Tuesday, October 17, 2006

Colorado Domestic Partnerships: A Moocher's Dream

There is a same-sex domestic partnership referendum on the Colorado ballot this year, Referendum I. It extends the legal benefits and responsibilities of marriage to registered same-sex domestic partners. Its supporters disingenously insist that domestic partnerships are in no way the same as marriage. The considerable moral concerns about legitimizing homosexual acts are excluded from the opposing arguments in the Colorado voters' Blue Book entry on the referendum. Observing the rampant amorality of our government and the collapse of substantive public ethical discussion, this exclusion is hardly surprising.

Yet the Blue Book also neglects fiscal argument nearly as important. It relates especially to the pension provisions of Colorado's Public Employees' Retirement Association(PERA).

PERA pensions are quite generous. According to the association's website at www.copera.org, $2,108,791,000 in payouts were made to 71,401 recipients in 2005. This averages out to about $29,500 per recipient.

The Fiscal Impact Statement for Referendum I(PDF) declares: "Because Referendum I provides that persons in a domestic partnership have the same benefits as spouses, a surviving partner would be eligible for a PERA survivor benefit and enrollment in the PERACare health benefits program. Thus, the referendum would minimally impact PERA benefit liabilities in the Pension Fund and the Health Care Trust Fund."

The impact is minimal only because of the massive size of the pension fund. Should domestic partnerships be instituted, this system is ripe for mooching.

Let?s examine PERA in detail.

PERA members include employees from both state and municipal governments: teachers, highway patrolmen, university employees, and even judges. All members make a contribution of eight percent of their annual salary to their retirement fund, which compounds at a tax-deferred annual five percent interest. Their contribution receives some matching funding from state and county governments. Their years of service are factored into their retirement benefits, with more years of service rightly linked to higher benefits.

There are three payment options for PERA members.

Option one provides the pensioner with a significant lifetime monthly benefit; upon his or her death the remaining pension balance will be matched by PERA and transferred to his or her cobeneficiary in a lump sum payment.

Under option two, following a pensioner's death his or her cobeneficiary will receive a lifetime monthly benefit equal to one-half the monthly benefit the pensioner was receiving at the time of his or her death.

Under option three, following a pensioner's death, his or her cobeneficiary will receive a lifetime monthly benefit equal to the monthly benefit the pensioner was receiving at the time of his or her death. IRS rules currently prohibit non-spouses more than ten years the beneficiary's junior from receiving option three benefits, but it is unclear whether domestic partnerships will evade such prohibitions. Regardless, there are always the first two options.

How might domestic partnership impact PERA? The legislation explicitly forbids domestic partnerships contracted between immediate family members: "an individual shall not enter into a domestic partnership with an uncle or aunt or with a niece or nephew, whether the relationship is by the half or the whole blood." However, this does not forbid other familial contracts. The retired public servant who alerted me to this looming problem noted that, should his beloved wife proceed him in death, he could contract a partnership with his eighteen-year-old grand-nephew(or some other favored youngster). With some three decades of service, upon his death his grand-nephew could receive this substantial lifetime monthly pension of a veteran worker, freeloading off of state employees and taxpayers for the duration of his long and healthy life.

The only social penalty this pensioner?s domestic partner in theft would face is an inability legally to marry while in a domestic partnership. Considering late marrying ages and contemporary habits of cohabitation, it is unclear whether this is a significant disincentive for a young man who must simply wait a few years until his partner, so generous with other peoples' money, finally expires.

I note here that I have neglected to examine here how such a couple could exploit health care plans under Referendum I provisions. Surely further explorations in this area will provide worries for the civic-minded, and delights for the opportunistic.

Referendum I's proponents claim domestic partnerships are not about marriage, but about basic legal rights. Yet precisely because they insist that their proposed domestic arrangement isn't really marriage, their system has little protection against cynical abuses such as that described here. Most people acknowledge a dislike for mercenary marriages. Yet why should domestic partnerships, lacking the respected name of matrimony, command the good behavior of their participants?

Names mean things. They have significance. Literally, they signify. Those advocating domestic partnerships equivocate between marriage and a state identical in material and legal benefits but certainly equivalent neither in content nor purpose. Such equivocations make for bad law. Should Referendum I pass, this wordplay will make for even worse finances.

(cross-posted at Denver YourHub

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