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.

This chart says XYZ.
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.

weekend update

How the education world is reacting to racist violence in Charlottesville — and to Trump’s muted response

PHOTO: Andrew Dallos/Flickr
A rally against hate in Tarrytown, New York, responds to the violence in Charlottesville.

For educators across the country, this weekend’s eruption of racism and violence in Charlottesville, Virginia, offered yet another painful opportunity to communicate their values to families, colleagues, and community members.

Many decried the white supremacists who convened in the college town and clashed with protesters who had come to oppose their message. Some used social media to outline ideas about how to turn the distressing news into a teaching moment.

And others took issue with President Donald Trump’s statement criticizing violence “on many sides,” largely interpreted as an unwillingness to condemn white supremacists.

One leading education official, U.S. Education Secretary Betsy DeVos, followed Trump’s approach, criticizing what happened but not placing blame on anyone in particular:

DeVos’s two most recent predecessors were unequivocal, both about what unfolded in Charlottesville and whom to blame:

Leaders of the nation’s two largest teachers unions responded directly to Trump:

The American Federation of Teachers, Weingarten’s union, is supporting vigils across the country Sunday night organized by chapters of Indivisible, a coalition that emerged to resist the Trump administration. The union also promoted resources from Share My Lesson, its lesson-plan site, that deal with civil rights and related issues.

“As educators, we will continue to fulfill our responsibility to make sure our students feel safe and protected and valued for who they are,” Weingarten said in a statement with other AFT officials.

Local education officials took stands as well, often emotionally. Here’s what the superintendent in Memphis, which is engaged in the same debate about whether Confederate memorials should continue to stand that drew white supremacists to Charlottesville, said on Twitter:

Teachers in Hopson’s district return for the second week of classes on Monday. They’ve helped students process difficult moments before, such as a spate of police killings of black men in 2016; here’s advice they shared then and advice that teachers across the country offered up.

We want to hear from educators who are tackling this tough moment in their classrooms. Share your experiences and ideas here or in the form below. 

Betsy DeVos

‘Underperformer,’ ‘bully,’ and a ‘mermaid with legs’: NYMag story slams Betsy DeVos

PHOTO: New York Magazine
A drawing of DeVos commissioned by an 8-year-old starts the New York Magazine article.

A new article detailing Betsy DeVos’s first six months as U.S. education secretary concludes that she’s “a mermaid with legs: clumsy, conspicuous, and unable to move forward.”

That’s just one of several brutal critiques of DeVos’s leadership and effectiveness in the New York Magazine story, by Lisa Miller, who has previously covered efforts to overhaul high schools, New York City’s pre-kindergarten push, and the apocalypse. Here are some highlights:

  • Bipartisan befuddlement: The story summarizes the left’s well known opposition to DeVos’s school choice agenda. But her political allies also say she’s making unnecessary mistakes: “Most mystifying to those invested in her success is why DeVos hasn’t found herself some better help.”
  • A friend’s defense: DeVos is “muzzled” by the Trump administration, said her friend and frequent defender Kevin Chavous, a school choice activist.
  • The department reacts: “More often than not press statements are being written by career staff,” a spokesperson told Miller, rejecting claims that politics are trumping policy concerns.
  • D.C. colleagues speak: “When you talk to her, it’s a blank stare,” said Charles Doolittle, who quit the Department of Education in June. A current education department employee says: “It’s not clear that the secretary is making decisions or really capable of understanding the elements of a good decision.”
  • Kids critique: The magazine commissioned six portraits of DeVos drawn by grade-schoolers.
  • Special Olympics flip-flop: DeVos started out saying she was proud to partner with the athletics competition for people with disabilities — and quickly turned to defending a budget that cuts the program’s funding.
  • In conclusion: DeVos is an underperformer,” a “bully” and “ineffective,” Miller found based on her reporting.

Updated (July 31, 2017): A U.S. Education Department spokesperson responded to our request for comment, calling the New York Magazine story “nothing more than a hit piece.” Said Liz Hill: “The magazine clearly displayed its agenda by writing a story based on largely disputed claims and then leaving out of the article the many voices of those who are excited by the Secretary’s leadership and determination to improve education in America.”