Charter schools want flexibility in pensions

Apr 14, 2013 by

Christian Gooden and ELISA CROUCH –

ST. LOUIS • Grand Center Arts Academy needed a reading teacher.

So Principal Lynne Glickert began recruiting a candidate from St. Louis County, a teacher whom she calls “amazing.”

But the teacher turned the job down. The reason: To work at Grand Center Arts Academy, a charter school, she’d have to switch to the city teachers’ pension system.

“I wish they had a choice,” said Glickert, who has run into this predicament before. “For her, it’s about the retirement.”

When the Missouri Legislature authorized charter schools in St. Louis in 1998, it freed them from many of the constraints that bind traditional school districts.

But one remained. Missouri charter schools — tuition-free independent public schools funded by taxes — cannot choose their own retirement plans. They are tethered to the pension plans of the St. Louis and Kansas City school districts, with the intent of protecting the retirement of thousands of city school teachers.

That raises concerns from some charter school leaders in St. Louis who say the requirement not only has hurt recruitment, but has saddled them with the legacy costs of a pension system that is becoming increasingly difficult for them and St. Louis Public Schools to maintain.

As charter schools grow in number and size, so do their contributions to the St. Louis Public School Retirement System. Yet neither charter schools nor their teachers have any representation on the pension system’s Board of Trustees, giving them no voice in how the money is invested.

Some charter school leaders point out that most of their staffs will never even draw a pension. Teachers at charter schools tend to be younger, work for less pay, and switch jobs at a much faster rate than those at St. Louis Public Schools. Based on historical data, half of teachers at charter schools will leave after one year, according to the pension system’s annual report. Just one out of three will remain in the system after three years. Becoming vested requires five years of employment.

“You’re transferring pension wealth from the charter schools to the public schools when you’ve got a situation like this,” said Mike Podgursky, an economics professor at the University of Missouri-Columbia, who has written several studies on public pensions. “This is not a good deal for charters.”

It’s a point that bothers Kelly Garrett, executive director of KIPP St. Louis, whose school KIPP Inspire recruits teachers from across the region and out of state. This year, the school is required to contribute just over 15 percent of its salaries toward teacher pensions — an increase from about 11 percent last year. The difference is around $60,000.

“I think, wow, there’s so much money being put toward their retirement that they’ll never have access to,” Garrett said. “It’s taking money away from kids. It’s not even giving money to teachers.”

Garrett said he’d rather offer teachers at KIPP a 401(k) plan with a hefty match from the school that staff could take with them whenever they leave, or even offer them higher salaries. In the city plan, teachers may cash out the money they’ve contributed after leaving the school, but they cannot cash out their employer’s contribution.

“I’d have a lot of flexibility if I did not have to participate,” Garrett said.

But not everyone is upset enough to push for a change, said Doug Thaman, executive director of the Missouri Public Charter School Association.

“There are a lot of different perspectives to this,” he said. “There are some who say we would really like to select our retirement system. We have others who say we don’t want to hurt everybody else’s retirement. How to unravel that there hasn’t been an easy solution.”

LOST PENSION WEALTH

The Public School Retirement System of the City of St. Louis is made up of more than 11,000 current and former employees from the city school system and charter schools. The Missouri Legislature created the system in 1944, as well as a similar one in Kansas City. Two years later, it created the Public School Retirement System for educators everywhere else in the state.

The pension systems have different contribution and retirement requirements. In St. Louis, educators pay 5 percent of their salaries into the fund, and employers pay whatever else is needed. They do not receive a cost of living adjustment upon retirement unless the governing board of St. Louis Public Schools approves it. City teachers also pay into Social Security.

Elsewhere in Missouri, teachers pay 14.5 percent of their salaries toward retirement and do not pay Social Security. Their pensions are adjusted each year according to the Consumer Price Index.

Switching between these retirement systems can be costly for teachers, leading to a later retirement age. As a result, it has the potential of costing them hundreds of thousands of dollars in pension wealth, according to a study co-authored by Podgursky and Robert Costrell, a professor of education reform and economics at the University of Arkansas.

When it comes to recruiting talented teachers from outside St. Louis, “It’s one of the biggest obstacles,” said Thaman, of the Missouri Public Charter School Association. “If you start separating your retirements out … it reduces the amount you retire on.”

NO EASY SOLUTION

Missouri’s situation is not unique. In the 40 states with charter schools, 24 require them to participation in a particular pension plan, according to the Fordham Institute. In the other states, charters have the option of participating.

“The best scenario is that we’d have the same pension plan as the rest of the state,” said Jeff Kuntze, chief financial and operating officer for Confluence Academies, which operates five charter schools in the city, including Grand Center Arts Academy.

Thaman said there have been discussions among charter school leaders to push for legislation that would give charter schools greater flexibility. But not every charter school organizer agrees, he said. And so far, no bill has been proposed.

Twenty-one charter schools across the city educate about 9,200 students, about one-third the number enrolled in St. Louis Public Schools. Payments from charter schools into the pension system accounted for just 4 percent of employer contributions in 2007. That share rose to 16 percent in 2011, according to the most recent numbers available.

“It’s nothing to sneeze at,” said Andrew Clark, executive director of the pension system. “They’re becoming more significant.”

And this is why Julie Frugo, head of school at St. Louis Charter School, wants representation on the system’s 11-member Board of Trustees.

“We need to have a voice in the planning piece,” she said.

Five trustees are elected by teachers paying into the system, two are elected by retirees, and four are appointed by the governing board for the St. Louis school district.

Neither Charter schools nor charter school employees are guaranteed a spot on the board, but they could run for election.

In 2010, Janice Denigan, the director of finance and operations for St. Louis Charter School, ran for a spot. She lost.

She predicts the outcome would be the same for most charter school representatives, who remain a minority in the pension system.

“We know it would be more difficult to elect anyone,” she said.

 

via Charter schools want flexibility in pensions : News.

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