Retiree setback

Supreme Court upholds cut in cost-of-living adjustment for PERA retirees

The Colorado Supreme Court on Monday unanimously upheld part of a 2010 law that made significant changes to the Public Employees’ Retirement Association, including a reduction in the annual cost-of-living increase awarded to retirees.

Reduction in the COLA drew a lawsuit from retirees shortly after Senate Bill 10-001 was signed into law, and lower courts issued conflicting rulings on the issue. The PERA system covers all Colorado teachers and a wide variety of other state and local civil servants.

The law eliminated payments associated with cost of living in 2010 and cut retirees’ annual benefit increases from 3.5 percent to 2 percent starting in 2011. Future increases could drop below 2 percent under certain conditions. (While the increases are commonly referred to as cost of living raises, they aren’t pegged to inflation or consumer prices.)

Plaintiffs argued they had a constitutional, contractual right to the 3.5 percent annual increase.

The supreme court’s ruling said, “We hold that the PERA legislation providing for cost of living adjustments does not establish any contract between PERA and its members entitling them to perpetual receipt of the specific COLA formula in place on the date each became eligible for retirement or on the date each actually retires.”

PERA doesn’t have an estimate for how much is saved every year by the COLA reduction. The law as a whole was projected to reduce PERA’s unfunded liability by $9 billion.

Observers of the case believed that overturning of the COLA reduction would significantly weaken the law’s ability to improve PERA’s financial health.

When the lawsuit was filed, plaintiffs estimated the COLA reduction could cost the typical retiree more than $165,000 over 20 years.

Here are the highlights of reaction to the ruling.

Rich Allen, president of Save PERA COLA, said, “Needless to say we are disappointed in the decision. It seems to us to be a major departure from the rule of law to allow a public entity to unilaterally abrogate an agreement to which they willingly and legally entered merely because they don’t feel like paying the costs anymore.” Read the full statement here.

The Coalition for Retirement Security, which represents several employee groups and which backed SB 10-001, said, “We are very thankful to the Colorado Supreme Court in upholding the changes we advocated for in Senate Bill 1. Senate Bill 1 represents shared sacrifice by retirees, employees and employers. This shared sacrifice put PERA on the track to being fully funded and today the Supreme Court upheld that sacrifice as legal.”

“Through the shared sacrifice approach recommended by the PERA board, the Colorado General Assembly responded after the Great Recession, and the Colorado Supreme Court agreed with our collaborative approach,” said Gregory W. Smith, PERA executive director.

A Denver District judge dismissed the lawsuit in June 2011, but the Colorado Court of Appeals reinstated it in October 2012 in a mixed ruling, saying PERA retirees have a contractual right to a cost-of-living adjustment but that they are not guaranteed the fixed 3.5 percent.

The state and PERA appealed that second ruling in November 2012, and the high court agreed to take the case in August 2013.

Teachers and school administrators dominate the system with more than half of the membership. There are 58,986 education retirees who received about $2 billion in benefits in 2012, an average of about $3,000 a month. The average retirement age for both School and DPS retirees is a little above 58 years old. The entire system has about 106,000 retirees.

Supreme court Justices Allison Eid and Monica Marquez didn’t participate in the case.

Looming threat

Report: Looming financial threats could undermine ‘fresh’ start for new Detroit district

The creation of a new school district last year gave Detroit schools a break from years of crippling debt, allowing the new district to report a healthy budget surplus going into its second year.

It’s the first time since 2007 that the city’s main school district has ended the year with a surplus.

But a report released this morning — just days after Superintendent Nikolai Vitti took over the district — warns of looming financial challenges that “could derail the ‘fresh’ financial start that state policymakers crafted for the school district.”

The report, from the Citizens Research Council of Michigan, notes that almost a third of the district’s $64 million surplus is the cost savings from more than 200 vacant teaching positions.

Those vacancies have caused serious problems in schools including classrooms crammed with 40 or 50 kids. The district says it’s been trying to fill those positions. But as it struggles to recruit teachers, it is also saving money by not having to pay them.

Other problems highlighted in the report include the district’s need to use its buildings more efficiently at a time when many schools are more than half empty. “While a business case might be made to close an under-utilized building in one part of the city, such a closure can create challenges and new costs for the districts and the families involved,” the report states. It notes that past school closings have driven students out of the district and forced kids to travel long distances to school.

The report also warns that if academics don’t improve soon, student enrollment — and state dollars tied to enrollment — could continue to fall.

Read the full report here:

 

Teacher Pay

Every Tennessee teacher will make at least $33,745 under new salary schedule

PHOTO: Patrick Wall

Some teachers in 46 Tennessee districts will see a pay boost next year after the State Board of Education voted Wednesday to raise the minimum salary for educators across the state.

The unanimous vote raises the minimum pay from $32,445 to $33,745, or an increase of 4 percent. The minimum salary is the lowest that a district can pay its teachers, and usually applies to new educators.

The boost under the new schedule won’t affect most Tennessee districts, including the largest ones in Memphis, Nashville, Knoxville and Chattanooga — where teacher salaries already exceed the state minimum. (You can see the list of districts impacted here.)

The state’s largest teachers union lauded the increase, which will be funded under the state’s 2017-18 budget under Gov. Bill Haslam.

“Teachers statewide are increasingly struggling to support their own families on the stagnant wages of a public school teacher,” said Barbara Gray, president of the Tennessee Education Association. “It is unacceptable for teachers to have to choose between the profession they love and their ability to keep the lights on at home or send their own children to college.”

Tennessee is one of 17 states that use salary schedules to dictate minimum teacher pay, according to a 2016 analysis by the Education Commission of the States. In that analysis, Tennessee ranked 10th out of 17 on starting pay.

The 4 percent raise is a step toward addressing a nationwide issue: the widening gap in teacher wages. On average, teachers earn just 77 percent of what other college graduates earn, according to a 2016 study from the Economic Policy Institute. Tennessee ranks 40th in that study, with its teachers earning 70 percent in comparison to other graduates.

View the Economic Policy Institute’s data in full: