As a candidate for Illinois governor, Bruce Rauner promised to address the Land of Lincoln’s virtually-bankrupt defined-benefit pensions. So far, he has at least put some effort on that front. But it will be all for naught if Rauner and state legislators force the pensions — especially the Teachers Retirement System — to provide honest numbers of the extent of their insolvencies.
Last month, as part of the proposed budget for the 2015-2016 fiscal year, the private equity player-turned-politician introduced a plan in which so-called Tier 1 employees — or teachers and state employees on the payroll before the passage of the Senate Bill 1 pension reform bill last year — could volunteer remove themselves out of one of the state’s pensions and into defined-contribution plans; as part of the deal, workers would get a lump-sum payment equaling what they would get out of the pension — essentially a version of the cash-balancing approach companies have used to transition employees out of their defined-benefit pensions — that would go into the defined-contribution account.
As you can expect, Rauner’s plan hasn’t gone down well with the NEA’s Illinois Education Association and the AFT’s Illinois Federation of Teachers. Through the coalition We Are One Illinois, the two unions (along with other public-sector unions such as the American Federation of State County and Municipal Employees) have already managed to get a state court judge to halt implementation of S.B. 1, the modest series of pension changes successfully pushed by Rauner’s predecessor, Pat Quinn. [The case is now before the Land of Lincoln’s Supreme Court, whose members are also covered by a pension that will eventually be targeted by reforms similar to S.B. 1 and thus, are essentially burdened by conflict of interest.] The suit, along with efforts by the unions to force the Democrat-controlled legislature to oppose the Republican governor’s proposal, essentially make Rauner’s effort more difficult than it should be.
Rauner’s plan could still be passed in some form by the legislature. After all, State Senate President John Cullerton was responsible for making S.B. 1 a reality. There’s also the presence of Chicago Mayor Rahm Emanuel, who as I noted today in an American Spectator column, is battling against public-sector unions such as AFT’s Second City local to solve the municipality’s equally-unenviable pension woes.
But as with so many pension reform plans, Rauner’s proposal will only work if it is based on realistic assessments of the state’s public pension insolvencies. This is especially true when it comes to dealing with TRS, which accounts for half of the Land of Lincoln’s $111 billion in (officially-reported) pension shortfalls. But as revealed by Dropout Nation‘s analysis of TRS’ comprehensive annual financial report, it is still less-than-candid about its true fiscal condition.
TRS officially reports that it is insolvent to the tune of $62 billion in 2013-2014; based on officially-reported numbers, this is a 10 percent increase over the previous fiscal year. But as readers know by now, the official numbers don’t represent reality. For one, this leaves out $3.7 billion in investment gains made during the fiscal year, all but 20 percent of the gains accounted for by TRS because of smoothing, an actuarial trick the state forced the pension to adopt six years ago. This allows the pension to effectively hide investment gains and losses under the guise of keeping the volatility pensions experience with investments from wreaking havoc on state and district budgets. As a result, taxpayers and policymakers aren’t getting a full picture of the pension’s insolvency.
The bigger problem is that TRS is using overly inflated assumptions of investment growth over time. The pension assumes that investments will grow by 7.5 percent every year. Certainly, this is a tad less dishonest than the eight percent rate of return the pension assumed in previous years. But the rate is still inflated by a country mile. TRS’ 10-year rate of return on investments is just 7.3 percent — and that’s only thanks to the bull market of the last two years (which helped overcome the losses of the last decade’s global financial meltdown). In fact, TRS admits that the actuarial value of its assets increased by a mere 23.7 percent (or an average growth rate of 2.4 percent a year) between 2005 and 2014; even if you just stick to fair market value, TRS’ assets have only increased by 34.4 percent (or an average annual rate of 3.4 percent) within that time.
As you readers know, using overly-inflated assumed rates of return are problematic because pensions can report insolvencies as being lower than they actually. During good times, when the stock and bond markets are performing stellar, pensions can claim that investments can cover shortfalls. This leads politicians to abandon all fiscal prudence by increasing annuity payments and reducing contributions paid by states, districts, and teachers in the hopes that Wall Street will cover the shortchanging. During periods such as the recent economic malaise, pensions can simply continue assuming that the markets will cover those insolvencies some day; because rates of return are key in determining shortfalls, a high rate of return gooses up the value of assets even if isn’t reality.
To get to the true level of TRS’ insolvency, Dropout Nation uses a version of a technique developed by Moody’s Investors Service, which assumes a more-realistic 5.5 percent rate of a return. [Moody’s bases its rate of return on the Citibank Pension Liability Index, which is based on the yield for AA-rated corporate bonds.] Based on the calculation, TRS’ true insolvency is likely $78 billion, or 27 percent more than officially-reported. When compared to the likely levels of insolvency calculated by Dropout Nation last year, TRS’ insolvency increased by 2.6 percent over the previous year. [The increase would have been even higher if not for the pension’s move to reduce its assumed rate of return.]
If Illinois state government was forced to pay down the insolvency over a 17-year period of amortization, taxpayers and teachers would have to contribute an additional $4.6 billion to eliminate TRS’ insolvency. This is more than double the $4.5 billion poured into the pension in 2013-2104. This would also hit hard Illinois’ already-strapped budget. If the state paid an additional $3.5 billion in contributions in 2013-2014, the percentage of the state budget dedicated to TRS would increase from 3.7 percent to 7.7 percent.
As Dropout Nation noted last year, state legislators along with Rauner need accurate numbers on TRS’ pension woes because even more Baby Boomers are heading into retirement than in previous years. Some 6,443 teachers covered by the pension retired in 2013-2014, 4.2 percent more than the average of 6,182 who have left classrooms in the past decade. With each retiree collecting annual annuities of $48,339 a year, TRS will have to pay out at least an additional $299 million a year.
None of this, by the way, even accounts for the three percent annual cost-of-living increases that TRS must pay out, which essentially means that a retiree can collect an annuity that it 30 percent higher than when they first retired; S.B. 1 put an end to those increases, but thanks to a state court ruling invalidating the plan late last year, those out-of-control raises continue to increase the pension’s insolvency.
When a pension system is so terrible for both teachers and taxpayers that its executive director admits it publicly and bluntly, it is time for a governor and state legislature to scrap the entire system altogether. This can be done constitutionally. Illinois is required to provide workers with retirement benefits, but it can be done in better ways than it does now.
With the We Are One coalition suit complicating matters, Rauner has no easy solution for this crisis. Any step he and legislators take must be bolder than those taken by Quinn in previous years. This includes wrestling control of the boards of TRS and other state pensions from public-sector unions; figuring out how to end the cost-of-living increases that are fiscally senseless; and requiring teachers to pay more into their retirements than the 21 cents of every dollar they current contribute. Rauner must also force legislators to stop making deals with teachers’ unions such as one contained in a 2007 pension bill that allowed AFT affiliate lobbyist David Piccioli to garner a pension despite having just spent one day working in a classroom as a substitute teacher.
At the same time, Rauner should scrap his current plan and embrace an approach touted by Dropout Nation as well as by pension researchers such as Josh B. McGee of the John & Laura Arnold Foundation and Marcus Winters of the Manhattan Institute. This would mean moving both existing and new employees out of defined-benefit pensions into hybrid approach that features defined-contribution accounts as well as cash-balanced accounts that guarantees an annual savings rate. [Rauner could still allow existing workers the ability to cash out of the old pensions and put that money into the new accounts.]
Particularly for younger teachers who have been forced by S.B. 1 to subsidize veteran colleagues (through contributions as well as taxes they also pay), and lose out on opportunities to truly save for their own retirements, such a plan would actually allow them to fully benefit from their hard work in classrooms. This, by the way, would also benefit younger workers currently paying into the state’s other pensions.
But the most-important step of all Rauner must take starts with forcing TRS and other pensions to offer honest data on their fiscal condition. Simply requiring them to issue special report to him and the legislature using the approach developed by Moody’s would go a long way toward accurate disclosure. Rauner should also demand the legislature to rescind the state law passed six years ago requiring TRS and other pensions to smooth out gains and losses; this means moving to fair market value assessment of assets and liabilities that are honest and clear for everyone.
Through moves such as issuing an executive order ending the ability of public-sector unions to forcibly collect dues from workers who aren’t in their rank-and-file, Rauner has shown so far that he is willing to take tough action that can help taxpayers and public employees alike. Demanding honest numbers from TRS and other pensions is another tough step he can — and should — do.
As you already know, one of the key reasons the United Federation of Teachers cites for its opposition to Gov. Andrew Cuomo’s effort to expand the number of charter schools in New York State is that the privately-operated public schools serve fewer numbers of kids condemned to special ed than traditional districts. If you only pay attention to the American Federation of Teachers local’s talking points, it is concerned that charters are shortchanging the neediest children by dissuading them from their classrooms.
But as I wrote back in January, the big reason why UFT is so concerned about the dearth of kids in special ed being served by charters has almost everything to do with money. In this case the additional state and federal subsidies collected by the Big Apple for every kid condemned to special ed, which, in turn, flows into the union’s coffers through the dues paid by teachers and paraprofessionals who work in them. At that time, the estimated pull from the state was $1,227.61 based on the data available at the time.
But as a new Dropout Nation analysis of federal data shows, the per-pupil dollars collected by the Big Apple for kids in its special ed ghettos is greater than originally known. Which provides an even better understanding of why UFT is so opposed to the expansion of school choice.
The Big Apple district collected $8,850.81 from the state in 2011-2012 for every one of the 160,134 children condemned to its special ed ghettos, according to data submitted by the district to the U.S. Census Bureau and U.S. Department of Education. How big a haul is this? The Big Apple collected 55 percent more from the state for each kid in special ed than the $5,715.45 it receives in general aid from the state for all of its students.
The cash flow from special ed gets even better once the federal subsidies are added in. New York City collected $2,090.39 in special ed subsidies from the federal government for every kid in its ghettos in 2011-2012. This is 144 percent more than the $856.58 per pupil in Title 1 dollars the district collects from the federal government for each child it serves.
Put altogether, the Big Apple collects $17,513.23 in state and federal subsidies (not including other subsidies and the city’s tax dollars) for every kid condemned into its special ed ghettos. This is nearly three times the $6,572.03 the district collects for kids in regular classrooms (not including other subsidies and the district’s own tax dollars).
Such additional dollars can help the Big Apple hire additional teachers and staff to work in special ed ghettos — and this is good for UFT. As I noted back in January, UFT may generate $14,154.60 per 186 teachers and paraprofessionals (based on an equal number of 93 of each) every month. This is just on the conservative side; after all, the Big Apple likely hires more than teachers and paraprofessionals than the statewide average of 186 per 1,000 students (which is already greater than the national average of 129 per 1,000). Any reduction in the number of kids in special ed ghettos means a reduction in money that the Big Apple can use to keep teachers on payrolls — and, in turn, means fewer dues-paying members for the union.
This is certainly a possibility if Cuomo successfully convinces his colleagues in Albany to allow more charters to open. After all, charters are less-likely to label kids as special ed cases than the traditional district in large part because simply educate kids who would otherwise be labeled as such as regular students as they often should be. One of the reasons why? Because New York City, like other traditional districts, often place kids into special ed for reasons other than actual cognitive and physical disabilities.
As you can already see, one reason is financial, with the district collecting far more money for kids in special ed than their peers in regular classrooms. Another culprit lies with the reality that diagnosing learning disabilities other than blindness or low-incidence disabilities such as severe cerebral palsy can be a guessing game. Illiteracy, for example, can be mistaken for mental retardation or developmental delays. Such mistakes in diagnosis (along with cultures in schools that don’t work out for active young men of all backgrounds) explain overdiagnosis of kids as suffering from Attention Deficit Hyperactivity Disorder is so rampant. This is problematic because at least two out of every five in kids in special ed are either labeled mentally retarded, developmentally delayed, emotionally disturbed or with a specific learning disability, all categories subject to mistaken diagnosis.
But the biggest problem lies with adults in New York City’s schools and their belief that only some kids are worthy of high-quality education. This is a group that includes some of the most-ardent traditionalists in the UFT’s own rank-and-file. As education scholars such as Vanderbilt University Professor Daniel J. Reschly have pointed out, adults in schools label certain groups of students as learning disabled because they think they are destined to end up that way. As studies such as one by a team led by Tobias Rausch of Germany’s Otto-Friedrich-Universität Bamberg show, teachers and school leaders can end up favoring kids who look like them or share their personality traits; those kids who don’t can end up either in special ed ghettos, targeted for harsh school discipline, or subjected to other forms of educational neglect and malpractice.
Considering the damage that comes from condemning kids to special ed — especially lower high school graduation rates and greater instances of being subjected to the harshest school discipline — UFT should be doing all it can to help reduce the percentage of kids condemned to the Big Apple’s special ed ghettos. This includes championing the expansion of charter and other forms of choice, as well as pushing for a reduction in special ed subsidies that can lead districts such as New York City to focus its special ed efforts on kids truly in need of help.
But given its financial concerns, as well as the sorry record of its now-partly shuttered charter school in handling students in special ed, no one should expect anything less than utter disdain for the futures of children. For UFT, condemning kids to despair is just the cost of doing business.
Given all the efforts by movement conservatives and others in Tennessee to halt the implementation of Common Core reading and math standards, you would think that its public education systems were doing a great job of preparing children for success in adulthood. Certainly the Volunteer State has reduced the percentage of functionally-illiterate children. This includes a seven percentage point decline in the number of eighth-graders reading Below Basic (from 30 percent to 23 percent) between 2011 and 2013 and a 14-percentage point decline in the number of low-income black eighth-graders struggling with literacy (from 57 percent to 43 percent). The state can even claim a six-percentage point increase in the number of eighth-graders overall reading at Proficient and Advanced levels, and a four percentage point increase in the number of black eighth-graders on free- and reduced lunch reading at grade level.
Yet when it comes to the goal of preparing children for success in higher education, the most-critical goal in this second era of systemic reform, Tennessee is doing poorly on this front. This is clear from a Dropout Nation analysis of data submitted by the Volunteer State to the U.S. Department of Education. With far too few kids regardless of background taking college-preparatory courses, Gov. Bill Haslam and state legislators need to recommit to implementing Common Core and helping every child for whom they claim concern gain the learning they need in an increasingly knowledge-based world.
Within the past year, Tennessee has gone from being a promising bellwether for reform to an cautionary tale of what happens when politicians back away from doing the right thing for children. Some Volunteer State Republicans in the legislature, taking marching orders from movement conservatives generally uninterested in reform and opposed to Common Core (as well as angered by Democrat Kevin Huffman’s hard-charging tenure as Haslam’s education commissioner), began agitating to halt the state’s so-far successful implementation of the standards.
But the effort to stop Common Core implementation gained momentum late last year when Haslam announced that he was convening a review of the standards even though he was assured of winning re-election. This signaled to Common Core foes that they could get their way. With Haslam backing away from the standards and their bete noire, Huffman, departing from the top education job last November, Common Core foes have gotten legislators to introduce legislation to halt the standards.
Now the fighting is less about whether the standards will remain in place than about how will they be eviscerated. With help from a group organized by his former campaign manager, Jeremy Harrell, Haslam is pushing back against the array of proposed legislation, especially House Bill 3 (which comes from State Rep. Billy Spivey). While the state’s district superintendents, along with reformers, are pushing to keep Common Core in place, movement conservatives and the National Education Association affiliate there are looking to put Common Core out to the proverbial pasture.
Yet amid all the effort to eviscerate Common Core, the question remains: Is Tennessee providing the college-preparatory curricula children need to successfully graduate from traditional colleges, technical schools, community colleges, and apprenticeships that make up American higher education. This is a discussion avoided by Haslam and his new education commissioner, Candice McQueen, as well as by Common Core foes in and out of the state legislature. Thanks to the U.S. Department of Education’s Civil Rights Data Collection the most-comprehensive database on college-preparation, Dropout Nation has the answer. It isn’t good at all.
Few Middle-Schoolers Take Algebra 1: Over the past couple of weeks, Dropout Nation has discussed how taking introductory algebra in middle school (along with strong support and acceleration of math curricula in the early grades) is critical to helping children gain the knowledge they need for success later in high school, in higher ed, and in their careers. Yet few states provide Algebra 1 to all or even half of their seventh- and eighth graders.
Tennessee is an especially atrocious example of states failing their middle-schoolers on this front. Just 6.5 percent of all seventh- and eighth-graders took Algebra 1 in 2011-2012, according to data submitted by the state to the federal government. Put simply, nine out of 10 Volunteer State middle-schoolers missed out on this key college prep course. Those levels are lower than the 29 percent average for California, Florida, Massachusetts, Minnesota, Pennsylvania, Virginia, and Washington, which have spent the past two decades mandating middle-school algebra, as well as the 29 percent rate for Maryland, which like Tennessee, has made little effort on that front.
One out of every five Asian and Native Hawaiian children took introductory algebra — levels lower than in the eight states reviewed earlier this month by Dropout Nation. The levels are even worse for black and Latino middle-schoolers; just five percent of black seventh- and eighth-graders along with 4.3 percent of Latino peers took Algebra 1 in 2011-2012. A mere 2.3 percent of middle-schoolers considered burdened by Limited English Proficiency also took introductory algebra. But the levels are not much better for white middle-schoolers; just 6.8 percent of these children took Algebra 1.
Some Common Core foes will try to argue that the levels won’t improve because the standards technically don’t call for introductory algebra to be taught until high school. But as your editor noted earlier this month, none of the five states surveyed in the Algebra 1 implementation report that are executing Common Core’s math standards experienced declines in the percentage of seventh- and eighth-graders taking Algebra 1. In fact, Massachusetts and Washington State adjusted the standards to continue the requirement. The problem in Tennessee on this front has nothing to do with Common Core and all to do with the lack of will among school leaders and politicians to do well by the state’s children.
Advanced Placement Coursework is Rarely Provided: Taking A.P. coursework, especially in math and history, is critical for all children — especially those from poor and minority households, in gaining preparation for success in higher education. Yet in Tennessee, few high school students are likely to be provided those courses.
Just one out of every 10 Volunteer State high-schoolers took A.P. courses of any kind in 2011-2012, a level half of those for Virginia and Maryland (which have been criticized on these pages for failing to provide our children in those states with college-prep curricula). Thirty-two percent of Asian high school students and one out of every five Native Hawaiian peers took A.P. courses, levels far above the statewide average, but lower than that for peers in the Old Line State and the Old Dominion (and likely lower than the national average).
The kids least likely to take A.P. courses are black and Latino children, who often come from households where families have never attended higher ed, and thus, need even more preparation than white or Asian peers. A mere 5.6 percent of black high-schoolers and nine percent of Latino peers were provided A.P. courses in 2011-2012, both below the statewide average; 5.2 percent of LEP students took A.P. as well. But white children fare little better; only 10.6 percent of white high-schoolers took A.P. coursework during the school year.
Not Enough Kids Are Given Advanced Math Classes: As you already know, trigonometry, statistics and other forms of advanced mathematics are key courses for children in order to take on middle class wage-paying blue- and white-collar jobs such as welding and marketing. But in order to learn those subjects, children must be provided those courses. This isn’t happening in Tennessee.
Only 11.3 percent of Volunteer State high school students were provided advanced math in 2011-2012. This means that nine out of every 10 kids in the late stages of secondary schooling were provided much-needed math instruction and curricula. To put in context, this is lower than the 18 percent average for Maryland and Virginia, the subject of this week’s This is Dropout Nation analysis.
When broken down by subgroup, this becomes clear: Not one subgroup in Tennessee has an advanced math course-taking rate greater than the 20 percent for Asian students. Just one out of every 10 white high-schoolers took advanced math, while a mere 8.2 percent of black counterparts and 7.5 percent of Latino peers took such coursework. No matter how one slices it, the Volunteer State is failing badly on the college-prep front.
Physics Course-Taking Rarely Happens: Careers in science, technology, engineering, and medicine are the gateways into the middle class. So high schoolers should be taking physics and other science courses — especially if they want to be successful in taking those courses when they enter higher ed and begin working toward STEM careers. But as you can already figure out, this doesn’t happen in the Volunteer State in any meaningful way.
A mere 3.5 percent of Tennessee’s high-schoolers were provided physics in 2011-2012. This means that 96.5 percent of students in the state didn’t take any kind of physics course. This is far lower than the one-in-10 average for Virginia and Maryland. When broken down by subgroup, the levels are even worse. Only one in 10 Asian high school students were provided physics, the only subgroup which managed to access those courses at that level. Less than one in 20 black, Latino, Native Hawaiian, LEP and white students were provided physics, while 6.9 percent of Native high schoolers accessed the course.
These low levels in physics may not be so bad if there were high levels of course-providing in other subjects. It isn’t. Just one out of every four Volunteer State high-schoolers were provided biology, another key college prep course that is what nearly every student in the nation is expected to take at some point. A mere one-in-five were provided chemistry. Chemistry. Add in the fact that few high-schoolers in Tennessee took A.P. science courses (or any science course at all), and it is clear that the state is committing educational neglect and malpractice.
What is clear from the data is that Tennessee is doing a terrible job in preparing children for higher ed and career success. But this isn’t shocking when you look at other data.
Twenty-one percent of Volunteer State community college students aged 17-to-19 (you know, college freshmen) took remedial math classes — and two out of every five failed to successfully complete them, according to Complete College America in its 2011 report. [Tennessee didn’t provide Complete College America with remediation rates for baccalaureate students.] There’s also the fact that the state’s math standards (before being replaced by Common Core) were rated D by the Thomas B. Fordham Institute in its 2010 study; this was better than the F rating given to them by Fordham a decade earlier.
With so many teens (especially those from poor and minority households) struggling to take on college-level work, preparing kids for the demands of higher ed while they are in elementary and secondary schools is of paramount importance. Yet the debate over halting Common Core implementation shows, neither Haslam nor legislators take these matters (or their obligation to children and taxpayers in the state) seriously. The governor, who has plenty of political capital to spend, shouldn’t have even indulged this discussion. Instead,Haslam should stand up strongly for Common Core implementation as counterparts such as Ohio’s John Kasich and Georgia’s Nathan Deal have done.
But Tennessee’s failures on the college prep front are even more embarrassing for the state because its senior U.S. Senator (and former governor), Lamar Alexander, is leading the charge to eviscerate the No Child Left Behind Act’s accountability provisions and has opposed the Obama Administration’s support for implementing Common Core. Given the shameful numbers in his home state (as well as the damage he is doing to his once-laudable legacy on advancing reform as governor and U.S. Secretary of Education), Alexander should be supporting implementation of the standards in his state as well as leading the charge for a stronger federal role in holding states accountable for preparing kids for future success.
Halting Common Core implementation now will do nothing more than stop the gains children in the early and middle grades are likely starting to make. So the state should continue putting the standards into place. At the same time, Tennessee needs to take other serious steps on the college prep front. This includes partnering with the National Math and Science Initiative on expanding A.P. courses to all students, as well as working with districts on accelerating math instruction with support (including providing Algebra 1 to middle-schoolers).
For reformers in the Volunteer State, as well as their counterparts in the rest of the nation, it is time to remind Haslam and the state legislature of their obligation to our children. This means continue implementing Common Core — or be held accountable for damaging the futures of kids who deserve better.
As you know by now, the United Federation of Teachers and the rest of the American Federation of Teachers have spent the past few weeks aggressively opposing New York Gov. Andrew Cuomo’s plans (and that of his school reform allies) to expand the number of public charter schools and refine the state’s teacher evaluation system. This included the AFT local lobbying within New York City’s traditional public schools as well as trying to win over parent-controlled Community Educational Councils that are the advisory boards within them. And UFT, along with AFT and New York State United Teachers, are getting vassals such as the Alliance for Quality Education and Citizens Action of New York (which have collected $180,000 from AFT and NYSUT in 2013-2014 alone) to prep their activists for visits to state legislators in their district offices.
But as Mona Davids of the New York City Parents Union alerts Dropout Nation this week, UFT is going further by asking the Community Education Councils to approve a resolution it drafted decrying Cuomo for daring to do the right thing by children. The move is another reminder to reformers in the Empire State as well as around the nation that working the grassroots is key to advancing and sustaining systemic reform.
The UFT’s resolution itself is rather hysterical in part because it is so focused on the union’s concerns for its own future. By proclaiming that Cuomo is “punishing low-performing schools” by floating a plan for the state education department to take over failing district schools, the union essentially betrays the real reasons why it opposes the concept: The schools would likely be placed into a Recovery School District-type model similar to that which has worked successfully in New Orleans in slowly improving quality of teaching and curricula.
In such a model, the UFT’s contracts with the New York City Department of Education (along with collective bargaining agreements its fellow AFT locals have struck with other districts) would likely be null and void. No more ability by UFT and other AFT locals to use the Empire State’s tenure law and teacher dismissal rules (which give them effective control over the process) to keep laggard and even criminally-abusive teachers in classrooms. Given that UFT collect $101.46 every month from every laggard teacher working in a failure mill, a state takeover means lost revenue into its coffers.
The UFT’s declaration that Cuomo’s plan to expand charters “reward” the sector for “bad behavior” would seem valid until you understand what they mean by misbehavior. As I noted last month, UFT and other AFT locals are annoyed at charters because they don’t over-label kids as special ed cases the same way New York City and other traditional districts do. For the union, every new charter that opens means fewer kids being given dubious diagnoses of mental retardation, learning disabled, emotionally disturbed or developmentally delayed — and therefore fewer kids condemned to academic in childhood as well as economic and social failure in adulthood.
This means the Big Apple and other districts lose out on an extra $1,227.61 in state aid per student. As you can expect, some of those dollars end up flowing into UFT’s coffers (and that of other AFT locals and the AFT itself) in the form of union dues of $14,154.60 paid by 186 teachers and paraprofessionals (based on an equal number of 93 of each) employed in district classrooms every month. For UFT, expanding choice that is beneficial for children and their families is a detriment to its finances.
Then there is UFT’s complaint that Cuomo’s effort to make state standardized test score growth data a larger component of the teacher evaluation system (from 20 percent of the performance measure as now structured) would “move high-stakes testing into overdrive”. But that isn’t so. For one, as the UFT would admit if pressed, standardized tests already account for 40 percent of the entire evaluation; this includes data from state exams as well as from district-administered tests essentially chosen by AFT locals. So nothing would change in terms of how many tests are administered. Given that testing itself helps improve student learning by helping teachers and policymakers learn how well kids are learning as well as what adults in schools are doing in instruction and curricula, UFT’s declaration is pure hype.
The real problem for UFT and its fellow AFT locals is that Cuomo’s plan would replace data from the local tests (which as I mentioned, the unions control, and thus, can game for self-protection) with using state test score growth data for half of the evaluation. Why? Because the state data, being of higher quality and less-subjected to gamesmanship, would likely lead to more laggard teachers being identified as such. This was made clear two years ago by the Bill & Melinda Gates Foundation in its study of teacher evaluation models. Again, the last thing UFT and the rest of the AFT want is for more teachers to lose their jobs; that means lost revenue (even if it would also mean elevating the profession, as younger teachers within the rank-and-file demand).
The funniest line of all in UFT’s declaration is that Cuomo’s reforms would be “silencing the voices of parents and educators”. This coming from the union that moved two years ago to suppress the voice of its rank-and-file members by increasing the number votes from retired members no longer in classrooms that could be counted in union elections from 18,000 to 25,000. This coming from the union which teamed up with the NAACP’s New York unit on unsuccessful legal bid to effectively end school choice by keeping the Big Apple from allowing charters to share space with traditional district schools in half-empty school buildings. This coming from a union that continues to maintain its sorry legacy of opposing the ability of families, especially those black and brown, to exercise their rightful roles as lead decision-makers in education.
As far as UFT’s leadership is concerned, families and teachers only exist as tools of co-opting in order to maintain its declining influence — and to keep its bank accounts filled. That they even attempt to portray themselves as being truly concerned for the grassroots is laughable.
But the union can occasionally get away with such sophistry because reformers often do such a poor job of working with families and communities on the ground. This time around, UFT is putting something before committees of families that they can vote on — which reform outfits such as StudentsFirst’s Empire State unit and others haven’t done. Which they can and should do. And if reformers in the Big Apple and the rest of the state don’t get to work now, it may succeed in doing so again.
Your editor didn’t expected much on the education policy front from new Maryland Gov. Larry Hogan, and so far, the former patronage handler for onetime predecessor Robert Ehrlich hasn’t disappointed. Save for a plan to reduce subsidies to districts such as Prince George’s County and Baltimore as part of his effort to address an $800 million budget shortfall for the upcoming fiscal year, the Old Line State governor has taken few steps to address the education crisis that has long been ignored by Democrats and Republicans alike through such guises as excluding kids in special ed ghettos from taking the National Assessment of Educational Progress.
But Hogan, along with legislators in Annapolis, will soon have to pay renewed attention to a financial challenge that cannot be ignored: The virtually-insolvent Teachers’ Combined System and its two defined-benefit pensions for instructors and school employees. The Republican will need to deal far more seriously with its underfunding than his immediate predecessor Martin O’Malley did during his tenure.
Even as Hogan gets into the job (including holding his first state of the state address this week), he finds himself reckoning with the legacy of O’Malley’s move three years ago to shift TCS’ future pension contribution costs outside those already borne by Maryland state government off its balance sheet onto that of counties, which are charged by the state with financial oversight of the state’s traditional districts. As with most modest pension reforms, O’Malley’s initiative did little to deal with the TCS’s growing unfunded liabilities from annuities (and cost-of-living increases) to retirees or clamp down on benefits to Baby Boomers and other teachers hired before the changes. The plan also didn’t lead to the state and counties to pay their fully-required contributions; they paid $359 million less into TCS in 2013-2014 than officially required.
The state legislature’s fiscal analysis agency determined that counties and districts will have to pay $56 million more in 2016 (when they bear the full costs) than originally anticipated. This comes just as some counties, notably Prince George’s (which is home to Dropout Nation) plan to increase sales taxes just to deal with TCS’ pension liabilities as well as the other long-term burdens from decades of dealmaking between districts, the state, and affiliates of the National Education Association and American Federation of Teachers.
Given these increased costs, and the complaints that will likely come from homeowners as counties such as Prince George’s begin hiking up property taxes, there will be strong resistance to any effort by Hogan to reduce school funding. Hogan’s plan to reduce the Old Line State’s overall tax burden, one of the nation’s highest, will likely fall apart in the face of worries over the increased costs.
But based on Dropout Nation‘s analysis of the pension’s financial numbers, the woes with which Hogan, legislators, and counties must wrangle are even worse than they realize.
As officially reported by the Maryland State Retirement and Pension System, which manages TCS, the pension is virtually-insolvent to the tune of $10.8 billion. But as this publication always reminds you, actuarial tricks such as smoothing (which allow for losses and gains to be recognized over five-year periods instead of immediately on a market-value as required in the private sector) essentially conceal the true value of pension assets, which meas that insolvencies may actually be greater than initially reported.
For TCS, the real problem lies with overly-inflated rates of returns on investments. This allows pensions to report insolvencies as being lower than they actually. How? During good times, when the stock and bond markets are performing stellar, pensions can claim that investments can cover shortfalls. This leads politicians to abandon all fiscal prudence by increasing annuity payments and reducing contributions paid by states, districts, and teachers in the hopes that Wall Street will cover the shortchanging. During periods such as the economic malaise that has engulfed the nation since 2007, pensions can simply continue assuming that the markets will cover those insolvencies some day; because rates of return are key in determining shortfalls, a high rate of return gooses up the value of assets even if isn’t reality.
The best approach is to assume a conservative rate of return, based either on yields for AA-rated corporate bonds (such as Citibank Pension Liability Index used by Moody’s Investors Service for its analysis of defined-benefit pension liabilities, or Barclays Capital Long U.S. Corporate Index), or a base rate of 5.5 percent as utilized by Dropout Nation based on an earlier version of Moody’s pension analysis model. In the case of TRS (as well as Maryland’s pensions for other civil servants), the official rate of return is 7.65 percent is at least 2.1 percentage points higher than it should be.
So to get to the full level of underfunding, Dropout Nation uses a version of the Moody’s model, using the 5.5 percent rate of return; for every percentage point decrease in rate of return, shortfalls increase by 13.3 percent. Based on the analysis, TCS’ is actually insolvent to the tune of $13.8 billion, or 28 percent higher than officially reported. Based on a 17-year amortization schedule, taxpayers would have to pay out an additional $813 million a year just to cover the shortfall; that is 81 percent more than the $1 billion contributed in 2013-2014 (which was $359 million less than was supposed to be paid).
For Hogan, addressing the shortfall in any sensible way becomes difficult because of O’Malley’s pension revamp. The governor could shift those full costs onto counties and districts. But massive property tax hikes won’t go over so well with homeowners, who will be reminded by superintendents and county executives that the fault lies with Annapolis, and thus, Hogan and his legislative colleagues. The state itself also doesn’t have a lot of wiggle room. The round of tax hikes under O’Malley’s tenure is one reason why Hogan won the top job over Lt. Gov. Anthony Brown last year.
There’s also the pressure from the Old Line State’s other virtually-busted pensions, which MSRPS officially reports as being $8.8 billion, but is more-likely $11.3 billion based on Dropout Nation‘s estimates. Taxpayers would have to pay an additional $662 million a year over 17 years (or nearly double the $734 million paid in 2013-2014) just to address those shortfalls properly. Pension costs account for 3.9 percent of state budget costs in 2013-2014, according to this publication’s analysis.
Meanwhile the problem will continue to get worse. This is because the number of retirees continues to grow. The number of TCS retirees increased by 43 percent between 2004-2005 and 2013-2014. With an average of 3,024 new retirees coming on board every year (all under the larger Teachers’ Pension System) at a cost of $61.8 million, TCS’ insolvency will continue to grow.
The state has failed to address TCS’ insolvency properly — and not just by shortchanging it by not paying the full tab. Because teachers only pay 31 cents out of every dollar put into the pension (versus contributing every dollar under a defined-contribution plan with an employer match up to six percent), they aren’t paying enough toward their own retirements.
But the problem isn’t just for taxpayers. Since three out of every 10 newly-hired teachers will leave classrooms within five years — and even higher rates of attrition are likely among high-quality instructors — defined-benefit pensions such as TCS are of no use to them. Because it takes 10 years to fully vest into a TCS pension — and the retirement funds aren’t portable as defined-contribution plans are — many teachers are unlikely to fully benefit from the few dollars they actually pay in. These problems, along with TCS’ underfunding, is why the National Council on Teacher Quality rated Maryland D-plus, or among the worst states for teacher retirement in a study it released last month. All in all, TCS is a bum deal for teachers, taxpayers, and children alike.
Hogan needs to take serious long-term steps on the pension front. This starts with fully paying down TCS’ insolvency (along with that of Maryland’s other pensions). The state will have to bear some of the additional costs; so will existing teachers, who must pay additional contributions into the pension just to address the shortfall. Since the state has no explicit laws on the books granting vesting rights to teachers and other public employees, the state should also move to shut down TCS other than to pay out benefits owed to retirees and current teachers who have already paid into it. The state must also put an end to cost-of-living increases for retirees, which add to the liabilities.
At the same time, Hogan must provide a better retirement deal for teachers, especially high-quality instructors who deserve better. This includes moving new teachers and current instructors into a hybrid system that features a contribution plan to which teachers can contribute as much toward their retirement as they so choose (with a five percent match from districts) along with a smooth accrual defined-benefit element similar to an approach advocated by Josh McGee of the John and Laura Arnold Foundation and Marcus Winters of the Manhattan Institute in a report released last year.
For Hogan, the state’s teachers’ pension woes provide a rude awakening to the realities of governing. He will need to use this early period to rally support for addressing a pension crisis that will complicate the state’s long-term prospects.
There has been even more happening in New York State in the days since Dropout Nation analyzed the steps the American Federation of Teachers would take to help its three affiliates deal with the departure of scandal-tarred soon-to-be-former Assembly Speaker Sheldon Silver and oppose efforts by Gov. Andrew Cuomo and school reformers to continue transforming public education in the state.
On Wednesday, Assembly Labor Committee Chairman Carl Heastie, who was cited by your editor Tuesday night as a likely candidate to succeed Silver, formally announced his bid for the top legislative job. His candidacy was joined by that of Catherine Nolan, the Assembly Education Committee Chairman who, like Heastie, was originally part of the five-person committee charged by Silver to run things when he planned to temporarily step aside. Nolan is hoping that her fellow assembly members from Queens will ignore calls from the Democratic party machine there and give her a chance. But this isn’t likely to happen, especially after both the Queens Democratic machine and that in Brooklyn gave Heastie their support.
The support from Democrats in the Big Apple’s second-largest borough explains why longtime Assemblyman Joseph Lentol, who had announced his bid earlier today withdrew it hours later. Keith Wright, the assemblyman who recently chaired the Empire State’s Democratic Party, also backed off his bid for the job. The Harlem politico likely kiboshed his plans after getting Heastie’s backing to run for the congressional seat that will be vacated by the infamous Charles Rangel next year; after all, part of Rangel’s district extends into the Bronx, where Heastie and his ally, Borough President Ruben Diaz, have control of the Democratic machine.
As a result of these machinations, Heastie is considered to be the front-runner to succeed Silver. But it isn’t a fait accompli. For one, Nolan could still rally women among Assembly Democrats to her side, especially playing upon their desire to replace Silver with the first woman in the state to hold one of the two top jobs in the state legislature. There’s also Joseph Morelle, Silver’s top lieutenant as Majority Leader, who can still command upstate Democrats to his side. Then there’s Heastie’s own reputation for alleged political corruption. This includes amassing more than $25,000 in credit card expenses that haven’t been accounted for, as well as collecting $20,706 in per-diem expenses, the most of any assemblyman. Imagine what the Daily News and the New York Post will sniff up in the coming weeks before February 10, when Assembly Democrats formally vote on Silver’s replacement. [Update: Both the Albany Project and the aforementioned Post have dug up some dirt on Heastie, while the Daily News decried his ties to the various Democratic Party political machines that are trying to regain power in both Albany and the Big Apple after decades of government reforms.]
What could this mean for Gov. Andrew Cuomo’s school reform efforts and those of the movement? Who knows. As Dropout Nation noted on Tuesday, Heastie doesn’t have much of a record on reform issues; he is also heavily backed by private-sector unions, who are more-supportive of school reform than the American Federation of Teachers, its three affiliates in New York, and their public-sector union allies. There’s also the fact that Heastie’s main ally, Bronx Borough President Ruben Diaz and his father, a state senator, are both backers of charter schools. But Heastie could also end up being an obstacle to any reform effort just because the AFT and its three affiliates are big backers of Assembly Democrats; Heastie alone collected $27,670 from New York State United Teachers and New York State Public Employees Federation since successfully winning his assembly spot 14 years ago. Heastie may have to give a little to AFT, which means watering down some reforms Cuomo wants to put in place, and blocking any effort to make state test score growth data a larger component of the teacher evaluation system, the bane of the union’s existence.
Meanwhile outside of Albany, AFT’s Big Apple local, the United Federation of Teachers, is taking up the charge against Gov. Cuomo’s reform efforts. Today the union’s boss, Michael Mulgrew, railed against the governor’s plan to expand the number of charter schools in the state, proclaiming that this shouldn’t happen. One reason why: Because the charters enroll lower numbers of kids labeled special ed than traditional districts; special ed students accounted for just 8.9 percent of kids in Big Apple charters in 2012-2013 versus 12.7 percent for the city’s traditional district, according to the city’s Independent Budget Office. Playing off sister local Chicago Teachers Union’s practice of issuing white papers, UFT then issued a package of hit pieces accentuating Mulgrew’s point.
But as Manhattan Institute scholar Marcus Winters pointed out in a 2013 report, the reality is that Big Apple charters enroll fewer kids labeled as special ed than the city’s traditional district because they are less-likely to overlabel struggling students. It isn’t that charters are refusing to let kids in special ed through their doors. In fact, as the Independent Budget Office shows in a study released this week, kids who are other health impaired (or suffer from actual health issues such as asthma or diabetes) make up a larger percentage of charter school special ed populations (10.5 percent) than in the city’s traditional district (8.6 percent). It is that they are not looking to condemn kids as special ed cases in the first place. Which, in turn, means that kids labeled as special ed by New York City’s traditional district are then brought into charters as regular ed students. As they almost always should be.
This is especially clear considering that, as Winters and others have noted, most children condemned to special ed ghettos are often put there based on rather subjective diagnoses that can often mistaken real learning issues as signs of cognitive problems. Many kids are condemned to special ed after being labeled as suffering from a “specific learning disability”, a vague catch-all that can include anything from dyslexia to Attention Deficit Hyperactivity Disorder, burdened by emotionally disturbed (which could easily mean that the kids could either be poorly disciplined at home or suffer severe depression), considered developmentally delayed (which could mean that the kids are either cognitively damaged, dyslexic or functionally illiterate), or mentally retarded (for which illiteracy can often be mistaken).
What is happening is that charters, who usually attempt to ditch the same failed thinking as traditional district counterparts, simply educate kids otherwise labeled as special ed as regular students as they often should be. Which as the Independent Budget Office shows, is showing good results, especially in charters retaining larger numbers of all students (and losing fewer of them to attrition or push-outs) than Big Apple district counterparts. One reason why? Because in most cases, the decisions by traditional districts such as New York City to condemn kids to special ed ghettos (which, in turn, benefit AFT and National Education Association affiliates) are driven by factors other than the actual learning issues (especially illiteracy) with which they are struggling.
One is financial: Special ed kids generating more in state per-pupil spending than kids in regular classrooms. New York City, for example, collected an extra $1,227.61 in state aid per student for the 171,333 kids condemned to the district’s special ed ghettos, according to a Dropout Nation analysis of data from the state’s Budget Office. [This, by the way, doesn’t include additional dollars provided by the state for special ed students through the main school funding formula or the dollars given to the city for special ed kids put into specialized private schools.] The additional money spent by the Empire State on special ed is likely one reason why districts in the state identified and condemned 17.3 percent of kids to special ed ghettos in 2009-2010, according to the Thomas B. Fordham Institute in a 2011 report; that was four percentage points more than the national average and more kids than every other state in the nation except Rhode Island.
The increased spending, in turn, benefits UFT and other teachers’ union locals because districts end up hiring more teachers and staffers under union contracts. UFT collects $50.74 every month from special ed paraprofessional on New York City’s payroll and picks up $101.46 from every teacher. In New York State alone, districts employ 186 teachers and paraprofessionals per 1,000 students, more than the national average of 129 per 1,000; just on those numbers, UFT may generate $14,154.60 per 186 teachers and paraprofessionals (based on an equal number of 93 of each) every month.
Put it bluntly, more kids in special ed ghettos means more dollars into UFT (and ultimately, AFT). Given its slow growth in rank-and-file as of late, UFT can use every dime it can get. And any expansion of charters, which are mostly non-unionized, will mean even fewer kids being labeled as special ed cases, and thus, less money for the union.
The other reason lies with the reality that many adults working in schools condemn children, especially those from poor and minority backgrounds, with low expectations. As Vanderbilt University Professor Daniel J. Reschly noted in his 2007 testimony to the U.S. Civil Rights Commission, adults in schools have a tendency to confuse the statistical probability that certain ethnic and gender groups may end up being diagnosed with a learning disability with the ethnic composition with ethnic composition within a disability category; essentially they end up labeling certain groups of students as learning disabled because they think they are destined to end up that way.
These acts of condemning the futures of Big Apple children aren’t the only examples of educational malpractice committed by many teachers and school leaders in the New York City Department of Education. As Contributing Editor Michael Holzman has noted in the past few years, the district’s continued practice of rationing high-quality education from some children, especially through gifted-and-talented programs that benefit white middle class kids at the expense of peers black, Latino, and poor, remains shameful. Yet Mulgrew and UFT have expressed little concern about these issues, and have remained silent amid the raging debate over whether to keep in place the district’s system of selective public high schools such as Stuyvesant, another legacy of denying high-quality education to those who need it most.
Certainly Big Apple charters can do better on some fronts. The overuse of out-of-school suspensions and other harsh forms traditional school discipline by many charters, especially by Eva Moskowitz’s Success Academy chain, betrays the mission of the charter school movement to build brighter futures for all children by not replicating the bad practices of traditional public education. But Mulgrew’s professed concerns about equity are mere covers for defending a failed system that has benefited UFT and AFT, as well as his own pockets. Expanding charters that can help more kids avoid special ed ghettos should be the first thing state legislators do once Assembly Democrats choose Silver’s replacement.