First Person

Voices: PERA responds to NCTQ report

According to the National Council on Teacher Quality or NCTQ, “State pension systems are severely underfunded. Most retirement eligibility rules are burdensome and unfair. Costs to teachers and school districts are on the rise. The squeeze is on teachers in numerous other ways.” These are the key findings in a recent report called No One Benefits: How Teacher Pension Systems Are Failing Both Teachers and Taxpayers on state teacher pension policy by NCTQ, an organization founded in 2000 to provide an alternative national voice to existing teacher organizations and to challenge the current structure and regulation of the teaching profession.

Ed News Colorado asked Greg Smith, executive director of the Colorado Public Employees’ Retirement Association (Colorado PERA), for his thoughts on the NCTQ report.

Greg Smith: From our perspective, Colorado PERA’s hybrid defined benefit plan accomplishes the priorities identified by the NCTQ report. The extraordinary investment return realized through Colorado PERA continues to work for Colorado taxpayers while providing fair, portable benefits to valued K-12 educators throughout the state. The comprehensive reform enacted in Colorado in 2010 was the first in the nation and restored Colorado PERA’s long-term sustainability. Unfortunately, the NCTQ report does not recognize many of the reforms enacted in Colorado, nor does NCTQ fully acknowledge the hybrid portability features existing in Colorado PERA law.

Defined contribution vs. defined benefit

In short, the report finds the structure of teacher pension systems in the United States “untenable.” In ultimately concluding that a defined contribution system is the better mechanism for public sector retirement, the report ignores from the outset the value that a pension plan provides in attracting and retaining quality educators. The report also fails to recognize the data that suggests that the defined benefit system is the most cost effective way to provide a secure retirement.

Through the outperformance of a professionally managed, globally diversified institutional investment program and the economies of scale over individual accounts, a defined benefit program delivers the same retirement income at a 46 percent lower cost than a defined contribution plan. According to the National Institute for Retirement Security’s research “A Better Bang for the Buck,” defined benefit plans 1) avoid the problem of “over-saving” by pooling the longevity risks of large numbers of individuals, 2) are ageless and therefore can maintain an optimally balanced investment portfolio rather than shifting over time to a lower risk/return asset allocation as is the case for individual investors, and 3) can achieve higher investment returns compared to individual investors because of professional asset management and lower fees.

In the case of Colorado PERA, members and taxpayers have been the beneficiaries of a 30-year annualized return of 10 percent on the Colorado PERA investments. During the 25 years ending Dec. 31, 2011, employers/taxpayers have paid $13.5 billion into the Colorado PERA system. During that same time, Colorado PERA distributed $37.8 billion to retirees and increased the investment portfolio from $5.9 billion to $38.2 billion. That’s $70 billion in value for a $13.5 billion taxpayer investment – a lot better than any 401(k)’s have performed, and a valuable benefit for Colorado educators and taxpayers.

Portability for Colorado teachers

Not only is the 401(k) approach inferior in its ability to generate retirement security, it offers no greater portability than the Colorado PERA hybrid defined benefit plan. Consistent with NCTQ’s principles, Colorado teachers always have access to their contributions into the system plus a competitive interest rate if they should leave public employment. They also have access to employer-paid money subject to a reasonable and equitable vesting schedule. Colorado PERA provides the right balance between portability and the employers’ interest in limiting costly turnover in teachers.

Turnover is extremely expensive and can be detrimental to the quality of education. When the objective is to have a consistent staff of quality educators, the overall compensation package should be designed to incentivize them to stay in the same educational environment. This is accomplished in Colorado through PERA’s hybrid portability features and the opportunity for a lifetime benefit for career teachers regardless of where they taught in Colorado.

With regard to state-to-state portability, PERA members are limited by both federal and state law to a maximum of 10 years of purchased service credit in the PERA system. Members are required by state law to pay the full actuarial cost associated with the purchase of service credit so PERA receives the amount of money necessary to fund the benefit being purchased. The NCTQ report actually points to a portion of Colorado PERA’s portability feature as an example other states should follow (on p. 36).

Pension reform in Colorado

With the passage of Senate Bill 10-1 many changes were made that both increased the funding to the system and lowered the cost of the benefits paid by the system. As a result of decisive and comprehensive action in 2010, Colorado PERA’s unfunded liabilities were reduced by over $9 billion overnight and the costs of future pensions were substantially reduced. These changes included contribution increases for both employers and employees that phase in over time, a decrease in the Cost of Living Adjustment (COLA) paid to all members including existing retirees, requirements that members work longer before reaching eligibility to retire with full benefits, and a reduction in the benefits for members who retire early in the future, among other cost-saving changes. Also, there was a change to when members receive a match of their contributions when they leave employment and decide to exercise that portability feature and take their account with them.

Prior to SB 10-1, regardless of the amount of service credit, any member who left employment and decided to take a refund received a 50 percent match on their contributions. SB 10-1 added a requirement that the member have at least five years of service in order to be eligible for a 50 percent match. Frankly, there was both a cost consideration and a retention incentive to go to a five-year vesting period.

Regrettably, the data used by NCTQ to come up with Colorado’s public retirement picture did not take into consideration the increased contributions from employers and employees and the benefit changes that are contained in the SB 10-1 reforms.

With the contribution increases, which will ratchet in over a period of years, and the benefit changes outlined above, PERA is projected to be fully funded within approximately 30 years. Contribution rates, when fully implemented, will meet or exceed the NCTQ recommended funding standards to ensure the long-term existence of a reliable pension for Colorado educators. In addition, consistent with objectives identified by NCTQ, Colorado has implemented safeguards to prevent politics from interfering with this reform. There are limited steps that can be taken to control what a future General Assembly does, but it is written into law that legislators cannot enact any benefit increases that have not been the subject of an actuarial study to ensure that there is adequate funding for the benefit increase.

Also, SB 10-1 included automatic triggers for when contributions can change and when the COLA can be adjusted. In some states, teacher unions negotiate increases in pension benefits. This currently doesn’t happen in Colorado.

Rate of return

Questions have also arisen about PERA’s annual projected rate of return on pension investments. In 2009, as part of the process for developing its comprehensive recommendation to the General Assembly to ensure the long-term sustainability of the fund, the PERA Board of Trustees reduced the assumed rate of return on its investments to 8 percent from 8.5 percent. Most recently, the board voted in November to keep the rate steady at 8 percent. The board follows a disciplined process in evaluating the investment return assumption which includes retaining renowned actuarial and investment experts. KPMG, PERA’s outside independent auditor selected by the State Auditor’s Office, called PERA’s process “the most rigorous it has seen.”

Some people have said that this figure is too high and therefore, not realistic. The PERA board recognizes the controversy over this expectation and the fact that reasonable people can disagree about what the future holds. In response, the board has led the public pension industry to a new level of transparency by reporting PERA’s funded status using a range of return expectations from 6.5 to 9.5 percent rate of return. (See the PERA Comprehensive Annual Financial Report, page 35.) The annualized rate of return since the 2008 financial crisis has been in excess of 10.9 percent. See also the Colorado PERA fact sheet “8 Reasons Why PERA Can Earn 8 Percent.”

In conclusion

The topic of retirement as a component of teacher compensation is an area that has garnered significant attention since the Great Recession. After the NCTQ report was released, the Center for State and Local Government Excellence issued “Compensation Matters: The Case of Teachers,” authored by Alicia H. Munnell and Rebecca Cannon Fraenkel of the Center for Retirement Research at Boston College.

This research concluded that total compensation (including a pension) matters when attracting the best talent to the teaching profession. Since 1931, Colorado PERA has been able to change with the times to remain sustainable. With a proven track record of providing value to the taxpayers and an equitable benefit to Colorado’s educators, we must have the discipline and patience to let the landmark, bipartisan reform legislation work.

Colorado PERA appreciates the opportunity to provide comment regarding the NCTQ report findings and we thank Ed News Colorado for its interest in providing a broader perspective on the important issue of retirement security as it relates to the education community.

No One Benefits: How teacher pension systems are failing both teachers and taxpayers

First Person

I’m a principal who thinks personalized learning shouldn’t be a debate.

PHOTO: Lisa Epstein
Lisa Epstein, principal of Richard H. Lee Elementary, supports personalized learning

This is the first in what we hope will be a tradition of thoughtful opinion pieces—of all viewpoints—published by Chalkbeat Chicago. Have an idea? Send it to

As personalized learning takes hold throughout the city, Chicago teachers are wondering why a term so appealing has drawn so much criticism.

Until a few years ago, the school that I lead, Richard H. Lee Elementary on the Southwest Side, was on a path toward failing far too many of our students. We crafted curriculum and identified interventions to address gaps in achievement and the shifting sands of accountability. Our teachers were hardworking and committed. But our work seemed woefully disconnected from the demands we knew our students would face once they made the leap to postsecondary education.

We worried that our students were ill-equipped for today’s world of work and tomorrow’s jobs. Yet, we taught using the same model through which we’d been taught: textbook-based direct instruction.

How could we expect our learners to apply new knowledge to evolving facts, without creating opportunities for exploration? Where would they learn to chart their own paths, if we didn’t allow for agency at school? Why should our students engage with content that was disconnected from their experiences, values, and community?

We’ve read articles about a debate over personalized learning centered on Silicon Valley’s “takeover” of our schools. We hear that Trojan Horse technologies are coming for our jobs. But in our school, personalized learning has meant developing lessons informed by the cultural heritage and interests of our students. It has meant providing opportunities to pursue independent projects, and differentiating curriculum, instruction, and assessment to enable our students to progress at their own pace. It has reflected a paradigm shift that is bottom-up and teacher led.

And in a move that might have once seemed incomprehensible, it has meant getting rid of textbooks altogether. We’re not alone.

We are among hundreds of Chicago educators who would welcome critics to visit one of the 120 city schools implementing new models for learning – with and without technology. Because, as it turns out, Chicago is fast becoming a hub for personalized learning. And, it is no coincidence that our academic growth rates are also among the highest in the nation.

Before personalized learning, we designed our classrooms around the educator. Decisions were made based on how educators preferred to teach, where they wanted students to sit, and what subjects they wanted to cover.

Personalized learning looks different in every classroom, but the common thread is that we now make decisions looking at the student. We ask them how they learn best and what subjects strike their passions. We use small group instruction and individual coaching sessions to provide each student with lesson plans tailored to their needs and strengths. We’re reimagining how we use physical space, and the layout of our classrooms. We worry less about students talking with their friends; instead, we ask whether collaboration and socialization will help them learn.

Our emphasis on growth shows in the way students approach each school day. I have, for example, developed a mentorship relationship with one of our middle school students who, despite being diligent and bright, always ended the year with average grades. Last year, when she entered our personalized learning program for eighth grade, I saw her outlook change. She was determined to finish the year with all As.

More than that, she was determined to show that she could master anything her teachers put in front of her. She started coming to me with graded assignments. We’d talk about where she could improve and what skills she should focus on. She was pragmatic about challenges and so proud of her successes. At the end of the year she finished with straight As—and she still wanted more. She wanted to get A-pluses next year. Her outlook had changed from one of complacence to one oriented towards growth.

Rather than undermining the potential of great teachers, personalized learning is creating opportunities for collaboration as teachers band together to leverage team-teaching and capitalize on their strengths and passions. For some classrooms, this means offering units and lessons based on the interests and backgrounds of the class. For a couple of classrooms, it meant literally knocking down walls to combine classes from multiple grade-levels into a single room that offers each student maximum choice over how they learn. For every classroom, it means allowing students to work at their own pace, because teaching to the middle will always fail to push some while leaving others behind.

For many teachers, this change sounded daunting at first. For years, I watched one of my teachers – a woman who thrives off of structure and runs a tight ship – become less and less engaged in her profession. By the time we made the switch to personalized learning, I thought she might be done. We were both worried about whether she would be able to adjust to the flexibility of the new model. But she devised a way to maintain order in her classroom while still providing autonomy. She’s found that trusting students with the responsibility to be engaged and efficient is both more effective and far more rewarding than trying to force them into their roles. She now says that she would never go back to the traditional classroom structure, and has rediscovered her love for teaching. The difference is night and day.

The biggest change, though, is in the relationships between students and teachers. Gone is the traditional, authority-to-subordinate dynamic; instead, students see their teachers as mentors with whom they have a unique and individual connection, separate from the rest of the class. Students are actively involved in designing their learning plans, and are constantly challenged to articulate the skills they want to build and the steps that they must take to get there. They look up to their teachers, they respect their teachers, and, perhaps most important, they know their teachers respect them.

Along the way, we’ve found that students respond favorably when adults treat them as individuals. When teachers make important decisions for them, they see learning as a passive exercise. But, when you make it clear that their needs and opinions will shape each school day, they become invested in the outcome.

As our students take ownership over their learning, they earn autonomy, which means they know their teachers trust them. They see growth as the goal, so they no longer finish assignments just to be done; they finish assignments to get better. And it shows in their attendance rates – and test scores.

Lisa Epstein is the principal of Richard H. Lee Elementary School, a public school in Chicago’s West Lawn neighborhood serving 860 students from pre-kindergarten through eighth grade.

Editor’s note: This story has been updated to reflect that Richard H. Lee Elementary School serves 860 students, not 760 students.

First Person

I’ve spent years studying the link between SHSAT scores and student success. The test doesn’t tell you as much as you might think.

PHOTO: Photo by Robert Nickelsberg/Getty Images

Proponents of New York City’s specialized high school exam, the test the mayor wants to scrap in favor of a new admissions system, defend it as meritocratic. Opponents contend that when used without consideration of school grades or other factors, it’s an inappropriate metric.

One thing that’s been clear for decades about the exam, now used to admit students to eight top high schools, is that it matters a great deal.

Students admitted may not only receive a superior education, but also access to elite colleges and eventually to better employment. That system has also led to an under-representation of Hispanic students, black students, and girls.

As a doctoral student at The Graduate Center of the City University of New York in 2015, and in the years after I received my Ph.D., I have tried to understand how meritocratic the process really is.

First, that requires defining merit. Only New York City defines it as the score on a single test — other cities’ selective high schools use multiple measures, as do top colleges. There are certainly other potential criteria, such as artistic achievement or citizenship.

However, when merit is defined as achievement in school, the question of whether the test is meritocratic is an empirical question that can be answered with data.

To do that, I used SHSAT scores for nearly 28,000 students and school grades for all public school students in the city. (To be clear, the city changed the SHSAT itself somewhat last year; my analysis used scores on the earlier version.)

My analysis makes clear that the SHSAT does measure an ability that contributes to some extent to success in high school. Specifically, a SHSAT score predicts 20 percent of the variability in freshman grade-point average among all public school students who took the exam. Students with extremely high SHSAT scores (greater than 650) generally also had high grades when they reached a specialized school.

However, for the vast majority of students who were admitted with lower SHSAT scores, from 486 to 600, freshman grade point averages ranged widely — from around 50 to 100. That indicates that the SHSAT was a very imprecise predictor of future success for students who scored near the cutoffs.

Course grades earned in the seventh grade, in contrast, predicted 44 percent of the variability in freshman year grades, making it a far better admissions criterion than SHSAT score, at least for students near the score cutoffs.

It’s not surprising that a standardized test does not predict as well as past school performance. The SHSAT represents a two and a half hour sample of a limited range of skills and knowledge. In contrast, middle-school grades reflect a full year of student performance across the full range of academic subjects.

Furthermore, an exam which relies almost exclusively on one method of assessment, multiple choice questions, may fail to measure abilities that are revealed by the variety of assessment methods that go into course grades. Additionally, middle school grades may capture something important that the SHSAT fails to capture: long-term motivation.

Based on his current plan, Mayor de Blasio seems to be pointed in the right direction. His focus on middle school grades and the Discovery Program, which admits students with scores below the cutoff, is well supported by the data.

In the cohort I looked at, five of the eight schools admitted some students with scores below the cutoff. The sample sizes were too small at four of them to make meaningful comparisons with regularly admitted students. But at Brooklyn Technical High School, the performance of the 35 Discovery Program students was equal to that of other students. Freshman year grade point averages for the two groups were essentially identical: 86.6 versus 86.7.

My research leads me to believe that it might be reasonable to admit a certain percentage of the students with extremely high SHSAT scores — over 600, where the exam is a good predictor —and admit the remainder using a combined index of seventh grade GPA and SHSAT scores.

When I used that formula to simulate admissions, diversity increased, somewhat. An additional 40 black students, 209 Hispanic students, and 205 white students would have been admitted, as well as an additional 716 girls. It’s worth pointing out that in my simulation, Asian students would still constitute the largest segment of students (49 percent) and would be admitted in numbers far exceeding their proportion of applicants.

Because middle school grades are better than test scores at predicting high school achievement, their use in the admissions process should not in any way dilute the quality of the admitted class, and could not be seen as discriminating against Asian students.

The success of the Discovery students should allay some of the concerns about the ability of students with SHSAT scores below the cutoffs. There is no guarantee that similar results would be achieved in an expanded Discovery Program. But this finding certainly warrants larger-scale trials.

With consideration of additional criteria, it may be possible to select a group of students who will be more representative of the community the school system serves — and the pool of students who apply — without sacrificing the quality for which New York City’s specialized high schools are so justifiably famous.

Jon Taylor is a research analyst at Hunter College analyzing student success and retention.