Pedigree and political ambition launched Walker Stapleton into the treasurer’s office, but state pension reform ‘put him on the map’

The privilege and promise of Walker Stapleton, part 3

Walker Stapleton addresses Huerfano County Republicans in late September. (Photo by Phil Cherner)

This is the third in a four-part series about Colorado’s Republican nominee for governor. Read part one and part two.

No issue has defined Walker Stapleton’s two terms as state treasurer more than his efforts to put Colorado’s Public Employee Retirement Association, known as PERA, on sound financial footing. After eight years sounding alarms about its solvency, fighting with the program’s beneficiaries, and suing board members, Stapleton can claim some victories.

“Walker has far more often been right than wrong on the PERA issue,” said Eric Sondermann, a political analyst who is co-director of the PERA-reform group Secure Futures Colorado. “But … he has often been a bull in a china shop.”

The state pension and health care fund, which affects more than 500,000 current and former public employees, has a $30 billion-plus funding gap that threatens the state’s bond rating and borrowing power. For nearly eight years as state treasurer, Stapleton has warned that without serious belt tightening, the next recession could plunge PERA even deeper in the red.

Stapleton blames “out of control retirement entitlements” in the program, which is a substitute for Social Security for most public employees.

He’s called for freezing benefits, raising the retirement age — he has floated a figure as high as 70 years old — and hitting the snooze button on cost-of-living raises until the system recovers. He wants to change the makeup of the 15-member PERA board, on which he sits, so it has fewer plan beneficiaries serving on it.  If elected governor, Stapleton would have three appointments on the board.

During his first term as treasurer, he unsuccessfully sued fellow PERA board members to obtain the identities and benefit records of the state’s top retirement system beneficiaries. The move pleased conservatives and others, including Gov. John Hickenlooper, but rankled some retiree groups and PERA board members, who were personally named in the lawsuit. He ripped the PERA board for giving its executive director a raise for what Stapleton called “simply showing up.”

State lawmakers tackled some of PERA’s problems when they passed a measure in May to help pay off the fund’s looming shortfall over the next 30 years by forcing public employees to contribute an extra 2 percent to the pension, raising the retirement age of most future employees from 60 (or 58 for teachers) starting in January 2020, and by eliminating cost-of-living raises for two years, then cutting them by half a percent. Nearly all retirees in the plan will see cuts to their benefits.

Stapleton ended up supporting the measure even though the fixes to PERA didn’t go as far as his own proposals to shore up the fund. His proudest accomplishment during his eight years of fire and fury over PERA, he says, was persuading the board to twice lower the fund’s expected rate of return, which he still thinks is overly optimistic.

His PERA crusade endeared him to conservatives in the legislature and elevated his profile beyond the often-overlooked treasurer’s office.

“It’s PERA that put him on the map — his opposition and criticism of PERA,” said Bob Loevy, a retired Colorado College political science professor, about how the once-unknown Stapleton made his mark on the GOP political landscape.

Using PERA as a calling card also earned him critics who say he’s used the issue to elevate his political profile. Kent Willmann, a teacher for 32 years, said he was able to retire with what he hopes is a reliable safety net if the program stays solvent. He criticizes Stapleton, saying the treasurer has turned PERA into a wedge issue.  “He’s more interested in using it for political purposes than he is looking at it as a really good investment tool,” Willmann said.

Critics also say that for all his concern, Stapleton has a habit of skipping PERA’s board meetings and ghosting public debates about how to fix it. Records show he attended nine out of 11 meetings in 2015, four out of 11 in 2016, seven of nine in 2017. He said he listened in by phone or sent a proxy when he was absent.

Julie Friedemann, who represents school retirees on the PERA board, said she has yet to meet Stapleton personally in the year she has served on the board. She recalled a planning session in Colorado Springs prior to this year’s benchmark legislative vote. It bothered her that both Stapleton and his deputy were absent during a key part of a presentation on the plan.

“I would like a governor who methodically thinks through issues, is there for the debate, is there for the discussion, and hasn’t, as it appears, made a decision before everything has been discussed,” she said, adding that she was speaking only for herself, not PERA beneficiaries in general.  

Ben Valore-Caplan, a Hickenlooper appointee who sat on the board for two and a half years as a Republican (he’s now unaffiliated), calls criticism of Stapleton’s absences a red herring.

“I do think that more than most board members, he was earnest in trying to raise this really core fundamental issue for the state — that this is not a sustainable business model,” he said.

But Valore-Caplan, an investment advisor, resigned in protest over legislation he said was pushed by Stapleton’s office during the 2015 session that, in part, could have refinanced some of the state’s debt to PERA by issuing pension obligation bonds — a financial move where a government borrows money at a low interest rate and invests it in hopes of a return higher than the borrowing cost. Stapleton’s support for the proposal, which would have given him the ability to issue bonds, ran into a buzzsaw among conservatives, talk-radio hosts, and limited-government groups who felt adding more debt was too risky. Americans for Prosperity, now a Stapleton ally in the governor’s race, ripped him that year, likening him to “liberal Sen. Michael Bennet.”

Stapleton eventually retreated from the proposal, saying he didn’t support it, despite having earlier testified in its favor. Some saw his reversal as politically expedient, and he did not get through the episode without some scars. “To hear Stapleton essentially say he didn’t support it, we were just stunned,” Americans for Prosperity’s regional director, Dustin Zvonek, said at the time. “There was no question in my mind he was in favor.”

Vincent Carroll, then The Denver Post’s editorial page editor, slammed Stapleton on the op-ed page, saying the treasurer sounded “like someone needing treatment for amnesia.”

Money in the market

After voters elected Stapleton in 2010, the first-time office holder made it a point to visit agency departments and toured all 64 county treasurers’ offices to learn how the state works and where tax money was going. He boasts of Colorado’s investments outperforming national benchmarks under his watch, and that he has helped businesses’ bottom lines by refinancing unemployment insurance and helped pass a bipartisan law saving taxpayers money by allowing counties to continue to invest in U.S. treasuries.

Stapleton declined repeated requests by The Colorado Independent for an interview for this series, but ask Republicans and Democrats what they think about his work and you’ll get what you might expect.

Republican Henry Sobanet, the former budget director for Democratic Gov. John Hickenlooper, said Stapleton’s and the governor’s priorities didn’t always align. “But our offices worked well together, and he had strong people handling the affairs of the office,” Sobanet said. “I did see Treasurer Stapleton dig in and learn about the issues over the years.”

Without Stapleton’s continued focus on the PERA funding gap, GOP state Rep. Bob Rankin from Carbondale said, “I’m not sure we could have done what we did this year.”

Democrats have accused him of frequent absences, not just from PERA board meetings, but from the treasurer’s office in general. They’ve pointed out that his statehouse parking spot is frequently unoccupied and that records tied to the key cards employees use to enter the building showed in 2014 that he’s had notable periods of inactivity.

Stapleton has said he accessed the building through a door in which key cards didn’t register and that his responsibilities managing the state’s investments have required him to attend meetings out of the office and throughout the state more than sitting behind his desk.

Questions about his attendance didn’t hamper his re-election. During the campaign, he touted that returns on the state’s $9 billion investment portfolio beat the national average. He defeated former Democratic Congresswoman Betsy Markey by nearly 10 points.

As treasurer, he has differed in some significant ways from his Democratic predecessor, Cary Kennedy.

Under Stapleton’s administration, Colorado no longer publishes a State Taxpayers Accountability Report, known as STAR, a program Kennedy launched in concert with the governor’s office and state controller. The initiative, which condensed hundreds of pages of the state’s publicly available fiscal statements into an easily digestible multi-page report, showed where money was coming from and where it was going, what Coloradans own, owe and buy, and effects of the state’s revenue-limiting Taxpayer’s Bill of Rights. The last one available is from 2011, and came from the state controller.

Rich Jones of the Bell Policy Center, a progressive think tank focused on increasing Coloradans’ economic mobility, said his organization relied on STAR to translate reams of financial data into something everyone could understand. “I think it did add to the transparency [of state government],” he said. “I think it would be helpful to be around.”

The STAR program no longer exists because the employee who compiled it under Kennedy left and the state controller took over the program, said treasurer’s office spokeswoman Rachel George. A spokesman for the state controller’s office said there was never any legal requirement to keep creating the report and says an online transparency initiative in state government might have made it redundant.

What to do with money in a roughly $1 billion Public School Permanent Fund was another area where Stapleton departed from the previous administration. Kennedy believed it was too risky to invest it in the stock market — and she told The Independent she still does. Stapleton thought otherwise, and supported a bipartisan bill to make it happen. He set up a board to manage the investments last year, marking the first time Colorado would put the money in the market (investing in individual stocks is prohibited, a board member says).

In addition to Stapleton, board members are John Hereford, partner in the Oak Leaf Energy Partners; Fred Taylor, president of the Northstar investment firm; Jackie Hawkey of the Black Creek real estate group; Greg Moffet, a Vail town councilman and state land board commissioner; and Peter Calamari of the Platte River Equity firm. All but Moffet are Stapleton campaign donors.

Moffet said it is too early to assess how the money is faring in what the board intended as a long-term investment strategy. “We have not gotten anywhere near that granular in our meetings as to what companies the funds are invested in,” he said.

So far, the fund has invested about $200 million in the market and has earned an additional dividend income of $1.9 million, treasurer’s office spokeswoman Rachel George said.

Over a few days in October, the stock market plummeted nearly 1,380 points. The state Constitution requires Colorado to make up any losses if the fund loses value, former treasurer Kennedy said. “Taxpayers are on the hook to backfill losses.”

George said the investment team told her that assessing the fund on a bad day for the market is not an accurate way to judge its health or the job the fund’s managers are doing. “In other words, these are long term investments,” she said. “It’s not like the people managing it are just day trading stocks like Amazon.”

While the public has heard little about the board and its investments, Coloradans know plenty about changes Stapleton made to another state program, the Great Colorado Payback.

In his first year, Stapleton decided the treasurer’s office should increase efforts to publicize the program, which urges Coloradans to check if they have unclaimed money from long-forgotten bank accounts or property from neglected safety deposit boxes. He aired TV ads during the popular March Madness college basketball tournament and doubled the number of claimants. The influx of claims swamped the office, which was still tracking claims by paper system, and broke the voicemail system.

Complaints poured in for months. “It is ridiculous how long it is taking to get MY money back from the state,” one claimant wrote in an email to the treasurer in 2016. “WHAT’S GOING ON WITH MY CLAIM???” wrote another.

Stapleton acknowledged the problems were “absolutely unacceptable” after a Denver TV station investigated hundreds of pages of complaints in 2017. The issue bubbled up again in this year’s governor’s race. The progressive group ProgressNow paid for a billboard outside the Broncos stadium directing people to a website about the program where they can read complaints. And Democrats in the legislature called for an audit.

Stapleton has said he’s improved the program by assigning a new manager to run it, creating a digital system to keep track of claims, and involving a background-check company to help verify claimants’ identities. He has said the office has returned more property during his tenure than in all other years combined.

A matter of blind trust

In his first term as treasurer, Stapleton quickly came under scrutiny for his role at Sonoma West, a publicly traded California real estate holding company that he had run since 2005 and in which his family owned nearly half the stock.

He resigned as CEO after his November 2010 election and was replaced by his father, Craig Stapleton.

Walker Stapleton continued to moonlight for Sonoma West when he entered into a consulting agreement through a company called Rocky Mountain Trust LLC, of which he was listed as manager, according to filings with the Securities and Exchange Commission. Those documents show he would make $250 an hour, up to $150,000 a year, advising his father, managing tenant relationships, and participating in meetings and conference calls, among other duties. It is legal in Colorado for statewide elected officials to hold side jobs.

But public information on Stapleton’s arrangement ended when the Stapletons took Sonoma West private four months after Walker became treasurer and the company no longer had to file SEC disclosures.

“I don’t think Walker was very involved in the going-private transaction. I think he was already state treasurer at the time and couldn’t appear to be actively working on another job,” Kent Rowett, a Californian whose firm Leeward Capital owned more than 7 percent of Sonoma West at the time, said of Walker Stapleton.

It is unclear whether Stapleton has continued to augment his $68,500 annual salary as treasurer by remaining on Sonoma West’s payroll. When asked in September if he still works for Sonoma West, he said simply that he is an owner. And he told his neighborhood newspaper, “I’m not precluded from owning a business or taking a company private because I’m the treasurer of Colorado … It never took away from the hours I spent in the treasurer’s office.” In an Oct. 5 debate, he said he is not involved in Sonoma West’s management or day-to-day operations. He told CBS4’s Shaun Boyd in late September that he has “tried to make a conscientious effort to avoid conflicts of interest at all costs.”

Coloradans will have to take his word on that because Stapleton has put his assets into a blind trust. Elected officials, including Stapleton’s rival for the governor’s office, Jared Polis, commonly establish such trusts to avoid potential conflicts of interest by having an independent third party manage their assets. Blind trusts also allow office holders to shield sources of personal income from public disclosure.

The public was able to get a sneak peek of Stapleton’s finances in 2009, before he set up his blind trust. In a personal financial disclosure filed with the secretary of state’s office when he declared his run for state treasurer, he listed his income and assets at that time. He reported he was drawing income from about a dozen companies, including Sonoma West Holdings, Denver Bank and Winston Partners Group. He also listed more than two dozen assets in which he had a financial stake, including Kroger, UnitedHealth Group, MetroPCS, Cisco Systems, and Wells Fargo. Some of the assets are current state investments.

Asked in a May interview if he still has sources of income beyond his state salary, Stapleton again touted his business acumen and responded: “You bet I do.”

Coming tomorrow: Part 4: His last two elections were GOP waves. This year Walker Stapleton wades into a riptide.

CORRECTION: An earlier version of this story stated a wrong figure for the pension system’s funding gap. 

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