Jeannie Kaplan served 2 term on the elected Denver school board. I asked her to discuss the concerns behind the strike.
On April 24, 2008 the Denver Public Schools agreed to obtain $750 million dollars from some of America’s top financial institutions for its outstanding pension debt. As I compose this blog site this early morning February 12, 2019 Denver’s teachers have entered the 2nd day of their very first strike in 25 years. The amount of loan being objected to is somewhere less than one-half of one percent of the total DPS spending plan. 0.04%. Less than $10 million out of $1.4 billion. The following informs some of the made complex story that links these two events.
The $750 million taxpayer financial obligation was divided this way: $300 million was to pay back currently existing pension financial obligation, $400 million was to totally fund the DPS retirement fund. The staying $50 million went to legal and financial charges. By the time this deal was “fixed out” in 2013 a veritable Who’s Who in the Wall Street world was involved: RBC C apital Markets, Goldman Sachs, JPMorgan, Citibank, Wells, Fargo, Bank of America. Part of the incentive to obtain this money was so DPS’ stand alone retirement fund might join the statewide retirement fund (Colorado Public Workers Retirement Association or PERA for brief) which would in turn allow for more worker movement into and out of DPS and would lower DPS’ yearly retirement contributions which would in turn supply more loan for classrooms. Since of previous monetary miscalculations DPS was paying more per pupil for its retirement fund than any other school district in the state. Had this offer not been executed, the dollars paid to banks and attorneys could have been put directly into the DPS retirement fund itself. The DPS S uperintendent at the time: Michael Bennet. The Chief Operating Officer: Tom Boasberg.
Bennet and Boasberg came from the business world and were heralded as monetary wizards. (They were boyhood friends growing up in Washington, D.C. together). Bennet had worked for billionaire Phil Anschutz and had already demonstrated a suspicion toward public pensions. Boasberg arrived at DPS from Level 3 Communications, “an American multinational telecommunications and Web service supplier” where he was a mergers and acquisition guy. Long story short they, along with lenders and lawyers concocted this extremely made complex and dangerous deal using taxpayer money. They were convinced that despite what was happening in the financial world at the time, DPS was going to conserve millions of dollars in pension costs.
Remember back to 2008. And remember we are talking about public, not personal, cash. In February the auction rate securities froze. In March Bear Stearns went under. There were many signs that something huge could be going on in the world monetary markets. However, in April the DPS board was motivated to proceed with the high risk transaction which relied on the weekly LIBOR rate (it is the primary benchmark, along with the Euribor, for short-term interest rates around the world. Libor rates are calculated for 5 currencies and 7 borrowing durations ranging from overnight to one year and are published each company day by Thomson Reuters.), swaps, (A swap is a derivative in which 2 counterparties exchange cash streams of one celebration’s monetary instrument for those of the other celebration’s financial instrument. The benefits in question depend on the type of monetary instruments involved.), bonds that were auctioned weekly. And here is the headline from that offer. In 10 years that $750 million loan has ballooned into twice as much debt ($1.8 BILLION) and just for the past two years has the district started paying any principal. And all at once, Bennet and Boasberg were able to persuade the Colorado legislature that DPS need to get the equivalent of “pre-payment” credit to deduct the PCOPs charges and interest from what would have actually been their regular pension contributions. Due to the fact that of these actions DPS staff members have witnessed their pension fund drop about 20% from completely moneyed (100%) on January 1, 2010 to a little under 80% moneyed in June 30, 2018. But as Bennet and Boasberg would state as this defunding is happening, “we are making our legal contributions, ” to which one should include, “Legal, however is it ethical?”
This story has become really pertinent today because after 15 months of negotiations the district and the teachers have been unable to reach an agreement. Denver’s teachers have actually gone on strike over a settlement system called ProComp (Professional Payment). And the ProComp battle comes back to the pension.
In 2005 Denver voters approved a $25 million tax (adjusted for inflation) for instructor pay-for-performance incentives. A few thousand dollars was awarded for instructors who worked in tough to serve schools and taught tough to teach subjects. The awarded dollars ($500-$2500) was meant to permanently raise base incomes. It was dependable raise and it was PENSIONABLE.
In 2008 – hum, is this a coincidence? – the ProComp “bonus” went from a entirely base structure system to a yearly one-time benefit system. And to even more make complex matters, new bonus requirements (based mainly on high-stakes testing) have given that been included. The result has been teachers can not tell how much they will be making from year to year. Some have stated they can’t even tell how much they will make from income to income. Oh, and of course, these perks do not contribute to a teacher’s PENSIONABLE earnings resulting in…less retirement cash for retiring instructors, and concurrently smaller sized needs on a dwindling pension fund.
While all this company benefit mess has been enforced in Denver, surrounding school districts have far exceeded Denver’s base pay scale, resulting in really high teacher turnover for DPS and a decreasing number of long serving professionals. Teachers are retiring earlier, teachers are leaving the district, and sadly teachers are leaving the occupation. And because Denver is the essential reform district, DPS has been really welcoming to the reform concept of hiring brief term, unlicensed teachers with non-traditional training. Think six week training programs. The result of all this radiance: fewer long serving staff members resulting in less demand on a pension fund. So the conflation of financial wizardry and education reform has hit Denver: business owners Bennet and Boasberg take over the finances of a public school district, prepare a made complex and risky situation during an unstable monetary time, get the legislature to permit the defunding of the pension, implement a bonus offer based pay system to replace base-building, and voila – a strike by Denver’s teachers for a fair, reliable, sustainable pay system.
One more crucial heading. ProComp rewards for teachers variety from $500-$3000 per classification per year. Last month a list of administrative bonuses without a rubric as to how the loan has been awarded became offered: the existing COO (Boasberg’s first task in DPS) got a $34,000 (!) perk on top of his $198,000 income, an “IMO executive principal” got $36,900 on top of his/her $130,000. An IMO executive principal is the most recent layer of reform administration. He/she manages a network of innovation schools (non union schools managed by the district) and makes 2 to three times as much as a DPS instructor. There are roughly 10 such positions with each person gathering around $20,000 in benefits. These rewards are not part of the ProComp arrangement but rather come out of the DPS basic fund. Just imagine. You might save almost half of the 8 million dollars they 2 sides are quarreling over if you just eliminated these positions and the perks.
We should never end any story about Denver Public Schools without a reference to educational results, for isn’t the very first concern of a public education system informing its trainees? After 15 years of education reform brought by Michael Bennet and Tom Boasberg, 42% of Denver’s students are proficient in English Language Arts and 32% proficient in math. Bennet and Boasberg monetary actions have also contributed to the doubling of the pension debt, and their policies have resulted in the first instructor strike in 25 years in Denver. Quite a legacy left by the kids from D.C.