From the Statehouse

PERA plan: “Work longer, pay more, receive less”

There was no good news in a 90-minute legislative discussion Thursday afternoon on the financial future of the Public Employees’ Retirement Association.

The PERA board has proposed a sweeping and complex plan designed to bring the recession-battered pension plan to solvency within 30 years. Board members and executives met with members of the Joint Budget Committee to answer questions on the plan.

Summing up the effects of the proposal on civil servants and retirees, PERA Executive Director Meredith Williams said, “So, essentially they’ll work longer, pay more and receive less.”

Public Employees' Retirement Association headquarters in Denver.
Public Employees' Retirement Association headquarters in Denver.

The rescue plan wouldn’t increase employee payroll deductions but would increase employer contributions – including from funds that otherwise would go for salary increases – and, for some workers, would raise the retirement age and reduce the salary base on which a pension is calculated.

The most controversial part of the plan, at least based on the volume of e-mail flowing into legislators’ in-boxes, is a proposal to reduce most retirees’ annual cost-of-living increases from 3.5 percent to 2 percent. It’s estimated that the current COLA would provide a third of the pension benefits over the retirement of a worker who retired in 2008.

The future of PERA – and the cost of fixing it – is of high interest to the Colorado education community. Of PERA’s 190,684 active members, 118,547 are in the school division, which includes all districts in the state except Denver. (DPS employees and retirees will enter the system Jan. 1 as a separate division.) Some 44,806 people receive benefits from the school division. Thousands of higher education employees also belong to PERA, as part of the state division.

Its investments hollowed out by the recession, PERA’s net assets available for benefits dropped from $43.1 billion at the end of 2007 to $30.8 billion at the end of 2008, a loss of more than 25 percent. The system pays about $3.1 billion in benefits a year and receives about $1.7 billion in contributions from covered employees and their employers. PERA overall is about 70 percent funded.

“Certainly these are scary times,” Williams said. “Right now we’re projected to run out of money during the lifetime of most of our members.” Despite the pain imposed by the plan, Wilson said, “It’s cheaper, more cost effective and less painful to act now.”

Some 20 percent of the money needed for the plan would come from employer and employee contributions and the rest from benefit cuts.

Thursday’s discussion was detailed and technical at times; here are some highlights.

They can’t take my COLA!

PERA officials believe retirees’ cost-of-living increases can be reduced because of legal precedent that allows doing so in times of “actuarial necessity” – legalese for the plan will go broke without changes being made.

“We believe the COLA can be modified” based on actuarial necessity, said Greg Smith, PERA chief operating officer and general counsel. “We believe that actuarial necessity exists today. … It is critical that we be able to modify the retiree COLA.” Without doing that, Smith said it would take an “extraordinary amount” of contributions for the plan to achieve solvency.

Many retirees have complained to legislators and others that they were told by human relations staff and in paperwork that the 3.5 percent COLA was guaranteed, so changing it would amount to breaking a contract.

“No matter what an employer hands out, if it doesn’t match the law, it’s not binding,”
Smith said.

Will it all end up in court?

Asked if PERA expects any changes approved by the legislature to end up in court, Smith said, “There is some speculation that it will end up in the courts. … It’s reasonable to expect litigation.”

Whom can we blame?

While neither PERA officials nor current legislators explicitly pointed fingers, there seemed to be general agreement that legislation passed in 2000 helped contribute to the current problem, During the height of the tech boom, 1999 and 2000 were the only two years that PERA has been fully funded in its 78-year history.

In 2000 lawmakers responded by effectively reducing contributions and raising benefits. “That’s kind of where it started,” Williams said.

But when asked if today’s problems could have been avoided if the legislature hadn’t been so generous in 2000, Williams said, “I think not,” saying that the economic crash in 2008 was just too big.

In 2004 and 2006 the legislature did increase contributions and tighten benefits for new employees, but Williams said lawmakers couldn’t go further then because  “We did not have an actuarial necessity. We could not make that legal case. Today we can.”

Don’t wait for the next bull market

Some lawmakers have asked – hopefully – if PERA could rescue itself by more aggressive investment strategies or be rescued by another market boom.

“That would be like going to Black Hawk and doubling down with the rent money,” said Susan Murphy of Denver, one of three PERA trustees who, by law, are neither members of nor beneficiaries of the pension system.

“That was our Plan B,” quipped Rep. Jack Pommer, D-Boulder and JBC chair.

Do your homework

rules and regs

New York adds some flexibility to its free college scholarship rules. Will it be enough for more students to benefit?

PHOTO: Office of Governor Andrew M. Cuomo
Governor Andrew Cuomo delivered his 2017 regional State of the State address at the University at Albany.

New York is offering more wiggle room in a controversial “Excelsior” scholarship requirement that students stay in-state after graduating, according to new regulations released Thursday afternoon.

Members of the military, for example, will be excused from the rule, as will those who can prove an “extreme hardship.”

Overall, however, the plan’s rules remain strict. Students are required to enroll full-time and to finish their degrees on time to be eligible for the scholarship — significantly limiting the number who will ultimately qualify.

“It’s a high bar for a low-income student,” said Sara Goldrick-Rab, a leading expert on college affordability and a professor at Temple University. “It’s going to be the main reason why students lose the scholarship.”

The scholarship covers free college tuition at any state college or university for students whose families earn less than $125,000 per year. But it comes with a major catch: Students who receive Excelsior funding must live and work in New York state for the same number of years after graduation as they receive the scholarship. If they fail to do so, their scholarships will be converted to loans, which the new regulations specify have 10-year terms and are interest-free.

The new regulations allow for some flexibility:

  • The loan can now be prorated. So if a student benefits from Excelsior for four years but moves out of state two years after graduation, the student would only owe two years of payments.
  • Those who lose the scholarship but remain in a state school, or complete a residency in-state, will have that time count toward paying off their award.
  • Members of the military get a reprieve: They will be counted as living and working in-state, regardless of where the person is stationed or deployed.
  • In cases of “extreme hardship,” students can apply for a waiver of the residency and work requirements. The regulations cite “disability” and “labor market conditions” as some examples of a hardship. A state spokeswoman said other situations that “may require that a student work to help meet the financial needs of their family” would qualify as a hardship, such as a death or the loss of a job by a parent.
  • Students who leave the state for graduate school or a residency can defer repaying their award. They would have to return to New York afterwards to avoid having the scholarship convert to a loan.

Some of law’s other requirements were also softened. The law requires students to enroll full-time and take average of 30 credits a year — even though many SUNY and CUNY students do not graduate on time. The new regulations would allow students to apply credits earned in high school toward the 30-credit completion requirement, and stipulates that students who are disabled do not have to enroll full-time to qualify.

language proficiency

Educators working on creating more bilingual students worry new state requirements aren’t high enough

A second grade class at Bryant Webster K-8 school in Denver (Joe Amon, The Denver Post).

Colorado educators who led the way in developing high school diploma endorsements recognizing bilingual students worry that new legislation establishing statewide standards for such “seals of biliteracy” sets the bar too low.

Two years ago, Denver Public Schools, Eagle County Schools and the Adams County School District 14 started offering the seal of biliteracy to their students. The three districts worked together to find a common way to assess whether students are fluent in English and another language, and recognize that on high school diplomas. Advocates say the seal is supposed to indicate to colleges and employers that students are truly bilingual.

A bill passed by state legislators this year that will go into effect in August sets a path for districts that want to follow that lead by outlining the minimum that students must do to prove they are fluent in English and in another language.

According to the new law, students must meet a 3.0 grade point average in their English classes and also earn a proficient score on the 11th grade state test, or on Advanced Placement or IB tests. For showing proficiency in the second language, students can either earn proficient scores on nationally recognized tests — or meet a 3.0 grade point average after four years of language classes.

Although educators say the law sends a message of support for bilingual education, that last criteria is one part of what has some concerned.

“It allows for proficiency in a world language to be established solely by completing four years of high school language classes,” said Jorge Garcia, executive director of the Colorado Association for Bilingual Education. “Language classes in one school district may have a different degree of rigor than they do in another.”

The second language criteria should be comparable to the English criteria, several educators said. In the requirements set by Denver, Eagle County and Adams 14, students must at a minimum demonstrate language proficiency through a test score, or in some cases with a portfolio review and interview if a test is not available.

The three districts also catered their requirements based on what each community said was important. In Adams 14 and in Eagle schools, students must perform community service using their language skills. Students also have to do an interview in both languages with a community panel.

“Our school district team developed the community service criteria because we wanted our kids to have authentic practice in their languages,” said Jessica Martinez, director of multilingual education for Eagle County Schools. “We also wanted students to be a bridge to another community than their own. For example, one group of students created academic tutoring services for their peers who don’t yet speak a lot of English. Another student started tutoring her mom and her parents’ friends so they could get their GED.”

The state law doesn’t require students to do community service. But it does allow school districts to go above the state’s requirements when setting up their biliteracy programs.

“Thoughtful school districts can absolutely address these concerns,” Garcia said.

Several school districts in the state are looking to start their own programs. In March, the school board for the Roaring Fork School District in Glenwood Springs voted to start offering the seal. Summit School District also began offering the seal this year.

Leslie Davison, the dual language coordinator for Summit, said that although her program will change in the next year as she forms more clear requirements around some new tests, she will continue to have higher requirements than the state has set.

This year her students had prove proficiency in their second language by taking a test in that language. They also had to demonstrate English proficiency through the ACT. In addition, students did oral presentations to the community in both languages.

“Their expectations aren’t as high as mine are,” Davison said. “We’ll probably stay with our higher-level proficiencies. I do have some work to do in terms of how that’s going to look for next year, but I certainly don’t want to just use seat time.”

Meanwhile, the districts that started the seal are increasing their commitment to biliteracy so as many students as possible can be eligible to earn seals in the future.

The Adams 14 school district in Commerce City is using Literacy Squared, a framework written by local researchers for teaching students to read English by strengthening literacy in the native language. The program is being rolled up year by year and will serve students in 34 classrooms from preschool through fourth grade in the fall.

In Eagle County, Martinez said parents have shown such a strong demand for biliteracy that most elementary schools are now dual language schools providing instruction to all students in English for half of the school day and in Spanish for the other half.

Both districts are also increasing the offerings of language classes in middle and high school. The options are important for students who are native English speakers so they too can become bilingual and access the seal. For students whose primary language is not English, the classes can help ensure they don’t lose their primary language as they learn English.

Of Eagle’s 25 students who graduated with a seal of biliteracy this year, 17 were native Spanish speakers and eight were native English speakers.

“We want all kids to see their bilingualism is an asset,” Martinez said. “It’s huge for them.”