Who Is In Charge

State pension plan weathers tough year

The state’s public pension system last year paid out more than it took in, auditors and system officials told the Legislative Audit Committee on Monday.

Greg Smith and Carole Wright
PERA interim executive director Gregory Smith makes a point as board president Carole Wright listens during Monday’s hearing.

The value of all funds administered by the Public Employees’ Retirement Association, known as PERA, declined $1.2 billion, or 2.8 percent, to about $39.9 billion, according to the pension system’s annual report, which was presented to the committee. PERA’s annual report and audit come before the committee every July.

The 483,467-member system covers all Colorado teachers and several thousand higher education employees. PERA’s financial health and its costs also are closely watched by the state’s school districts, whose pension contributions are scheduled to rise to about 20 percent of payrolls by 2018.

Was the decline “just because of market conditions?” asked committee member Rep. Jim Kerr, R-Lakewood.

“There was a significant decline in overall returns … PERA was generally in line with the overall market” in 2011, said auditor David Eberly of KPMG, which audited the pension system for the state auditor’s office.

PERA’s investment income actually rose last year, up $724 million, a return of about 1.9 percent. The system also recorded employer contributions of just over $1 billion and employee contributions of $855 million.

But the system paid out benefits of nearly $3.3 billion, accounting for the year’s loss.

The pension system has been in the Capitol spotlight since 2008, when the national economic downturn caused a 26 percent loss in PERA assets.

Major legislation passed in 2010 was intended to help restore PERA’s long-term financial prospects by tightening various eligibility and benefit rules. Increased employer contributions were set by earlier legislation.

But some legislators, particularly Republicans, are nervous about PERA’s future, particularly PERA’s current assumption of 8 percent average investment returns over the next 30 years.

Kerr, a leading legislative critic of PERA, noted that the system’s rate of return over the last 10 years is less than 6 percent and said, “I’m curious why you haven’t modified your (assumptions) to reflect that real number.”

Gregory Smith, PERA interim executive director, said the system’s board has studied the issue carefully and received lots of professional advice: “The process has resulted in a belief by the board, or at least the majority of the board, that 8 percent is a realistic figure.”

Kerr continued pushing his point, saying, “Why does the board continue to use a number that hasn’t been sustained for 10 years?”

“The board listens to experts,” Smith replied.

“Are these the same kind of experts who are with the city of San Bernardino?” Kerr asked, referring to a California municipality that recently declared bankruptcy.

“I don’t know who the experts are for the city of San Bernardino,” Smith replied.

Sen. Lois Tochtrop, D-Thornton and a PERA supporter, used a different statistic – a 10 percent rate of return over three years – to conclude, “Overall, PERA is pretty stable.” Tochtrop later made a point of complimenting PERA on a clean audit by KPMG.

After she praised PERA executives for “good work,” Republican Sen. Scott Renfroe of Greeley quipped, “I don’t know if I call a billion-dollar loss good work.”

Jennifer Paquette, the system’s chief investment officer, told the committee that 2012 investment returns through May are running at about 5 percent. She also noted that PERA’s 2011 investment performance was higher than market benchmarks.

Educators major part of PERA membership

The schools division of PERA, which covers most of the state’s teachers, has 51,861 retirees, 116,415 active members and 100,203 inactive members. A separate Denver Public Schools division has about 13,500 members; Denver’s pension system recently merged with PERA.

PERA also has separate divisions for state employees (including higher education), participating local governments and court employees. Each division has a separate trust fund that can be used only for its own members.

Teachers contribute 8 percent of their salaries to PERA, while districts contribute 15.73 percent of payroll, an amount scheduled to rise to about 20 percent by 2018.

The average annual pension for a schools division retiree is $34,740. PERA members aren’t eligible for Social Security. The division’s trust fund is about 60 percent funded and is estimated to be fully funded in 35 years, if the average 8 percent rate of return holds up.

The pension system is governed a 16-person board, including 11 elected by the members, three appointed by the governor and a non-voting member representing DPS retirees. State Treasurer Walker Stapleton, a Republican and a vocal critic of PERA, also sits on the board and has sued the agency over release of some retiree information.

The board is chaired by Carole Wright, a retired Aurora teacher. Six board members have education ties.

Republican lawmakers regularly introduce bills to make major changes in PERA, including the composition of the board. The board has no power over benefits or employer contribution rates; those are set by the legislature.

Such bills have gone nowhere in recent sessions, generally dying in the Democratic-controlled Senate.

Missing from Monday’s meeting was Meredith Williams, PERA executive director for 11 years and a key figure in fending off attempts to change the system and upend the 2010 restructuring. Williams now heads the California-based National Council on Teacher Retirement.

Who Is In Charge

CPS to enforce nine training sessions for local school council members

PHOTO: Elaine Chen
Local school council members at a training session on Tuesday

In a classroom at Bogan High School Tuesday, trainer Jose Ortiz quizzed four local school council members on why they have to hold public meetings before approving their school improvement plan, a key document outlining school priorities and direction. The room fell silent.

“Because,” he answered himself, “the worst thing that the local school council could do is not consult the community.”

Ortiz’s training session illustrated the challenges that Chicago Public Schools faces in ensuring that all members of the powerful councils understand their roles and responsibilities.

The district requires those who help govern its 646 schools each attend around 18 hours of in-person training, or nine online modules. But not everyone complies: Ortiz said that last week, around 10 people attended each module he taught, and on Tuesday, only four people sat through his class. Most council members take the training online, but the effectiveness of those modules is questionable, council members said.

In a district whose school board is appointed by the mayor instead of elected by city residents, the councils, as Ortiz pointed out, serve as important channels enabling residents to drive the direction of their children’s education. Normally consisting of 12 members, including the principal, teachers, parents, and community members, the councils hire and evaluate the principal, approve the budget, and help craft two-year school improvement plans for their schools.

Chicago schools have another problem with the councils: 47 percent of schools have failed to field enough candidates to fill seats, which then allows sitting council members to fill the vacancies. That means less electoral control for residents. It’s unclear if the training requirement deters people from seeking council seats.

Nevertheless, district officials said that this year they will enforce the training requirement and will contact members who fail to finish it.

“We are going to start removing people this year, but it will be after contacting them by email, through phone and then giving them an opportunity before we schedule a hearing, and then we will consider removing them,” said Guillermo Montes de Oca, director of the Office of Local School Council Relations.

As Ortiz continued with his training, he asked if members remember approving their school improvement plan in the past school year. The attendees looked at him with puzzled faces.

“Oh yes, I remember now,” said Andrea Sanchez, a council member at Richard J. Daley Elementary Academy. But, she added, “it’s just overwhelming because you’re looking at numbers and pages, especially when you’re not used to seeing it.” Sanchez has been a council member since December, but she had attended only one out of the nine mandatory training modules before Tuesday, because most of the two-hour sessions were held in various locations throughout the city far from her home.

According to the Illinois School Code, council members must finish all modules within six months of taking office, so newly elected members who take office on July 1 have until Dec. 31 to complete the modules. CPS has never removed a council member for not finishing the training, said Guillermo Montes de Oca. However, that’s changing.

This year, CPS has also been encouraging council members to finish the modules by July 31, he said, because “if you’re going to be seated, discussing the budget and everything, you need to be informed.”

Sanchez said she didn’t know know about the six-month deadline until Tuesday. She wishes the nine modules would be held all at once at her school. “The information in the modules should be given to us right away [upon joining the council],” she said.

Montes de Oca said that the Office of Local School Council Relations encourages council members to take the training online. Especially because the office only offers a few modules per month, to meet the July 31 deadline, council members would have to take most of their training online.

But the attendees Tuesday seemed to prefer the in-person trainings . Denishia Perkins, a council member at Shields Middle School for almost two years, said that she had taken all the training modules online, but they “didn’t do much for me.” The online training consists of clicking through slides of bullet-pointed information and then taking a short quiz at the end of each module.

“It’s so possible to get elected and not know about this stuff,” Perkins said. So she decided to attend the in-person training on Tuesday.

Sanchez said of Ortiz’s class, “It felt one-on-one, and he’s really explaining it to you.”

The trainings are not the only impediment to filling local school council seats.

A representative from the parent group Raise Your Hand told the Sun-Times that people may not want to run for a council position because “people are a little frustrated at the weakening of the local school council.” Currently, 50 percent of principals’ evaluations rely on CPS’ data and metrics, when previously the evaluations relied solely on the council members’ judgment.

Sanchez said that the work of councils are just not advertised enough, and many parents like  her already are involved with jobs or other organizations.

“I don’t think the parents know that we’re that important,” Sanchez said. “I didn’t know either.”

performance based

Aurora superintendent is getting a bonus following the district’s improved state ratings

Aurora Public Schools Superintendent Rico Munn. (Photo by Andy Cross/The Denver Post)

Aurora’s school superintendent will receive a 5 percent bonus amounting to $11,820, in a move the board did not announce.

Instead, the one-time bonus was slipped into a routine document on staff transitions.

Tuesday, the school board voted on the routine document approving all the staff changes, and the superintendent bonus, without discussion.

The document, which usually lists staff transfers, resignations, and new hires, included a brief note at the end that explained the additional compensation by stating it was being provided because of the district’s rise in state ratings.

“Pursuant to the superintendent’s contract, the superintendent is entitled to a one-time bonus equal to 5 percent of his base salary as the result of the Colorado Department of Education raising APS’ district performance framework rating,” the note states.

The superintendent’s contract, which was renewed earlier this year, states the superintendent can receive up to a 10 percent bonus per year for improvements in state ratings. The same bonus offer was in Munn’s previous contract with the district.

The most recent state ratings, which were released in the fall, showed the state had noted improvements in Aurora Public Schools — enough for the district to be off the state’s watchlist for low performance. Aurora would have been close to the five years of low-performance ratings that would have triggered possible state action.

“I am appreciative of the Board’s recognition of APS’ overall improvement,” Superintendent Munn said in a statement Wednesday. “It is important to recognize that this improvement has been thanks to a team effort and as such I am donating the bonus to the APS Foundation and to support various classroom projects throughout APS.”

This is the only bonus that Munn has received in Aurora, according to a district spokesman.

In addition to the bonus, and consistent with his contract and the raises other district employees will receive, Munn will also get a 2.93 percent salary increase on July 1. This will bring his annual salary to $243,317.25.

At the end of the board meeting, Bruce Wilcox, president of the teachers union questioned the way the vote was handled, asking why the compensation changes for teachers and compensation changes for other staff were placed as separate items on the meeting’s agenda, but the bonus was simply included at the bottom of a routine report, without its own notice.

“It is clear that the association will unfortunately have to become a greater, louder voice,” Wilcox said. “It is not where we want to be.”