humbling harbinger

Squeezed by ballooning pension costs, charters cut programs

A Queens charter school that pays for pension costs directly out of its budget is cutting programs to afford pensions.
A Queens charter school that pays for pension costs directly out of its budget is cutting programs to afford pensions.

Stacey Gauthier at the Renaissance Charter School is worrying a lot these days — about money. This year she’s had to increase class sizes, cut the summer school program, and forgo hiring experienced teachers when an older teacher retires. Yet she still hasn’t cut enough to be able to afford the school’s rising pension costs, which have grown from $12,000 per teacher in 2004 to $21,000 per teacher this year.

Pension costs for city teachers have been rising steadily over the past decade, but for the most part the expenses have been hidden from individual schools, which rely on the city to cover all pension costs. Yet for a small number of charters schools like Renaissance that participate in the Teacher Retirement System (TRS) out of their own budgets, the ballooning price of a comfortable retirement has been acutely felt.

“We have another year to live,” Gauthier said. “We’re dipping into our savings now, which is okay, but if things don’t rebound, we won’t be financially viable.”

Although TRS costs have always been high relative to the private sector, their impact on charter school budgets has become especially burdensome since state lawmakers froze planned increases in charter school funding two years ago. (A breakdown of several charter schools’ pension and 401(k) payments is below the jump.)

The freeze made it harder for schools to pay their TRS contributions, which have increased by 10 percent since 2008. At a loss, schools said their pension payments are often coming at the expense of other school programs — a situation that the district schools could see themselves in if promised budget cuts are approved for next year.

“Our costs are growing astronomically,” said Vicki Zubovic, the managing director of development at the KIPP charter schools. “It’s becoming harder and harder to meet these needs.”

The TRS pension squeeze affects at least 12 charter schools in New York City. The rest offer some sort of 401(k) or 403(b) defined contribution plan in which employees contribute a portion of their salary to a fund and employers agree to match that amount up to a certain percentage.

The difference in cost between the two options is enormous.

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PHOTO: Nicholas Garcia
The more generous public pension plan costs much more per student than a slimmer 401k retirement option.

According to an analysis using the fiscal audits from 2008-2009, on average, non-TRS schools contributed about 2 percent of all payroll expenses to their pension funds. TRS schools contributed around 14 percent of all payroll expenses to the TRS. This comes down to a difference of over $1,400 per student that TRS schools must spend on pensions that other charters are free to direct elsewhere.

Citywide, pensions cost on average $2,000 per pupil — a higher figure than charter schools face because district teachers are generally older and because of the way the TRS accounts for charter school pension costs. Overall, pensions make up $2.1 billion, or 10 percent, of the DOE’s total budget of $21 billion.

Most charter schools in the TRS joined because they are “conversion” schools that transformed into charters from traditional public schools — and as a result were required by the state to keep the same union benefits afforded district school teachers. But a handful of charter schools that belong to TRS opted into the plan on their own.

School leaders said they wanted to offer their employees the same benefits offered by district schools. There is simply no way that a 401(k) plan can offer the benefits that the TRS promises, such as free retiree health care and a guaranteed yearly pension that gets paid whether the market is down or not.

“We knew going in we were going to offer the TRS,” said Leonard Goldberg, the principal of Opportunity Charter School. “It’s hard for a teacher who has five, ten years in a system to try working in a charter school if the charter school doesn’t offer the same benefit.”

Goldberg said that TRS membership has helped Opportunity meet its goal of attracting and retaining experienced teachers. The plan is expensive, he said. But he added, “We believe at the moment it’s worth the investment.”

To compete, some charter schools that don’t participate with TRS have tried to make their 401(k) plans as lucrative as possible.

Take the plan at KIPP S.T.A.R., the only one of the four New York City KIPP schools that is not in the TRS. KIPP S.T.A.R. matches 50 percent of employee contributions up to the federal limit of $16,500 per year. In addition, the school offers employees a partially subsidized health care plan.

Despite all this, KIPP officials conceded that this plan, which is generous by most standards, still can’t compete with the TRS.

Not all unionized charter schools participate in TRS; two that offer 401(k) plans are Amber Charter School in Manhattan and Merrick Academy in Queens.

Even if the TRS schools stop thinking the plan is worth the investment, there’s nothing they can do: According to state law, once a school is in the TRS, it can never leave.

But that hasn’t stopped the schools from asking for relief. Several schools in the plan are pushing to get an increase in state funding to cover the costs. The UFT has proposed pension relief for charter schools that would require the Department Of Education to pay for the schools’ TRS costs. How that would work in practice has yet to be worked out.

But most schools in the plan agree that the simplest option — letting the charter schools opt out of the TRS — would not be a fair resolution.

“I think that there are some ridiculous parts of the pension, but we didn’t set that up,” said Gauthier of Renaissance. “The politicians, traditional public schools, they all have this benefit. Why are charter schools expected to be the sacrificial lambs?”

Here is a breakdown of charter schools’ pension plans and payments, as reported in their 2008-2009 audited financial statements. One note before reading: A small contribution to a school’s pension fund does not necessarily indicate poor policy on the part of the school. Because 401k/403b plans state that an employer must contribute to the plan only if an employee contributes, some schools contribute little to no money to their pension plans due to their employees’ decisions.

Betsy DeVos

To promote virtual schools, Betsy DeVos cites a graduate who’s far from the norm

U.S. Education Secretary Betsy DeVos spoke to the National Alliance for Public Charter Schools in June.

If Betsy Devos is paying any attention to unfolding critiques of virtual charter schools, she didn’t let it show last week when she spoke to free-market policy advocates in Bellevue, Washington.

Just days after Politico published a scathing story about virtual charters’ track record in Pennsylvania, DeVos, the U.S. education secretary, was touting their successes at the Washington Policy Center’s annual dinner.

DeVos’s speech was largely identical in its main points to one she gave at Harvard University last month. But she customized the stories of students who struggled in traditional schools with local examples, and in doing so provided an especially clear example of why she believes in virtual schools.

From the speech:

I also think of Sandeep Thomas. Sandeep grew up impoverished in Bangalore, India and experienced terrible trauma in his youth. He was adopted by a loving couple from New Jersey, but continued to suffer from the unspeakable horrors he witnessed in his early years. He was not able to focus in school, and it took him hours to complete even the simplest assignment.

This changed when his family moved to Washington, where Sandeep was able to enroll in a virtual public school. This option gave him the flexibility to learn in the quiet of his own home and pursue his learning at a pace that was right for him. He ended up graduating high school with a 3.7 GPA, along with having earned well over a year of college credit. Today, he’s working in finance and he is a vocal advocate for expanding options that allow students like him a chance to succeed.

But Thomas — who spoke at a conference of a group DeVos used to chair, Advocates for Children, in 2013 as part of ongoing work lobbying for virtual charters — is hardly representative of online school students.

In Pennsylvania, Politico reported last week, 30,000 students are enrolled in virtual charters with an average 48 percent graduation rate. In Indiana, an online charter school that had gotten a stunning six straight F grades from the state — one of just three schools in that positionis closing. And an Education Week investigation into Colorado’s largest virtual charter school found that not even a quarter of the 4,000 students even log on to do work every day.

The fact that in many states with online charters, large numbers of often needy students have enrolled without advancing has not held DeVos back from supporting the model. (A 2015 study found that students who enrolled in virtual charters in Michigan, Illinois, and Wisconsin did just as well as similar students who stayed in brick-and-mortar schools.) In fact, she appeared to ignore their track records during the confirmation process in January, citing graduation rates provided by a leading charter operator that were far higher — nearly 40 points in one case — than the rates recorded by the schools’ states.

She has long backed the schools, and her former organization has close ties to major virtual school operators, including K12, the one that generated the inflated graduation numbers. In her first week as education secretary, DeVos said, “I expect there will be more virtual schools.”

Correction: An earlier version of this article misstated the location of the dinner.

expansion plans

Here are the next districts where New York City will start offering preschool for 3-year-olds

PHOTO: Christina Veiga
Schools Chancellor Carmen Fariña, left, and Mayor Bill de Blasio, center, visited a "Mommy and Me" class in District 27 in Queens, where the city is set to expand 3-K For All.

New York City officials on Tuesday announced which school districts are next in line for free pre-K for 3-year-olds, identifying East Harlem and the eastern neighborhoods of Queens for expansion of the program.

Building on its popular universal pre-K program for 4-year-olds, the city this year began serving even younger students with “3-K For All” in two high-needs school districts. Mayor Bill de Blasio has said he wants to make 3-K available to every family who wants it by 2021.

“Our education system all over the country had it backwards for too long,” de Blasio said at a press conference. “We are recognizing we have to reach kids younger and more deeply if we’re going to be able to give them the foundation they need.”

But making preschool available to all of the city’s 3-year-olds will require an infusion of $700 million from the state or federal governments. In the meantime, de Blasio said the city can afford to expand to eight districts, at a cost of $180 million of city money a year.

Funding isn’t the only obstacle the city faces to make 3-K available universally. De Blasio warned that finding the room for an estimated 60,000 students will be a challenge. Space constraints were a major factor in picking the next districts for expansion, he said.

“I have to tell you, this will take a lot of work,” he said, calling it “even harder” than the breakneck rollout of pre-K for all 4-year-olds. “We’re building something brand new.”

De Blasio, a Democrat who is running for re-election in November, has made expansion of early childhood education a cornerstone of his administration. The city kicked off its efforts this September in District 7 in the South Bronx, and District 23 in Brownsville, Brooklyn. More than 2,000 families applied for those seats, and 84 percent of those living in the pilot districts got an offer for enrollment, according to city figures.

According to the timeline released Thursday, the rollout will continue next school year in District 4 in Manhattan, which includes East Harlem; and District 27 in Queens, which includes Broad Channel, Howard Beach, Ozone Park and Rockaways.

By the 2019 – 2020 school year, the city plans to launch 3-K in the Bronx’s District 9, which includes the Grand Concourse, Highbridge and Morrisania neighborhoods; and District 31, which spans all of Staten Island.

The 2020 – 2021 school year would see the addition of District 19 in Brooklyn, which includes East New York; and District 29 in Queens, which includes Cambria Heights, Hollis, Laurelton, Queens Village, Springfield Gardens and St. Albans.

With all those districts up and running, the city expects to serve 15,000 students.

Admission to the city’s pre-K programs is determined by lottery. Families don’t have to live in the district where 3-K is being offered to apply for a seat, though preference will be given to students who do. With every expansion, the city expects it will take two years for each district to have enough seats for every district family who wants one.