This post was originally published on Watchdog Wire Colorado (“Gov. Hickenlooper Admits: Districts Can Use Amendment 66 Money For PERA“).

From the beginning, one of the key concerns surrounding Amendment 66 has been its prospective use to backfill the state’s public pension obligations, rather than aid Colorado students in the classrooms.

It’s a serious worry for Amendment 66 supporters- they even produced a video on this point, claiming that, “There is only one way to read Amendment 66 when it comes to where the new money goes” (visible at 1:38).

PERA’s own website references a Grand Junction Sentinel editorial denying the charge:

“Or, as the group pushing the ballot amendment states on its website, money that will be raised by Amendment 66, ‘is constitutionally and statutorily prohibited from ever being used directly to fund PERA.'”

But that one word, “directly,” is a loophole that even Governor Hickenlooper won’t climb through, and as a result, undercuts this entire claim by proponents.

A Revealing Question

As a result of my membership on the Jewish Community Relations Council of Colorado, I received an invitation to an event on October 8 in support of Amendment 66, hosted by Cherry Hills Village residents David and Laura Merage.  The Merages are prominent entrepreneurs and founders of the David and Laura Merage Foundation, which counts education among its primary missions.  Gov. John Hickenlooper was a featured speaker and gave some remarks regarding Amendment 66 to the crowd of about 40 people, followed by a question and answer session. I took this opportunity to ask the Governor for clarification on PERA funding. The following is an audio file and transcript of our exchange:

Gov. Hickenlooper: Anything else? What else?

Sharf: OK, so a question about the PERA. So, you had said that it can’t be used to backfill PERA, which is certainly true at the state level.

Gov. Hickenlooper: Yep

Sharf: Well, once the money gets to the districts…now, under SB1, which was supposed to be the fix for PERA, the districts were supposed to split – there was a lot more money going into PERA, there was some increases, some supplemental payments, that were going to go into PERA.

Gov. Hickenlooper: Right

Sharf: And, the districts were supposed to split that increase with the employees, with the unions.

Gov. Hickenlooper: Yep

Sharf: But with the exception maybe of Adams, they haven’t really. Overwhelmingly…

Gov. Hickenlooper: I’m not sure that that’s right –

Sharf: Well, Greg Smith –

Gov. Hickenlooper: They have not split it, they’ve just swallowed it.

Sharf: Right, that’s what I mean, is that they’ve basically just swallowed it.

Gov. Hickenlooper: Well, if you want to fix that, if that’s what’s happening, then we can’t legislate that. There’s a certain amount of money that goes into the districts, and that is the way our education system is structured. If you want to fix that, put it up on our website, how much of that money the district is spending on PERA. And I guarantee you the parents will go nuts.

Sharf: But do you need the tax increase to put it up on the website?

Gov. Hickenlooper: YES!  I mean, to have a website like that, $18 million, $20 million, and then to operate it, yeah! You should see – you know what it’s going to cost – I just got the budget today – you know what it’s going to cost to finally have our drivers license system for the state of Colorado, to have a simple system where you go in and you get your driver’s license? And you can do it as you’re coming in, do all the prep work on your handheld device? You know what that’s going to cost? Eighty million dollars. Just so you’re clear; we’ve been working on that for two and a half years, they just told me that today in our budget meeting. That’s just what it is.

Under the terms of SB10-001, passed in 2010 and signed by then-Governor Bill Ritter, school districts are required to make additional payments into PERA in order to help stabilize the program. PERA’s Executive Director, Greg Smith, is on record as saying that the legislature’s intent was that they split the cost of those increased payments with their employees. Smith, in legislative testimony, noted that most school districts have failed to do so.

Sen. Michael Johnston, a prime sponsor of Amendment 66’s implementing legislation, SB13-213, and advocate for Amendment 66, also seemed to believe that SB10-001 required increased employee contributions, and seemed surprised in December of last year to find out that that wasn’t happening:

[youtube]http://www.youtube.com/watch?v=kNqWlwKr9Ig#t=4845[/youtube]

Question (at 1:21:05): The pushback that I got from our district, and quite honestly, there was no change in the contribution rate for the teachers, for the employees of the district. All the increase, at least in Jefferson County, picked up by the taxpayers and the district. They kept insisting that there was nothing they could do, so please go to the legislature and take care of that, there was nothing they could do about adjusting how much the contributions – the contributions go up really high on the taxpayer side but they haven’t moved for the teachers, at least in JeffCo. Perhaps in other districts…

Sen. Johnston: We should touch base after this, because the bill that I voted for did include increases on employee contributions, so we should talk about that.

On a per-pupil basis, this becomes clear. Statewide, the overall increase in PERA contributions (left axis) strongly parallels the increase per-student contribution to PERA from the districts, while the per-pupil contribution from the employees has barely budged (per-student on right axis):

Source: PERA CAFRs and Colorado Department of Education

District Versus State Rules

Because teachers are employees of the school districts and not the state, the overwhelming portion of the employer’s PERA contribution to the School Fund comes from the districts to begin with.

(One major exception is Denver teachers, whose retirement plan recently merged with PERA and has its own fund.  Under the terms of the merger, DPS payments are currently offset by the interest payments on the debt DPS floated in 1997 and 2008 to fund their pension obligations.)

The governor’s candid admission that once the money leaves for the districts, the state has no real control over how it’s spent, severely undercuts one of Amendment 66’s supporters’ key claims about how much of the $1 billion in additional tax money is required to make it to the classroom, and how much will be diverted to the pension fund.

And the districts’ recent behavior gives taxpayers little cause for optimism, either.