No free lunch

Study: Pension system shift could be costly in more ways than one

Converting the current pension plan for teachers and state employees to a defined contribution system could cost up to $15.9 billion over four decades, according to a new study.

And a replacement system likely would be more expensive for the state and school districts to operate if current levels of retiree benefits are maintained, according to the new study by the actuarial firm of Gabriel, Roeder, Smith & Co. It was presented to the Legislative Audit Committee Monday.

The 211-page report, one of three commissioned by a 2014 law, provides the first-ever detailed projections about the cost of converting the Public Employees’ Retirement Association and also gives new details about what it costs government employers to maintain current levels of retiree benefits as compared to other types of retirement plans.

The PERA system is primarily a defined-benefit plan, meaning retirees are paid monthly pensions based on years of work and an average of their three highest-salaried years. (PERA actually is called a “hybrid” plan because it also has a feature that allows people who leave the system before retirement to keep their contributions in PERA, earn interest on those and receive benefits when they do retire.)

Defined contribution plans are similar to 401(k) savings plans in that retirees receive benefits based on what they and their employers deposited into their plans, plus any investment earnings.

The PERA system’s pension obligations currently are only about 62 percent funded. The division that covers about more than 295,000 retired, active and inactive school employees is about 61 percent funded, while another division covering 30,000 Denver Public Schools members is 82 percent funded. Closing those gaps is expected to take 30 to 40 years in some cases.

That gap has sparked years of debate in the legislature, with many Republicans, worried about the unfunded liability, arguing that PERA should be converted to a defined contribution plan.

The problem is that vested PERA members and retirees have a legal right to current benefits so can’t be forced into a new system. “The state cannot eliminate the unfunded liability by moving new hires to an alternative plan, but must develop a plan to address the existing unfunded accrued liability,” the study concluded.

The Gabriel report provided the first estimates that have been made of what it would cost to switch PERA to a type of defined contribution plan. A scenario involving an accelerated pay-down of the unfunded liability from now through 2053 would cost $8.8 billion.

The study estimates it would cost $15.9 billion through 2053 if the pay-down wasn’t accelerated.

Another key aspect of the Gabriel study was a review of what it costs PERA employers to maintain the system’s current average retiree benefit, which provides an estimated 72 percent of preretirement salary for civil servants and teachers who enter the system at age 35 and work for 30 years. (PERA members are not eligible for Social Security.)

“This study found that the current PERA Hybrid Plan is more efficient and uses dollars more effectively than the other types of plans in use today,” the report concluded.

Leslie Thompson, the actuary who was the senior consultant on the project for Gabriel, told the committee, “There was no alternative plan that was as cost-effective at delivering the retirement benefit as PERA. … There is no alternative plan for which you could pay the same cost and get a higher benefit.”

Greg Smith, PERA executive director, said the Gabriel report “allows policymakers to see the efficiency of the plan we have in place. … What we learned from the report today is the most efficient way to address that is within the hybrid defined benefit plan.”

Smith said he believes the Gabriel study also demonstrates the advantages of PERA for employees such as teachers who leave the system after several years but allow their funds to remain within PERA to grow and be taken upon retirement.

“Our plan provides greater retirement security for even the short-term employee,” he said.

Some education reform groups have argued that pension systems like PERA don’t provide adequate incentives for young teachers (see story).

The PERA system was more than 100 percent funded as recently as the turn of the century, but its position has slipped because of legislative expansion of benefits and reduction of contributions early in the century. And stock markets drops in 2001 and 2008 damaged PERA’s investment portfolio.

The legislature raised employer contributions in the mid-2000s, and in 2010 lawmakers passed a comprehensive PERA overall that tightened benefits for new employees and reduced cost-of-living increases for retirees, among other changes.

Despite passage of that law, PERA has remained a popular target for Republican-sponsored bill in recent sessions, none of which have passed. The 2014 law that required the Gabriel study also commissioned a separate study of how to improve tracking of PERA’s financial health at intervals over the coming decades. (See this story for more details on the thinking behind the studies.)

And PERA is scheduled to issue a report at the end of the year on the impact of the 2010 reforms.

All of the studies will give the upcoming legislative session plenty of information to work with, although major pension charges may be unlikely, given that Democrats control the House and Republicans run the Senate and that 2016 is an election year.

How I Lead

This Memphis principal says supporting teachers and parents helped pull her school out of the bottom 10 percent

PHOTO: Caroline Bauman
Principal Yolanda Dandridge has led Georgian Hills Achievement Elementary for the last two years, and was previously the academic dean.

Here, in a series we call “How I Lead,” we feature principals and assistant principals who have been recognized for their work. You can see other pieces in the series here.

Principal Yolanda Dandridge walks almost 14,000 steps a day — double the national average.

It takes a lot of walking to manage two schools. Dandridge has led Georgian Hills Achievement Elementary for the last two years and was previously the academic dean. She temporarily took over Frayser Achievement Elementary when the schools had to share space this year because of maintenance issues at Georgian Hill’s original building.

“I am constantly on the move,” Dandridge said. “How else can you keep up with elementary students?”

Both schools are part of the Achievement School District, which is charged with turning around the state’s lowest-performing schools but has struggled to accomplish the task.

This year, Georgian Hills not only left the bottom 5 percent but moved out of the bottom 10 percent. In 2016, before Dandridge took charge, Georgian Hills was in the worst 2 percent of schools.

Dandridge was honored by the achievement district for her work.

“She is a real standout among our principals of someone who understands what it takes to turn things around,” said interim achievement district leader Kathleen Airhart.

Dandridge talked to Chalkbeat about how she gets to know her students, her efforts to motivate teachers, and why school buildings are important.

This interview has been condensed and lightly edited.

What was your first education job and what sparked your interest in the field?

PHOTO: Caroline Bauman
Dandridge walks almost 14,000 steps a day — double the national average.

I tell my teachers to always stay focused on the “why” behind their careers. For me, my “why” was the fact that my little brother got all the way through elementary school without learning to read. He wasn’t able to read until the fifth grade. He came from a family of educators, and he still slipped through the cracks. If that could happen to him, it could happen to so many kids.

I started teaching in Rolling Fork, Mississippi, and I taught in that state for more than a decade. I came to Memphis as a teacher, I was asked later to consider taking on the principal role at Georgian Hills. I said, “You want me to do what?” Now, I’m grateful for all those years in the classroom and as an academic dean to prepare me for this role.

How do you get to know students even though you don’t have your own classroom?

Any chance to get into the classroom, I will. If a substitute teacher doesn’t come, which does happen sometimes, I will teach the students in that classroom for a day. I love getting to know students by helping out in the classroom.

I am also constantly walking the hallways of both schools. That’s how I start the morning — I greet students and their parents by name when they walk into the school. I walk students to their classrooms. I’m constantly monitoring the hallways.

When a new student registers for classes, the first thing the office staff knows to do is call me down so I can meet them.

How do you handle discipline when students get into trouble?

I really prefer to always consider the experiences that a child may have had prior to entering our building.  When you approach discipline with a keen awareness of the types of situations a child might have or experience, it really makes you a better educator.  And you understand that the best thing for us to do is to ensure that students know and understand that we have their best interests in mind. When children connect with you and other teachers in this way, discipline is less challenging.

What is an effort you’ve spearheaded at your school that you’re particularly proud of?

I’m very proud of what we’ve done at Georgian Hills and now at Frayser to really focus on our teachers.

Every Wednesday after school, we’ll have a period of professional development. I try to be attentive to what my teachers tell me they want to learn more about. There is a lot of coordination on lesson plans in particular. Teachers work together on their lesson planning, and I also will personally give feedback on a teahers’ lesson plans. My biggest, driving question is “What do my teachers need most?” They don’t need to be spending hours everyday lesson planning when they can collaborate. We can help there.

Tell us about a time that a teacher evaluation didn’t go as expected — for better or for worse?

Evaluating teachers has always provided me with the opportunity to hear and see the creativity and passion that our teachers bring to the classroom.  My thought on evaluations is to take the anxiety out of it and ensure that teachers are comfortable and understand that the overall process is about improving their skills and enhancing the tools in their toolbox.

Tell us about a memorable time — good or bad — when contact with a student’s family changed your perspective.

PHOTO: Caroline Bauman
This year, Georgian Hills not only left the bottom 5 percent but moved out of the bottom 10 percent of schools in Tennessee.

When I was early in my teaching career in Mississippi, I had a student with a single mom. Her mom was an amazing support system for me and my classroom. She was always wanting to volunteer at the school. But she struggled to provide basic needs for her daughter — she was struggling to get a job. But she was trying so hard. There’s a stigma of parents, especially in low-income communities, not participating or caring about their child’s education. This mom was giving her all, and it changed my view of parental support. The school needed to find ways to also support her.

And so as a principal, I’m always thinking about how I can support my parents and invite them into the school. So that they feel welcome and wanted, and also so they are encouraged in their own role in their child’s education. We hold math and science nights, where parents learn how to do math games or science experiments at home with their kids. We provide them with materials and knowledge so that they can provide enrichment in their own home.

What issue in the education policy realm is having a big impact on your school right now? How are you addressing it?

We, like many schools in Memphis, don’t have the facilities we need for our students. Georgian Hills had to vacate our school building due to an issue with the roof. That created a hard environment for this school year — moving to a new building where we share space, and then me taking on that school as its school leader when the principal left. Honestly, I thought this year could break me as a school leader. But it didn’t, and it didn’t break our school either. We had a culture in place where our teachers felt supported among the chaos of the start of the year. After a year of repairs, we’re planning on moving back to our original building this fall.

But the issue here is that we don’t have the school buildings we need. Schools should be palaces in a community.

What’s the best advice you’ve received?

You have to mobilize people’s efforts to “win.” The first secret to this is to love your people. They are here for a purpose and you have to help them understand the higher purpose that they are here to serve.  You have to have the right people in place, be responsible for developing them, and have the courage to let them go when student’s needs aren’t being met. Finally, transparency rules.

School Finance

How much are Indianapolis teachers paid? Here are the highest and lowest paid districts in the city

PHOTO: Alan Petersime

As teachers across the country rally for more education funding and higher salaries, policymakers and the public are paying renewed attention to how much educators are paid.

Nationwide, stagnant teacher pay coupled with plentiful well-paying openings in other fields means that it’s even harder for principals and administrators to fill open positions. For some teachers, low pay is one reason they leave the classroom altogether, whether to become administrators or find another career.

In Indiana, cash-strapped districts often struggle to pay for raises even for their current staff — making it difficult to retain teachers. Educators in Indianapolis have lots of schools to choose from, and teachers can increase their pay by heading to nearby districts.

Educators in Indiana school districts made an average of about $48,743 last year, according to the Indiana Education Employment Relations Board. Pay is higher in districts in the state’s capitol, but it varies widely, with educators in the lowest paying district earning about $11,000 less on average than teachers in the top paid district. (The board only collects data on districts with teachers unions so it does not include average pay for teachers in charter schools.)

When teachers with particularly high demand skills switch jobs, they can also boost their earning by moving higher on the pay scale.

Average teacher pay in Marion County 2016-17

Source: Indiana Education Employment Relations Board collective bargaining report. (Image by Sam Park)

One reason why average pay might be higher in some districts than others is because the pay scale is higher. Starting pay in Beech Grove Schools, for example, is $38,000 per year. In Speedway Schools, a district with consistently high pay, teachers earn a minimum of $44,252.

Minimum teacher pay in Marion County 2016-17

Source: Indiana Education Employment Relations Board collective bargaining report. (Image by Sam Park)

The gap is even wider for experienced educators. In Indianapolis Public Schools, the pay scale sets the maximum salary at $72,740. That’s almost $14,000 less than the max pay for teachers in Speedway — $86,702. (Some teachers may earn more because they are still paid based on older pay scales with higher caps.)

Maximum teacher pay in Marion County 2016-17

Source: Indiana Education Employment Relations Board collective bargaining report. (Image by Sam Park)

But there’s another reason why some districts have lower average pay than others — they have more inexperienced teachers. Both Beech Grove and Indianapolis Public Schools have higher floors and ceiling for pay then they did in 2013-2014. Nonetheless, the average pay in those districts has declined, likely because they have more inexperienced teachers with lower salaries.

This year, both districts have relatively high numbers of teachers in their first year, according to data from the Indiana Department of Education. In Indianapolis Public Schools, nearly 10 percent of certified educators are new to the classroom. In both Beech Grove and Warren Township Schools, about 7 percent of educators are new.