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.


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.

What's Your Education Story?

As the 2018 school year begins, join us for storytelling from Indianapolis educators

PHOTO: Dylan Peers McCoy/Chalkbeat
Sarah TeKolste, right, and Lori Jenkins at a Teacher Story Slam, in April.

In partnership with Teachers Lounge Indy, Chalkbeat is hosting another teacher story slam this fall featuring educators from across the city.

Over the past couple of years, Chalkbeat has brought readers personal stories from teachers and students through the events. Some of our favorites touched on how a teacher won the trust of her most skeptical student, why another teacher decided to come out to his students, and one educator’s call to ramp up the number of students pursuing a college education.

The event, 5:30 p.m. Thursday, Sept. 13, is free and open to the public — please RSVP here.

Event details:

5:30 p.m. to 7:30 p.m.
Thursday, Sept. 13, 2018
Tube Factory artspace
1125 Cruft St., Indianapolis, IN 46203
Get tickets here and find more on Facebook

School safety

Hiring more security officers in Memphis after school shootings could have unintended consequences

PHOTO: Jahi Chikwendiu/The Washington Post/Getty Images

Tennessee’s largest district, Shelby County Schools, is slated to add more school resource officers under the proposed budget for next school year.

Superintendent Dorsey Hopson earmarked $2 million to hire 30 school resource officers in addition to the 98 already in some of its 150-plus schools. The school board is scheduled to vote on the budget Tuesday.

But an increase in law enforcement officers could have unintended consequences.

A new state law that bans local governments from refusing to cooperate with federal immigration officials could put school resource officers in an awkward position.

Tennessee Education Commissioner Candice McQueen recently reminded school personnel they are not obligated to release student information regarding immigration status. School resource officers employed by police or sheriff’s departments, however, do not answer to school districts. Shelby County Schools is still reviewing the law, but school board members have previously gone on the record emphasizing their commitment to protecting undocumented students.

“Right now we are just trying to get a better understanding of the law and the impact that it may have,” said Natalia Powers, a district spokeswoman.

Also, incidents of excessive force and racial bias toward black students have cropped up in recent years. Two white Memphis officers were fired in 2013 after hitting a black student and wrestling her to the ground because she was “yelling and cussing” on school grounds. And mothers of four elementary school students recently filed a lawsuit against a Murfreesboro officer who arrested them at school in 2016 for failing to break up a fight that occurred off-campus.

Just how common those incidents are in Memphis is unclear. In response to Chalkbeat’s query for the number and type of complaints in the last two school years, Shelby County Schools said it “does not have any documents responsive to this request.”

Currently, 38 school resource officers are sheriff’s deputies, and the rest are security officers hired by Shelby County Schools. The officers respond and work to prevent criminal activity in all high schools and middle schools, Hopson said. The 30 additional officers would augment staffing at some schools and for the first time, branch out to some elementary schools. Hopson said those decisions will be based on crime rates in surrounding neighborhoods and school incidents.

Hopson’s initial recommendation for more school resource officers was in response to the school shooting in Parkland, Florida, that killed 17 people and sparked a wave of student activism on school safety, including in Memphis.

Gov. Bill Haslam’s recent $30 million budget boost would allow school districts across Tennessee to hire more law enforcement officers or improve building security. Measures to arm some teachers with guns or outlaw certain types of guns have fallen flat.

For more on the role and history of school resource officers in Tennessee, read our five things to know.

Sheriff’s deputies and district security officers meet weekly, said Capt. Dallas Lavergne of the Shelby County Sheriff’s Office. When the Memphis Police Department pulled their officers out of school buildings following the merger of city and county school systems, the county Sheriff’s Office replaced them with deputies.

All deputy recruits go through school resource officer training, and those who are assigned to schools get additional annual training. In a 2013 review of police academies across the nation, Tennessee was cited as the only state that had specific training for officers deployed to schools.