: YES!  I mean, to have a website like that, $18 million, $20 million, and then to operate it, yeah! You should see – you know what it’s going to cost – I just got the budget today – you know what it’s going to cost to finally have our drivers license system for the state of Colorado, to have a simple system where you go in and you get your driver’s license? And you can do it as you’re coming in, do all the prep work on your handheld device? You know what that’s going to cost? Eighty million dollars. Just so you’re clear; we’ve been working on that for two and a half years, they just told me that today in our budget meeting. That’s just what it is.

Under the terms of SB10-001, passed in 2010 and signed by then-Governor Bill Ritter, school districts are required to make additional payments into PERA in order to help stabilize the program. PERA’s Executive Director, Greg Smith, is on record as saying that the legislature’s intent was that they split the cost of those increased payments with their employees. Smith, in legislative testimony, noted that most school districts have failed to do so.

Sen. Michael Johnston, a prime sponsor of Amendment 66’s implementing legislation, SB13-213, and advocate for Amendment 66, also seemed to believe that SB10-001 required increased employee contributions, and seemed surprised in December of last year to find out that that wasn’t happening:

[youtube]http://www.youtube.com/watch?v=kNqWlwKr9Ig#t=4845[/youtube]

Question (at 1:21:05): The pushback that I got from our district, and quite honestly, there was no change in the contribution rate for the teachers, for the employees of the district. All the increase, at least in Jefferson County, picked up by the taxpayers and the district. They kept insisting that there was nothing they could do, so please go to the legislature and take care of that, there was nothing they could do about adjusting how much the contributions – the contributions go up really high on the taxpayer side but they haven’t moved for the teachers, at least in JeffCo. Perhaps in other districts…

Sen. Johnston: We should touch base after this, because the bill that I voted for did include increases on employee contributions, so we should talk about that.

On a per-pupil basis, this becomes clear. Statewide, the overall increase in PERA contributions (left axis) strongly parallels the increase per-student contribution to PERA from the districts, while the per-pupil contribution from the employees has barely budged (per-student on right axis):

2012-PERA-School-Contrib

Source: PERA CAFRs and Colorado Department of Education

District Versus State Rules

Because teachers are employees of the school districts and not the state, the overwhelming portion of the employer’s PERA contribution to the School Fund comes from the districts to begin with.

(One major exception is Denver teachers, whose retirement plan recently merged with PERA and has its own fund.  Under the terms of the merger, DPS payments are currently offset by the interest payments on the debt DPS floated in 1997 and 2008 to fund their pension obligations.)

The governor’s candid admission that once the money leaves for the districts, the state has no real control over how it’s spent, severely undercuts one of Amendment 66’s supporters’ key claims about how much of the $1 billion in additional tax money is required to make it to the classroom, and how much will be diverted to the pension fund.

And the districts’ recent behavior gives taxpayers little cause for optimism, either.

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John Batchelor Show

I had the pleasure of being a guest on the John Batchelor Show yesterday, to discuss the ongoing launchpad explosion that are the Obamacare online exchanges.  Since the show was podcast for rebroadcast later in the evening, we chatted a little before and after the segment about the exchanges, and I found Batchelor to be well-read on his subject, serious about it, not given at all to hyperbole or theatrics.  In other words, just as he sounds on the air.

You can listen to my segment below, or at this link, but if you have any sense, you’ll listen to the whole hour.

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Amendment 66 – Exacerbates The Revenue Problem

Rather than aid poorer school districts, Amendment 66 will, in the long run, likely end up hurting them, making budgeting harder for those districts, and lives more difficult for both the students and teachers who live and work there.

The state is complaining that it’s chronically short of cash for education, both as a result of decreased tax revenues since the recession, and the state’s budget restrictions.  In response, they have proposed a two-tiered income tax system, the first in over a quarter of a century in Colorado.

Currently, Colorado has a flat, 4.63% income tax rate from the first dollar of income.  The proposed system would raise that to 5% for income under $75,000 and to 5.9% for income over $75,000.  Colorado has roughly 1.8 million filers in the first bracket, and just under 600,000 filers in the proposed upper bracket.  Proponents claim this would raise roughly $1 billion a year in new revenue, which they also claim would go largely to the poorer and neediest school districts.

How could a $1 billion tax increase make things worse for these districts?  Because the income tax, unlike the property tax, is pro-cyclical.  When the economy is doing well, incomes are highers, and receipts from the income tax rise.  The income tax varies much more with the business cycle than the property tax does because incomes vary much more than property values do.

This conclusion is borne out by a 2010 Tax Foundation study comparing variations in various sources of state and local income nationwide.  Corporate income tax was the most volatile, with personal income tax next.  A more recent analysis, also by the Tax Foundation, confirmed this result, and found that over the last 20 years, the least volatile source of state and local revenue has been the property tax, the primary source of income for school districts.

This has particular resonance for Colorado.  In 2008-2009, Colorado ranked 36th in year-over-year percentage change in state tax revenues; increasing the state’s dependence on personal income taxes will likely make them more volatile, and adding a progressive component will make them more volatile still.

Under Amendment 66, the state will backfill much of the difference for poorer districts.  This means that those poorer districts will find themselves more dependent on a more volatile source of income: personal income taxes.  When times are good, this will help them.  But when the next recession inevitably hits, it’s those poorer districts, the ones that Amendment 66 claims to help the most, who will in fact, suffer the most.

 

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The Healthcare Exchanges – A Failure of Leadership

As the launchpad explosion of the Obamacare Healthcare exchanges continues to play out, the risk builds of putting the blame on the programmers.  This would be a mistake, and I don’t say this out of some sense of fraternal protectiveness for the developers.

The blame here lies squarely on leadership.

Notice that I don’t say management.  I say leadership, in particular, the political leadership.

It’s true that the code isn’t very good.  In fact, it would be fair to say that the piece of the code we’ve been able to see – mostly the javascript – is lousy with bugs and poor coding practices.  And it’s also true that Barack Obama and Kathleen Sebelius didn’t write the code or manage its development.  But they are responsible for the overall environment in which that code was written, including the timeline and the expectations.

They were so committed to the October 1 launch date for the entire system that they didn’t leave enough time for proper development and testing.

It’s quite clear that the development team simply wasn’t given the time it needed to do the job.  By some reports, top-level decision-makers were so slow in approving requests that certain key functionality had about ten months in development.  That’s simply not enough time for a large, complex system that involves a lot of cross-communication with other systems.

What’s also not clear unless you’ve worked in software development for a while is that such large systems are developed with a lot of back-and-forth between the pieces.  Data that needed may not be available at a certain point in the process; you may find out later on that you want to keep users from entering certain kinds of data in combination, and so forth.  A lot of this only becomes clear once development is well underway, and UI developers – the guys who create and program the User Interface that you see – are usually at the tail end of the process.  This often gives them the least amount of time to do their work.  Since it’s clear from the sorts of error messages we’re seeing that even the underlying middle-tier and database code still isn’t ready, it’s clear why the user interface keeps breaking.

As mentioned above, the political leadership, evidently fearing political fallout from any delay whatsoever, has decided to act like Soviet leadership facing a poor harvest.  (Was there every any other kind?)  Instead of facing reality, and preparing people for that reality, they resorted to a number of strategies.

In such situations, it’s almost impossible to make up for that by throwing more people and resources at it.  Design and development can only bear so many chefs; the complexity isn’t in the small pieces of the code that need to be written, but in the overall picture of how the various systems fit together, and the business rules that need to be enforced at each step.  Adding more people to the design process isn’t going to get the work done any more quickly.  And just adding more developers to the coding process doesn’t solve that problem at all.  In fact, it can make it worse, as different coding styles begin to conflict with each other.

And yet, that’s just what the administration seems to have done, with an initial price tag of $100 million ballooning to over $630 million as of this writing.  When they asked how things were coming, they were told, “not well.”  And when they asked if more resources would help, and were told, “yes,” they wrote a bigger check.  They may not even have asked the second question, and the contractors may have said yes in order to get a bigger check.  And no doubt the contractors will be hauled in front of a Congressional committee to tell this story.  The point is, that it’s possible to imagine a scenario where Washington reacted as Washington always has – write a bigger check – and such a reaction was doomed to complicate the failure, not ameliorate it.

Their public reaction to the failure has be equally Soviet.  They first blame circumstances beyond their control – for the Russians, it was the weather; for this crew, it was server load.  In neither case was that factor beyond normal.  And yet they stuck with it for days after it became clear.

And now, we’re being told that “it’s getting better every day.”

Here’s the secret: it’s not.  What’s happening is that the developers and designers are now rushing to meet another hard deadline – December 31, when people will, by law, have to have signed up for health insurance, or risk fines from the IRS.  The scenario they’re desperate to avoid is one where someone can’t sign up, files his taxes, has his refund garnished by the IRS to enforce the penalty, and files a class-action lawsuit in the middle of election season to remind everyone of last year’s Hindenburg.

The development team still isn’t getting the time it needs to do this right, and in continuing to rush to rebuild a system that already exists, it’s only going to make things worse.  It may succeed in hiding some of the more public failures, but the back-system stuff is going to be held together with chewing gum and baling wire, and is going to be ripe for hackers and routine breakages.

As I said before, just be glad that nobody’s actual care is depending on this thing.  Yet.

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Healthcare Exchanges – Why and How They Failed

This post originally appeared at PJ Media Lifestyle, (“No Good Excuses Exist for the Failure of Obamacare’s Expensive Website“).

By now, it’s hard to decide if the launch failure of the Obamacare exchange websites isn’t funny anymore, or just keeps getting funnier.

Sites went down — including the individual state sites for states that are running their own exchanges. When people weren’t getting “due to an extraordinarily high volume of calls” errors, they were getting 404 Not Found messages, and pages were finding new and creative ways of erroring out. Even Wednesday afternoon, I was getting server errors just trying to finish the account creation process on the California site.

Almost as quickly as the train wreck itself unfolded, so did the explanations for it evolve. First, both President Obama and then Press Secretary Jay Carney claimed with straight faces that the failures were a result of the massive interest in the exchanges. Then, others claimed that these were normal rollout errors that occur with all large, complex systems. Finally, as the engineers rolled the platform back to the hangar for retooling, there was no hiding the fact that this was indeed a software failure, not just a set of normal launch “glitches” (to use the press’s word du jour).

The exchanges’ bad day brought to mind a number of other high-profile website failures, including the Romney campaign’s spectacular white elephant of a killer whale, Orca.

I’ve been in web development for most of my professional career. I’ve participated in successful launches, and launches that needed to be rolled back and fixed. I’ve spent very long days dealing with one error after another, and equally long, uneventful days waiting for the deluge that mercifully never came.

It’s always easy to criticize someone else’s failures, and with my luck, tomorrow the QA guys will rain down trouble tickets on my head like nobody’s business. Nevertheless, it remains inescapably true that while there were reasons this happened, they weren’t good reasons, and could have been avoided. Given three years and hundreds of millions of dollars for development, they should have.

Here’s why, and how.

How Web Systems Work

First, a very simplified description of how large, commercial websites are put together nowadays. They basically have three layers of servers – 1) the web layer, which talks to you, the user; 2) the database layer, where the data is stored; and 3) middle-tier layers, which figure out what questions they need to ask the database, and what they need to tell the database, in order for the front-end that you see to work properly.

Each layer consists of many servers. You may be talking to Web Server 1 for a little bit, and then switch over to talk to Web Server 2. And Web Server 1 may send your first request to Middle Tier 1, and your next request to Middle Tier 5. This lets them answer many more questions at once, and talk to many users at once. It’s how Google is able to get results back to literally millions of simultaneous requests almost instantaneously.

These layers have traffic cops (called “routers”) to make sure that no one computer is trying to handle too many questions at once. Other traffic managers keep track of who you are and where you are on the site, so you don’t have to keep starting over.

There are even multiple databases. Data that change a lot (this is called “volatile”), like information about you, or your orders, or billing information, may only be stored once (and backed up regularly). But information that doesn’t change very often, like plan pricing and terms, may be stored in more than one database, to make it faster and easier to get to.

Web systems have used this basic architecture for over a decade now, and launching large, complex sites is now less art and more science.

What Can Go Wrong

Of course, no technology is foolproof, and large, complex websites do fail.

First, users are unpredictable. There’s a saying that you can make something foolproof, but you can’t make it damn-foolproof. People are ingenious in the ways they will misuse something that you put in front of them, and programmers are always complaining about users “doing it wrong.” Of course, it’s not the users who are “doing it wrong,” it’s the programmers who didn’t anticipate their doing it that way.

Second, servers will fail, network connections will fail, routers will fail. Sometimes this just happens, and there’s not much you can do about it, except hope that whatever’s left can handle the load, while you work to get the servers back up.

Sometimes, the load really is too large for the servers’ performance limits and number of servers. Web servers can only handle so many questions per second; the same is true for middle-tier and database servers. This is what happened to the Colorado Rockies in 2007, when seemingly all of Colorado tried to buy World Series tickets at once. The traffic jam brought the website to its knees, and people had to wait a day for the engineers to rework it so that wouldn’t happen again.

And sometimes, programmers just mess up. The database isn’t designed right, and it either loses information or takes too long to answer questions. The middle tier doesn’t ask the database the right questions, or fails to store what the customer needs stored. The web server can ask for information that isn’t there, not keep track of the where you are in the site, show you stuff you didn’t ask for, or let you choose things that don’t make sense in combination.

And the layers can send the wrong information to each other, or misread the information that gets sent to them by other layers.

How You Keep Things From Going Wrong

Test.

Test.

Test.

Of course, programmers are responsible for testing their own code as far as possible. But programmers are usually the worst people to test their own code. They know where all the bodies are buried, and only the most disciplined are likely to test things they know are likely to break. After all, they’ve fixed it before, and are heartily sick of making sure that the date field doesn’t bomb when someone enters 11//1994, instead of 1/1/1994.

There are QA testers, who make sure that things work as advertised. They’re given a list of expected behaviors, and run through the site, making sure that the it does the things the programmers say it will do. More importantly, they run through the site, deliberately making mistakes, to be sure that the site doesn’t break.

There’s beta testing, which basically is a larger group of people who aren’t given any specific instruction. They’re the ones most likely to imitate actual users, since ideally, they have no preconceptions of how the site is supposed to behave, and where it might break.

There’s load testing, which simulates a huge number of hits, all at once, to make sure that the servers don’t buckle and fold like a cheap suit when everyone tries to buy that cool toy all at the same time.

What Went Wrong

From the evidence, it’s clear that the Obamacare exchange servers saw errors of all different kinds. They weren’t prepared for the load, even though this was never very heavy. California reported about 600,000 unique visitors, and Colorado reported about 55,000 unique visitors.

There were screen captures of database errors, not because the data was bad, but because the structure that holds the data was misdesigned.

There were 404 errors, which are totally design errors, meaning that the web sever was trying to get to a page that didn’t exist. (This led to the best hashtag of the day, #404care.)

There were non-descript server errors like the one I got from the California server.

There were user-interface errors. At about 10:00 AM, Colorado suspended new accounts on its site (it’s one of the ones using its own site, not the main exchange site), and didn’t get around to allowing new accounts again until 3:00 PM. At that point, the “New Account” button sent you to the login page for existing accounts. If you chose to enter your childhood phone number for a secret question, it wouldn’t take it, no matter what format (certainly not the format it used when asking for your current phone number).

This is why I say it was clear that this wasn’t just one of those things. The volume of inquiries wasn’t high by large-system standards, and the rest of the errors were in the control of the programmers.

These were design and execution errors, pure and simple. They were all catchable, with proper beta and load testing.

What Could Have Been Done

Test. Test. Test.

If you’re going to have a big, splashy rollout of a controversial government service that half the country is rooting against anyway, you need to test it until it’s bulletproof.

Because failures are often ambiguous from the user side, it’s hard to tell exactly where a lot of these errors originated from. It’s certainly true that the data — involving as it does multiple insurance companies, with multiple plans, for different pricings based on location and number of people covered — is incredibly complicated, and that some states didn’t have final price and deductible information available.

As a programmer, I can tell you with certainty that simply logging into a system shouldn’t produce an error.

And with three years and tens of millions per site at the ready, this was inexcusable.

It didn’t have to be that way. Instead of announcing October 1 as the date that Obamacare would save the world, they could have had a series of smaller rollouts, opening up various portions of the registration process at, say, monthly intervals.

In effect, ask the public to act as your beta testers. They would have lost some of the sizzle in return for a robust system that wasn’t freighted with unrealistic expectations, but right now, I think that’s a trade they would happily have made.

It’s true that it’s hard to get a real feeling for how much of the problem was data-driven, since many times we couldn’t get far enough into the site to find out. But again, it could have been rolled out in pieces, letting people browse before the law said they could buy.

All of the code would still have needed merciless QA testing and beta testing, but each section would have been solid before the next one was rolled out, and where that wasn’t possible, the potential weaknesses would have been known beforehand, making it easier to locate the launch-day failures that remained.

In the cases cited earlier, the damage was either limited, or over. People’s irritation at not being able to score World Series tickets was tempered somewhat by the fact that they were seeing their team in the World Series at all. The Romney campaign had one day to make Orca work. Once it didn’t it was game over, and there was no payoff at all for getting it working Wednesday.

Obamacare exchanges are different. Not only are they supposed to be the tool by which tens of millions of Americans will — forever — select their health insurance, they’re a precursor to the systems that will store actual medical information for patients, insurers, hospitals, doctors, regulators.

In the end, the only good thing about these websites is that nobody’s actual health depended on their working.

This time.

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Fairness and Compassion, Liberal-Style

One of the manifest failings of conservatives in the battle for public opinion has been to cede arguments based on fairness and compassion to the Left.  Conservatives care about fairness and compassion every bit as much as liberals do.  However, following the advice of Milton Friedman, they have been reluctant to make arguments on that basis. In part, this is because they pride themselves on making fact-based and (in the case of the more libertarian-inclined) philosophically clean arguments.  In part, this is because they consider fairness and compassion to be subjective, and a slippery slope to accepting the basic liberal thesis of an activist government.

Ultimately, this has been a mistake, leading many in the middle to conclude – incorrectly – that since conservatives only talk about poverty in terms of numbers, rather than people, conservatives don’t really care about poor or vulnerable people.

At Monday night’s City Council meeting, we got a chance to see what happens when conservatives make fairness and compassion arguments, and defend the poor and vulnerable.  Virtually every one of those testifying against the Bag Tax brought up the fact that it would disproportionately hurt the poor.  Here’s how liberal Democrat Paul Lopez, who was a strong supporter of Occupy Denver, responded:

 

If you’re on SNAP benefits, you’re food is paid for. If you can carry five bags, that’s fifty cents. It’s not that big of an impact.

In his manner, his style, and his words, he sounded exactly like every liberal’s caricature of a conservative talking about how the poor don’t carry their weight.

Here was Councilman Debbie Ortega:

 

You know, I get the Mayor’s concern about the fee and the impact to people. I just had the budget office pull for me a list of all the fees that we’ve done in the last two years, and we’ve got over twenty-three different fees that have been brought forward, so to say that we’re concerned about a 5-cent fee when – and, and that’s not all of them that are on the table. We’ve got some others that are being discussed right now. So I’m not real sure what the real angst is, about a 5-cent fee…

Wow, we’ve already jacked up fees on poor people twenty-three times over the last two years, so why do they care about about five cents every time they pick up some groceries?

This is what happens when conservative learn to properly point out that liberal policies hurt the poor the most, and conservative policies offer them the best chance at a better life. Liberals react by saying the same, tone-deaf things that conservatives have earned a reputation for saying over the last few years.

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A New Challenge to Amendment 66

Late this afternoon, a lawsuit was filed challenging the validity of many of the signatures gathered by the supporters of Colorado Initiative 22, now Amendment 66, which seeks to raise state income tax and create a two-tiered tax system for the state.

The lawsuit was filed in Denver District Court by a bipartisan pair of former state legislators, Norma Anderson (R) and Bob Hagedorn (D), and has not yet been scheduled for hearing. According to the press release by Coloradans for Real Education Reform, its primary charge is that the IDs of many of the petition-gatherers were not properly validated by notaries.

If upheld, this challenge could invalidate as many as 39,000 of the nearly 90,000 signatures ruled valid by the Secretary of State’s office. (Initiative supporters had turned in just over 165,000 signatures, of which just under 76,000 were rejected as invalid.) The Initiative needs a little over 86,000 signatures to qualify, so this section alone would invalidate far more than enough to keep the measure off the ballot.

Colorado had long had what was regarded as one of the nation’s least restrictive ballot access requirements for both statewide initiatives and proposed constitutional amendments. A 2009 law, HB09-1326, passed with strong bipartisan majorities in both houses of the legislature, tightened up those requirements in a number of ways. It contained restrictions on signature-gatherers, including those that are being challenged in this section of the lawsuit.

Part of the 2009 law requires that circulators sign an affidavit on the petition sections they submit, stating that all of the signatures on that section were gathered in their presence, and that to the best of their knowledge, the signers’ information is correct.

The revised section, Colorado Revised Statutes 1-40-111, reads that:

(C) The circulator presents a form of identification, as such term is defined in section 1-1-104 (19.5). A notary public shall specify the form of identification presented to him or her on a blank line, which shall be part of the affidavit form.

(II) An affidavit that is notarized in violation of any provision of subparagraph (I) of this paragraph (b) shall be invalid

The plaintiffs argue that in many cases, the circulator himself wrote down the form of ID that was presented, rather than the notary, as is required by law. This would seem to defeat the purpose of having the notary verify the identification.

The 2009 law also inserted language stating that, “that he or she understands that failing to make himself or herself available to be deposed and to provide testimony in the event of a protest shall invalidate the petition section if it is challenged on the grounds of circulator fraud.” This would seem to mean that signatures gathered by any circulator whose affidavit is being challenged, and who won’t or can’t testify for this case would be thrown out, as well.

While a 2010 lawsuit (Johnson v. Beuscher) did challenge the validity of some signatures under the new law, this particular section was not used in that suit.

It would also seem that the filing of the suit by members of each party, neither of whom has a reputation for anti-tax activism, would lend it credibility. Part of the reason for the late date of the suit is the late date of the filing deadline; signatures were submitted in August, and the Secretary of State only issued his ruling on the petition on September 4.

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Crisanta Duran’s Premature Celebration

To celebrate the rollout of Obamacare’s Health Insurance Exchanges, State Representative Crisanta Duran (D-Denver) tweeted the following:

CDuran-Ocare

Only problem was, about 90 minutes earlier, Connect for Health Colorado, the state’s implementation of the exchange, had suspended new accounts because of technical difficulties:

 

C4HCO-Ocare

Colorado’s 2011 decision to implement the health care exchanges was controversial; it was passed only with the support of a few state House Republicans, who had regained that chamber largely on the strength of public anger over Obamacare’s passage.  The decision to implement the Exchanges was defended on grounds that the alternative would have been to throw Coloradoans into the federally-run exchanges, and to sacrifice state control.

Given that Colorado boasts a robust tech entrepreneurial sector, you would think that over two years would have been enough for them to get these things working.

 

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More Bad News for Colorado’s Public Pensions

Another month, another report showing the country’s pension problem to be worse than we thought, Colorado’s pension problem to be among the nation’s worst.  This time, it’s a report from the non-partisan State Budget Solutions, “Promises Made, Promises Broken – The Betrayal of Pensioners and Taxpayers.”

In three significant measures, Colorado ranks in the bottom third of the nation’s public pensions: Its funded ratio is the 11th-lowest in the country, at 32.8%; the per capita unfunded liability is 15th-worst, at $16,158 per head; and as a percentage of the state’s GDP, Colorado is 16th-highest, at just over 31%.  These dire rankings corroborate a recent Moody’s study that had Colorado’s unfunded pension liability in the bottom 10 as a percentage of state government revenues, another measure of the state’s ability to cover these debts.

They calculate the actual unfunded liability at just under $84 billion, nearly four times what PERA admits to, and $27 billion more than is estimated in an upcoming Independence Institute report.  It should be noted, however, that the authors include five plans managed by the state’s Fire and Police Pension Association, much smaller plans which are not part of PERA.

The report takes issue with most public pensions’ investment return expectations, which usually vary between 7% and 9%, and the aggressive discounting oliabilities that most plans engage in.  Instead of the optimistic – some would say wildly optimistic – return assumptions, the report’s authors use 3.225%, the 15-year Treasury rate.  They also use that number to discount plans’ liabilities, arguing correctly that the discount rate should reflect a plan’s risk to its investors, not its returns on its investments.  They argue that since these plans approach being risk-free investments, they should be discounted as such.

Personally, I think both the return assumption and the discount rate are too low.  Even if 8% is unrealistic, and I’m not sure that it is, funds tend to have their money in diversified portfolios which will average returns higher than Treasuries.  In addition, the plans are covered by state obligations, not federal ones.  Investors have long recognized that state obligations carry more risk than do federal “risk-free” obligations, a fact reflected in the higher interest rates carried by state debt.

That said, the study makes two useful contributions to the debate.  By making the return and discount assumptions it has, the report effectively sets an upper bound on the problem; surely no lower interest or discount rates could reasonably be chosen.

More concretely, by showing us to occupy the same neighborhood as such well-known pension basket cases as New Jersey and California, the report shows the foolishness of the approach of Amendment 66 – raising taxes, while appropriating all of the increased short-term revenue to ongoing operations.

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Why Rhonda Fields Is Worse Than Wrong

In a committee hearing yesterday, State Senator Vicki Marble found herself on the wrong end of a Rep. Rhonda Fields race-baiting attack.  Marble – in a committee hearing devoted to race- and ethnicity-based sources of and effects of poverty – had the temerity to suggest that there might be some cultural and dietary contributors to poverty in certain groups.  In reality, this isn’t even a particularly controversial statement.  It was said without malice, and African American State Rep. Tony Exum, who spoke immediately after Marble, apparently didn’t even react.  It was only Fields who went nuts, supposedly taking offense, attacking Marble, posing as a victim of racism – in a meeting devoted to racial disparities in poverty rates.

Fields is the one who deserves to be condemned here.  Not because she’s effectively played the ever-popular race card for partisan political reasons, but because she’s hurting the very people whom we all agree need help the most, while pretending to defend and support them.

Let’s be clear – it is a dangerous and socially destabilizing situation when a group of people believes that it’s denied participation in the fruits of the American dream because of their race.  It is fundamentally unfair and indecent to the extent that it turns out to be true.  There is every reason for the state government to take an interest in the welfare of its citizens, especially the poorest and most vulnerable.  And there is every reason for a state to try to determine the extent to which actual, real, discrimination exists.

Which is why Rep. Fields’s outburst is so reprehensible.  Instead of identifying areas where Blacks and Hispanics might be able to take their destiny into their own hands, she actively encourages them to think of themselves as victims, nurse grievances, and tend to resentments.  Instead of looking for actual sources of discrimination, she invents reasons for outrage.  Instead of finding ways that people can lift themselves off the Safety Net, she is more interested in keeping them enmeshed in it.

In Detroit, in spectacular fashion, we’ve seen where this leads.

Rep. Fields has no business serving on such a committee.

And anyone who truly cares about the welfare of poor African Americans and Hispanics should stand up and say so.

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