HOUSE 3rd Reading Unamended May 1, 2015 HOUSE Amended 2nd Reading April 30, 2015First Regular Session Seventieth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 15-0178.02 Jason Gelender x4330 HOUSE BILL 15-1388 HOUSE SPONSORSHIP Pabon and Rankin, SENATE SPONSORSHIP Kerr, House Committees Senate Committees Finance A BILL FOR AN ACT Concerning the creation of the "Securitizing Contributions for Retirement Earnings Act", and, in connection therewith, authorizing the Colorado housing and finance authority to issue pension obligation bonds in order to more quickly eliminate unfunded accrued actuarial liabilities of the public employees' retirement association subject to a judicial determination of constitutionality and the approval of the governor and the state treasurer and requiring the association to contract with the authority regarding the repayment of any bonds issued. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The state and school divisions of the public employees' retirement association (PERA) each have an unfunded accrued actuarial liability (UAAL), a shortfall in the amount of each division's assets needed, according to actuarial projections, to pay the benefits projected to be owed to each division's PERA members in the future. Current law requires state and school division employers to make amortization equalization disbursement (AED) payments and supplemental amortization equalization disbursement (SAED) payments in order to reduce and eventually eliminate the UAAL over a 30-year period. Section 3 of the bill authorizes the Colorado housing and finance authority (CHFA) to issue bonds and cause net bond proceeds to be deposited to the PERA state and school division trust funds if: The governor and the state treasurer have obtained an unappealable court judgment, which they are required to seek, that the issuance of bonds is constitutional; and The governor and the state treasurer certify that doing so will eliminate the UAALs sooner than would otherwise be the case. Section 4 of the bill creates state division and school division AED and SAED special revenue funds (special funds). If CHFA issues bonds: PERA must enter into a contract with CHFA under which PERA agrees to make payments to CHFA to ensure that CHFA can repay the bonds; and PERA must deposit AED and SAED payments that it receives into the special funds for the purpose of making payments to CHFA. Section 4 of the bill also creates an "intercept" program that allows the state treasurer to make AED and SAED payments to PERA on behalf of a school division employer that fails to make such payments and to withhold monthly payments of state total program and county-collected property taxes from the school division employer to the extent necessary to cover the AED and SAED payments. The bill also generally specifies various requirements relating to the amount of bonds that may be issued and the manner of issuance and repayment. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Short title. This act shall be known and may be cited as the "Securitizing Contributions for Retirement Earnings Act". SECTION 2. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) It is committed to the goals of maintaining the current employer contribution rates for, preserving this current actuarial funding ratio of, and improving the future actuarial funding ratio of the state division trust fund and the school division trust fund of the public employees' retirement association; (b) It has carefully considered various alternatives to achieve these goals and has determined that the amendments to law made in this act that authorize the issuance of bonds, require the inclusion of certain covenants, and otherwise direct or authorize related actions represent the best means of achieving these goals and are necessary, appropriate, and in the best interest of the state; and (c) It intends that the bonds be issued in one or more series in the maximum aggregate principal amount that the governor and the state treasurer determine is financially prudent under prevailing market conditions within the interest rate, funding ratio, coverage ratio, time period, and other parameters set forth in section 29-4-710.8 (4) and (9), Colorado Revised Statutes. SECTION 3. In Colorado Revised Statutes, add 29-4-710.8 as follows: 29-4-710.8. Powers of the board - issuance of bonds to fund the state division trust fund and the school division trust fund of the public employees' retirement association - definitions - legislative declaration. (1) Unless a specific term is otherwise defined in this subsection (1) or elsewhere in this section, definitions of terms defined in section 24-51-101, C.R.S., apply to this section. As used in this section, unless the context otherwise requires: (a) "Association" means the public employees' retirement association created in section 24-51-201, C.R.S. (b) "Bonds" means bonds or notes issued by the authority as authorized by this section. (c) "Required covenants" means the following covenants that must be included in the terms of a trust indenture or other instrument governing a series of bonds in accordance with subparagraph (IV) of paragraph (c) of subsection (4) of this section: (I) A covenant that an immediate event of default under the trust indenture or other instrument occurs if section 24-51-411, C.R.S., is amended to lower the percentage of the total payroll of state division employers or school division employers on which the amortization equalization disbursement payments or supplemental amortization equalization disbursement payments are calculated from the percentage set forth in section 24-51-411, C.R.S., as of the effective date of this subparagraph (I), including increases required under said section 24-51-411, C.R.S., through 2018, subject to reductions allowed under section 24-51-411 (8), C.R.S.; and (II) A covenant that an immediate event of default under the trust indenture or other instrument occurs if section 24-51-401 (1.7), C.R.S., is amended to lower the percentage of the total payroll of state division employers or school division employers on which employer contributions are calculated from the percentage set forth in section 24-51-401 (1.7), C.R.S., as of the effective date of this subparagraph (II); except that the lowering of the percentage is not an event of default if: (A) The most recent actuarial valuation of the association states that the state division trust fund and the school division trust fund are funded, based on the actuarial value of the assets of the funds, at or above one hundred thirty percent of their respective accrued actuarial liability and the lowered percentage maintains the then-current funded ratio of the state division trust fund and the school division trust fund; or (B) The percentage of the total payroll of state division employers or school division employers on which employer contributions are calculated is lowered in connection with a declared fiscal emergency under section 24-50-109.5, C.R.S., and, by the end of the fifth fiscal year following the fiscal year in which the lower percentage is effective, state division employers and school division employers have made additional employer contributions to the association equal to the amount of the reduction in employer contributions resulting from the lowering of the percentage plus earnings on the reduction in the fiscal year in which the lower percentage is effective and in each fiscal year during the five-year cure period at the actuarial investment assumption rate used in the actuarial valuation of the association for each such fiscal year; except that, if the additional employer contributions have not been made by the end of the fifth fiscal year, the event of default is immediately effective and the cure period may not be extended for any reason. (d) "School division special fund" means the school division amortization equalization disbursement and supplemental amortization equalization disbursement special revenue fund created in section 24-51-201.1 (3) (a), C.R.S. (e) "School division trust fund" means the school division trust fund of the association created in section 24-51-208 (1) (a.5), C.R.S. (f) "State division special fund" means the state division amortization equalization disbursement and supplemental amortization equalization disbursement special revenue fund created in section 24-51-201.1 (2) (a), C.R.S. (g) "State division trust fund" means the state division trust fund of the association created in section 24-51-208 (1) (a), C.R.S. (h) "Unfunded accrued actuarial liability" means the unfunded accrued actuarial liability of the state division trust fund, the school division trust fund, or both, as appropriate, of the association as set forth in the most recent official financial report of the association. (2) Upon receiving the certifications specified in subsection (4) of this section, the authority, in addition to the other powers granted by this part 7, has the following powers: (a) To issue one or more series of bonds as provided in this section to fund the state division trust fund and the school division trust fund and, in connection with that power: (I) To pay the principal of, and interest and premium, if any, on, the bonds, the costs of bond issuance and administration, and any other related fees and costs of the authority, the association, the governor, and the state treasurer relating to the bonds; (II) To establish reserves for the bonds; and (III) To make deposits into the state division trust fund and the school division trust fund and otherwise apply the proceeds of the bonds for any of the purposes set forth in this paragraph (a); and (b) To enter into contracts with the association pursuant to which the association agrees to pay and pledges to the authority moneys in the state division special fund and the school division special fund to pay and secure the payment of bonds. (3) Bonds are limited obligations of the authority and are payable solely from moneys paid to the authority by the association from moneys in the state division special fund and the school division special fund and proceeds derived from the sale of the bonds, earnings on such proceeds, and other moneys and securities that are held by the authority or by a trustee for the owners of the bonds, all to the extent that such moneys, proceeds, earnings, and other moneys and securities have been pledged by the authority for payment of the bonds. The owners or holders of bonds may not look to any other revenues or assets of the state or the authority for the payment of the bonds and may not, under any circumstances, seek or be entitled to seek any assets or revenues of the association other than moneys in the state division special fund and the school division special fund that have been pledged for the payment of the bonds. Neither bonds, nor any contract between the association and the authority, any other contract or agreement relating to or entered into in connection with bonds, nor any obligation of the state division or a school division employer to pay the amortization equalization disbursement payments and the supplemental amortization equalization disbursement payments to the association create an indebtedness or multiple-fiscal year direct or indirect debt or other financial obligation of any state division or school division employer within the meaning of the state constitution or the laws of this state concerning or limiting the creation of indebtedness or multiple-fiscal year direct or indirect debt or other financial obligations by the state or any school district. (4) The authority shall not issue any series of bonds until: (a) The governor and the state treasurer have delivered to the authority and the association a written certificate stating that, based on the actuarial investment assumption rate and the other assumptions used in the most recent actuarial valuation of the association and the terms of the series of bonds and other items included in the certification pursuant to this subsection (4), the issuance of the series of bonds should reduce the unfunded accrued actuarial liability of the trust fund or trust funds of the association into which proceeds of the bonds are to be deposited more quickly than if the bonds were not issued. The governor and the state treasurer are hereby authorized to make all determinations required to deliver and to actually deliver such a certificate. (b) (I) The attorney general has delivered to the authority, the association, the governor, and the state treasurer a certificate stating that a court of competent jurisdiction has issued a final nonappealable order to the effect that neither bonds nor the obligations of the association under a contract entered into pursuant to section 24-51-201.1, C.R.S., nor the involvement of the state of Colorado create a debt by loan in any form for purposes of section 3 of article XI of the state constitution or a multiple-fiscal year direct or indirect debt or other financial obligation for purposes of section 20 of article X of the state constitution. (II) The general assembly finds and declares that: (A) The certificate requirement set forth in subparagraph (I) of this paragraph (b) is necessary because the issuance of bonds, the obligations of the association under a contract entered into pursuant to section 24-51-201.1, C.R.S., and the involvement of the state of Colorado raise important, concrete, and immediate issues requiring judicial resolution so that the authority and the association may proceed with the important public business that the general assembly has assigned to them by enacting this section, section 24-51-201.1, C.R.S., and the other provisions of House Bill 15-1388, enacted in 2015; (B) The judicial resolution of these issues involves the application of legal standards to terms that will be established and of public record, which makes the issues ripe for judicial resolution; and (C) It is therefore necessary and appropriate to require the governor and the state treasurer to seek and state courts to conduct a judicial examination and determination regarding these issues as specified in subparagraphs (III) and (IV) of this paragraph (b). (III) The governor and the state treasurer shall file a petition in the district court in and for the city and county of Denver praying for a judicial examination and determination that neither bonds nor the obligations of the association under a contract entered into pursuant to section 24-51-201.1, C.R.S., nor the involvement of the state of Colorado create a debt by loan in any form for purposes of section 3 of article XI of the state constitution or a multiple-fiscal year direct or indirect debt or other financial obligation for purposes of section 20 of article X of the state constitution. (IV) A judicial examination and determination requested as required by subparagraph (III) of this paragraph (b) is in the nature of a proceeding in rem, and jurisdiction of all parties interested may be had by publication and posting as specified in this subparagraph (IV). Notice of the filing of a petition for judicial examination shall be given by the clerk of court, under the seal thereof, stating in brief outline the contents of the petition and stating where a full copy of the petition may be examined. The notice shall be served by publication for five consecutive weeks in a weekly or daily newspaper of general circulation in each of the state's planning and management regions as defined by the department of local affairs. Notice shall also be posted for at least five consecutive weeks in the offices and on the web sites of the association, governor, and treasurer. Compliance with these publication requirements confers jurisdiction upon the district court, and a hearing shall be held not less than thirty nor more than forty days after the notice by publication is complete. The district court shall issue its judicial determination within fourteen days after the close of the hearing. Any person interested in the issues set forth in the petition may appear and answer the petition at a time fixed by the district court that is prior to the date fixed for the hearing, and the petition shall be taken as confessed by all persons who fail to appear. Costs may be divided or apportioned among any contesting parties in the discretion of the district court. The Colorado rules of civil procedure govern in matters of pleading and practice where not otherwise specified in this section. Any review of the judicial determination of the district court shall proceed immediately to the Colorado supreme court and shall be applied for within thirty days after the time of the rendition of the judicial determination. The Colorado supreme court has exclusive original appellate jurisdiction, and it shall accept such an application for review, shall advance briefing and argument, and shall render a decision as a matter of highest priority. In that regard, the supreme court shall order that the appellate record be prepared and transmitted to it within fourteen days of the notice of appeal; that the opening brief be filed within thirty days of the filing of the record on appeal; that the answer brief be filed within thirty days of the opening brief; and that the reply brief be filed within fourteen days of the answer brief. All other procedure is governed by the Colorado rules of appellate procedure. The courts shall disregard any error, irregularity, or omission that does not affect the substantial rights of the parties. (c) With respect to each series of bonds to be issued, the governor and the state treasurer have delivered a written certificate to the authority and the association that includes directly or by reference to other documents delivered with the certificate: (I) Certifications that: (A) The governor and the state treasurer have approved the principal amount, maturity dates, principal amount maturing on each maturity date, and interest rates for the series of bonds and the date on which the series of bonds is to be issued. (B) The aggregate principal amount of all series of bonds issued pursuant to this section does not exceed either the maximum principal amount that can be issued in compliance with the coverage ratio requirements set forth in subsection (9) of this section or the principal amount required to increase the funding ratios of the state division trust fund and the school division trust fund, based on the respective actuarial values of the assets of the funds, to one hundred percent. (C) The final maturity date of the series of bonds occurs not later than forty years after the date the series of bonds is issued. (D) The interest rate on the series of bonds is fixed and the net effective interest rate of any series of bonds does not exceed the actuarial investment assumption rate used in the most recent actuarial valuation of the association minus two hundred basis points. (II) Certification that the governor and the state treasurer have approved the use of the proceeds of the series of bonds, including, but not limited to, the amount of proceeds to be deposited into the state division trust fund or school division trust fund, any reserve fund or funds for the series of bonds, and the costs of issuance of the series of bonds. The proceeds of the series of bonds delivered to the association for deposit into the state division trust fund and the school division trust fund must be allocated between the trust funds in accordance with section 24-51-201.1 (4) (a), C.R.S. (III) Certification that the governor and the state treasurer have approved the redemption provisions applicable to the series of bonds; (IV) (A) Certification that the governor and the state treasurer have approved the terms of the trust indenture or other instrument governing the series of bonds, which must include the required covenants. (B) Events of default described in the required covenants remain in effect and are irrevocable so long as the bonds are outstanding, but such events do not give rise to any remedies against the authority, the association, the governor, the state treasurer, the state, state division employers, or school division employers and do not allow any of those officers or entities to fail to perform any of their obligations relating to the bonds, any contract between any of them and the association, or any other contract or agreement relating to or entered into in connection with the bonds. (V) Certification that the terms of the contract between the authority and the association pursuant to which the association agrees to pay to the authority moneys from the state division special fund created in section 24-51-201.1 (2), C.R.S., and the school division special fund created in section 24-51-201.1 (3), C.R.S., and pledges the moneys to secure the association's obligation to make the payments to the authority; and (VI) Certification that the governor and the state treasurer have approved the other terms, conditions, or provisions applicable to the series of bonds or to the trust indenture or other instrument, the contract with the association and any ancillary contracts related to the series of bonds. (d) With respect to each series of bonds to be issued, the governor and the state treasurer have delivered a written certificate to the authority and the association designating the underwriters, bond counsel, disclosure counsel, bond insurers, letter of credit banks, rating agencies, consultants, agents, and other persons whose services may be required or deemed advantageous by the governor and the state treasurer for the series of bonds and the trustee for the owners of the series of bonds. Except for rating agencies, each of the foregoing must be selected by a competitive process, and disclosure counsel must be separate and independent from bond counsel. (5) The costs of issuance of each series of bonds included in the certificates delivered by the governor and the state treasurer pursuant to subsection (4) of this section must include the payment of the reasonable costs incurred by the authority, the association, the governor, and the state treasurer in connection with the issuance of the series of bonds. The terms of the trust indenture or other instrument governing each series of bonds and the contract with the association entered into in connection with the issuance of each series of bonds included in the certification by the governor and the state treasurer pursuant to subsection (4) of this section must include the payment of the reasonable costs to be incurred by the authority, the association, the governor, and the state treasurer in connection with the administration of the series of bonds. (6) The certificates delivered by the governor and the state treasurer pursuant to subsection (4) of this section with respect to a series of bonds may be updated by the governor and the state treasurer from time to time up to and including the time the series of bonds is issued. (7) If the governor, the state treasurer, and the attorney general deliver the certificates described in subsection (4) of this section with respect to a series of bonds, the authority is authorized to issue the bonds and to take all other actions reasonably requested by the governor and the state treasurer to cause the bonds to be issued in accordance with the certificates. (8) The scheduled principal, interest, and mandatory redemption payments payable in any fiscal year on all bonds, net of the amount that the state treasurer estimates will be payable from the state division special fund and the school division special fund during the fiscal year to pay the reasonable costs of the association, the governor, the state treasurer, the authority, and the trustee for the owners for administering the bonds and to establish or replenish reasonable reserves for the bonds, determined as of the date each series of bonds is issued, shall not exceed an amount that results in a coverage ratio for each fiscal year of revenue to principal, interest, and mandatory redemption payments payable in any fiscal year of less than one hundred thirty percent in the fiscal year in which the series of bonds is issued and in each of the three immediately succeeding fiscal years and one hundred fifty percent in each fiscal year thereafter. For the purpose of calculating either coverage ratio, "revenue" means the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable to the association by employers in the state division and school division during the applicable fiscal year, as projected in the most recent actuarial valuation of the association. Compliance with this subsection (8) shall be determined by the state treasurer based on the advice of the financial advisor for the bonds in connection with the issuance of each series of bonds and shall be included in the certificate delivered by the governor and the state treasurer pursuant to sub-subparagraph (B) of subparagraph (I) of paragraph (c) of subsection (4) of this section. (9) The authority, the association, the governor, the state treasurer, state division employers, and school division employers may enter into contracts with any person that they deem necessary or appropriate in connection with bonds, the contract between the authority and the association, or any other transaction or activity related to the exercise of their powers or duties under this section, section 24-51-201.1, C.R.S., or any other provision of law that relates to the implementation of said sections. (10) No bonds may be issued after December 31, 2018. (11) An action or proceeding at law or in equity to review any acts or proceedings or to question the validity or enjoin the performance of any act or proceedings, including but not limited to the issuance or proposed issuance of any bonds or the execution or performance or proposed execution or performance of any contract, or for any other relief against or from any acts or proceedings done or that may be done under this section, section 24-51-201.1 or 24-51-201.3, C.R.S., or any other provision of law that relates to bonds or to contracts entered into by the association and the authority pursuant to section 24-51-201.1, C.R.S., whether based upon irregularities or jurisdictional defects, shall not be maintained unless commenced within thirty days after the effective date of this subsection (11), and is thereafter perpetually barred, and, if commenced within the thirty-day period, shall be joined with any pending proceeding commenced pursuant to paragraph (b) of subsection (4) of this section. (12) The powers conferred by this section, section 24-51-201.1 or 24-51-201.3, C.R.S., or any other provision of law that grants powers relating to bonds or to contracts entered into by the association and the authority pursuant to section 24-51-201.1, C.R.S., are in addition and supplemental to, and not in substitution for, and the limitations imposed by those sections or other provisions of law do not directly or indirectly modify, limit, or affect, the powers conferred to the governor, the state treasurer, the association, or the authority by any other law. Any provision of this section, section 24-51-201.1 or 24-51-201.3, C.R.S., or any other provision of law that grants powers relating to bonds or to contracts entered into by the association and the authority pursuant to section 24-51-201.1, C.R.S., or any other provision of law applicable to the association, the authority, or the state that conflicts with or is inconsistent with any other state statutory provision, principle of common law, or case law supersedes the other state statutory provision or provision of common law or case law. (13) The general assembly finds and declares that: (a) Bonds are not a multiple-fiscal year direct or indirect debt or other financial obligation for purposes of section 20 of article X of the state constitution because the authority is not a district, as defined in section 20 (2) (b) of article X of the state constitution, subject to the requirements of said section 20 and because: (I) The authority is a special purpose authority, as defined in section 24-77-102 (15), C.R.S., and is therefore not part of the state, as defined in section 24-77-102 (16), C.R.S.; (II) Under the Colorado supreme court's decision in Campbell v. Orchard Mesa Irrigation District, 972 P.2d 1037 (Colo. 1998), the authority is neither the state nor a local government and therefore is not a district, as defined in section 20 (2) (b) of article X of the state constitution, subject to the requirements of section 20 of article X of the state constitution because: (A) The authority is not authorized to levy general taxes. (B) Although the authority is a body corporate and a political subdivision of the state serving public purposes, it is not an agency of state government and is not subject to administrative direction by any department, commission, board, bureau, or agency of the state. (C) The general public is not entitled to vote for the members of the board of the authority or with respect to any other action of the authority. (b) Bonds are not a debt by loan in any form for purposes of section 3 of article XI of the state constitution because the authority is not part of the state for the reasons described in paragraph (a) of this subsection (13) and because the bonds are payable from a special fund. (c) The involvement of the state in the actions authorized by this section does not change the findings and declarations set forth in paragraphs (a) and (b) of this subsection (13). SECTION 4. In Colorado Revised Statutes, add 24-51-201.1 and 24-51-201.3 as follows: 24-51-201.1. Contracts with Colorado housing and finance authority - state and school division amortization equalization disbursement and supplemental amortization equalization disbursement special revenue funds. (1) If the Colorado housing and finance authority issues bonds as authorized by section 29-4-710.8, C.R.S., the association shall enter into a contract with the authority under which the association agrees to make payments to the authority from and pledges as security for the payments moneys in the state division special fund created in subsection (2) of this section and the school division special fund created in subsection (3) of this section. The contract must include the terms described in subsection (4) of this section. The association's financial obligations under any such contract are limited obligations of the association, payable solely from moneys held in the special funds that have been pledged by the association for the payment of the financial obligations. The association shall not be required to remit any amounts to the authority over and above the amounts available in the special funds. Any pledge by the association pursuant to this subsection (1) is valid and binding and creates a valid security interest and lien enforceable against all parties having claims against the association of any kind, irrespective of whether the claiming party has notice of the security interest or lien. A contract need not be recorded or filed to perfect the pledge, security interest, and lien. (2) (a) The state division amortization equalization disbursement and supplemental amortization equalization disbursement special revenue fund, referred to in this section as the "state division special fund", is hereby created. Moneys in the state division special fund are not part of the state division trust fund or any other trust fund or other fund of the association, are not part of the corpus or income of the pension plan or plans or pension trust or trusts of the association, and are not available to pay benefits or for any other purpose not specifically permitted by this subsection (2). (b) From the date the association enters into a contract with the Colorado housing and finance authority to make payments from the state division special fund in connection with bonds issued by the authority until all obligations of the association under the contract have terminated, all moneys received by the association from the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments paid to the association by employers in the state division shall be deposited into the state division special fund. The association may establish separate accounts within the state division special fund as needed. The association shall invest moneys in the state division special fund that are not needed for immediate use in the types of investments authorized in section 24-36-113, subject to any limitations set forth in the instruments governing the bonds issued by the authority and any limitations set forth in the contract between the association and the authority entered into in connection with the authority's bonds. All interest and income derived from the deposit and investment of moneys in the state division special fund shall be credited to the state division special fund. (c) The association shall expend moneys from the state division special fund as required by paragraph (b) of subsection (4) of this section. After each expenditure of moneys from the state division special fund pursuant to said paragraph (b), the balance remaining in the state division special fund shall be transferred to the state division trust fund. Moneys transferred to the state division trust fund pursuant to this paragraph (c) become trust assets and are not available and may not be used for any of the purposes described in said paragraph (b). (3) (a) The school division amortization equalization disbursement and supplemental amortization equalization disbursement special revenue fund, referred to in this section as the "school division special fund", is hereby created. Moneys in the school division special fund are not part of the school division trust fund or any other trust fund or other fund of the association, are not part of the corpus or income of the pension plan or plans or pension trust or trusts of the association, and are not available to pay benefits or for any other purpose not specifically permitted by this subsection (3). (b) From the date the association enters into a contract with the Colorado housing and finance authority to make payments from the school division special fund in connection with bonds issued by the authority until all obligations of the association under the contract have terminated, all moneys received by the association from the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments paid to the association by employers in the school division shall be deposited into the school division special fund. The association may establish separate accounts within the school division special fund as needed. The association shall invest moneys in the school division special fund that are not needed for immediate use in the types of investments authorized in section 24-36-113, subject to any limitations set forth in the instruments governing the bonds issued by the authority and any limitations set forth in the contract between the association and the authority entered into in connection with the authority's bonds. All interest and income derived from the deposit and investment of moneys in the school division special fund shall be credited to the school division special fund. (c) The association shall expend moneys from the school division special fund as required by paragraph (b) of subsection (4) of this section. After each expenditure of moneys from the school division special fund pursuant to said paragraph (b), the balance remaining in the school division special fund shall be transferred to the school division trust fund. Moneys transferred to the school division trust fund pursuant to this paragraph (c) become trust assets and are not available and may not be used for any of the purposes described in said paragraph (b). (4) A contract entered into by the association and the Colorado housing and finance authority pursuant to subsection (1) of this section must include the following terms: (a) The proceeds of bonds issued by the Colorado housing and finance authority as authorized by section 29-4-710.8, C.R.S., net of the proceeds to be deposited into any reserve fund or funds for the bonds and the costs of issuance of the bonds as set forth in the certificate delivered pursuant to section 29-4-710.8 (4), C.R.S., shall be delivered to the association and deposited into the state division trust fund and the school division trust fund in proportion to each division's percentage of the total annual contributions remitted to the association by the state division employers and the school division employers based on the most recent comprehensive annual financial report of the association at the time the bonds are issued; except that, if the amount deposited into either the state division trust fund or the school division trust fund would cause the funding ratio of the fund, based on the actuarial value of the assets of the fund, to exceed one hundred percent, the amount that would cause the funding ratio of the fund to exceed one hundred percent shall be deposited into the other fund. The proceeds of bonds that are deposited into the state division trust fund and the school division trust fund pursuant to this paragraph (a) shall be invested by the association pursuant to the provisions of section 24-51-206. (b) Moneys shall be paid to the Colorado housing and finance authority from the state division special fund and the school division special fund on a monthly basis in an amount sufficient to pay one-fifth of the next interest payment on the bonds occurring within the next six months and one-eleventh of the next principal or mandatory redemption payment on the bonds occurring within the next twelve months, the reasonable costs of the association, the governor, the state treasurer, and the authority for administering the bonds, the amount necessary to establish or replenish reasonable reserves for the bonds, and the amount necessary to make up for any shortfalls in any previous monthly payment. The amounts payable to the authority pursuant to this paragraph (b) shall be paid from the state division special fund and the school division special fund in proportion to the amount of proceeds of bonds issued by the authority as authorized by section 29-4-710.8, C.R.S., most recently deposited into the state division trust fund and the school division trust fund pursuant to paragraph (a) of this subsection (4). The obligations to make the payments from the state division special fund and the school division special fund are not interdependent or interchangeable. Each payment from the state division special fund and the school division special fund is and remains the separate obligation only of the respective special fund and is not due or payable from the other special fund. (c) If the amount on deposit in either of the special funds is not enough to cover amounts payable from the special fund in any month pursuant to paragraph (b) of this subsection (4), the association is not required to remit any additional amounts to the Colorado housing and finance authority for that month. (d) The contract shall provide that if, on the date money is to be paid to the Colorado housing and finance authority from either of the special funds, the amount on deposit in the special fund is not enough to cover the payment because state statutes have been amended to reduce the amount of the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable by state division employers or school division employers, then an event of default has occurred under the contract or the instruments governing the bonds, and the remedies for the event of default do not include the recovery of moneys from the association or from any of the trust funds or other funds of the association other than the amounts in the special funds that are available for that purpose as specified in this subsection (4). (5) If the Colorado housing and finance authority issues bonds as authorized by section 29-4-710.8, C.R.S., in addition to entering into a contract with the authority as required by subsection (1) of this section, the association shall take all other actions reasonably requested by the governor and the state treasurer to cause the bonds to be issued in accordance with the certifications described in section 29-4-710.8 (4), C.R.S. (6) The association shall cooperate with the governor and the state treasurer before any bonds are issued by the Colorado housing and finance authority as authorized by section 29-4-710.8, C.R.S., to provide the governor and the state treasurer an understanding of the association's investment strategy for the bond proceeds so that the governor and the state treasurer can determine whether or not the bonds should be issued under current market conditions. (7) If the Colorado housing and finance authority issues bonds as authorized by section 29-4-710.8, C.R.S., no later than July 15, 2016, and no later than July 15 of each year thereafter so long as the bonds are outstanding, the association shall submit: (a) A report to the members of the general assembly that includes, at a minimum, information regarding the investment performance of the state division and the school division during the preceding calendar year; and (b) A report to the members of the general assembly and the office of state planning and budgeting that includes the total amount of proceeds derived from the issuance of the bonds, the total amount applied in each fiscal year to the payment of the bonds, and the cost of issuing and administering the bonds. (8) The general assembly finds and declares that: (a) The obligations of the association under a contract entered into with the Colorado housing and finance authority pursuant to this section are not a multiple-fiscal year direct or indirect debt or financial obligation under section 20 of article X of the state constitution because the association is not a district, as defined in section 20 (2) (b) of article X of the state constitution, subject to the requirements of said section 20 and because: (I) The association is a special purpose authority as defined in section 24-77-102 (15) and is therefore not part of the state, as defined in section 24-77-102 (16). (II) Under the Colorado supreme court's decision in Campbell v. Orchard Mesa Irrigation District, 972 P.2d 1037 (Colo. 1998), the association is neither the state nor a local government and therefore is not a district, as defined in section 20 (2) (b) of article X of the state constitution, subject to the requirements of section 20 of article X of the state constitution because: (A) The association is not authorized to levy general taxes. (B) Although the association is an instrumentality of the state, it is not an agency of state government and is not subject to administrative direction by any department, commission, board, bureau, or agency of the state. (C) The general public is not entitled to vote for the members of the board of the association or with respect to any other action of the association. (III) Contributions paid to the association by employers and members do not affect the fact that the association is not subject to section 20 of article X of the state constitution because the contributions are paid in exchange for the required payment by the association of benefits to benefit recipients and therefore are not grants, either as defined by section 24-77-102 (7) or as referenced in section 20 (2) (d) of article X of the state constitution. (b) The obligations of the association under a contract entered into with the Colorado housing and finance authority pursuant to this section are not a debt by loan in any form for purposes of section 3 of article XI of the state constitution because the association is not part of the state for the reasons described in paragraph (a) of this subsection (8) and because the obligations are payable from a special fund; and (c) The involvement of the state in the actions authorized by this section does not change the findings and declarations set forth in paragraphs (a) and (b) of this subsection (8). 24-51-201.3. Timely payment of certain school district obligations to the public employees' retirement association. (1) If the association has not received payment of the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable to the association pursuant to section 24-51-411 from an employer in the school division of the association, the association shall notify the state treasurer and the school division employer by telephone, facsimile, or other similar communication, followed by written verification, of such payment status. Within five business days, the state treasurer shall contact the school division employer and determine whether the employer will make the payments, together with any interest due on the payments, and, if so, by what date. (2) If an employer in the school division of the association fails to make payment with necessary interest within thirty days after being contacted by the state treasurer pursuant to subsection (1) of this section, the state treasurer shall forward to the association the amount in immediately available funds necessary to make the payment of the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable to the association pursuant to section 24-51-411, together with any interest due on the payments. The state treasurer shall recover the amount forwarded by withholding amounts from the school division employer's payments of the state's share of the school division employer's total program received in accordance with article 54 of title 22, C.R.S., and from property tax and specific ownership tax revenues collected by the county treasurer on behalf of the school division employer; except that the state treasurer may not recover amounts from property tax revenues that are pledged to pay notes or bonds issued by the school division employer. The total amount withheld in a month from the state's share of total program and the tax revenues due to the school division employer for each occasion on which the treasurer forwards an amount pursuant to this section shall not exceed one-twelfth of the amount forwarded; except that the state treasurer, in one or more months during the twelve-month withholding period, may withhold more than one-twelfth of the amount forwarded if the school division employer in one or more months during the twelve-month withholding period receives total program and tax revenues in an amount that is less than one-twelfth of the amount forwarded. The state treasurer shall not withhold amounts for more than twelve consecutive months for each occasion on which the treasurer forwards amounts pursuant to this section. The state treasurer, in writing, shall notify the county treasurer for the school division employer of the amount of tax revenues to be withheld pursuant to this subsection (2) and the period of withholding. Notwithstanding any provision of this subsection (2) to the contrary, a school division employer may elect to make early repayment of all or any portion of an amount forwarded by the state treasurer on behalf of the school division employer pursuant to this section. When a school division employer fully repays an amount forwarded by the state treasurer on behalf of the school division employer pursuant to this section, the state treasurer, in writing, shall notify the county treasurer for the school division employer to discontinue the withholding of tax revenues. (3) The association shall apply amounts forwarded to the association by the state treasurer solely to the payment of the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable to the association pursuant to section 24-51-411 by the school division employer. The state treasurer shall notify the department of education, the chief financial officer of the school division employer, and the general assembly of amounts withheld and payments made pursuant to this section. (4) The state hereby covenants with the purchasers and owners of bonds issued by the Colorado housing and finance authority as authorized by section 29-4-710.8, C.R.S., that it will not repeal, revoke, or rescind the provisions of this section or modify or amend the same so as to limit or impair the rights and remedies granted by this section. Nothing in this subsection (4) requires the state to continue the payment of state assistance to any school division employer or limits or prohibits the state from repealing, amending, or modifying any law relating to the amount of state assistance to school division employers or the manner of payment or the timing thereof. Nothing in this section creates a debt of the state with respect to bonds or other obligations within the meaning of any state constitutional provision or creates any liability except to the extent provided in this section. (5) Whenever this section requires the state treasurer to make a payment of amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable to the association pursuant to section 24-51-411 on behalf of a school division employer, the department of education shall initiate an audit of the school division employer to determine the reason for the nonpayment and to assist the school division employer, if necessary, in developing and implementing measures to ensure that future payments will be made when due. (6) Nothing in this section requires the state treasurer to make any payment of the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments payable to the association pursuant to section 24-51-411 on behalf of a school division employer except as provided in and subject to the terms of this section. SECTION 5. In Colorado Revised Statutes, 24-51-204, add (12) as follows: 24-51-204. Duties of the board. (12) The board, the association, the state, the governor, the state treasurer, and the Colorado housing and finance authority are immune from claims arising from the enforcement and implementation of section 24-51-201.1, 24-51-201.3, or 29-4-710.8, C.R.S., or any other law that relates to contracts entered into by the association and the authority pursuant to section 24-51-201.1 or bonds issued by the authority as authorized by section 29-4-710.8, C.R.S. SECTION 6. In Colorado Revised Statutes, 24-51-205, add (8) as follows: 24-51-205. General authority of the board. (8) The board may enter into contracts with the Colorado housing and finance authority in accordance with section 24-51-201.1. SECTION 7. In Colorado Revised Statutes, 24-51-207, add (2) (d) as follows: 24-51-207. Standards of conduct. (2) (d) Notwithstanding the provisions of paragraph (a) of this subsection (2), the board's entry into a contract with the Colorado housing and finance authority pursuant to section 24-51-201.1 and any actions the board takes that are reasonable and necessary for the fulfillment of the association's obligations under the terms of such a contract do not constitute a breach of the board's duties or standards of conduct. SECTION 8. In Colorado Revised Statutes, 24-51-411, amend (8) as follows: 24-51-411. Amortization equalization disbursement. (8) (a) The amortization equalization disbursement and the supplemental amortization equalization disbursement payments by employers in the state, school, and Denver public schools divisions shall continue at the rate specified in subsections (3), (3.5), (6), and (6.5) of this section until adjusted pursuant to this subsection (8) paragraph (a). When the actuarial funded ratio of the state, school, or Denver public schools division of the association, based on the actuarial value of assets, is at or above one hundred three percent as determined in the annual actuarial study of the association, the amount of the amortization equalization disbursement and supplemental amortization equalization disbursement shall be reduced, in equal parts, for that particular division by one-half of one percent each. If the actuarial funded ratio of the division based on the actuarial value of assets reaches one hundred three percent and subsequently the actuarial funded ratio of the division is below ninety percent, the amortization equalization disbursement and supplemental amortization equalization disbursement shall be increased by one-half of one percent each; except that, at no time shall the amortization equalization disbursement for the school and Denver public schools divisions exceed four and one-half percent or for the state division exceed five percent nor shall the supplemental amortization equalization disbursement for the school and Denver public schools divisions exceed five and one-half percent each or for the state division exceed five percent. (b) The amortization equalization disbursement rate and supplemental amortization equalization disbursement rate for state division employers and the amortization equalization disbursement rate and supplemental amortization equalization disbursement rate for school division employers shall not be reduced pursuant to paragraph (a) of this subsection (8) if the reduction in rates would cause the amount of amortization equalization disbursement payments and the amount of supplemental amortization equalization disbursement payments paid by state division employers or school division employers, respectively, during the immediately preceding fiscal year to fall below the amount necessary to fund the amounts payable pursuant to section 24-51-201.1 (4) (b) during the current fiscal year or any future fiscal year. (c) Notwithstanding paragraphs (a) and (b) of this subsection (8), if bonds have been issued pursuant to section 29-4-710.8, C.R.S., so long as any such bonds are outstanding, the amortization equalization disbursement rate and supplemental amortization equalization disbursement rate for the state division or the school division shall not be reduced pursuant to said paragraph (a) or (b) if the reduction in rate would cause the amount of the amortization equalization disbursement payments and supplemental amortization equalization disbursement payments for the division to fall below the minimum amount required to meet the applicable coverage ratio described in section 29-4-710.8 (9), C.R.S., with respect to outstanding bonds or a new series of bonds. SECTION 9. In Colorado Revised Statutes, amend 24-51-1010 as follows: 24-51-1010. Increase in benefits - actuarial assessment required. (1) Before increasing benefits provided by the association, the general assembly shall cause to be conducted pursuant to subsection (2) of this section an actuarial assessment to ensure that the increases in benefits would not cause the actuarial value of assets of the association to decline below ninety percent of the actuarial accrued liabilities of the association or, if the Colorado housing and finance authority has issued bonds as authorized by section 29-4-710.8, C.R.S., to ensure that, so long as the bonds are outstanding, the increases in benefits above the level that exists on the effective date of this subsection (1), as amended, would not cause the actuarial value of assets of either the state division trust fund or school division trust fund to decline below one hundred thirty percent of the respective fund's actuarial accrued liabilities. (2) Upon direction from the president of the senate and the speaker of the house of representatives, the director of research of the legislative council shall contract with a private person to conduct an actuarial assessment of the association. The assessment shall be conducted to determine whether and to what extent an increase in the benefits provided by the association would cause the actuarial value of the assets of the association to decline below ninety percent of the actuarial accrued liabilities of the association, or, if the Colorado housing and finance authority has issued bonds as authorized by section 29-4-710.8, C.R.S., to ensure that, so long as the bonds are outstanding, the increases in benefits above the level that exists on the effective date of this subsection (2), as amended, would not cause the actuarial value of assets of either the state division trust fund or school division trust fund to decline below one hundred thirty percent of the respective fund's actuarial accrued liabilities. The assessment shall be completed and a final report of its findings and conclusions shall be submitted to the general assembly as soon as practicable. The person conducting the actuarial assessment of the association and such the person's employees shall, during the term of the contract, have access to any necessary documents and information in the custody of the association. SECTION 10. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.