Colorado

Podcast: PERA’s $23.5 billion shortfall

While Colorado is taking steps to close the gap between what it has promised public employees in terms of retirement benefits and what it can actually pay, the state needs to do more.

Those were the conclusions of two policy experts in the public employee retirement sphere who were the featured speakers Friday in the Donnell-Kay Foundation’s Hot Lunch series in Denver.

David Draine, lead researcher on public sector retirement systems at the Pew Center on the States, said his mission is to help states both recruit talented employees with a solid compensation package while helping states keep retirement costs under control.

“Colorado faces a fiscal challenge because of unfunded pension promises,” Draine said, pointing out the state has a $23.5 billion shortfall between what should have set aside for promises made to workers and retirees and what the plan actually has on hand.

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Draine said it’s hard to predict future plan investment returns, but clearly those returns will have “major implications” on the state’s plan.

A pessimistic analysis foresees the gap could grow to $35 billion, while more upbeat forecasts calling for 9.5 percent annual returns on plan investments mean a $14.5 billion unfunded liability.

“Even with really good investments, that doesn’t make the problem vanish,” Draine said. “No matter what, more money is going to have to go into the system.”

The reason for the gap?

Contributions weren’t made, benefit increases weren’t paid for and investment returns didn’t materialize, he said.

Draine noted that Colorado’s public pension plan – the Public Employees’ Retirement Association or PERA – was fully funded in 2000. But between 2000 and 2011, contributions from state and local governments fell short by $3.5 billion and investments fell short over the same period. Investments in pension plans grew by 4.5 percent when they needed to grow by 8.4 percent, he said.

Meanwhile, in the booming 1990s, unfunded cost-of-living adjustments were granted. When the bill came due, investment returns tanked. In short, the pension plan’s liabilities grew faster than the state’s assets.

What Colorado is doing to fix PERA

The state has put reforms in place to make the system whole by 2042, but more could be done so that this never happens again, Draine said.

Learn more
  • Read this July 2012 EdNews’ story on PERA’s plight.
  • Read Alexander Ooms’ opinion blog post about the Hot Lunch talk and why you should care about public pension plans.

For instance, there were no cost-of-living raises in 2010, and future cost-of-living increases were capped at 2 percent vs. 3.5 percent. Employer and employee contributions went up, and the retirement age was raised.

“Colorado still faces years of large and increasing employer contributions taxpayers will be on the hook for,” Draine said.

In 2011, Colorado set aside more than $1 billion to put PERA on a path of financial health, but that contribution fell short by $138 million, he said. Colorado needs to make sure it has a credible plan to fix the system over a reasonable time frame that involves putting more money into the system and sticking to the payment schedule.

Colorado isn’t the only state facing these problems. In fact, nationwide, the unfunded liability in both pensions and retiree healthcare now stands at $1.38 trillion.

Josh McGee, vice president at the Laura and John Arnold Foundation, said states must be concerned about “crowd out.” In other words, the more money states have to sink into depleted retirement programs, the less states have to spend on other key projects and programs. And the cost of labor rises.

Some states, for instance, are hiring more contract or part-time teachers because they can’t afford to add more people to the salaried employee roster. Teacher salaries are also kept lower, which can  make it more difficult to recruit the best talent.

“There is substantial evidence people value current wage more than they value deferred compensation,” McGee said. “The state has a limited number of compensation dollars that have to be divided. I would encourage you to think holistically about the compensation dollars being offered.”

Disclosure: The Donnell-Kay Foundation is a funder of Education News Colorado.

Weekend Reads

Need classroom decor inspiration? These educators have got you covered.

This school year, students will spend about 1,000 hours in school —making their classrooms a huge part of their learning experience.

We’re recognizing educators who’ve poured on the pizazz to make students feel welcome. From a 9th-grade “forensics lab” decked out in caution tape to a classroom stage complete with lights to get first graders pumped about public speaking, these crafty teachers have gone above and beyond to create great spaces.

Got a classroom of your own to show off? Know someone that should be on this list? Let us know!

Jaclyn Flores, First Grade Dual Language, Rochester, New York
“Having a classroom that is bright, cheerful, organized and inviting allows my students to feel pride in their classroom as well as feel welcome. My students look forward to standing on the stage to share or sitting on special chairs to dive into their learning. This space is a safe place for my students and we take pride in what it has become.”

Jasmine, Pre-K, Las Vegas, Nevada
“My classroom environment helps my students because providing calming colors and a home-like space makes them feel more comfortable in the classroom and ready to learn as first-time students!”

 

Oneika Osborne, 10th Grade Reading, Miami Southridge Senior High School, Miami, Florida
“My classroom environment invites all of my students to constantly be in a state of celebration and self-empowerment at all points of the learning process. With inspirational quotes, culturally relevant images, and an explosion of color, my classroom sets the tone for the day every single day as soon as we walk in. It is one of optimism, power, and of course glitter.”

Kristen Poindexter, Kindergarten, Spring Mill Elementary School, Indianapolis, Indiana
“I try very hard to make my classroom a place where memorable experiences happen. I use songs, finger plays, movement, and interactive activities to help cement concepts in their minds. It makes my teacher heart so happy when past students walk by my classroom and start their sentence with, “Remember when we…?”. We recently transformed our classroom into a Mad Science Lab where we investigated more about our 5 Senses.”

 

Brittany, 9th Grade Biology, Dallas, Texas
“I love my classroom environment because I teach Biology, it’s easy to relate every topic back to Forensics and real-life investigations! Mystery always gets the students going!”

 

Ms. Heaton, First Grade, Westampton, New Jersey
“As an educator, it is my goal to create a classroom environment that is positive and welcoming for students. I wanted to create a learning environment where students feel comfortable and in return stimulates student learning. A classroom is a second home for students so I wanted to ensure that the space was bright, friendly, and organized for the students to be able to use each and every day.”

D’Essence Grant, 8th Grade ELA, KIPP Houston, Houston, Texas
“Intentionally decorating my classroom was my first act of showing my students I care about them. I pride myself on building relationships with my students and them knowing I care about them inside and outside of the classroom. Taking the time to make the classroom meaningful and creative as well building a safe place for our community helps establish an effective classroom setting.”

 

Jayme Wiertzema, Elementary Art, Worthington, Minnesota
“I’m looking forward to having a CLASSROOM this year. The past two years I have taught from a cart and this year my amazing school district allowed me to have a classroom in our school that is busting at the seams! I’m so excited to use my classroom environment to inspire creativity in my students, get to know them and learn from their amazing imaginations in art class!”

 

Melissa Vecchio, 4th Grade, Queens, New York
“Since so much of a student’s time is spent inside their classroom, the environment should be neat, organized, easy to move around in but most of all positive. I love to use a theme to reinforce great behavior. I always give the students a choice in helping to design bulletin boards and desk arrangements. When they are involved they take pride in the classroom, and enjoy being there.”

moving forward

After Confederate flag dispute at Colorado football game, schools pledge to bring students together

PHOTO: Marc Piscotty
Manual High students.

Acknowledging “we may never have a conclusive picture of what happened,” two Colorado school districts sought to move past a controversy over whether a Confederate flag was displayed at a football game and open a conversation between the two school communities.

The principal of Manual High, Nick Dawkins, wrote in a community letter over the weekend that the visiting Weld Central High School team “displayed a Confederate flag during the first quarter of the (Friday night) game, offending many members of the Manual community.”

Officials from Denver Public Schools and Weld County School District Re-3J released a joint letter Tuesday saying that based “on what we have learned to date, however, the Weld Central team did not display the Confederate flag.” At the same time, it said, multiple Manual eyewitnesses “reported seeing spectators who attempted to bring a Confederate flag into the game and clothing with flag images.”

Going forward, students from the two schools — one rural and one urban — will participate in a student leadership exchange that has student leaders visit each other’s schools and communities to “share ideas and perspectives,” the letter says.

“At a time in our country when so many are divided, we want our students instead to come together, share ideas and learn together,” says the letter, which is signed by the principals of both schools and the superintendents of both school districts.

The alleged incident took place at a time when issues of race, social injustice, politics and sports are colliding in the United States, making for tough conversations, including in classrooms.

Weld Central’s mascot is a Rebel. Manual, whose mascot is the Thunderbolts, is located in one of Denver’s historically African-American neighborhoods.

Dawkins in his initial community letter also said “the tension created by the flag led to conflict on and off the playing field,” and that three Manual players were injured, including one who went to the hospital with a leg injury. He also said some Manual players reported that Weld Central players “taunted them with racial slurs.”

Weld Central officials vehemently denied that their team displayed the flag. In addition, they said in their own community letter they had “no evidence at this point that any of our student athletes displayed racially motivated inappropriate behavior.”

They said district officials “do not condone any form of racism,” including the Confederate flag.

Weld Central fans told the Greeley Tribune that they didn’t see any Confederate flag.

Read the full text below.