Joint Committee Committee on Joint Finance (01/20/2005)

Final
STAFF SUMMARY OF MEETING

COMMITTEE ON JOINT FINANCE

Date:	01/20/2005	ATTENDANCE

Time:	09:43 AM to 11:26 AM	Benefield	X
		Cloer	X
Place:	HCR 0107	Crane	X
		Frangas	X
This Meeting was called to order by		Garcia	X
	Representative Vigil	Jahn	X
		Judd	X
This Report was prepared by		Marshall	X
	Ron Kirk	Massey	X
		May M.	X
		McCluskey	X
		McElhany	X
		Shaffer	X
		Taylor	X
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Presentation by Department of Revenue Presentation by Public Employees' Retirement Assn. Presentation by CHFA		- - -

09:43 AM -- Call to Order

Representative Vigil called the meeting to order and welcomed everyone to the first Joint House and Senate Finance Committee of the 2005 session.

09:44 AM -- Presentation by the Department of Revenue

Ms. Michael Cooke, Executive Director, and John Vecchiarelli, Senior Director, Taxation, Colorado Department of Revenue, presented information on the department to the committee. A copy of their presentation materials is provided as Attachment A.

Ms. Cooke began by discussing the department's "Organization Chart." She briefly discussed the functions of each division in the Department of Revenue found on the organization chart.

09:50 AM

Ms Cooke continued by discussing the department's key accomplishments for the recent year. The department has worked hard to update and enhance its online systems to give citizens more electronic options for filing taxes and other services. Ms. Cooke briefly discussed the enhancements to the department's Net-File system, which allows citizens to file state income taxes online.

Representative Vigil inquired whether the department's Net-File system has the capability to allow citizens to make direct payments electronically to the department for income taxes owed. Ms. Cooke responded that the Net-File system allows citizens to make electronic fund transfers to either pay taxes or claim tax refunds. Mr. John Vecchiarelli commented that consumers cannot make direct tax payments or use a credit card to pay taxes through the Net-File system, but that the department is trying to move in that direction.

Ms. Cooke continued by discussing Colorado's Lottery Program. The lottery had it second best year for lottery sales with over $401 million in total sales. About $104 million was distributed to Great Outdoors Colorado, state parks, the Conservation Trust Fund and $2.4 million will be distributed to schools. At the same time, the department achieved a number of savings for the lottery program through efficiencies which saved the department about $1 million.

09:55 AM

Ms. Cooke discussed the department's drivers' license operations and commented on the use of facial recognition in the licensing process. The committee briefly discussed the use of facial recognition in the licensing process. Ms. Cooke discussed the length of time it takes to obtain a permanent drivers' licence and discussed the option that consumers have to renew their license through the mail.

The committee briefly discussed the waiting lines in driver's licensing offices. Ms. Cooke commented that during certain days, the licensing offices across the state have long lines with an average wait of 28 minutes. The committee briefly discussed the driver license offices that have been closed due to budgetary reductions in previous years.

Ms. Cooke commented that the department is trying to promote its Electronic Renewal-by-Mail (ERBM) Program that was implemented in 2004. The program is an alternative to using drivers' license offices to renew drivers' licenses. Persons must have a clear driving record and be between the ages of 21 and 60 to participate in the ERBM Program.

10:25 AM

Ms. Cooke briefly discussed the department's efforts to provide better assistance to citizens who need telephone assistance to file their state income taxes. The Taxpayer Service Call Center processed over 1 million calls last year to taxpayers. The call wait-time for citizens to reach the department has significantly been reduced.

Ms. Cooke closed by discussing the department's efforts to continue to improve some of its systems, such as the Colorado State Titling and Registration System (CSTARS) and the online state tax filing systems. The department's efforts to improve the CSTARS system was a product of working with committees to develop new budget policies and procedures to make the program more efficient.

Representative Vigil inquired about the department's Checkoff Program should the number of programs exceed the statutory 12 program requirement. Ms. Cooke responded by saying that should the statutory limit be exceeded, the department would incur a significant cost for programming unless the last summary page for the Checkoff Program was changed and to accommodate additional checkoff programs.
Representative Witwer inquired whether the department could provide information on past TABOR refunds for each year the state had a refund. He requested information on the number of taxpayers who received refunds, the range for refunds, and the average refund paid to taxpayers by income tier.

10:31 AM -- Presentation by the Public Employees' Retirement Association

Meredith Williams, Executive Director, Jennifer Paquette, Chief Investment Officer, and Rob Gray, Director of Governmental Relations, Public Employees' Retirement Association (PERA) presented information on PERA to the committee. A copy of their presentation is provided as Attachment B.

Mr. Williams began by discussing the composition of PERA's membership. At the end of November 2004, PERA had 361,317 members. The average PERA retiree is 68 years old, retires at age 58 with 22 years of service, and receives an average monthly benefit of $2,140.

Mr. Williams commented on the benefits that state employees receive and discussed the cost for service years that state employees can purchase to enhance retirement. Members generally contribute 8 percent of their income toward their retirement. The employer's contribution share is over 9 percent. Mr. Williams discussed the voluntary 401 (k) plans that employees can contribute to and also commented on plan policies that govern when an employee can retire.

Mr. Williams discussed the recent surge in the purchase of service credit by members. In 2003, members purchased $772 million worth of service credit which resulted in a $1.2 billion unfunded liability. As of November 1, 2005, members will have to pay the full actuarial cost of service credit. He also discussed PERA portability features. Members may purchase service credit for previous or private employment.

Mr. Williams commented that PERA's pension investment portfolio was $5.6 billion in 2003 and yielded a 24 percent rate of return based on over 7 million trades. The investment portfolio went up by $5 billion in 2003 and yielded $620 million in positive cash flows.

The committee briefly discussed PERA's service credit transactions. Mr. Williams commented that PERA's practice of allowing members to purchase service credit will be closely aligned with annuities that can be purchased on the open market as of November 2005. Mr. Williams commented that the practice of selling service credits has been historically viewed as a member benefit that would encourage talented private sector employees to pursue a job in the public sector.

Mr. Williams closed saying PERA has traditionally taken a long-term view for its investment strategy and believes that this approach is the most accountable and beneficial to its members.

10:49 AM

Ms. Paquette discussed PERA's investments and asset allocation. As of December 31, 2004, the total market value for PERA's investment program was $31.4 billion, of which the largest portion is made up of domestic equities (42.8 percent). Ms. Paquette commented that the unaudited rate of return for equities for 2004 is expected to come in at 10 percent. For 2005, PERA expects a health economy and a good performance from equities, but returns may not be as strong as the prior year.

10:54 AM

Mr. Gray discussed issues regarding PERA's unfunded liabilities and talked about the history of PERA's funding ratio. He stated that the recent unfunded liability is a function of the poor investment performance in the last few years and the large number of state retirements between FY 2001-02 and FY 2002-03.

Mr. Gray continued by discussing the different divisions under PERA such as the State, School, and Judiciary Divisions. Mr. Gray discussed the 30-year projection for funding ratios. A 9.5 percent rate of return would result in a 83 percent funding ratio in 2032. Mr. Gray discussed the employer contribution rate.

Mr. Gray compared PERA's pension contribution rates with other retirement plans. The average costs for private employers with similar plans was 11.75 percent for 2002. In comparison, the state employer contribution rate is 10.5 percent.

Mr. Gray commented on the role of PERA's Board to monitor the pension fund's performance in relation to unfunded liability. He indicated that the unfunded liability during the 1970s was about 70 percent.

Mr. Gray closed by discussing 2005 legislative issues and responded to questions about Pinnacol's conversion to nonprofit status.

11:12 AM -- Presentation by the Colorado Housing and Finance Authority

Mr. Chris White, Chief Operating Officer, and Mr. Tom Hemmings, Chief Financial Officer, Colorado Housing and Financing Authority (CHFA) presented information on CHFA to the committee. A copy of their presentation is provided as Attachment C.

Mr. White began by providing an overview of CHFA and said that it was created by the General Assembly in 1973. CHFA issues bonds and notes to finance home loans. These bonds and notes are not obligations of the state. Mr. White discussed the 11-member Board of Directors and provided background information on each board member.

Mr. White commented that CHFA provides home financing, rental financing, and business financing in it role as a housing lender. CHFA has financed 57,000 single family homes and 56,000 rental units. CHFA finances homes in all 64 counties in Colorado.

11:18 AM

Mr. Hemmings commented that 2004 was a good year for CHFA. In 2004, CHFA financed 3,198 home loans, and had a total production level of loans that amounted to over $550 million. Mr. Hemmings closed by discussing the types of bonds that CHFA issues. The current rating for its general obligation bonds is A to A1.

11:24 AM

Mr. White closed by discussing some CHFA highlights for 2005. One initiative is to apply for $150 million in tax credits through the federal treasury for redevelopment in blighted areas. Another goal for 2005 is to make more money available to developers who develop homes around transit hubs such as light rail stations along the TREX line.

11:26 AM

Adjourn.