Thursday, October 17, 2013

So, can Amendment 66 money be used for PERA?

Posted By on Thu, Oct 17, 2013 at 3:59 PM

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If you‘ve heard of Amendment 66, you’ve probably also heard that there’s a huge controversy over whether the $950 million education tax hike could be used to backfill the Public Employees' Retirement Association, the state’s flailing pension fund.

Proponents say no. On their campaign website, the group Colorado Commits has an entire page dedicated to “debunking the myth.”

[A]ll new money raised by Amendment 66 must be placed in the newly created State Educational Achievement Fund, where it can ONLY be used for “Implementing educational reforms and programmatic enhancements.” To be certain there is no question as to what qualifies as “educational reforms and programmatic enhancements,” lawmakers defined them in 19 categories in Senate Bill 213. As a further protection, Amendment 66 requires an annual state audit “to ensure compliance” that new money is only spent on education reforms and program enhancements. That’s why we say the money is “constitutionally and statutorily prohibited from ever being used directly to fund PERA."

But opponents say that’s nonsense and point to recent comments from Colorado Gov. John Hickenlooper, who noted that there are fewer controls on how money is spent once it's transferred to school districts.

“There’s a certain amount of money that goes into the districts, and that is the way our education system is structured,” he’s quoted as saying.

So what’s the deal? We talked to Jennifer Okes, director of Public School Finance for the Colorado Department of Education, for an explanation. Okes clarifies that no money from Amendment 66 is going to be used to shore up the state’s problems with PERA. The money is clearly earmarked for education.

But here’s where it gets tricky: School districts pay PERA, and so do employees. Due to legislation in 2010 aimed at fixing PERA, districts pay more for PERA every year, creating a stress on their budgets. So Okes believes districts could shuffle some of their funds if Amendment 66 passes to cover those increases.

Colorado Springs School District 11 Chief Financial Officer Glenn Gustafson agrees. He notes that much of the funding in Amendment 66 is specifically earmarked and couldn't be used for PERA. But he believes that some of it could be used for that purpose — though he says it’s unlikely that D-11, for one, would use it that way.

Whatever happens in the November election, though, Gustafson says PERA is a problem for school districts. In better years, benefits in PERA increased significantly. More recently, it became obvious that those benefits were unsustainable and they were pulled back, but a huge chunk of employees were grandfathered into the richer plan. In the recession, PERA’s investments fared poorly, and that created the funding problems that school districts and the state are now struggling to fix, he explains.

As PERA payments tick up in the coming years, Gustafson notes, districts will be paying three times as much for PERA and Medicare as a private employer pays for Social Security and Medicare taxes.

Check out the bottom line in the chart below to see the percentage of each employee's salary that school districts must pay into PERA in the years to come:

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