Pensions vs. Schools

THE PROBLEM

Education funding for downstate and suburban pre-K-12 schools – i.e., all Illinois school districts outside of Chicago – is one of the state’s highest priorities. It’s also one of the only expenditures where increased funding is almost guaranteed year after year, even in times of fiscal crises.

Illinois is in such a crisis now. The 2016 budget is currently $4 billion out-of-balance, the state’s credit rating has fallen to within four notches of junk status, and the state’s pension shortfall has reached an all-time high of $111 billion.

Despite the above issues, 2016’s education spending has already been appropriated and passed into law – and has actually been increased over last year.

However, increasing the dollar amount spent on education does not guarantee that more money will be spent on teaching children.

That’s because state education spending is made up of much more than what is spent daily to run Illinois schools. It also includes the annual contributions to teachers’ retirements and retiree health care. And, while not part of the budget for education, Illinois must also pay down the portion of the state’s annual pension obligation bond payments (POBs) allotted to the Teachers’ Retirement System, or TRS, which covers all Illinois elementary- and secondary-school teachers outside of Chicago. In 2003, 2010 and 2011, Illinois issued POBs to pay for annual contributions into the pension system. Now the state has to pay back those bonds over a period of time, which adds additional costs to teacher-retirement spending.

Unfortunately, these mounting, nonoperating retirement costs are dramatically siphoning funds away from classrooms.

In fact, if you look at total education spending from 2009 to 2014, the state added $8.9 billion in new dollars over and above the base amount of $6.8 billion it spent in 2009. Of those new dollars spent, 89 percent went to pay for retirement costs. Just 11 percent made it to the classroom.

The money that politicians poured into education over the last several years has really been funding pensions instead.

Spending on retirement costs already rivals the total amount spent on classrooms. From 2015 to 2019, retirement spending will almost equal classroom spending. And by 2025, if spending continues along its current trajectory, the amount spent on retirement costs will surpass that spent on classrooms.

By the time a child born in 2015 enters the sixth grade, the state will be spending more on teacher retirements than on aid to pre-K-12 schools.

Even assuming that TRS’s unfunded liability doesn’t grow progressively worse as it has in years past, retirement costs will consistently make up more than 50 percent of all education spending through 2045.

However, if TRS’s unfunded liabilities do continue to increase, as recent pension-fund history would indicate, retirement costs will crowd out funds for downstate and suburban classroom spending even further.

This crowding out will drastically affect local school districts’ operational budgets – especially poorer districts that rely heavily on state funding.

The amount of property wealth in each school district determines the amount of taxes it can raise locally to finance its education needs. The less property wealth a district has, the more state funds it receives. The neediest districts, then, receive a majority of their funding from the state.

While the vast majority of Illinois school districts draw most of their funding from local sources, almost a third of the districts in Illinois receive at least 40 percent of their revenues from the state.

Without real pension reform, hundreds of schools across those districts may have to cut programs, increase class sizes or lay off teachers as more and more new state dollars are directed away from operations toward retirements.

And as districts with higher levels of state funding generally serve lower-income and minority communities, those groups will end up being the most negatively affected by the growth in retirement spending.

CROWD-OUT CULPRITS

Contributing disproportionately to its general budget crisis is Illinois’ worsening government-pension funding crisis. The shortfall from the state’s pension funds reached an all-time high of $111 billion in 2014, $62 billion of which was attributable to TRS.

The crisis in TRS has been building for years. In 2000, TRS’s pension shortfall equaled just $15 billion.

However, an additional decade and a half of pension underfunding, faulty actuarial assumptions, and extra benefits for workers have driven the system’s unfunded liabilities sky-high.

TRS had only 40 cents of every dollar it needs to pay out future benefits as of August 2015. By any private-sector measure, the fund is already bankrupt.

As a result, the state has to contribute more and more taxpayer dollars to keep teacher pensions afloat. According to TRS actuaries, the state will need to contribute over $3.4 billion toward teacher pensions this year alone. By 2030, the state will have to pour $5.9 billion into teacher pensions. By 2045, that amount will rise to $8.5 billion.

Pension bonds and health care spending

Contributions to TRS are not the only teacher-retirement expense that the state of Illinois pays.

Each year, state government has to make payments on POBs that were approved in 2003, 2010 and 2011 to cover annual pension contributions. In addition, the state has to pay a portion of the costs of health insurance for retired teachers through the Teachers’ Retirement Insurance Program, as well as a portion of the State Employees’ Group Insurance Program.

In 2016, the state will pay $900 million in health care and POB costs combined. That amount will remain relatively steady until 2020, when the end of payments toward the state’s 2011 POB will reduce the combined POB and health care retirement costs.

But by 2025, the combined repayment of the 2003 POB, along with health care and pension contributions, will cause total retirement spending to equal spending on classrooms. Every year thereafter, total retirement spending will surpass classroom spending.

EDUCATION SPENDING COMPROMISED BY ILLINOIS’ BUDGET CRISIS

Unfortunately, the state cannot easily increase education funding to make up for ever-growing teacher-retirement expenditures.

With Illinois’ out-of-control pension crisis, the Illinois Supreme Court’s hostility to pension reforms that include any changes to the future benefits of current workers, and the increasing cost of borrowing due to the state’s lowered credit rating, significant funding increases for Illinois’ classrooms will be few and far between.

Pre-K-12 education won’t be the only budget area taking a hit. Higher-education appropriations will also be crowded out by pensions for educators in the state’s community colleges and state universities. And the federally mandated expansion of Medicaid through ObamaCare will cost Illinois an additional $10 billion between 2014 and 2019.

OUR SOLUTION

If the current growth in retirement spending continues, Illinois will soon become a state that spends more on teacher-retirement costs than on classroom teaching.

The only way to avoid that outcome is to reduce retirement costs and find ways to spend existing classroom dollars more effectively.

Fortunately for Illinois, there are several innovative ways to do this.

The single most important step Illinois can take to reduce education-retirement costs is to create self-managed retirement plans, or SMPs. SMPs will give both taxpayers and the state more budget certainty and will provide teachers the retirement security they deserve.

The state won’t have to look far for a model SMP: One already exists right here in Illinois. Today, almost 20,000 active and inactive members of the State Universities Retirement System, participate in a 401(k)-style plan. These state-university workers control their own retirement accounts and aren’t part of Illinois’ increasingly insolvent pension system.

Enacting the university-worker plan for newly hired teachers will help stabilize education-retirement expenditures for the state by halting the growth of TRS unfunded liabilities for new teachers. And because only newly hired teachers would participate in any 401(k)-style plans, such a reform would pass constitutional muster. The reform would also make future retirement expenditures easier to estimate, as the cost of SMPs would equal a fixed percentage of TRS’s payroll.

With unfunded liabilities under control, the state would no longer be subject to runaway retirement costs, allowing both the state and local school districts to create more stable budgets.

But bringing education-retirement costs under control is only one-half of education-funding reform. Illinois also needs to embrace educational innovations that will spend classroom dollars more efficiently while fostering an environment that will encourage academic achievement by students.

Enacting a statewide school-choice program would both save the state money and improve educational outcomes for students.

With over half the states in the country, including Wisconsin and Indiana, now offering some form of school-choice program, Illinois can choose from several different successful models.

For example, just over the border in Milwaukee, Wisconsin, more than 25,000 low-income children receive Choice Scholarships of up to $7,800 to attend the schools their parents select for them – whether religious, private, traditional public or charter. That’s far less than the $13,000 Milwaukee public schools spent per student in 2012.

Children also perform better academically when they can attend schools chosen by their parents. A recent five-year study of Milwaukee’s program found that more kids are graduating from high school, enrolling in and graduating from four-year colleges, and achieving higher test scores since the start of the program.

Those same positive financial and academic results have been replicated in numerous states. Several gold-standard studies have found that school-choice programs result in students receiving at least the same, and often a better, education at a reduced cost to the state.

School-choice programs have been growing rapidly across the country. Nevada, the most recent state to initiate such a program, is offering education savings accounts to almost all of its 385,000 public-school students.

Illinois would be wise to follow Nevada’s and many other states’ leads.

Another innovation might take the form of new educational techniques such as blended learning, which mixes classroom and personalized digital learning. Not only do such programs often result in higher levels of student achievement, but they can also drive down education costs for the state.

Carpe Diem schools, for example, use individualized online courses of study coupled with live instruction to create a hybrid learning structure that has proved both academically enriching and financially cost-effective.

Innovations such as school choice and new educational techniques like blended learning could eventually save Illinois hundreds of millions in education costs – freeing up that money for other purposes.

The Daily Nightly (NBC's Janelle Richards):

Sevanna Power sits at her workstation, completing her daily assignments. She’s logged into a computer, which is where she does most of her lessons and coursework. Power is a seventh-grader at Carpe Diem Collegiate High School and Middle School in Yuma, Arizona. This is her second year attending the charter school where there are no traditional classrooms.

“I do miss [classrooms],” Power said. “Because I had a lot of fun with reading and we still do that here, but I like to hold books too, so it’s just interesting to not have that now.”

At Carpe Diem, students use computers to work at their own pace. The middle and high schoolers kick off the day in the learning center, then rotate between completing online assignments and going into classes — where they receive direct instruction from teachers in what they call workshops.

“There are lectures on the computer but it’s very one dimensional. There’s one way to explain things and some children don’t get that … that’s why we have the workshops,” said Chet Crain, dean of students at Carpe Diem. “So a student who doesn’t understand, say, dividing fractions, they’ve listened to the lecture on their computer but they still don’t get it, then they can come to the workshop and ask our math teacher to please explain this another way. And by using projects, by using manipulatives and by using whatever it takes, we will make that student successful.”

Organizers say this blended learning model allows students to pursue their individual education plans. Floor staff is always on hand in case students need help. Some say the mix of technology and teacher interaction at Carpe Diem is what’s necessary to educate kids in the 21st century.

Dan Harvey, who has three children enrolled in the school, called it the best of both worlds, describing the setup as unique because of the “traditional aspects with the workshops and the classrooms, but then the individual nature of it. We’ve got five kids and they’re all very different … this kind of enables them to kind of do their own pace and go their own speed.”

Larry Cuban, education professor emeritus at Stanford University, said that while this type of model may work for some, it’s not one-size fits all — and more research needs to be done because “very few studies are done independent of the schools of themselves. And so the evidence isn’t there. But that doesn’t mean that people are not going to try it. There are a lot of things tried in American schools that have very little evidence or research to support them.” Cuban said he understands why blended learning is attractive to educators and families.

Carpe Diem administrators and teachers explain the importance of the blended learning model and why moving away from a traditional classroom prepares students for the future. “Parents want their kids to be treated as individuals” and “[blended learning] programs promise that there will be more individualized teaching and learning by the students,” he said.

He also pointed to cost, explaining, “You don’t need as many teachers. And that is attractive … when a lot of districts are letting teachers go, when there is a smaller teacher force now.”

Carpe Diem’s four academic teachers agreed that the program is not for everyone, but the test results are promising: 90 percent of Carpe Diem students are proficient in core subjects, compared to about 70 percent statewide, according to the Arizona Department of Education.

Many Carpe Diem students used to attend more traditional schools and said there are pros and cons to both.  “I like the fact of how flexible [Carpe Diem] is,” said seventh-grader Timothy Harvey. “I can’t take tests at home, so if I wanna do work from home I can, on the weekends or after school if I feel that I want to, or if my parents want me to do some work, or I need to if I’m behind.”

For Kristina Felix, a senior, the undivided attention she receives from the same teacher every year and the ability to work at her own pace are a plus.

“It’s really great, like I get to communicate more with them,” Felix said. “There’s less people here so I feel less pressured; I don’t have to compare myself to other people … I wanna be a nurse and with this I think it’s really helping me a lot.”

Carpe Diem Charter School Seizes Tomorrow’s Innovations Today

Explaining the success of Carpe Diem Collegiate High School and Middle School requires more than simple answers, but the school’s innovations hold great promise for expanding educational excellence and opportunity.

With dozens of cubicles filling a large, open room, Carpe Diem resembles a corporate office more than a traditional school. Students in grades 6 through 12 sit at their individual stations as software loaded on their laptop computers guides them through core instructional material.

School leaders insist there is no magic in the circuitry or fiber optics. “It’s not about technology,” says Carpe Diem founder and executive director Rick Ogston. “It’s about how students learn nowadays.” He believes engaging students in their education requires a proper understanding of the art of instruction, and technology provides the critical leverage.

When it opened in 2002, the Yuma, Arizona K-12 charter school used a traditional program and format. Three years later Carpe Diem converted its middle and high school to a unique blended learning model. A January 2011 report by the California-based Innosight Institute defines blended learning as a system “in which students learn online in an adult-supervised environment at least part of the time.”

“[Carpe Diem] is one of the best-executed in terms of everything, to have rethought curriculum, instructional delivery, teacher role, and student supports,” says Michael Horn, Innosight’s executive director of education.

In addition to a physical education instructor and a special education teacher, Carpe Diem employs one instructor in each of five core subject areas to serve nearly 240 students enrolled in 2010-11.

With students spending half to two-thirds of the school day working at their individual stations, teachers trade lectures for coaching students who need help. These “guides on the side” have the flexibility to call out groups of 10 to 25 students to smaller rooms along the building’s periphery to provide face-to-face instruction.

“They are constantly grouping and regrouping students based on what they need, not based on some arbitrary decision,” Horn says.

After his visit to the school, Arizona superintendent of public instruction John Huppenthal recalled how he was impressed by the use of glass on the breakout classrooms, which enables easy observation.

“Now every teacher [and] every classroom is always open for review by the principal or visitors,” said Huppenthal. “We think that this is a unique motivating factor for improving teacher performance.”?? Ogston said he believes the teacher-student relationships are “absolutely essential” to Carpe Diem’s success. The school converted to the blended learning model in 2005 without having to import new faculty members.

Working year-round rather than in traditional nine-month terms, teachers grow personally familiar with students’ needs not only through years of consistent interactions but also regular feedback from the data-rich curricula. A full-time “course manager” provides weekly reports of individual learning, and staff, parents, and even students can monitor progress on a daily basis.

“They become managers of their learning instead of just receivers of information,” Ogston explained. Carpe Diem’s success is borne out in state testing results. Students have demonstrated stellar academic growth on Arizona’s Instrument to Measure Standards (AIMS) tests. The school rates first in the state for recorded learning gains in mathematics.

“We believe that Carpe Diem is a model for the future of education,” Huppenthal says. “Blended, or hybrid, learning offers exciting opportunities for schools and districts faced with shrinking resources to look for and find new ways to get a bigger bang for their educational buck.”

Ogston says he is concerned about funding inequities that shortchange Arizona charter schools, as it requires a reasonable amount of dollars to maintain necessary personnel. The school compensates teachers the same as or more than school district counterparts while spending at a more efficient per-pupil rate.

“When it comes down to the business side, maximizing resources for results, that’s really what this model does,” Ogston says. The Arizona superintendent argues a key factor in expanding the reach of innovative models like the one pioneered by Carpe Diem is in technology itself. “We need to be looking for those breakthrough software programs that are showing that they can produce significant student academic performance,” Huppenthal said.

Carpe Diem changes the software it provides to ensure the use of effective and rigorous curricula in the computer-assisted instruction. The school’s current e2020 system provides for a customized learning experience and allows students to engage the material through various interfaces.

Horn says budget belt-tightening has led most American school districts to experiment with some form of blended learning. But doing it right on a broad scale will require significant reforms, such as attaching funding to students down to the course level, Horn said.

“Rick Ogston is willing to ignore what the incentives in the system actually encourage him to do,” says Horn. “Instead of overcoming perverse incentives, we need to get the incentives right to really reward teachers for learning outcomes rather than for seat time and for categories.”

Carpe Diem’s founder remains focused on improving the model he and his colleagues have worked to pioneer.

“We don’t consider ourselves as having arrived,” says Ogston. “We are still tweaking ourselves and bettering ourselves every year.”

Ben DeGrow (ben@i2i.org) is senior education policy analyst for the Independence Institute, a free-market think tank in Golden, Colorado.

Education Commissioner approves charter application from Carpe Diem San Antonio

As mentioned in this earlier post, Education Commissioner Michael Williams has approved a charter application from Carpe Diem Schools–San Antonio (application).

Under the new process created by SB2, the State Board of Education could exercise a veto at its November meeting.

“Public charter schools are in great demand from parents across Texas, and we look forward to these schools receiving final approval and beginning to serve students,” said David Dunn, executive director of the Texas Charter Schools Association (TCSA). “From innovative blended learning to public montessori education, these charters will be providing quality, individualized learning for successful student achievement.”

“TEA Commissioner grants four new charters, sends decision to SBOE”, Tracy Young, Texas Charter Schools Association news release, September 27, 2013.

Carpe Diem is known for blended learning—combining self-paced online coursework with support from teachers and fellow students. (Read more about the Carpe Diem model in this earlier post from July and this earlier post from February.) Blended learning has its critics:

Some have expressed concern about the school’s blended learning model. Karen Miller, a former leader in the Texas PTA, said the program’s focus on online learning may deprive students of the social skills adopted when learning in groups and with teachers.

“Ed chief approves new S.A. charter schools”, Joshua Fechter, San Antonio Express-News, September 27, 2013.

Carpe Diem Schools, a Tuition-Free Public Charter School, Is Coming to San Antonio

Carpe Diem Innovative Schools will develop a new $7.25 million charter school campus in San Antonio that will accommodate as many as 400 middle and high school students by the fall 2015-2016 school year.

Construction on the 42,888-square-foot Westwood campus will begin on Saturday, May 2 at 8038 W. Military Drive.

The whole campus will be equipped with electronics that will allow students to work independently on digital curriculum. Teachers assess students at their performance level and then develop individual learning plans. Students will be put on accelerated learning tracks.

By the fall of 2015, Carpe Diem Innovative Schools also will have locations in Indianapolis and Cincinnati.

See original article here: http://www.bizjournals.com/sanantonio/news/2015/04/28/new-charter-school-coming-to-san-antonio.html