First Person

Voices: Why PERA's presumptions are faulty

Joshua Sharf, of the Independence Institute, offers a counterpoint to an earlier EdNews Voices post by PERA Executive Director Gregory Smith in which Smith defends Colorado’s public retirement system. 

Did you recognize the faulty presumptions in PERA’s spirited defense of defined benefit plans?

You have been given a false choice about why defined benefits plans are better than defined contribution plans.Image of school desk atop a dollar bill.

In a recent EdNews Colorado Voices column, Colorado PERA Executive Director Greg Smith avers that PERA’s existing defined benefit structure best serves both the teachers and the taxpayers of Colorado. He was responding to a report by the National Council on Teacher Quality that leads the reader to support reforms to move away from the existing scheme and toward a defined contribution plan. Smith’s claims are wrong about the advantages of defined benefit plans in general, and PERA’s actuarial soundness in particular.

Smith cites a National Institute on Retirement Security (NIRS) report that claims three advantages for defined benefit plans over defined contribution plans:

  1. Less error in the amount saved for retirement,
  2. Less need to rebalance and re-allocate assets over time, and
  3. Better returns, largely as a result of lower transaction costs.

Each advantage turns out not to be dependent on having a defined benefit plan, but on having a professionally-managed, aggregated plan. The same advantages would accrue to a similar defined contribution plan that was also aggregated and professionally-managed.

PERA already has such an option, PERA Plus. It’s organized as a three-part 457(b) / 401(k) / Defined Contribution option. Like any set of diversified retirement offerings, it includes a variety of funds with different investment goals. For our discussion, the most relevant set of funds are those with target retirement dates. PERA has nine of these, with target dates every five years from 2015 to 2055, and an Income Fund designed to provide current income for current retirees.

Over time, as the target date for each fund approaches, that individual fund reallocates its assets into more conservative investments, before maturing and merging into the Income Fund. While each individual fund “ages,” all the funds collectively are maintaining a proper average. Taken together, they continue to represent the aggregate ages and target retirement dates of the entire set of members, the very source of the first two alleged advantages. The third, that of lower transaction costs, is completely independent of how liabilities are calculated.

There is no inherent reason why the assets of a DB plan should earn a higher return than those of an identically-invested DC plan.  The only mandatory difference is that the defined benefit plan beneficiary has a share only in the specific benefits to be paid – the fund’s liabilities. By comparison, the owner of a defined contribution plan has a property right in the assets. Therefore, while a defined contribution plan is, by definition, always fully-funded, a defined benefit plan may have to seek additional funding, or trim back on its promises, in order to remain so.

The danger of unrealistic promises

It is therefore imperative that the promises being made to future retirees be realistic. All the more so if the promised benefits are being used to attract and retain qualified or exceptional teachers. Unfortunately, it is far from certain that PERA can afford the promises it is making, given its current funding levels.  Recent legislative reforms (Senate Bill 10-001 in particular), while welcome and substantial, simply do not close the gap.

By PERA’s most recent published calculations, its unfunded liabilities remain at a staggering $26 billion, and its overall funded level is well below 60 percent, on a par with the chronically ill Illinois public pensions. In fact, a recent study by Barry Poulson suggests that PERA could be in the worst shape of any statewide plan in the country.

Let’s give credit where credit is due. PERA’s adoption of a 401(k)-like portability is indeed commendable. But if it’s designed to mimic the properties of a 401(k), it can hardly then provide an advantage over one.

While PERA is no longer “letting it ride,” as it did with its stock market investments of the late 90s, the 8 percent returns needed for a return to solvency come with risk. Even better-than-average returns during regular years won’t make up for prior losses in bad years, because funds must then catch up, while payments can’t be deferred.

What success SB1 does offer is predicated on both benefit reductions and payment increases. However, a court challenge to the limitation of COLAs to 2 percent has been upheld by a State Court of Appeals, and its future is uncertain at best. Should the lower courts find that limitation not to be justified, most of the immediate reduction in PERA’s unfunded liability will be wiped out.

On the contribution side, PERA plans to require supplemental increases, rising incrementally from 2 percent to 5.5 percent until 2018.  School districts have been picking up the tab for these increases, rather than passing them on to the teachers themselves, as they are allowed to do.  As a result, PERA now absorbs upwards of 15 percent of annual operating expenses in many large school districts, a number that is expected to rise to 20 percent as the existing plan increases for make-up contributions.

Disclosure of ties to lobbying group needed

It is also worth noting that the institute that issued the favorable DB article (NIRS) is the lobbying and public policy arm of the defined benefit public pensions, with a particularly close relationship with Colorado PERA.  Smith sits on the board of directors of NIRS, as does Meredith Williams, PERA’s former executive director.  Colorado PERA is both a charter member and in NIRS’s Visionary Circle, along with such other public plans as CalPERS and the Illinois Municipal Retirement Fund.

Inasmuch as NIRS is not an independent think tank, but instead is a creation of interested parties to the debate over public pensions, this relationship ought to have been disclosed.

While there is no doubt that total compensation is an important part of attracting and retaining effective teachers, those promises must be grounded in reality. Until realistic arguments are used, PERA will continue to fail not only its member teachers, but also the schools and parents it is intended to serve.

First Person

I’m a principal who thinks personalized learning shouldn’t be a debate.

PHOTO: Lisa Epstein
Lisa Epstein, principal of Richard H. Lee Elementary, supports personalized learning

This is the first in what we hope will be a tradition of thoughtful opinion pieces—of all viewpoints—published by Chalkbeat Chicago. Have an idea? Send it to

As personalized learning takes hold throughout the city, Chicago teachers are wondering why a term so appealing has drawn so much criticism.

Until a few years ago, the school that I lead, Richard H. Lee Elementary on the Southwest Side, was on a path toward failing far too many of our students. We crafted curriculum and identified interventions to address gaps in achievement and the shifting sands of accountability. Our teachers were hardworking and committed. But our work seemed woefully disconnected from the demands we knew our students would face once they made the leap to postsecondary education.

We worried that our students were ill-equipped for today’s world of work and tomorrow’s jobs. Yet, we taught using the same model through which we’d been taught: textbook-based direct instruction.

How could we expect our learners to apply new knowledge to evolving facts, without creating opportunities for exploration? Where would they learn to chart their own paths, if we didn’t allow for agency at school? Why should our students engage with content that was disconnected from their experiences, values, and community?

We’ve read articles about a debate over personalized learning centered on Silicon Valley’s “takeover” of our schools. We hear that Trojan Horse technologies are coming for our jobs. But in our school, personalized learning has meant developing lessons informed by the cultural heritage and interests of our students. It has meant providing opportunities to pursue independent projects, and differentiating curriculum, instruction, and assessment to enable our students to progress at their own pace. It has reflected a paradigm shift that is bottom-up and teacher led.

And in a move that might have once seemed incomprehensible, it has meant getting rid of textbooks altogether. We’re not alone.

We are among hundreds of Chicago educators who would welcome critics to visit one of the 120 city schools implementing new models for learning – with and without technology. Because, as it turns out, Chicago is fast becoming a hub for personalized learning. And, it is no coincidence that our academic growth rates are also among the highest in the nation.

Before personalized learning, we designed our classrooms around the educator. Decisions were made based on how educators preferred to teach, where they wanted students to sit, and what subjects they wanted to cover.

Personalized learning looks different in every classroom, but the common thread is that we now make decisions looking at the student. We ask them how they learn best and what subjects strike their passions. We use small group instruction and individual coaching sessions to provide each student with lesson plans tailored to their needs and strengths. We’re reimagining how we use physical space, and the layout of our classrooms. We worry less about students talking with their friends; instead, we ask whether collaboration and socialization will help them learn.

Our emphasis on growth shows in the way students approach each school day. I have, for example, developed a mentorship relationship with one of our middle school students who, despite being diligent and bright, always ended the year with average grades. Last year, when she entered our personalized learning program for eighth grade, I saw her outlook change. She was determined to finish the year with all As.

More than that, she was determined to show that she could master anything her teachers put in front of her. She started coming to me with graded assignments. We’d talk about where she could improve and what skills she should focus on. She was pragmatic about challenges and so proud of her successes. At the end of the year she finished with straight As—and she still wanted more. She wanted to get A-pluses next year. Her outlook had changed from one of complacence to one oriented towards growth.

Rather than undermining the potential of great teachers, personalized learning is creating opportunities for collaboration as teachers band together to leverage team-teaching and capitalize on their strengths and passions. For some classrooms, this means offering units and lessons based on the interests and backgrounds of the class. For a couple of classrooms, it meant literally knocking down walls to combine classes from multiple grade-levels into a single room that offers each student maximum choice over how they learn. For every classroom, it means allowing students to work at their own pace, because teaching to the middle will always fail to push some while leaving others behind.

For many teachers, this change sounded daunting at first. For years, I watched one of my teachers – a woman who thrives off of structure and runs a tight ship – become less and less engaged in her profession. By the time we made the switch to personalized learning, I thought she might be done. We were both worried about whether she would be able to adjust to the flexibility of the new model. But she devised a way to maintain order in her classroom while still providing autonomy. She’s found that trusting students with the responsibility to be engaged and efficient is both more effective and far more rewarding than trying to force them into their roles. She now says that she would never go back to the traditional classroom structure, and has rediscovered her love for teaching. The difference is night and day.

The biggest change, though, is in the relationships between students and teachers. Gone is the traditional, authority-to-subordinate dynamic; instead, students see their teachers as mentors with whom they have a unique and individual connection, separate from the rest of the class. Students are actively involved in designing their learning plans, and are constantly challenged to articulate the skills they want to build and the steps that they must take to get there. They look up to their teachers, they respect their teachers, and, perhaps most important, they know their teachers respect them.

Along the way, we’ve found that students respond favorably when adults treat them as individuals. When teachers make important decisions for them, they see learning as a passive exercise. But, when you make it clear that their needs and opinions will shape each school day, they become invested in the outcome.

As our students take ownership over their learning, they earn autonomy, which means they know their teachers trust them. They see growth as the goal, so they no longer finish assignments just to be done; they finish assignments to get better. And it shows in their attendance rates – and test scores.

Lisa Epstein is the principal of Richard H. Lee Elementary School, a public school in Chicago’s West Lawn neighborhood serving 860 students from pre-kindergarten through eighth grade.

Editor’s note: This story has been updated to reflect that Richard H. Lee Elementary School serves 860 students, not 760 students.

First Person

I’ve spent years studying the link between SHSAT scores and student success. The test doesn’t tell you as much as you might think.

PHOTO: Photo by Robert Nickelsberg/Getty Images

Proponents of New York City’s specialized high school exam, the test the mayor wants to scrap in favor of a new admissions system, defend it as meritocratic. Opponents contend that when used without consideration of school grades or other factors, it’s an inappropriate metric.

One thing that’s been clear for decades about the exam, now used to admit students to eight top high schools, is that it matters a great deal.

Students admitted may not only receive a superior education, but also access to elite colleges and eventually to better employment. That system has also led to an under-representation of Hispanic students, black students, and girls.

As a doctoral student at The Graduate Center of the City University of New York in 2015, and in the years after I received my Ph.D., I have tried to understand how meritocratic the process really is.

First, that requires defining merit. Only New York City defines it as the score on a single test — other cities’ selective high schools use multiple measures, as do top colleges. There are certainly other potential criteria, such as artistic achievement or citizenship.

However, when merit is defined as achievement in school, the question of whether the test is meritocratic is an empirical question that can be answered with data.

To do that, I used SHSAT scores for nearly 28,000 students and school grades for all public school students in the city. (To be clear, the city changed the SHSAT itself somewhat last year; my analysis used scores on the earlier version.)

My analysis makes clear that the SHSAT does measure an ability that contributes to some extent to success in high school. Specifically, a SHSAT score predicts 20 percent of the variability in freshman grade-point average among all public school students who took the exam. Students with extremely high SHSAT scores (greater than 650) generally also had high grades when they reached a specialized school.

However, for the vast majority of students who were admitted with lower SHSAT scores, from 486 to 600, freshman grade point averages ranged widely — from around 50 to 100. That indicates that the SHSAT was a very imprecise predictor of future success for students who scored near the cutoffs.

Course grades earned in the seventh grade, in contrast, predicted 44 percent of the variability in freshman year grades, making it a far better admissions criterion than SHSAT score, at least for students near the score cutoffs.

It’s not surprising that a standardized test does not predict as well as past school performance. The SHSAT represents a two and a half hour sample of a limited range of skills and knowledge. In contrast, middle-school grades reflect a full year of student performance across the full range of academic subjects.

Furthermore, an exam which relies almost exclusively on one method of assessment, multiple choice questions, may fail to measure abilities that are revealed by the variety of assessment methods that go into course grades. Additionally, middle school grades may capture something important that the SHSAT fails to capture: long-term motivation.

Based on his current plan, Mayor de Blasio seems to be pointed in the right direction. His focus on middle school grades and the Discovery Program, which admits students with scores below the cutoff, is well supported by the data.

In the cohort I looked at, five of the eight schools admitted some students with scores below the cutoff. The sample sizes were too small at four of them to make meaningful comparisons with regularly admitted students. But at Brooklyn Technical High School, the performance of the 35 Discovery Program students was equal to that of other students. Freshman year grade point averages for the two groups were essentially identical: 86.6 versus 86.7.

My research leads me to believe that it might be reasonable to admit a certain percentage of the students with extremely high SHSAT scores — over 600, where the exam is a good predictor —and admit the remainder using a combined index of seventh grade GPA and SHSAT scores.

When I used that formula to simulate admissions, diversity increased, somewhat. An additional 40 black students, 209 Hispanic students, and 205 white students would have been admitted, as well as an additional 716 girls. It’s worth pointing out that in my simulation, Asian students would still constitute the largest segment of students (49 percent) and would be admitted in numbers far exceeding their proportion of applicants.

Because middle school grades are better than test scores at predicting high school achievement, their use in the admissions process should not in any way dilute the quality of the admitted class, and could not be seen as discriminating against Asian students.

The success of the Discovery students should allay some of the concerns about the ability of students with SHSAT scores below the cutoffs. There is no guarantee that similar results would be achieved in an expanded Discovery Program. But this finding certainly warrants larger-scale trials.

With consideration of additional criteria, it may be possible to select a group of students who will be more representative of the community the school system serves — and the pool of students who apply — without sacrificing the quality for which New York City’s specialized high schools are so justifiably famous.

Jon Taylor is a research analyst at Hunter College analyzing student success and retention.