Under fire in Colo for lack of transparency, Stapleton in DC argues for more transparency
Friday, May 06, 2011 at 5:19 pm
Progressive politics coalition Campaign for a Strong Colorado says state Treasurer Walker Stapleton should follow the advice he provided to the U.S. House Ways and Means committee this week when he argued in favor of the Public Employee Pension Transparency Act. “Greater transparency and better information is important for the fiscal health of our states and for our taxpayers,” he said. Strong Colorado agreed and urged Stapleton to bring his point home to the taxpayers he serves by opening up his full current employment records so the Colorado public can see how he’s earning his money and spending his time.
“Stapleton should follow his own testimony that ‘greater transparency and better information is important’ –- not just for pensions and public employees, but for public officials too,” said Strong Colorado Executive Director Ellen Dumm.
The deal in the news
Stapleton came under fire almost the same week he took office in January when a Politics Daily report based on public Securities and Exchange Commission documents (pdf) detailed how Stapleton had signed a lucrative consulting contract with SonomaWest Holdings, the Northern California real-estate firm he headed for years as CEO. Stapleton arranged to consult with Sonoma for $250 an hour for up to $150,000 per year while acting as Colorado’s treasurer.
The arrangement drew the attention of government watchdogs, who took comfort from the fact that the records filed publicly with the SEC would continue to provide some level of transparency into the deal. Coloardo Ethics Watch called it a “back-door form of transparency” and said full or front-door transparency was warranted because the deal as revealed “could potentially take up a huge portion of the state Treasurer’s time.” Toro said there was also no real way to verify Stapleton’s claim that there was “no potential for conflict of interest between the state and SonomaWest.”
As the Colorado Independent reported in March, the question of transparency gained new urgency when Stapleton’s family business, Denver-based Stapleton Acquisitions Company, announced it intended to buy out SonomaWest shareholders and take the company private, putting an end to SEC filings.
The roughly $6 million deal, financed with loans taken from Wachovia/Wells Fargo, is now close to complete. It will mean no more public records from which to monitor Stapleton’s moonlighting as a consultant. In effect, the back door has been closed to the public and it is up to Stapleton to open the front door. Four months after the moonlighting story broke, however, Stapleton has yet to report to the public how much and what kind of work he has done for SonomaWest.
The story in Washington
Stapleton, who as part of his treasurer’s duties serves on the board of the Colorado Public Employee Retirement Association (PERA), has been critical of the group’s investment strategies, arguing in op-eds and now on Capitol Hill that a lack of transparency around public employee investing has left not only the employees but also government leaders and the public out of the loop, giving insiders free rein to take up risky approaches.
“The Public Employee Pension Transparency Act makes a lot of sense,” he said before the Ways and Means Committee. To Coloradans with an eye on national politics, however, the fact that Stapleton, a Bush family scion, is staking ground on the especially charged partisan topic of public-sector workers and that he traveled to Washington in support of the Republican-backed bill authored by GOP budget leader Paul Ryan, suggests there may be more at work in all of this than just good sense.
Some suspect Stapleton is adding his voice and the resources of his office to the national movement to undercut public workers, a movement on display most prominently these days in Wisconsin. Indeed, Stapleton’s congressional testimony is sure to fuel those suspicions.
His shorthand references to the unreliability of public employee investments, impenetrable decision-making bureaucracies, coming government expenses and the potential need for “federal bailouts” do sound like the kind of talking points designed to give wind to anti-government privatization efforts and composed in the think tank offices of the conservative American Legislative Exchange Council.
“While it is not mandatory for states to adopt, [the act] categorically states that the federal government will not bail out a state’s public pension system,” Stapleton told the committee.
This act increases transparency standards for public pension systems. Unfortunately, the Government Accounting Standards Board (GASB) refuses to require this minimum level of transparency from public pension plans in its accounting standards. The GASB currently does not and will not in the future require plans to disclose a sensitivity analysis of discount rates so that plan members, local government leaders, and the public can assess for themselves what the underlying liabilities in these plans may be.
Greater transparency and better information is important for the fiscal health of our states – and for our taxpayers – to use when it comes to evaluating the significant liabilities associated with public pension systems in this country.
The devil in the details
Colorado Coalition for Retirement Security spokesperson Lynea Hansen told the Colorado Independent that Stapleton has been using unreliable numbers in his writing and public talks to rail against PERA. She stands by the numbers compiled by PERA and the lawmakers and staff who have worked over the last years to stabilize the state’s public employee pension plan.
“Last year, to stabilize PERA, Senate Bill 1 was developed in a bi-partisan manner,” she wrote in a memo she shared with the Independent. “And Senate Bill 1 is working. All of the divisions of PERA are projected to be fully funded within 30 years which was the bi-partisan goal.” Yet Stapleton, she said, continues to argue against the facts.
[He] argues that PERA’s assumed rate of return is too high at 8 percent…. Even taking into consideration the market crashes of 2001, 2002 and 2008 PERA’s average rate of return for the past 25 years is 9 percent. The rate of return for PERA in 2010 looks like it will be well above the assumed rate of 8 percent.
Nationally, the facts back up PERA’s assumed rate of return. For the 80-year period from 1930 to 2010, a portfolio of 60 percent stocks and 40 percent bonds earned 8.0 percent, and for the last 25 years the median annualized public pension fund investment return was 8.8 percent. Add that to the fact that the average expected investment return of corporate pension plans is 8.0 percent and it makes PERA’s assumed rate of 8 percent look well thought out and appropriate.
Hansen says she is scheduled to debate Stapleton on Denver talk radio KVOR 740 and KHOW 630 in the coming weeks and is looking forward to additional opportunities to compare her numbers with his.
Note: The original version of this story reported that Stapleton contracted with SonomaWest to work 250 hours for up to $150,000. That was an editing error. He has arranged to work for $250 an hour for up to $150,000 per year (or about 11 hours a week).