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Colorado Gets Bad Grade on NCTQ’s Latest Pension Report

We’ve been talking a lot about policy recently. ESEA reauthorization issues, the hazards of requiring state testing in private schools, and some number crunchin’ on the subject of Colorado’s school funding. Then last Friday, you had a nice break. We spoke instead about School Choice Week, which is sort of like Christmas for eduwatchers like me. The successful (and fun) NCSW rally is over, but School Choice Week is still going. That means you should be out tweeting and Facebooking and doing everything you can to get the message out!

Before you go do that, though, let’s talk about just a little more policy. And to spice things up, let’s make it PERA policy. You’ll recall that we’ve talked before about the wild, shaggy policy beast that is the Colorado Public Employees Retirement Association. Like many others, I pointed out some serious flaws with the state’s system, including unfunded liabilities and the unfair way the current system treats young or new public employees.

Well, those problems as they relate to teachers have once again been quantified by the National Council on Teacher Quality (NCTQ). The organization recently released its latest annual report on the health of teacher pension systems around the country. The report grades each state on the extent to which their teacher pension plan:

  • Offer teachers the option of a flexible and portable primary pension plan, such as a defined contribution (DC) plan.
  • Ensure that traditional defined benefit (DB) pension plans are portable, flexible and fair for all teachers.
  • Ensure some basic principles of fairness in traditional systems.
  • Shore up pension funding for existing commitments
  • Require that pension systems smoothly accrue pension wealth with each year of work.

Yeah, I know. That’s a lot of wonk talk. But here’s the rub: Colorado got a C- on its report card (we didn’t do so well in last year’s report, either). I don’t know about you, but at my school a C- is not so great. So what’s wrong with Colorado’s system?

According to NCTQ, Colorado’s system falls short for a number of reasons, including the facts that it is not well funded, does not provide an option for portable pension plans, does not treat young or new teachers fairly, and does not use contribution rates that the organization would call “reasonable.” The report doesn’t mention COPERA’s other big problem: The constant ratcheting up of employer contributions (called SAED)—a “feature” of 2010’s SB 1, a law that modified some aspects of PERA without addressing the biggest issues. As you can imagine, this puts a significant (and growing) hole in districts’ budgets.

So there’s a problem. What’s the solution? One way forward is to move away from defined benefit plans and toward defined contribution plans. This year’s SB 080 (sponsored by Senate Education Committee Chairman Owen Hill) seems to be an effort to move the system in that direction. There are also more nuanced considerations, which is why I’m happy to once again plug the folks over at the Colorado Pension Project. They’re doing great work on this front.

If you’re interested in the PERA issue and how it affects districts (and charter schools), I encourage you dig around. You’ll find no shortage of reading material. Until next time!