I’ve already mentioned a few numbers provided by state agencies. In 2006-2007, the state of Colorado apparently spent about $3.8 billion dollars on K-12 education. Then we had a severe recession, and the state government reduced funding for nearly all its services, including education. The latest numbers I found online suggest that, last school year, the state of Colorado spent about $7.1 billion on K-12 education, which would amount to more than an 80% increase over 2006-2007. The number of teachers had increased by only 9% during that same period.
How did $3.3 billion additional dollars get spent? We have not seen a significant change in student achievement since 2006-2007. Our teachers don’t seem to be especially well paid, or any happier. In fact, no one seems a lot happier… except maybe investment bankers?
Some of that $3.3 million seems to have disappeared into a financial hole called PERA. From a June 2019 article by reporter Brian Eason, in the Colorado Sun:
Thanks to a brutal December for stocks, Colorado’s pension lost $1.8 billion on its investments in 2018, according to the annual financial report released Friday. That’s a 3.5% drop for a portfolio that policymakers rely on to fund the retirement plans of more than 600,000 Coloradans.
As a result of the losses, last year’s landmark deal to rescue the Public Employees’ Retirement Association from the financial brink is going to cost everyone in the state millions more than initially expected…
Colorado’s Public Employees’ Retirement Association (PERA) was established in 1931 by the Colorado legislature at the request of a group of state employees who foresaw the need for a safe and secure retirement system. The federal Social Security system wasn’t established until 1935, four years later, and Colorado public employees — including public school teachers — do not participate in the Social Security system.
PERA currently serves more than 600,000 current and former public employees — about one of every ten Colorado workers — promising lifetime retirement benefits. At the moment, however, those benefits are costing a pretty penny, and may not be as “lifetime” as one would hope for. Back in 1999, PERA was fully funded; the association had more assets than it actually needed to meet its promised “lifetime” benefits. But two recessions later, the picture has become bleak. As of this year, it appears that PERA assets would cover only about 59% of its promised long-term benefit oligations.
The cost of those benefits — for current employees, and current taxpayers — has increased substantially since 1999.
This chart, above, is from Brian Eason’s Colorado Sun article, and shows an increase in tax-funded entity contributions (in light blue) and employee contributions (in dark blue.) Back in 2001, public employees were making an 8% PERA contribution out of their paychecks. This year, PERA employees are contributing 8.75% — and that amount will increase to 10.5% by 2021. It would appear that, in essence, teachers and other state employees will take home a smaller paycheck year after year, into the indefinite future, thanks to PERA funding problems.
Tax-funded entities, meanwhile, were kicking in a 10.5% PERA contribution back in 2001. By 2019, that amount had increased to 20.4%, and it will grow to almost 21% by 2021.
Those increases are meant to help address an unfunded obligation estimated at $32 billion or $50 billion, depending on who you ask, and what you think the economy is going to do over the next half-century. But the situation is even more bleak, because that taxpayer contribution for each employee is not actually going into a savings account for future retirement. More than three-quarters of the state contribution is being used to pay teachers and other state employees who are already retired. Less than 3% of the total 20.4% tax-entity contribution is being saved for the employee’s actual retirement fund.
We note, meanwhile, that according to PERA documents, teachers who began teaching prior to 2005 can retire at age 50, if they have 30 years of PERA employment behind them, or at age 60 if they have 20 years of service. Teachers who are just beginning their careers must work until age 58, if they have served 30 years by that age. (See this PERA document for current retirement ages.)
Given the direction the education pendulum has been swinging lately, it seems that Colorado teachers are especially prone to early retirement, which is putting even more pressure on the PERA funding shortfall.
To put all this data into a few simple statements:
If a public school is paying a beginning teacher $40,000 a year, that same school is also paying out $8,200 to help shore up the PERA retirement system. The teacher is contributing another $4,000, so his or her take-home pay is about $36,000. Cost to the school for one employee: $48,200.
Total payments to PERA for this starting salary: about $12,400 per year. Of that total, more than half is used to backfill unfunded PERA obligations.
Teachers and school districts are understandably concerned about changes that must be made to the PERA retirement system before it goes completely bankrupt. Those changes might include reduced retirement benefits, an increased retirement age, and more years of required service prior to retirement. In other words, these changes might make teaching even less attractive is a profession.
But taxpayers are understandably concerned about calls for salary increases, smaller class sizes, a greater investment in mental health programs, and increased paraprofessional staffing, when schools are already paying out a 21% PERA surcharge for each employee — not only teachers, but all full-time employees — thanks to the adjustments to state retirement benefits made over the past 20 years.
Reporter Eason’s Colorado Sun article included this telling quote from Hilary Glasgow, the executive director of Colorado WINS, a state employees’ union:
Hilary Glasgow… said she still believed the [2018 PERA] legislation was necessary to shore up the system’s finances. “We had to do it.”
But she added, “there’s going to have to be further steps to protect PERA” without continually eroding worker benefits. “As public workers, the idea has basically been you’re going to make less pay wise, but you’re going to make a better retirement package,” she said. “If you don’t have those (benefits)… why be a public servant?”
And that poses a difficult question for the young people enrolling in college next year. If your retirement package is going to be uncertain, and if legislative mandates have eliminated your professional autonomy in the classroom by forcing you to “teach to the test”, and if you must walk through a metal detector each morning as you enter the school building…
…why be a public servant?