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.

the one to watch

Inside the three-candidate battle for northeast Denver’s school board seat

File photo of student at Marrama Elementary School in northeast Denver. (The Denver Post)

Of the Denver school board races on the November ballot, none packs more intrigue than the fight for District 4.

The three-person slate of candidates features an appointed incumbent who’s never run for office and supports the district’s current path, an outspoken recent high school graduate who sharply disagrees, and a former charter school educator with a more nuanced view and — in what on its surface may seem surprising — the endorsement of the teachers union.

The seat represents a large swath of northeast Denver with a wide range of income levels, including areas that are gentrifying quickly and others that have been home to some of the district’s most aggressive school improvement strategies.

The Nov. 7 election is high stakes. Four of the seven seats on the Denver school board are up for grabs. If candidates who disagree with Denver Public Schools’ direction win all four races, they’ll have the political power to change key policies in the state’s largest school district and one nationally recognized for its embrace of school choice and autonomy.

Tay Anderson is one of those candidates. The 19-year-old graduated from Denver’s Manual High School last year and is now a student at Metropolitan State University. On the campaign trail, he has doggedly criticized the district for what he describes as weak community engagement efforts and a move to “privatize” public education by approving more charter schools, which are publicly funded but independently run (in Denver, by nonprofit operators).

He also has led the charge in attempting to tie the current school board and the incumbent candidates to U.S. Education Secretary Betsy DeVos, whose stance on school choice — and especially private school vouchers, which DPS does not support — have made her a controversial figure.

    This is the first of a series of articles profiling this year’s Denver school board races. You can read about where candidates in all the DPS races stand on issues here, in Chalkbeat’s candidate questionnaire. Check out our coverage of the campaign’s first campaign finance reports here.

When DeVos came to Denver in July to give a speech to a group of conservative lawmakers from across the United States, Anderson organized a protest against her. In front of a crowd of hundreds, he called out the current Denver school board members.

“We can tell them, ‘Screw you. You’re fired in November!’” he said.

Anderson has a compelling personal story. The teenager struggled in high school before becoming a leader at Denver’s Manual High. He was student body president, chairman of the Colorado High School Democrats and a member of the Student Board of Education.

Anderson was also homeless for a time and has said his own challenges give him valuable insight into the lives of other Denver students living in difficult situations. About two-thirds of the district’s 92,000 students qualify for subsidized lunches, a proxy for poverty.

“I have had nobody in my corner when I was a homeless student and when I was in and out of foster care,” Anderson said at a recent televised candidate debate. “And now it is my turn to turn to our students and say, ‘I am going to be your champion.’”

His candidacy has attracted more local and national press attention than is usual for a school board race. But while Anderson has said his young age would bring a fresh perspective to the board, his opponents have questioned whether he has the experience to serve.

“It’s one thing to swing a hammer at a frustration, but it’s another to know where to swing it,” said candidate Jennifer Bacon, one of Anderson’s two opponents.

Anderson is running against Bacon, 35, and incumbent Rachele Espiritu, 48. Espiritu was appointed to fill a vacancy on the board in May 2016. The appointment process was long and marked by controversy. The first appointee, MiDian Holmes, stepped aside after details about a misdemeanor child abuse conviction and her mischaracterization of it came to light.

Both Espiritu and Bacon were among the finalists for the position. But Bacon withdrew, explaining at the time it was “in consideration of my need for growth and readiness for this position, as well as my interests in supporting the board.”

Asked recently to elaborate, Bacon said she withdrew because she sensed she wasn’t going to be appointed. She said she, too, had an arrest in her background: for stealing a necklace from Macy’s when she was in college. Bacon said the charge was dropped and she was not convicted. (No charges showed up in a background check done by Chalkbeat.)

Bacon, who attended college in Louisiana, said the arrest was a turning point at a time when she was struggling to find her purpose. She went on to join the Teach for America corps, teaching for a year in New Orleans and a year in Miami.

After teaching, she went to law school and then moved in 2010 to Denver, where she worked first as a dean for the city’s largest charter school network, DSST, and then in alumni affairs for Teach for America. She is now a regional director with Leadership for Educational Equity, a nonprofit organization that trains educators to advocate for policy changes.

Bacon said she wondered whether her positions on key issues also made her an unlikely appointee. For instance, she has said she’s not opposed to charter schools but believes Denver has reached its threshold and should focus on shoring up its traditional schools.

“People ask me if I’m pro-charter,” Bacon said in an interview. “I’m pro-community.”

Since Espiritu was appointed, she has largely voted in line with the rest of the school board. But she chafes at the idea that the board is monolithic or a rubber stamp for the administration. Much back-and-forth occurs before a decision, she said in an interview, and each board member brings a unique background and set of life experiences to the table.

Espiritu often says on the campaign trail that she’s the only immigrant to serve on the board in the last century. She was born in the Philippines and came to the United States as a toddler. She holds a PhD in clinical psychology from the University of Colorado Boulder and helped found a small business called Change Matrix that assists organizations with planning, putting into place and monitoring change. She and her family moved to Denver in 2012.

Espiritu has two sons. Her oldest goes to DSST: Stapleton High, a charter school. Her youngest goes to William (Bill) Roberts School, a K-8 district-run school. She has said that in choosing schools for her children, she focused on quality and not on type.

As a member of the board, Espiritu has paid particular attention to efforts to improve student mental health. She recently encouraged DPS to become a “trauma-informed school district.”

“I want us to be a district that addresses student and educator trauma in a proactive or preventative way that’s culturally sensitive and systematic in fashion,” she said at a September board meeting. “…We need to shift our thinking from asking what is wrong with a child to what happened with a child.”

Parts of northeast Denver have struggled academically. The region is home to the district’s biggest-ever school turnaround effort, as well as two of three schools the board voted unanimously last year to close due to poor performance.

The candidates’ disparate views on school closure offer a window into what differentiates them. Espiritu voted for the closures, though she noted at a subsequent board meeting that doing so was “a painful process … and such a difficult decision.”

Anderson has said he opposes closing any more traditional, district-run schools. Bacon, meanwhile, has said that while she doesn’t believe in “trapping kids in failing schools,” ideas about how to turn things around should originate with affected families.

Two local groups that traditionally endorse candidates and contribute large sums of money struggled this year with who to support in District 4. The Denver Classroom Teachers Association endorsed Bacon, but a progressive caucus of the union chose to separately support Anderson. The pro-reform group Stand for Children did not endorse any candidate, explaining that both Bacon and Espiritu surpassed its “threshold for endorsement.”

Of the three candidates, Espiritu had raised the most money — $73,847 — as of Oct. 11, when the first campaign finance filing period ended. Bacon had raised $59,302, including $10,000 from the teachers union, while Anderson had raised $16,331.

Espiritu and Bacon have also benefitted from the support of independent expenditure committees. A union-funded group called Brighter Futures for Denver spent $139,000 on Bacon. Two other groups, Students for Education Reform and Raising Colorado, which is associated with Democrats for Education Reform, spent a total of $73,229 on Espiritu.

Sorting the Students

As Nashville heads to court over sharing student information with the state, here’s why Memphis probably won’t

PHOTO: Grace Tatter
Nashville's Davidson County Chancery Court building where the state filed against Metro Nashville Public Schools over sharing contact information with charter schools.

Tennessee’s two largest school districts are often in lockstep on key issues. But in a recent tiff with the state about sharing student information with charter schools, the two districts are poised to part ways.

Leaders of Nashville’s school district have repeatedly defied an order from Tennessee’s education commissioner to share student addresses, phone numbers, and other information with the state’s controversial turnaround district, as required by a new state law. The state filed a lawsuit this week in response.

Meanwhile, leaders of the Memphis district have spoken out about the rule — but are preparing to comply. The district has given parents until Sunday, Oct. 22 to opt out of sharing their contact information with charter schools.

Instead of outright rejecting McQueen’s deadline last month like Nashville did, Superintendent Dorsey Hopson sought a compromise and the district has indicated contact information after the opt out window could be shared.

“… we respectfully request you extend your deadline until October 23, 2017 to allow our families the opportunity to make an informed decision regarding their rights and to give our board an opportunity to vote on the release of the data,” Hopson said in a letter to McQueen.

The state education department says it is holding off filing a similar suit against that district, for now. The Memphis district “is still deciding whether to comply, whereas Metro [Nashville] has made its decision already,” state spokeswoman Sara Gast said. “Given that, it is appropriate to file here and then review Shelby’s decision to decide if litigation is necessary.”

Shelby County Schools declined to share how many parents have chosen to opt out so far, but said it plans to share information with its board about the effort next week.

The fight has ignited long-simmering tensions around enrollment and the state’s influence in local schools, and comes on the heels of Metro Nashville Public Schools board voting to join Shelby County Schools in its landmark funding lawsuit against the state.

Memphis leaders have also said that the issue at hand is student privacy, though a robocall to Memphis parents indicated that the main goal of the opt-out process was not to lose students to charter schools.

Memphis’ compromise stance will be good news to groups like parent advocacy organization Memphis Lift, which says it has gathered about 1,200 parent signatures urging Shelby County Schools to release the contact information.

What Memphis parents should know about how schools share student information

The legal questions at stake are the first challenge to a slight, but significant, amendment to federal rules

The Nashville school board cited two reasons for defying the state’s order in late August: One is U.S. Department of Education rule that allows districts to have discretion on who gets student directory information. The second was that when state lawmakers crafted the law that requires school districts to share student information, they did not intend for that information to be used for recruitment.

According to Frank LoMonte, a First Amendment lawyer and director of The Brechner Center at the University of Florida, said the lawsuit could have national implications.

“What we’re about to see is the first test of whether the U.S. Department of Education amended rules in 2011 are enforceable or not,” he said. What it comes down to, he said, is if a federal rule can give local districts the permission to violate state law.

The Nashville board’s second justification reflects concerns from State Rep. John Forgety, who chairs a key House education committee. He says the state is misinterpreting the law he helped create.

The state said in a statement that Commissioner Candice McQueen is seeking to confirm her interpretation of the new state law, “ensuring that families can be informed of all public education opportunities available to them.”

Below is a copy of the state’s court filing: