Who Is In Charge

Concerns raised over DPS tax measures

Denver Public Schools officials are promoting two measures on the Nov. 6 ballot that would add $515 million to the school district’s debt load, which some contend already is weighed down by past bond issues and unfunded pension obligations.

Image of school desk atop a dollar bill.The district is asking Denver voters to approve a $49 million mill levy (3A on the ballot) and a $466 million bond issue (measure 3B) for classroom programs and critical maintenance needs in the district. If both measures pass, they would add about $140 a year to the tax bill of a $225,000 home, according to the district.

While there’s no denying that state budget cuts have hurt Colorado school districts and that many Denver schools are in need of maintenance and upgrades, some current and former public officials are concerned about the debt burden created by the district’s past bond issues.

In partnership
  • Partnering with the Denver Business Journal allows EdNews to provide our readers with stories written by professional journalists with financial expertise.

Related stories

DBJ endorsement

Tom Boasberg, DPS superintendent, said if the measures pass, Denver taxpayers still will be paying less than taxpayers in neighboring jurisdictions.

“Funds for K-12 education have been severely cut for last three years,” Boasberg said. “We are getting $800 less per student than we did three years ago — that’s $60 million less a year than we were receiving three years ago.”

At the same time, DPS has grown by almost 11,000 students, or about 15 percent, in the last five years, he said.

“The mill levy would allow us to expand arts, music, sports and enrichment programs and provide critical tutoring and small-group tutoring for our kids,” Boasberg said. “It will allow 1,000 4-year-olds in poverty the chance to go to full-day preschool … instead of sitting on wait lists for this critical opportunity.”

The $466 million bond issue will enable the district to “perform critical maintenance and renovations on our school buildings,” he said.

But those concerned about the district’s debt point to $750 million in pension certificates of participation (PCOPs) the district issued in 2008 to take care of its unfunded pension liabilities. They note that DPS’ pension liabilities are higher now than they were before the district did the complex financing, which will cost Denver taxpayers a total of nearly $2 billion by 2038, according to DPS figures.

The DPS Division of the Colorado Public Employees Retirement Association (PERA) had $637 million in unfunded pension liabilities at the end of 2011, according to PERA’s latest annual report.

When DPS issued $750 million in PCOPs in 2008, the district had a $400 million pension shortfall, about $265 million in previously issued pension debt and the costs associated with the issuing of new debt.

“We suffered the worst crash since the Great Depression, so all of PERA is down,” Boasberg said of the increased DPS pension shortfall since 2008.

Lynn Turner, board member of PERA, said the district bond issues have “only shifted who they owed money to from the pension plan to the bond investors. They never changed the fact they still had to come up somehow with money to cover the debt and cash-flow shortfalls.”

Turner, a former chief accountant for the U.S. Securities and Exchange Commission, said DPS officials have long been trying to figure out ways to make up for unfunded pension liabilities without hurting the district’s cash flow.

“DPS has had shortfalls in cash flows since the late 1990s that have led to the underfunding of their pension plan obligations,” Turner said, noting he was speaking only for himself, not for PERA. “DPS, instead of addressing the core issue, has put their heads in the sand and issued bonds trying to make it look like their pension problem has been solved, when the reality is that it hasn’t.”

John MacPherson, a retired DPS teacher and principal who was a board trustee for the Denver Public Schools Retirement System when the 2008 PCOPs were issued, asserts that DPS “has not contributed enough to its pension plan to cover even the normal cost for active employees” since July 1, 2009.

Employers with defined-benefit pension plans are required to cover “normal” costs for employees, or the present value of benefits that have accrued on behalf of members during the valuation year. In addition, employers in PERA also are required to contribute to pay down unfunded liabilities.

Legislation passed in 2009 related to the DPS merger of its pension fund with PERA allows DPS to reduce the amount it contributes to PERA based on the PCOPs payments it makes.

In 2011, DPS contributed 3.67 percent of its payroll to pension benefits, compared with 15.31 percent by the School Division (the rest of the state’s public schools), according to the PERA annual report. DPS was able to reduce its contribution by 14.88 percent last year, with the PCOPs credit.

“What we have today, and my concern, is that DPS is purposely defunding the employees’ pension plan to be able to save money in the name of the 2008 PCOPs transaction,” MacPherson said. “They are correct that it is perfectly legal. My question is … is it ethical?”

Boasberg countered that the DPS Division is better funded than the School Division of PERA, thanks to the PCOPs; that DPS pays a lower interest rate to bondholders than the School Division pays to PERA; and the credit it gets on its contributions is meant to bring DPS in line with the School Division in terms of its unfunded pension liabilities.

At the end of 2011, the DPS pension was 81.9 percent funded, down from 88.2 percent at the end of 2010, the first year the DPS pension was part of PERA.

The School Division was 60.2 percent funded at the end of last year, down from 63.3 percent at the end of 2010.

But Turner thinks the 2009 legislation “ensured the funding levels of the pension would fall precipitously to very low and dangerous levels.”

“This was the result of DPS being able to, in essence, count their bond payments toward the amount of annual contributions into the pension fund, even though they would not be making the required annual fund contribution,” he said.

And Turner isn’t a fan of the PCOPs transaction in 2008. “DPS gambled with taxpayers’ money when they decided to enter into interest-rate swaps — and they lost,” he said. “To date, that gamble has taken a lot of money out of the classroom that would have otherwise benefited students. And instead, money has gone into the pockets of bankers.”

Richard Allen, the DPS assistant superintendent for budget and finance from 2001 to 2006, said chronic underfunding of the DPS pension has created the problems the district now faces.

“It’s the wages of past sins that makes this happen,” Allen said. “And 20 years from now, someone else will be having this same conversation.”

Heather Draper covers banking, finance, law and the economy for the Denver Business Journal and writes for the “Finance Etc.” blog. Phone: 303-803-9230.

Copyright 2012 Denver Business Journal. This article is reprinted with permission.

Big speeches

Emanuel tries to shore up education legacy in final budget address

PHOTO: Elaine Chen/Chalkbeat
Rahm Emanuel at Cardenas Elementary School in Little Village, moments before he announced this year's $1 billion capital plan.

Chicago Mayor Rahm Emanuel choked up twice during his final budget address to Chicago’s City Council Wednesday morning: once when he talked about his wife, Amy Rule, and the other when he read aloud a letter from a John Marshall High School senior who lives on Chicago’s West Side.

The address highlighted millions he wants to spend to expand after-school programming, middle school mentoring, and a summer jobs initiative for Chicago teens. It also signaled loud and clear how Emanuel views his legacy: as the mayor who took the reins when the city faced a $600 million deficit and then righted Chicago’s fiscal ship, while pushing for the expansion of programs that serve public schools and children.

In the speech, he ticked off such accomplishments as expanding kindergarten citywide from a half- to a full-day, extending the city’s school day, increasing the graduation rate to a record 78.2 percent up from 57 percent when he took office in 2011, and paving the path for universal pre-kindergarten, though that initiative is still in the early stages.

“When you step back and look at the arc of what we’ve done in the past seven years, and take a wide lens view, from free pre-K to free community college, from Safe Passage to mentors to more tutors in our neighborhood libraries … at end of day, it is really no different than what Amy and I, or you and your partner, would do for your own children,” he said.

Emanuel, the former congressman and chief of staff for President Barack Obama who announced on the first day of school in September that he won’t be running for re-election, acknowledged that shoring up civic finances isn’t glitzy work — not like, say, plopping a major park in the middle of downtown, as his predecessor Richard M. Daley did by opening Millennium Park.

But, said Emanuel, “one thing I’ve learned in the past 24 years in politics is that they don’t build statues for people who restore fiscal stability.”

Outside of the longer school day and school year, the mayor stressed his work expanding programming for children — particularly teenagers — after school and in summers as an antidote to the city’s troubling violence that did not abate in his term. Amid a $10.7 billion budget plan that includes a chunk of new tax-increment finance dollars that will go toward schools, the new budget lays out $500,000 more funding for his signature Summer Jobs program, bringing projected total spending on that up to $18 million in 2019.

He also set aside $1 million for his wife’s Working on Womanhood mentoring program that currently serves 500 women and girls, $1 million more for the after-school program After School Matters, and more money for free dental services at Chicago Public Schools and trauma-informed therapy programs.

The mayor’s address had barely ended when the Chicago Teachers Union sent an email with the subject line “No victory lap for this failed mayor.” It pointed to blemishes on Emanuel’s education record, from closing 50 schools in 2013 to systemic failings in the city’s special education program — an issue that now has Chicago Public Schools under the watchful eye of a state monitor.

CTU President Jesse Sharkey called on the city’s next mayor to restore money to mental health clinics and social services, fund smaller class sizes, broaden a “sustainable schools” program that partners community agencies with languishing neighborhood schools, and invest in more social workers, psychologists, nurses, librarians, and teachers’ assistants.

In his address, Emanuel did not talk about some of the tough decisions the school district had to make during tough budget years, such as the school closings or widespread teacher layoffs that topped 2,000 that same year. 

He did, however, stress his philosophy that investments in children must extend beyond the typical school day. In the letter from the Marshall High School senior, the teen wrote that, until his freshman year of high school, “I never saw or met any males like me who lead successful lives.” The letter went on to praise the nonprofit Becoming A Man, a male mentoring program that has expanded among Chicago schools during Emanuel’s tenure.

The teen intends to attend Mississippi Valley State University next fall, the mayor said. When Emanuel pointed out the young man and his Becoming A Man program mentor in the City Council chambers, many in attendance gave them a standing ovation.

 

 

public comment

Chicago sets community meetings on controversial school inventory report

Chicago Public Schools is hosting a dozen workshops for community members focused on a controversial report about local schools that offers an unprecedented window into the assets — and problems — in certain neighborhoods.

The district published report, called the Annual Regional Analysis, in September. It shows that, in many areas of the city, students are skipping out on nearby options, with less than half of district students attending their designated neighborhood schools.

The school district and Kids First, the school-choice group that helped compile the report, maintain that the analysis is meant to help guide investments and empower communities to engage in conversations about their needs.

The report divides the school district into 16 “planning regions” showing where schools are, what programs they offer, how they are performing, and how people choose among the options available.

The meetings will start with a presentation on the report. They will include small-group discussions to brainstorm how Chicago Schools can invest in and strengthen schools. The first workshop is scheduled for Wednesday at Collins Academy High School.

While the school district has touted the detailed report as a resource to aid planning and community engagement, several groups have criticized the document and questioned the district’s intent.  The document has sparked fears among supporters of neighborhood schools that the district might use it to propose more school closings, turnarounds, and charter schools.

The parents group Raise Your Hand, the neighborhood schools’ advocacy group Generation All, and the community organizing group Blocks Together penned a letter recently scrutinizing the report’s reliance on school ratings, which are based largely on attendance and test scores.

“Research has shown that test scores and attendance tell us more about the socioeconomic status of the students’ communities rather than the teaching and learning inside the school itself,” they wrote. Chalkbeat Chicago first reported about the analysis in August after obtaining a copy of it. Yet, the document has sparked fears among supporters of neighborhood schools that it could be used to propose more school closings, turnarounds, and charter schools.

Here’s a list of the 12 community workshops, all of which all begin at 6 p.m.:

West Side Region: Oct. 17, Collins Academy High School

Greater Lincoln Park Region: Oct. 18, Lincoln Park High School

Greater Calumet Region: Oct. 22, Corliss High School

South Side Region: Nov. 7, Lindblom High School

Greater Stony Island Region: Nov. 8, Chicago Vocational Career Academy

Far Southwest Region: Nov. 13, Morgan Park High School

Far Northwest Side Region: Nov. 14, Steinmetz High School

Greater Milwaukee Region: Nov. 15, Wells High School

Greater Stockyards Region: Nov. 19, Kelly High School

Pilsen/Little Village Region: Nov. 26, Benito Juarez Community Academy

Greater Midway Region: Dec. 6, Curie Metropolitan High School

North Lakefront Region : Dec. 11, Roger C. Sullivan High School