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.

a closer look

Fact-check: Weighing 7 claims from Betsy DeVos’s latest speech, from Common Core to PISA scores

PHOTO: Dylan Peers McCoy

In a speech Tuesday at the American Enterprise Institute, U.S. Education Secretary Betsy DeVos made the case for giving up on the type of school improvement efforts favored by Presidents Obama and George W. Bush. In its place, she argued, the federal government should encourage tech-infused innovation and school choice.

Looking to weigh her claims? Here’s a closer look at a few.

1. DeVos: “The most recent Program for International Student Assessment, or PISA, report, with which you are all familiar, has the U.S. ranked 23rd in reading, 25th in science and 40th in math. And, you know this too: it’s not for a lack of funding. The fact is the United States spends more per pupil than most other developed countries, many of which perform better than us in the same surveys.”

This stats are accurate, but may not be fair. The U.S. does spend more per pupil, in raw dollars, than most other countries. But international comparisons of these sorts are complicated, and American spending is similar to countries with similarly sized economies.

As we’ve written previously, it’s also misleading to say that more money wouldn’t help American schools. A number of studies have found precisely the opposite, including a recent one showing how cuts to schools during the Great Recession lowered student test scores and graduation rates.

2. DeVos appeared to refer to Common Core as “federal standards,” saying, “Federally mandated assessments. Federal money. Federal standards. All originated in Washington, and none solved the problem.”

That’s off the mark. As advocates for the Common Core never tire of pointing out, the creation of the standards was driven by state leaders through the National Governors Association and Council of Chief State School Officers, with the support of several private organizations, most prominently the Gates Foundation. (Gates is a funder of Chalkbeat.) As DeVos notes earlier in the speech, the Obama administration did incentivize states to adopt the standards, though, and Secretary Arne Duncan was a vocal champion.

3. DeVos: “At the U.S. Department of Education, Common Core is dead.”

This is true, in a sense — the Every Student Succeeds Act, which passed before DeVos became secretary, prohibits the federal government from pushing states to adopt specific standards. But DeVos doesn’t control what academic standards states adopt, and most states are still using use some version of the Common Core.

4. DeVos: “Throughout both initiatives, the result was a further damaged classroom dynamic between teacher and student, as the focus shifted from comprehension to test-passing. This sadly has taken root, with the American Federation of Teachers recently finding that 60 percent of its teachers reported having moderate to no influence over the content and skills taught in their own classrooms. Let that sink in. Most teachers feel they have little – if any — say in their own classrooms.”

The statistic DeVos pulled from this poll is accurate, though her framing may be more negative than the results suggest. It asked teachers to rate how much control they had over “setting content, topics, and skills to be taught.” The most common answer was “a great deal” (at about 40 percent of teachers), and another 30 percent or so chose moderate control. Twenty percent said minor, and only 10 percent said they had no control.

5. DeVos: “To a casual observer, a classroom today looks scarcely different than what one looked like when I entered the public policy debate thirty years ago. Worse, most classrooms today look remarkably similar to those of 1938 when AEI was founded.”

This statement is misleading but has a grain of truth. We examined a similar claim when the TV program produced by the XQ prize argued that schools haven’t changed in 100 years. In short, DeVos is right that many basic trappings of school — a building, a teacher at the front of the class, a focus on math, reading, science, and social studies — have remained consistent. But this glosses over some substantial changes since 1938: the end of legally mandated race-based segregation, the rise of standards for special education students, and the expanded use of testing, among others.

6. DeVos: “While we’ve changed some aspects of education, the results we all work for and desire haven’t been achieved. The bottom line is simple: federal education reform efforts have not worked as hoped.”

This is a big assertion, and it’s always tricky to judge whether something in education “worked.” As DeVos pointed out, a federal study showed the federal school turnaround program didn’t help students. She also highlighted relatively flat international test scores, and others have pointed to flat national scores in recent years.

That said, there were substantial gains in math in fourth and eighth grade, particularly in the early 2000s.

But raw trend data like this can’t isolate the effects of specific policies, particularly when other unrelated changes — like the Great Recession — can also make a big difference. Studies on No Child Left Behind have shown positive results in math, but little or no effect in reading. An analysis of Race to the Top was inconclusive.

One bright spot: a program that paid performance bonuses through the federal Teacher Incentive Fund led to small test score bumps, according to a recent study by DeVos’s Department of Education.

7. In response to a question about school performance in Detroit, DeVos said she shouldn’t be credited — or blamed — for the results in the city. “You’re giving me a whole lot of credit to suggest that whatever happened in Detroit was as a result of what I did,” she said. “We have been long-term supporters of continued reform and choice in Michigan.”

This one is up for debate, though it’s clear DeVos has long been a major player in Detroit’s education scene. She has supported charter schools, which educate about half the public school students in that city, and been a major donor to Republican politicians and causes in the state. She started an influential advocacy group in the state called Great Lakes Education Project.

She was also a key opponent of a commission that would more tightly oversee Detroit charter schools, which ultimately failed amid GOP opposition. It’s clear she has had an impact in the city, but that doesn’t mean she’s gotten everything she’s wanted: in 2000, Michigan voters rejected a DeVos-funded effort to fund vouchers for private schools. She also hasn’t gotten her wish that Detroit have a traditional school district eliminated entirely.

DeVos on offense

DeVos criticizes Bush-Obama policies, saying it’s time to overhaul conventional schooling

PHOTO: U.S. Department of Education
U.S. Education Secretary Betsy DeVos speaking to the Council of Great City Schools.

One era of federal involvement in education is over, U.S. Secretary of Education Betsy DeVos said Tuesday, in some of her most expansive public remarks since taking over the department last year.

DeVos used a speech at the American Enterprise Institute to hit on familiar themes: America’s schools haven’t changed in many years, failing to embrace technology while still spending more and more money. But she also offered a pointed skewering of the approach of her recent successors.

“Federally mandated assessments. Federal money. Federal standards. All originated in Washington, and none solved the problem,” said DeVos. “Too many of America’s students are still unprepared.”

She also gave a harsh assessment of one of the most controversial policies of the period. “Common Core is a disaster,” DeVos said, echoing her boss, President Trump. “And at the U.S. Department of Education, Common Core is dead.”

In place of those efforts, DeVos offered a different framework for improving education: overturning a host of conventional approaches to schooling.

“Why do we group students by age?” she asked. “Why do schools close for the summer? Why must the school day start with the rise of the sun? Why are schools assigned by your address? Why do students have to go to a school building in the first place? Why is choice only available to those who can buy their way out? Or buy their way in? Why can’t a student learn at his or her own pace? Why isn’t technology more widely embraced in schools?”

Some of these questions dovetail with DeVos’s embrace of private school choice programs and tech-infused approaches to schools, including fully virtual options. The emphasis on technology is aligned with a number of wealthy philanthropies that have embraced computer-based “personalized learning.”

They also mark a departure from the paradigm of previous administrations. No Child Left Behind, the law signed by President George W. Bush, and the Obama-era Race to the Top program both focused on improving academic standards, instituting tests, holding schools and teachers accountable for results, and expanding charter schools, though generally not private school voucher initiatives.

DeVos’s vision is more aligned with a strain of conservative thought that has grown increasingly skeptical of test scores. “I talk about accountability more in terms of transparency and information that parents can access to find out how the schools are doing for their child,” DeVos said in a follow-up session with Rick Hess of AEI, the conservative think tank whose board DeVos previously sat on.

This rift is not entirely surprising. Former secretary Arne Duncan has sharply criticized DeVos and Trump, and left-of-center charter advocates have attempted to separate themselves from an unpopular and polarizing president and secretary of education.

In a rare agreement with the American Federation of Teachers, DeVos argued that federal involvement had put too much focus on test scores, citing a poll commissioned by the union. “The result was a further damaged classroom dynamic between teacher and student, as the focus shifted from comprehension to test-passing,” she said.

The AFT responded icily on Twitter: “More American educators feel disrespected by DeVos than anyone else in the entire world. You can’t blame Bush & Obama for that.”  

Debates about evidence continue

Earlier at the event, “Bush-Obama school reform: Lessons learned,” researchers and policymakers conducted a post-mortem of the last couple of decades of federal school reform.

The results weren’t always pretty. Virtually all participants agreed that well-meaning efforts had proven difficult to implement and sustain: No Child Left Behind had become widely reviled for increasing testing; teacher evaluations pushed by the Obama administration continued to rate most teachers as effective and faced stiff opposition from teachers’ unions; Common Core became the target of conservative ire and the associated tests were scrapped in most states; and a comprehensive study of the federal school turnaround program found that it made little impact on test scores or graduation rates.

Evaluating large policies, like Race to the Top or Common Core, is inherently challenging.  Nationwide test scores have been fairly stagnant in recent years, though that may be due to the effects of the Great Recession.

At one session, participants suggested that not enough had been done to incorporate teachers’ perspective into federal policy. (Notably, no current teachers or union representatives participated in panels at the AEI event.)

Still, research suggests that No Child Left Behind substantially improved math achievement. Studies in some districts have found benefits of their revamped teacher evaluation systems, too.

Joanne Weiss, chief of staff at the Department of Education under Duncan, cautioned against judging policies too quickly. “At some point you gotta say, the results should be in today,” she said. “[But] we have a history in education of calling it too early and moving on to something else, and then 10 years later the research comes in.”

Nevertheless, DeVos seized on the mixed results of past efforts to make the case for her favored changes: more school choice and more innovation at the school level, not driven by the federal government.

She didn’t mention the research on those approaches, which is decidedly mixed and even negative in some cases.

A number of recent studies on school voucher programs have found showed they hurt student test scores, though they bounce back for some students who stay in private schools for several years. In DeVos’s account of disappointing federal programs, she did not mention a recent study of Washington D.C.’s voucher program, which showed drops in math achievement. (A few studies have found positive impacts on high school graduation rates and college attendance.)

Fully virtual charter schools, which DeVos has long backed, have posted even worse results. And some math programs that blend technology with more traditional classroom culture have posted positive results, but as a whole, the evidence base for those approaches remains thin.

DeVos’s skepticism of federal involvement also highlights the central paradox of her job: As the leader of the very agency she is critiquing, how will she advance her agenda without expanding the federal footprint?

So far, DeVos has rolled back a number of Obama-era regulations and supported a new federal tax break for private school tuition, while acknowledging its impact would be modest.

We also fact-checked seven claims — from Common Core to PISA test scores — DeVos made during her speech. Read more here.