Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT FINANCE

Date:12/15/2014
ATTENDANCE
Time:09:05 AM to 01:00 PM
Becker
X
DelGrosso
E
Place:LSB A
Foote
X
Grantham
E
This Meeting was called to order by
Hill
E
Representative Court
Joshi
X
Kagan
X
This Report was prepared by
Kerr
*
Matt Kiszka
Labuda
E
Melton
E
Pabon
X
Priola
*
Saine
E
Swalm
E
Ulibarri
E
Wilson
E
Johnston
*
Court
X
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
Public Employees' Retirement Association SMART Act Hearing
Department of Treasury SMART Act Hearing
Department of Revenue SMART Act Hearing
Public Employees' Retirement Association Witness Testimony		Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only


09:07 AM -- Public Employees' Retirement Association SMART Act Hearing

The committee was called to order. The chair introduced new legislators in attendance and appointed to the 2015 Finance Committees. Mr. Greg Smith, Executive Director, and Ms. Jennifer Paquette, Chief Investment Officer, both representing the Public Employees' Retirement Association (PERA), came to the table to discuss PERA's financial performance during the last fiscal year. Committee members received a packet of materials summarizing PERA's mission and performance during the last year (Attachment A). Mr. Smith walked the committee through various handouts included in the packet of materials. Mr. Smith discussed the assumed rate of return on PERA's investments for 2015. He explained that the assumed rate of return is a measure of how much PERA anticipates earning from its investments over a 30-year period. Mr. Smith addressed a question from the committee about the primary asset class contributing to the 15 percent earnings during the last fiscal year. He next provided information about the statutory provisions controlling PERA and the difference between the defined benefit and defined contribution (or 401K) retirement plan options.

Attachment A can be viewed at State Archives.







09:21 AM

Discussion continued on the topic of defined benefit and defined contribution plans and the merits of each. Mr. Smith explained that an individual can change his/her selected plan one time after the first year of employment and before the sixth year of employment. Discussion continued on the topic of the plan options and how plan selection effects expectations related to anticipated returns on investment.


09:30 AM

Mr. Smith continued his presentation with a discussion about the number of contributors, retirees, and amounts contributed and distributed during the last fiscal year. He also provided an historic overview of asset distribution by retiree class and geographic location.


09:38 AM

Ms. Paquette continued the presentation with an overview of the investment asset allocation. She responded to a question from the committee about potential investments in hedge funds. Discussion continued on the topic of specific investments made by PERA. Mr. Smith returned to the topic of the rate of return on PERA's investments. He compared public and private rates of return. He responded to a question from the committee about a reporting requirement created under Senate Bill 10-001, which requires PERA to submit a report concerning the funding status of its plans to the General Assembly on January 1, 2016, and every five years thereafter.


09:55 AM

Mr. Smith discussed the funded status and amortization of the PERA fund, and responded to questions on the leading drivers of the increase in the amortization period to full funding that PERA has adopted. Mr. Smith spoke to Governmental Accounting Standards Board (GASB) Statements Number 67 and 68, which affect pension standards reporting for PERA beginning in 2013. He responded to questions on the impact of these statements, and said that the stated intention of the GASB statements was to increase transparency. He responded to another question about the anticipated adjustments to solvency or percentage of assets paid under new GASB standards. Discussion ensued on this topic.


10:17 AM -- Department of Treasury SMART Act Hearing

Mr. Walker Stapleton, State Treasurer, and Mr. Brett Johnson, Deputy State Treasurer, discussed the performance of the Department of Treasury during the last fiscal year and the major departmental initiatives planned for the upcoming legislative session. Committee members received a copy of the presentation (Attachment B) and the Department of Treasury Performance Plan for FY 2014-15 (Attachment C). Mr. Johnson and Mr. Stapleton discussed the state's debt policy and disclosure issues that occurred in 2014 with the Securities and Exchange Commission.

14JtFinSMARTAct1215AttachB.pdf14JtFinSMARTAct1215AttachB.pdf 14JtFinSMARTAct1215AttachC.pdf14JtFinSMARTAct1215AttachC.pdf







10:26 AM

Mr. Johnson spoke to debt consolidation successes and refinancing opportunities for the Treasury. He provided an overview of the department's performance plan, highlighting how the Treasury's investments are performing, the investment benchmarks that are in place, unclaimed property claims received by the department, and a supplemental appropriation request that the department plans to submit. Mr. Johnson and Mr. Stapleton discussed the antiquated software currently used by the Treasury and why an update to this software is critical. They also responded to a question on investment management and benchmarks for the department's investments.


10:39 AM

Mr. Johnson addressed the Treasury's legislative agenda for 2015, which includes a potential bill that would provide the Treasury with greater latitude in the investment of state assets.


10:43 AM -- Public Employees' Retirement Association Witness Testimony

Mr. Sharf, representing the Independence Institute, provided testimony on PERA. (Mr. Sharf's testimony was postponed until after the Treasury hearing.) He distributed a handout (Attachment D), and discussed the funding of PERA and the potential risks involved in how the state retirement fund is invested and managed. He responded to questions on the rate of return of investments made by PERA and the growth in the number of individuals employed by the state and paying into the fund.

14JtFinSMARTAct1215AttachD.pdf14JtFinSMARTAct1215AttachD.pdf


11:14 AM -- Department of Revenue SMART Act Hearing

Ms. Barbara Brohl, Executive Director of the Department of Revenue (DOR), came to the table to present to the committee. The Office of State Planning and Budgeting's performance report for the department was distributed to the committee (Attachment E), as well as a copy of the DOR presentation (Attachment F), and the department's regulatory agenda (Attachment G). Ms. Brohl explained how funding is distributed across the department's various divisions and the major activities of DOR in FY 2013-14. She spoke to the current status of retail marijuana in the state, and responded to questions on under-reporting of sales and use and excise taxes by marijuana businesses. Mr. John Vecchiarelli, Senior Director of Taxation, came to the table to answer a question on how the department refunds overpayment of taxes by businesses. The panel responded to questions on marijuana tax revenue projections and the taxation and overall sales of medical marijuana as compared to retail marijuana.

Attachment E & Attachment F can be viewed at State Archives.

14JtFinSMARTAct1215AttachG.pdf14JtFinSMARTAct1215AttachG.pdf








11:29 AM

Ms. Brohl discussed the working group that DOR had formed to study retail marijuana product potency and serving size. She responded to questions on the differences between the regulated labeling of medical marijuana edibles and retail marijuana edibles. Mr. Ron Kammerzell, Senior Director of Enforcement, spoke to the more sophisticated nature of most medical marijuana users when consuming marijuana compared to the majority of recreational users. Mr. Louis Koski, Director of the Marijuana Enforcement Division (MED), responded to questions on the harmonization of medical marijuana regulations with retail marijuana regulations, the potency limits of edibles, and the potential for increased regulation of the medical market and red card holders.


11:43 AM

Ms. Brohl spoke to the formation of the required stakeholder group as laid out by House Bill 14-1366. The group was tasked with developing recommendations for future regulation in order to make edible retail marijuana products more clearly identifiable to the general public. Ms. Brohl responded to questions on whether DOR was poised to move forward on the formation of increased edibles regulation or if it was in need of further clarification from the General Assembly.


11:49 AM

Ms. Brohl told the committee about the current status of the Colorado Lottery, highlighting the implementation of the new Jackpot system, sales and proceed amounts, and lottery proceed recipients.


11:51 AM

Ms. Brohl discussed the performance of the Division of Motor Vehicles (DMV) in FY 2013-14 and the decreased customer wait times achieved across DMV locations. Mr. Mike Dixon, DMV Senior Director, responded to questions on the age at which a senior citizen must go into a DMV location to renew their driver's license (DL) and the requirements involved in this renewal. Ms. Brohl responded to a question on issuing DLs to individuals institutionalized in the Department of Corrections.


12:03 PM

 Ms. Brohl provided updates on other DMV successes achieved, including the acceptance of credit cards at all 36 state DL offices and installation of automated testing systems. She responded to questions on interlock ignition devices that return false positives and the circumstances under which the department might sell vehicle registration information.















12:12 PM

Ms. Brohl discussed Senate Bill 13-251, which implemented the Colorado Road and Community Safety Act, providing a Colorado DL to those who are unable to demonstrate lawful presence. She responded to a question on how Colorado residency can be determined for such documentation. Ms. Brohl continued her presentation, laying out DMV-related funding requests, the legislative initiatives of the department for FY 2015-16, and industry and stakeholder outreach performed by DOR in 2014.


12:22 PM

Ms. Brohl discussed the department's strategic plan, and Mr. Vecchiarelli came to the table to specifically speak to the Division of Taxation's strategic goals. He explained that these goals are centered around the division tax call center and electronic filing of tax returns. Mr. Vecchiarelli responded to questions on whether the division captures demographic data on its customers and the electronic submittal of sales and income taxes.


12:30 PM

Mr. Dixon came to the table to explain the DMV's major strategic objectives, highlighting improved operations and decreased customer wait times of: title and registration call centers; driver services call centers; and DL offices. He noted that the division had also seen increased online renewal of and payment for DLs. Ms. Brohl responded to a question on whether the department has the authority to reduce the fees related to DL processing. Mr. Dixon spoke to the audits conducted by the DMV in 2014.


12:42 PM

Laura Solano, Director of the Colorado Lottery, came to the table to speak to the lottery's sales and profits.


12:43 PM

Ron Kammerzell spoke to the Enforcement Division's strategic goals for FY 2015-16, which surround liquor license processing, auto industry complaint resolution, racing compliance, marijuana license processing, and gaming compliance.


12:50 PM

Ms. Brohl described the executive director's office and administration goals for 2015 to the committee. She discussed cash handling, project management, rule and regulation review, hiring of personnel, and employee satisfaction. She then discussed the department's regulatory agenda. She responded to questions on the total number of employees within DOR and employee engagement and satisfaction.


1:00 PM

The committee was adjourned.