Who Is In Charge

PERA had good year in 2010

The Public Employees’ Retirement Association had a good investing year in 2010 but still is feeling the hangover of the market drop in 2008.

Greg Smith, Meredith Williams, Maryann Motza
Meredith Williams, PERA executive director (center) makes a point during a hearing on July 11, 2011. At left is general counsel Greg Smith, with board vice chair Maryann Motza at right.

The pension system’s annual comprehensive financial report, released along with an annual outside audit on Monday, showed that the market value of PERA’s portfolio rose 14 percent in 2010 to a net asset value of $38.7 billion. The actuarial value, a different calculation used for forecasting, is about $39.2 billion.

“We had a pretty good year,” said Meredith Williams, PERA executive director.

PERA’s annual financial report is submitted about this time every year to the Legislative Audit Committee and is of high interest to the system’s 476,235 active, inactive and retired members, well over half of whom are in education. The system also covers state and judicial branch workers and some local government employees. (Figures for 2010 also include addition of assets from the former Denver Public Schools retirement system, which was merged into PERA at the beginning of the year.)

The system had assets with a market value of $41.1 billion in 2007, which plunged to $29.3 billion in 2008, the year the bottom dropped out of the economy.

The 2008 market drop had a huge impact. PERA’s three-year rate of return is -.3 percent, and the five-year rate of return is 4.7 percent. Over the last 25 years, the return has been 9 percent.

Unaudited numbers for the first six months of 2011 put market value at $40.2 billion, an increase of about 5 percent.

The continued hangover from 2008 also has affected the funded status of PERA’s five divisions.

The school division was 69.2 percent funded in 2009, dropping to 64.8 percent last year. The DPS division was 88.3 percent funded two years ago and 88.9 percent funded in 2010. The state, local government and judicial divisions all dropped.

“This has been a very, very difficult decade for the pension system,” Williams said.

The 2010 legislature passed a sweeping reform plan that reduced cost-of-living increases for retirees and made other benefit and eligibility changes that will make pensions less rich for new employees going forward. A lawsuit challenging that law recently was thrown out.

The law was intended to make the pension system 100 percent funded in 30 years, and officials told the committee Thursday they still believe that will happen.

“We’ll be close to 100 percent funded in 30 years,” said Thomas Cavanaugh of the actuarial firm Cavanaugh Macdonald Consulting, which advises PERA.

The PERA “rescue” plan approved last year includes the assumption that PERA assets will grow an average of 8 percent a year over the next 30 years, an assumption that some legislators question.

Republican Rep. Jim Kerr of Lakewood and Sen. Scott Renfroe of Greeley both raised that issue Monday, but the discussion was brief and low key.

Cavanaugh said that even if returns average 6.5 percent in the next 30 years, the system will remain solvent but will take longer to reach 100 percent funding.

“Even at 6.5 percent the fund is sustainable,” he said.

Chart of PERA assets
Chart of PERA assets over time. Source: Cavanaugh Macdonald Consulting. (Click to enlarge.)
Many observers trace PERA’s troubles to the late 1990s, when the legislature sweetened benefits but reduced contributions to the system. That’s “when we gave away the store … that’s the root cause of this,” Williams said.

In the middle of the last decade the legislature did increase contributions on a staggered schedule that continues for the next few years. But that has created financial pressures outside the pension system. School district contributions, for instance, are scheduled to top out at 20 percent of payroll, a cost that’s creating additional pressures on district budgets at the same time that state aid has been cut and local property tax revenues are shrinking.

The 2011 legislature saw several attempts to tinker with PERA, including Republican bills to change the makeup of the pension system’s board, convert the whole system to a 401(k)-type program and to allow school boards to shift more of the contribution burden to teachers. All failed, but PERA is expected to be an issue again in 2012.

listening tour

We asked six Colorado school board members what they want from the state’s next governor. Here’s what they said.

Democratic gubernatorial candidates Donna Lynne, Noel Ginsburg and Cary Kennedy at a candidate forum hosted by the Colorado Association of School Boards. (Photo by Nic Garcia)

Late last week, nine candidates for Colorado governor came together to talk education, addressing an annual fall conference of school board members.

Now, we’re giving some of those audience members a chance to speak up.

Before the gubernatorial hopefuls took the stage, Chalkbeat recorded interviews with a half-dozen school board members who represent districts across the state. Our question to them: What are the big education questions you hope the next governor will take on?

Not surprisingly, funding challenges came up time and again.

One school board member asked for a more predictable budget. Another asked for schools to get their fair share of annual increases in new tax dollars. One went so far as to say the next governor would be a chicken if he or she didn’t take on reforming the state’s tax code.

We also heard a desire for leadership on solving teacher shortages, expanding vocational training and rethinking the state’s school accountability system.

Here are the six gubernatorial wishes we heard from Colorado’s school board members:

Reform TABOR to send more money to schools

Wendy Pottorff, Limon Public Schools

Since the Great Recession, Colorado schools have lost hundreds of thousands of dollars. And while the state legislature has tried to close its education funding shortfall, lawmakers haven’t been able to keep up. Getting in the way, Pottorff says, is the state’s Taxpayer Bill of Rights, or TABOR.

Change the conversation about public schools

Paul Reich, Telluride School District

Reich says public schools are under attack under the false premise that they’re failing — and that isn’t helping the state recruit bright young teachers. He said the next governor must change the conversation about schools to make teaching a more desirable profession.

Provide a clear budget forecast

Anne Guettler, Garfield School District

Approving a school district’s budget is one of the many responsibilities of a Colorado school board. That’s a tall challenge when the state’s budget is constantly in flux, Guettler says. She hopes the next governor can help provide a clearer economic forecast for schools.

Rethink school accountability to include students and parents

Greg Piotraschke, Brighton 27J

Colorado schools are subject to annual quality reviews by the state’s education department. And it’s time for the state to rethink what defines a high-quality school, Piotraschke said. He suggested the governor could help rethink everything from how the state uses standardized tests to how to incorporate parents and students into the review process.

Give schools more resources to train the state’s high-tech workforce

Nora Brown, Colorado Springs District 11

In light of Colorado growing tech sector, several gubernatorial candidates have come out in support of more technical training for Colorado students. But that costs money, Brown says. The Colorado Springs school board member said promising better job training for high school students without more resources is empty.

Remember there’s a difference between urban and rural schools

Mark Hillman, Burlington School District

Crafting statewide policy is an onerous task in Colorado, given the diversity of the state’s 178 school districts. Hillman said the next governor must remember that any legislation he or she signs will play out 178 different ways, so they must be careful to not put more undue pressure on the state’s smallest school districts.

Colorado Votes 2018

Five things we learned when Colorado’s gubernatorial candidates got on the same stage to talk about education

Colorado Republicans running for governor addressed some of the state's school board members at a forum hosted by the state's association of school boards. From left are George Brauchler, Steve Barlock, Greg Lopez, Victor Mitchell and Doug Robinson. (Photo by Nic Garcia/Chalkbeat)

Nine Republicans and Democrats hoping to become Colorado’s next governor offered contrasting views Friday of the state’s public schools to an audience of more than 100 local school board members.

Most of the five Republicans told the crowd of locally elected officials — who are charged by the state’s constitution with governing Colorado’s public schools — that their programs were in need of improvement and innovation, and that they were there to help.

The four Democrats hoping to succeed fellow Democrat Gov. John Hickenlooper, who is term-limited, pledged to reform the state’s tax code to send more money to schools.

The candidates spoke at the annual fall delegation conference of the state’s association of school boards.It was the first forum of its kind to address education issues exclusively this election election cycle.

Unlike previous elections, Colorado’s public education system has been a key policy debate early in the campaign. Several candidates, especially Democrats, have worked on education issues before.

Here are our five takeaways from the forum:

The Republican candidates didn’t pull any punches when they said the state’s public schools were in need of improvement — and several said that they were the ones to do it.

From District Attorney George Brauchler to businessman Doug Robinson, every Republican candidate said one part or another of the state’s school system needed to do better.

“Education is life itself,” said former state lawmaker Victor Mitchell. “And there is no greater challenge facing our state than 50 percent of our at-risk kids who graduate can’t complete college-level course work.”

Both Mitchell and Robinson pointed to their experience as entrepreneurs as evidence that they could help set the state’s schools free of what they consider unnecessary red tape. Brauchler called for empowering teachers and parents.

Every Democrat and several Republicans agreed that the state’s schools were in a “funding crisis.” But they offered very different paths forward.

It was an easy question for Democrats. Businessman Noel Ginsburg, former state Sen. Michael Johnston, former state treasurer Cary Kennedy and Lt. Gov. Donna Lynne were in lock-step that the state’s schools are in need of more money.

“If we don’t fundamentally solve this crisis, the rest of the issues don’t matter,” Johnston said.

Former state Sen. Michael Johnston and Lt. Gov. Donna Lynne talk after a forum for gubernatorial candidates. Both are Democrats. (Photo by Nic Garcia/Chalkbeat)

Johnston and Kennedy forcefully pledged to take on the state’s Taxpayer Bill of Rights, which limits how much tax revenue the state can collect and requires voter approval to raise taxes.

Lynne was more tempered. While she acknowledged tax reform was needed, she said wanted a legislative committee working on school finance to complete its work before suggesting any overhauls.

Greg Lopez, the former mayor of Parker and a small business owner, was the only GOP candidate who said he would take on the state’s complicated tax laws. If elected, he promised to establish a committee to send a reform proposal to voters.

Robinson and Brauchler acknowledged that schools were in a funding crunch. But they stopped short of saying they’d send more money to schools.

Mitchell said “he wasn’t sure” if there was a funding crisis, but added, “The system should be reformed before it’s fully funded.”

PERA, the state’s employee retirement program, could play a prominent issue in the election — especially for Republicans.

Earlier at the conference, school board members received a briefing on a proposed overhaul to the state’s retirement program, which includes school district employees.

While the situation is not as dire as it was a decade ago, the program’s governing board has become so increasingly worried about unfunded liabilities that it’s asking state lawmakers to pass a reform package to provide more financial stability.

Two Republicans, Brauchler and Steve Barlock, who co-chaired President Trump’s campaign in Colorado, said PERA was in crisis. Barlock warned school board members that their budgets were in jeopardy as lawmakers fiddle with the system.

Neither went into any detail about how they hoped to see the retirement program made more fiscally stable. But watch for this issue to gain greater traction on the campaign trail, especially as Republican state Treasurer Walker Stapleton ramps up his gubernatorial campaign, and as lawmakers begin to wrestle with PERA reforms next year. (Stapleton did not attend the forum.)

Some candidates offered careful responses to a question about school choice. Others, not so much.

Every Democrat and one Republican, Brauchler, said they respected a family’s right to choose the best school for their children. But that choice, they said, should not come at the expense of traditional, district-run schools.

“I’m concerned that we’d build a system where the success of some schools is coming at the expense of other schools,” Kennedy said.

Republicans strongly supported charter schools, and in some cases, vouchers that use taxpayer dollars to pay for private schools. Robinson called on creating new ways to authorize charter schools. Mitchell said he wanted to repeal a provision in the state’s constitution that has been used to rebuff private school vouchers.

There’s no party line over rural schools.

Republicans and Democrats alike said the state needed to step up to help its rural schools, which are typically underfunded compared to schools along the Front Range. They need more teachers, better infrastructure and fewer regulations, the candidates said.

“We need to get rural areas into the modern age,” Robinson said.