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.

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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.

Budget woes

In budget address, Illinois governor J.B. Pritzker proposes modest education increases

J.B. Pritzker speaks during a round table discussion with high school students at a creative workspace for women on October 1, 2018 in Chicago, Illinois.

Even while calling his proposed budget “austere” and speaking plainly about the yawning deficit he inherited, Illinois’ new governor, J.B. Pritzker, struck an optimistic chord when describing how he plans to plow more money into schools.

His fiscal year 2020 budget would allocate a total of $7.2 billion for K-12 funding, including an extra $25 million in addition to the mandated $350 million annual minimum increase under the state’s funding formula.

“There’s a focus here on trying to not only rebuild from the damage that was done over the last four years but also to set us up for growing the economy, which happens in part because of our investments in education,” Pritzker said, nodding to a nearly two-year budget stalemate under his predecessor, Republican Bruce Rauner, that left the state with billions in unpaid bills.

During Wednesday’s speech, the governor said the long-term solution to the state’s budget deficits  was a progressive income tax that would take more money from Illinois’ wealthiest residents.

In the shorter term, though, Pritzker’s budget proposal includes an additional $25 million for Illinois schools, an increase of $21 million in special education grants, and a $5 million boost for career and technical education programs for high school students.

Also in the proposal: $50 million in need-based college grants, another $35 million in university scholarships, and $2 million to cover waived fees for low-income students taking Advanced Placement tests.

Pritzker’s budget would allocate an additional $100 million to the Early Childhood Block Grant. That would bring the state investment in early childhood education to $594 million next year.

The governor Wednesday also proposed freezing a tax credit for businesses and individuals who contributed scholarships for private schools. Critics argued the program cut into state income taxes that would otherwise help fund public schools. Supporters, including Rauner, said it was one of the few ways struggling families could afford private schools.

Pritzker noted that given Illinois’ economic reality, there is a limit to how much cost-cutting alone could do. Instead, he promised to pass a budget that would include an increase in funding across the board as a way to invest in the state’s future, with a particular focus on education.

“We must stop slashing programs that build future prosperity,” Pritzker said in his budget address. “Over the long term, we must make investments in education, livable wages, innovative human service programs and job training.”

In unveiling his budget, the governor spoke plainly about the state’s dire fiscal situation: a $3.2 billion budget deficit and $15 billion in debt from unpaid bills — an amount that is equal to funding “free four-year university tuition for more than 12,000 students,” he said.

Nearly two years without a state budget under the previous governor prompted a massive backlog of funding in the K-12 education budget that the state is still struggling to fill, on top of an $8.1 billion backlog of unpaid bills across state agencies.

A 2017 overhaul in the formula Illinois uses to fund schools put the state on a 10-year path to closing the more than $6.8 billion gap between what it spends on K-12 public schools and the projected cost of adequate school funding. In January, the state board of education asked for $15 billion in public schools funding.

“It’s a very teensy step and better an increase than not,” Wendy Katten with Raise Your Hand Action, a parent group advocating for public education, said of the increased funding for K-12 schools. “But that’s nowhere near the $7 billion that’s needed for basic adequacy, let alone the $2 billion needed for [Chicago Public Schools].”   

Pritzker’s proposed additions are modest, to be sure, but unions representing teachers in Chicago and statewide, as well as disability advocates, said any additional investment in education is most welcome.

“It’s clear that he understands the importance of great public schools and higher education and is committed to fulfilling the state’s responsibility to invest in them,” the president of the Illinois Federation of Teachers, Dan Montgomery, said.

And the Chicago Teachers Union asked that Chicago Public Schools to use any extra state funding to lower class sizes and increase special education staffing.

“The increase in evidence-based funding over the statutory minimum recognizes that Illinois’ challenges with education funding equity are fundamentally rooted in the need to drive more resources to students, like those in CPS, who have suffered from decades of insufficient and unequal school funding,” Jesse Sharkey, president of the union, said.

Chris Yun, the education policy analyst with Access Living, which advocates for people with disabilities, said she was heartened to see a bump for special education funding, noting: “Students with disabilities are often forgotten because the number is much less than general education students. We have a long way to go, but this is just step one.”

Pritzker told Chalkbeat in October that contributing more money to education would require solving the state’s longstanding budget woes. At that time, Illinois was expected to enter fiscal year 2019 with a budget deficit of more than $1 billion. That figure has now more than tripled.

Its problems are compounded significantly by its pension responsibilities, making it increasingly difficult to allocate money to other needs, said Ralph Martire, director of the Center for Tax and Budget Accountability.

“The payments are jumping at levels our system can’t afford,” Martire said.

Pritzker on Wednesday said he would “smooth the pension ramp by modestly extending it,” which hints at a plan to push payments off further.

While Pritzker’s progressive taxation plan has a steady thrum of support from Democratic lawmakers, the measure has not yet passed the state legislature.

Pritzker acknowledged that his 2020 budget was built on a tax structure that he still considered regressive and said he hoped to change that going forward.  

“Not only is our tax system unfair, it’s also inadequate to solve our long-term financial challenges,” he said. “Make no bones about it, I choose to stand up for working families and will lead the charge to finally enact a fair tax system in Illinois.”

Cassie Creswell, a board member of public education advocacy group Raise Your Hand Action, said the budget address was a positive indicator of Pritzker’s support for revamping taxation, but feared “the rates that will be proposed to make it politically palatable won’t make it the rate we need to fund stuff in the state.”

interview time

Four candidates left make their case before commission for open Shelby County Schools board seat

PHOTO: Caroline Bauman
Interim school board candidate Aubrey Howard presents before the Shelby County Commission.

Four remaining candidates for a vacated Memphis school board seat had their chance to tell the Shelby County Commission why they are the right person for the job on Wednesday afternoon.

They were the remaining viable candidates after six applicants were disqualified for living outside of District 2, the area the interim board member will represent in Shelby County Schools. Chalkbeat reported on Monday that six of the candidates live outside of the district. The appointee will fill the seat Teresa Jones vacated following her recent appointment as a municipal court judge, and will serve until the term expires in August 2020.

The four applicants are (We’ve linked to their full applications.):

  • Erskine Gillespie, an account manager at the Lifeblood Mid-South Regional Blood Bank.
  • Althea Greene, a retired Memphis educator and pastor of Real Life Ministries.
  • Aubrey Howard, the executive director of governmental and legislative affairs in the Shelby County Trustee’s Office.
  • Charles McKinney, the Neville Frierson Bryan Chair of Africana Studies and associate professor of history at Rhodes College.

The interim member will join the school board at a crucial time, amid the search for a new superintendent to replace Dorsey Hopson, who left the district in December. Currently, Joris Ray is serving as interim superintendent.

Commissioners peppered the candidates with questions on big issues facing the district, including school choice, the budget process, managing the district’s aging buildings and underenrollment, and how they could improve the relationship between the district and the county commission, the funding body for schools.

In their pitches to commissioners, applicants touted their previous experiences with K-12 education, such as work with nonprofits and curriculum development, and their ties to Memphis schools. “I’m a product of Memphis schools,” was a phrase said again and again.

Most applicants expressed general support for charter schools, which have grown significantly in recent years in Memphis, but Gillespie said he believed “the influx of our charter school program is an issue that must be addressed.” McKinney sits on the board of a charter high school, and Greene and Howard said they had no issues with charter schools as a way to serve individual needs of students.

On the relationship with the county commission, Greene said: “I think it’s important that as a school board member, I’m at county commission meetings. And work as a bridge to educate children and give them the best education we can, and we know that costs money.”

Gillespie was asked by Commissioner Willie Brooks what he thinks of alternative schools, which serve students who have been expelled or suspended from traditional schools for behavioral reasons. There are several alternative schools in District 2.

“I think alternative schools are truly something necessary,” Gillespie said. “They can provide a trauma-informed response for our students.”

The questionnaire given to each candidate asked about TNReady, the state’s embattled testing system. Commissioner Michael Whaley, who chairs the education committee, asked Howard to expand on his answer that the test “didn’t work.”

“Those decisions about testing and teacher evaluations would be better met if they were local and not state controlled,” Howard replied. “For sure, the state wasted a huge amount of money with the companies they hired that failed us.”

Gillespie and McKinney described aging and often near-empty school buildings as a large issue facing the district. The interim board member would help analyze a massive district plan left by former superintendent Hopson that would consolidate 28 Memphis schools into 10 new buildings.

McKinney said the school board should be having regular conversations with the commission and the neighborhoods it serves on how demographic shifts have impacted the county, creating underenrollment in some schools.

“For the school board, those conversations need to be ongoing, so when it comes time to make a decision about whether or not to close a school, it’s not coming as a surprise,” McKinney said.

Three people from Memphis Lift, a parent advocacy group, spoke in support of McKinney. The group’s leader, Sarah Carpenter, said he’s been a consistent figure in her neighborhood of North Memphis.

Shelby County Commission
PHOTO: Caroline Bauman
Commissioner Willie Brooks (left) asked candidates about how they would work with the county commission.

“I’m tired of people coming to our community when they want a seat and we don’t see them anymore,” Carpenter said. “Our children’s lives are on the line.”

Commissioner Edmund Ford, himself a former teacher, said after the interviews he would like to see an educator on the board.

“There were a lot of things I saw as a teacher, when I would go to the school board to ask for their assistance, that I would not receive,” Ford said. “Personally, I would like to see someone who has been there and done that.”

After hearing from the candidates, the commission voted to move the item to its Monday meeting, where commissioners will vote on a successor.

For more details, see our Twitter thread from the hearing.