Who Is In Charge

PERA plan: “Work longer, pay more, receive less”

There was no good news in a 90-minute legislative discussion Thursday afternoon on the financial future of the Public Employees’ Retirement Association.

The PERA board has proposed a sweeping and complex plan designed to bring the recession-battered pension plan to solvency within 30 years. Board members and executives met with members of the Joint Budget Committee to answer questions on the plan.

Summing up the effects of the proposal on civil servants and retirees, PERA Executive Director Meredith Williams said, “So, essentially they’ll work longer, pay more and receive less.”

Public Employees' Retirement Association headquarters in Denver.
Public Employees' Retirement Association headquarters in Denver.

The rescue plan wouldn’t increase employee payroll deductions but would increase employer contributions – including from funds that otherwise would go for salary increases – and, for some workers, would raise the retirement age and reduce the salary base on which a pension is calculated.

The most controversial part of the plan, at least based on the volume of e-mail flowing into legislators’ in-boxes, is a proposal to reduce most retirees’ annual cost-of-living increases from 3.5 percent to 2 percent. It’s estimated that the current COLA would provide a third of the pension benefits over the retirement of a worker who retired in 2008.

The future of PERA – and the cost of fixing it – is of high interest to the Colorado education community. Of PERA’s 190,684 active members, 118,547 are in the school division, which includes all districts in the state except Denver. (DPS employees and retirees will enter the system Jan. 1 as a separate division.) Some 44,806 people receive benefits from the school division. Thousands of higher education employees also belong to PERA, as part of the state division.

Its investments hollowed out by the recession, PERA’s net assets available for benefits dropped from $43.1 billion at the end of 2007 to $30.8 billion at the end of 2008, a loss of more than 25 percent. The system pays about $3.1 billion in benefits a year and receives about $1.7 billion in contributions from covered employees and their employers. PERA overall is about 70 percent funded.

“Certainly these are scary times,” Williams said. “Right now we’re projected to run out of money during the lifetime of most of our members.” Despite the pain imposed by the plan, Wilson said, “It’s cheaper, more cost effective and less painful to act now.”

Some 20 percent of the money needed for the plan would come from employer and employee contributions and the rest from benefit cuts.

Thursday’s discussion was detailed and technical at times; here are some highlights.

They can’t take my COLA!

PERA officials believe retirees’ cost-of-living increases can be reduced because of legal precedent that allows doing so in times of “actuarial necessity” – legalese for the plan will go broke without changes being made.

“We believe the COLA can be modified” based on actuarial necessity, said Greg Smith, PERA chief operating officer and general counsel. “We believe that actuarial necessity exists today. … It is critical that we be able to modify the retiree COLA.” Without doing that, Smith said it would take an “extraordinary amount” of contributions for the plan to achieve solvency.

Many retirees have complained to legislators and others that they were told by human relations staff and in paperwork that the 3.5 percent COLA was guaranteed, so changing it would amount to breaking a contract.

“No matter what an employer hands out, if it doesn’t match the law, it’s not binding,”
Smith said.

Will it all end up in court?

Asked if PERA expects any changes approved by the legislature to end up in court, Smith said, “There is some speculation that it will end up in the courts. … It’s reasonable to expect litigation.”

Whom can we blame?

While neither PERA officials nor current legislators explicitly pointed fingers, there seemed to be general agreement that legislation passed in 2000 helped contribute to the current problem, During the height of the tech boom, 1999 and 2000 were the only two years that PERA has been fully funded in its 78-year history.

In 2000 lawmakers responded by effectively reducing contributions and raising benefits. “That’s kind of where it started,” Williams said.

But when asked if today’s problems could have been avoided if the legislature hadn’t been so generous in 2000, Williams said, “I think not,” saying that the economic crash in 2008 was just too big.

In 2004 and 2006 the legislature did increase contributions and tighten benefits for new employees, but Williams said lawmakers couldn’t go further then because  “We did not have an actuarial necessity. We could not make that legal case. Today we can.”

Don’t wait for the next bull market

Some lawmakers have asked – hopefully – if PERA could rescue itself by more aggressive investment strategies or be rescued by another market boom.

“That would be like going to Black Hawk and doubling down with the rent money,” said Susan Murphy of Denver, one of three PERA trustees who, by law, are neither members of nor beneficiaries of the pension system.

“That was our Plan B,” quipped Rep. Jack Pommer, D-Boulder and JBC chair.

Do your homework

pushing back

State’s most drastic school intervention plans won’t work, say Memphis board members

PHOTO: Laura Faith Kebede
Shelby County Schools board member Stephanie Love

School board members in Memphis are pushing back on the state’s plan to intervene in two low-performing schools.

In their first public discussion of an intervention plan outlined this month by the Tennessee Department of Education, members of Shelby County’s board of education said they aren’t convinced the most drastic recommendations will work for Hawkins Mill Elementary and American Way Middle schools.

The state has recommended closing Hawkins Mill because of its low enrollment and poor academic performance. American Way is on the state’s track either for takeover by Tennessee’s Achievement School District or transfer to a charter organization chosen by Shelby County Schools beginning in the fall of 2019.

But school board members said they’d rather move both schools to the Innovation Zone, a turnaround program run by the local district which has had some success since launching in 2012.

And Superintendent Dorsey Hopson said he wants to keep Hawkins Mill open because the Frayser school is in its first year under his “critical focus” plan to invest in struggling schools instead of just closing them.

“I would prefer to stay the course,” he told board members Tuesday evening. “I don’t think the board should be forced to close something by the state.”

Whether local school leaders can make that call is up for debate, though.

The intervention plan is the first rolled out under Tennessee’s new tiered school improvement model created in response to a 2015 federal education law. State officials say it’s designed for more collaboration between state and local leaders in making school improvement decisions, with the state education commissioner ultimately making the call.

But Rodney Moore, the district’s chief lawyer, said the state does not have the authority to close a school if the board votes to keep it open.

Both Hawkins Mill and American Way are on the state’s most intensive track for intervention. The state’s plan includes 19 other Memphis schools, too, with varying levels of state involvement, but only Hawkins Mill and American Way sparked discussion during the board’s work session.

Until this year, Hawkins Mill was one of the few schools in the Frayser community that hadn’t been under a major improvement plan in the last decade — unlike the state-run, charter, and iZone schools that surround it. But last year, Hopson’s “critical focus” plan set aside additional resources for Hawkins Mill and 18 other struggling schools and set a three-year deadline to turn themselves around or face possible closure.

School board members Stephanie Love, whose district includes Hawkins Mill, said that timeline needs to play out. “I am in no support of closing down Hawkins Mill Elementary,” she said. “We have what it takes to fully educate our children.”

PHOTO: Tajuana Cheshier
Protests over the state takeover of American Way Middle School in 2014, which is in Rep. Raumesh Akbari’s district in Memphis, motivated her to file legislation designed to limit the power of the state’s Achievement School District.

American Way Middle has been on the radar of local and state officials for some time. In 2014, the state explored moving it to the ASD, but that didn’t happen because the southeast Memphis school had higher-than-average growth on student test scores. American Way has not kept up that high growth, however, and Chief of Schools Sharon Griffin considered it last year for the iZone.

Board member Miska Clay Bibbs, whose district includes American Way, was opposed to both of the state’s intervention options.

“What you’re suggesting is something that’s not working,” Bibbs said of the ASD’s track record of school turnaround based on its charter-driven model.

Bibbs added that any improvement plan for American Way must be comprehensive and offered up a resolution for consideration next week to move the school into the iZone next school year.

“We can no longer be: change a principal, tack on an extra hour. It has to be a holistic approach,” she said, adding that feeder patterns of schools should be part of the process.

Turnaround 2.0

McQueen outlines state intervention plans for 21 Memphis schools

PHOTO: TN.gov
Candice McQueen has been Tennessee's education commissioner since 2015 and oversaw the restructure of its school improvement model in 2017.

Tennessee Education Commissioner Candice McQueen has identified 21 Memphis schools in need of state intervention after months of school visits and talks with top leaders in Shelby County Schools.

In its first intervention plan under the state’s new school improvement model, the Department of Education has placed American Way Middle School on track either for state takeover by the Achievement School District or conversion to a charter school by Shelby County Schools.

The state also is recommending closure of Hawkins Mill Elementary School.

And 19 other low-performing schools would stay under local control, with the state actively monitoring their progress or collaborating with the district to design improvement plans. Fourteen are already part of the Innovation Zone, the Memphis district’s highly regarded turnaround program now in its sixth year.

McQueen outlined the “intervention tracks” for all 21 Memphis schools in a Feb. 5 letter to Superintendent Dorsey Hopson that was obtained by Chalkbeat.

Almost all of the schools are expected to make this fall’s “priority list” of Tennessee’s 5 percent of lowest-performing schools. McQueen said the intervention tracks will be reassessed at that time.

McQueen’s letter offers the first look at how the state is pursuing turnaround plans under its new tiered model of school improvement, which is launching this year in response to a new federal education law.

The commissioner also sent letters outlining intervention tracks to superintendents in Nashville, Chattanooga, Knoxville, and Jackson, all of which are home to priority schools.

Under its new model, Tennessee is seeking to collaborate more with local districts to develop improvement plans, instead of just taking over struggling schools and assigning them to charter operators under the oversight of the state-run Achievement School District. However, the ASD, which now oversees 29 Memphis schools, remains an intervention of last resort.

McQueen identified the following eight schools to undergo a “rigorous school improvement planning process,” in collaboration between the state and Shelby County Schools. Any resulting interventions will be led by the local district.

  • A.B. Hill Elementary
  • A. Maceo Walker Middle
  • Douglass High
  • Georgian Hills Middle
  • Grandview Heights Middle
  • Holmes Road Elementary
  • LaRose Elementary
  • Sheffield Elementary
  • Wooddale High

These next six iZone schools must work with the state “to ensure that (their) plan for intervention is appropriate based on identified need and level of evidence.”

  • Sheffield Elementary
  • Raleigh-Egypt High
  • Lucie E. Campbell Elementary
  • Melrose High
  • Sherwood Middle
  • Westwood High

The five schools below will continue their current intervention plan within the iZone and must provide progress reports to the state:

  • Hamilton High
  • Riverview Middle
  • Geeter Middle
  • Magnolia Elementary
  • Trezevant High

The school board is expected to discuss the state’s plan during its work session next Tuesday. And if early reaction from board member Stephanie Love is any indication, the discussion will be robust.

“We have what it takes to improve our schools,” Love told Chalkbeat on Friday. “I think what they need to do is let our educators do the work and not put them in the situation where they don’t know what will happen from year to year.”

Among questions expected to be raised is whether McQueen’s recommendation to close Hawkins Mill can be carried out without school board approval, since her letter says that schools on the most rigorous intervention track “will implement a specific intervention as determined by the Commissioner.”

Another question is why the state’s plan includes three schools — Douglass High, Sherwood Middle, and Lucie E. Campbell Elementary — that improved enough last year to move off of the state’s warning list of the 10 percent of lowest-performing schools.

You can read McQueen’s letter to Hopson below: