Friday, 3 December 2010 09:14 by Admin
Colorado's second straight year of inevitable cuts in state aid to education can become an opportunity to improve learning performance while shedding needless costs, according to a policy brief from the Centennial Institute, Colorado Christian University's think tank. The paper is online here: Centennial Policy Brief No. 2010-2 "Much Better Schools on Much Lower Budgets: A Primer for Colorado Policymakers" draws on proven models for achieving more with less, from schools across the country and around the world. "Our state has massive cost inefficiencies and educational deficiencies within the structure of K-12 education, built up over decades and crying out for correction," says the author. Over $1 billion must be cut from projected spending in order to balance the 2011-2012 budget. Students in neighboring Utah, the paper points out, significantly outperform Colorado students on the respected NAEP test, even though Utah's spending per pupil is only 61 cents on the dollar compared to Colorado's. Denver parochial schools succeed better with minority youngsters than nearby public schools, at just 55 cents on the dollar. Looking abroad, we see education systems from Canada to Korea to Germany far exceeding the United States in academic achievement at 30% lower cost. The paper is organized in Q&A format around 20 concise topics, starting with "Admit: The US trails woefully in global rankings," running through "See why the teaching profession has faltered" and "Realize school funding is bloated, not starved," and concluding with recommendations to "Legislate boldly in 2011." William J. Moloney, former Colorado Education Commissioner with a lifetime of school experience in a half-dozen other states and countries, authored the policy brief in consultation with a panel of educators, legislators, and budget experts. "It is in our power to fix what is broken; all that's needed is the political will," Moloney writes in the introduction. "There will never be a more opportune moment to break out of the old paradigm." He calls on the General Assembly to reinterpret Amendment 23's factor formulas in line with budget realities; offer local school districts a timeout from costly mandates, accreditation, and testing; allow schools to outsource many functions; encourage charters, vouchers, and tax credits; and defuse PERA's "pension time bomb." John Andrews, director of the Centennial Institute, says in an editor's note that when Moloney warned some weeks ago about Colorado public education becoming one of several "metastasizing entitlements that have reached a point of absolute unsustainability," defenders of the education status quo replied in print with emotion, not logic. They deemed the former commissioner's analysis "offensive to educators" -- without attempting to refute it factually. (Denver Post, Oct. 3 and Oct. 14, 2010.) In releasing the policy brief today, Andrews commented: "Centennial Institute and Bill Moloney will be working actively with legislators of both parties to help translate this new paradigm into budgetary solutions. With or without cooperation from teacher unions and the education lobby, the state's dire fiscal condition is forcing policymakers to think way outside the box -- and that's good news for ill-served Colorado schoolchildren."
(Centennial Fellow) For an example of the genius of a recently floated, reform-government, multi-trillion-dollar debt-reduction plan, look at how it would salvage Social Security while simultaneously tickling the fancies of experts left and right. Maybe you don't like the provision raising the benefits retirement age to 68 and then 69, but read on. The changes don't happen for decades, people are already living and working longer than when previous retirement ages were decided, the provision includes rescue clauses for below-age employees in tough spots and it would save gobs of money. Many might not be enthusiastic either about a provision upping the income level at which payments would still be due on the payroll tax. The change would nevertheless raise needed revenues as it lowered the ire of liberals insisting the present system is inequitable, and next comes the best part of all: a new way of indexing initial benefits. The first thing to understand about this idea is what too many news outlets don't seem to grasp. No one will get less in inflation-adjusted dollars than what people in similar circumstances receive today. But the best off among us would get less in the future than they would otherwise receive under a 1970s-introduced formula that had the program on a sure march to financial mayhem. With a quibble here and another there, experts as ideologically different as Peter Orzag and Charles Blahous see major virtue in this Social Security restructuring as envisioned by the co-chairmen of President Obama's bipartisan debt commission. Orzag, who signaled his blessings in a New York Times op-ed piece, is the top budget official in the Obama White House. Blahous, who has also written of his approval, is a Social Security trustee and served as an economic assistant to President George W. Bush. Entitlement reforms are easy to run away from if you are a political coward and to demagogue if you are a political opportunist. The fact is that Social Security, Medicare, Medicaid and other entitlements constitute a major portion of the federal budget, are growing like crazy and must be addressed if a killer debt is to be tamed. Two who grasp that truth are the aforementioned co-chairmen, the wise former Republican Senator Alan Simpson and the devoutly pragmatic Erskine Bowles, who was a chief of staff for President Clinton. And so it is that they also take on Medicare and Medicaid, going to far as to propose growth caps on Medicare, but their grasp of truths does not stop there. They see a federal government shooting skyward like Jack's beanstalk, and suggest job eliminations and wage freezes. They see wasteful spending at the Pentagon, and call for defense cuts consonant with national security. They endorse deduction-erasing, rate-lessening simplification of our social-engineering income tax. They say we should bring anti-competitive corporate taxes down even as we also whack away at loopholes. They take note of a welfare state gone bananas and figure out means not only of stopping its growth, but reducing it. They notice -- who could miss it? -- the bad joke of farm subsidies and tell us to quit laughing and get serious about their demise. They see all kinds of programs we can no longer afford and should never have been the federal government's business anyway, and say we should end them. These two are not pronouncing debt dogma. They aim to start a serious discussion and, by my best guess, wanted all these substantive thoughts on the table before the commission puts out a meaningless formal report, as commissions often do. Simpson has joked that he and Bowles may have to go into a witness protection program, and considering the irresponsible overreaction among many liberals and some conservatives, that seems almost a real possibility. But while there's nothing that says all their items are sacred and should be adopted without debate or change, what we have here is an intelligent, principled, America-saving mix of the progressive and the prudent, something actually practicable instead of fierce, knee-jerking, political insistence on wishes that will never be realized Jay Ambrose is a Colorado-based columnist and Centennial Institute Fellow. He was formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado.
('76 Contributor) What could a Colorado family of four do with an additional $300 a month? Should taxpayers be able to keep more of their hard-earned money? Will that help create jobs and business? Do Colorado citizens deserve to have more money left over after deductions and taxes -- to spend, save, invest or give away? Do you?
[Editor: This post advocating the three tax measures is a counterpoint to Mark Hillman's recent post opposing them. Centennial Institute never takes an official position for or against ballot proposals, candidates for public office, or pending legislation.]
Opponents of Amendments 60 and 61, and Proposition 101 have flooded the media “infosphere” by raising $6,863,021 (how much from out of state?) as reported by the Secretary of State, with $102,418.76 left (as of the October 18, 2010 report). Wow. Not surprisingly, many contributions are taxpayer dollars fighting taxpayers. Check out “Opposition Funding” at www.COtaxreforms.com . See who contributed and how much. Then ponder “WHY?”
Who are these opponents, surprisingly many from out-of-state, who have spent in excess of $6.76 million for sinful excess of TV, radio, newspaper, road and yard signs, badges, bumper stickers, plus public-influencing strategies and expertise being expended?
It is the ephemeral opponent organization, Coloradans for Responsible Reform. Have they ever reformed anything, rather instead, obstructing citizen initiatives that seek to contain government growth, power, spending, debt and taxation? When there’s an issue they’re there; when not, they’re not.
1. The flip side of these issues provides great promise for Colorado’s people and future, in a custom-designed, long-range stimulus strategy for building Colorado’s true prosperity. It will help create more jobs, housing, businesses, product and service output; while ensuring a growing avalanche of revenues for Colorado governments, with concurrent diminishing need for them.
2. The opposition tells how passage of 60, 61, 101 will reduce Colorado governments funding by $4.4 billion, that’s $4,400 million. With five million population, that’s about $880 per capita, or almost $3,600 for a family of four. What can happen when that family has an additional $300 a month to spend, save, invest or give away? And taking into account the vagaries of replacing it, they have to earn some $400 a month to regain that amount after taxes.
3. Revisit some basic economics. Etch these four-words on the inside of your left eyelid, “Only people pay taxes”; the right eyelid, “Businesses pay no taxes.” All revenues, fees, taxes, etc., to finance jobs and functions in the public (government) sector come only from the private sector -- business, commerce, industry. Businesses collect required taxes in their prices of goods and services, and by law pay them to the various governments. A prosperous, burgeoning private sector will pour tons of funds into governments.
4. Speaking of Colorado governments, how many are there? Colorado’s Department of Local Affairs tallies 3,305 (http://dola.colorado.gov/dlg/local_governments/lgtypes.html , 10/23/10). With 2,860 governments in 2006 (Independence Institute Backgrounder IB-2007-F, August 2007, page 1), Colorado governments are growing an average rate of one additional government every four days. And they all demand a piece of the diminishing people tax pie. How much government and how many governments are enough?
5. Do those who believe in Colorado’s economic, business, governmental, constitutional and legal system forget they can get all the tax revenues they need? Protected by the Taxpayer’s Bill of Rights, all they have to do is ask for it. Determine that incoming revenues are insufficient to provide the necessary services, make the case and take it to the voters for approval. Example, state gasoline taxes have not been increased since 1994. Is it possible, even probable such a public vote on a five-, ten- or more cent-increase would pass?
6. Do Coloradans already pay significant taxes? 2009 Economic Report of the President data show that per capita federal taxes for 2008 were $8,275; Colorado, $2,984 (from Colorado 2009 Comprehensive Annual Financial Report), for a total of $11,259 taxes per capita -- federal, state-and-local taxes, direct and mostly indirect.
7. By way of comparison, in merry olde England, serfs (near-slaves?) paid one-third the fruits of their labor to the Manorial Lord for his protection and use of his land. Again, same 2009 ERP data, based on personal income, federal receipts were 20.2%, state, 16.1% for a total of 36.4% (total governments spending were 41.9% of personal income).
8. Government employment growth from 2002 to 2009 in Colorado was 9.1% compared to the private sector’s 7.3%. At the state level, total full time equivalent employees, FTEs, in seven years, grew 11.3% -- 6,561 -- 728 classified, state personnel system; 5,833 non-classified, Judicial, Legislative, Governor, Law, Education and Higher Education Departments. At the 2008 average annual Colorado FTE salary, benefits and perquisites of over $87,000, a million dollars annual State expenditure amounts to about 11.5 state employees.
9. Virtually all this 60,61,101 opposition fundraising, negative publicity and promotion is part of the continuing effort to emasculate, defang and destroy Colorado’s Taxpayer’s Bill of Rights. How good has TABOR been? A study of the 10-years before TABOR and 10-years after convincingly makes the point.
10. For the 10-years before TABOR, Colorado all-government employment grew 21.1% (50,000), non-government employment 17.5% (198,000). For the 10-years after TABOR, all-government growth dropped to 20.0% (59,600); non-government growth more than doubled to 37.7% (526,400). (See “A Decade of TABOR,” Issue Paper No. 8-2003, page 7, http://old.i2i.org/articles/tabor2003.PDF ).
11. In 1992 Colorado’s Governor said if TABOR passed he would have to post signs at Colorado’s borders, “Colorado is Closed for Business.” A County Sheriff I debated told the audience if it passed he would have to don his uniform, let most of his deputies go, and let jailed persons back out on the street. TABOR passed by over 53% in 1992.
Did the signs go up? Did their dire predictions come to pass? Do the scare tactics sound familiar?
12. TABOR implementation began in 1993. In 1994 Colorado was judged to be the number one, best state in the nation, in business and economic performance. This was routinely reported in the “Development Report Card for the States,” published annually by the Washington DC-based, non-profit Corporation for Enterprise Development.
13. Colorado continued number one in 1995, 1996, 1997, 1998 and 1999 -- six consecutive years. Could it be that as the establishment power structure continued to whittle away, dilute and destroy TABOR, its business and economic good began to go away.
14. Amendments 60 and 61, and Proposition 101 are a magnificent gift to the people and future of Colorado, a great and growing stimulus package that will reset Colorado government and get it back on track.
15. If you do not want continuing high unemployment, higher taxes, more governments, bigger government, that gets more expensive, expansive, wasteful, intrusive, invasive, powerful and controlling of Colorado citizens, voters and taxpayers: Vote FOR 60, 61 and 101
(Denver Post, Oct. 3) The 18th century English lexicographer Samuel Johnson famously discovered virtue in the prospect of being hanged in the morning because said circumstance "concentrated the mind wonderfully." Similarly, public officials all across Colorado will be having their minds concentrated wonderfully as they commence what one described as the "budget year from hell."
[Editor's Note: Moloney is heading the School Finance 2.0 study group to provide state legislators with Centennial Institute's recommendations for implementing the concepts in this article when next year's budget is written. Details here.]
In August. Gov. Bill Ritter and state legislators learned that worsening revenue collections had created an additional $60 million hole in the current year's budget. Now that looks like the "good old days" in light of the recent announcement by chief legislative economist Natalie Mullis that the $60 million hole had exploded into a $257 million gap and coming soon was a jaw-dropping $ 1.1 billion shortfall for 2011-12.
The gargantuan size of the shortfalls make abundantly clear that future budget making in Colorado will require an entirely different way of thinking to deal with an entirely new financial environment. Equally clear is that the fiscal crisis we face is as much a result of metastasizing entitlements as it is of collapsing revenues.
In the August budgetary re-balance, Ritter ruled out any cuts to education, but now in light of the new numbers, his budget director, Todd Saliman, says it would be "difficult to address that $257 million shortfall without impacting K-12." Very true, and it will be even more true when we get to the looming $1.1 billion shortfall for 2011-12. Saliman's remark is a simple reflection of the fact that any serious address to the state's mammoth budget crisis is impossible without a determined effort to constrain the one expenditure area that already consumes half of Colorado's budget, and is the lion's share of all local expenditure as well.
Historically, we have not thought of education as an entitlement program, but it assuredly is. Like Social Security, Medicare and Medicaid, it represents a permanent obligation of government monies embedded in both law and public expectation. Also it has, through incremental growth over time, reached a point of absolute unsustainability at anything like the rates of increase it has seen in recent decades.
The startling disconnect between education costs and reality was underlined by highly respected economics writer Paul J. Samuelson, who noted that between 1970 and 2008, though national student population increased by only 8 percent, the number of teachers increased by 61 percent. In a similar vein, he reported that between 1955 and 2007, student teacher ratios had fallen from 27-to-1 to 15-to-1. Accordingly, there is little surprise in the U.S. Bureau of Labor Statistics reports that per pupil expenditure in K-12 education increased — adjusted for inflation — 134 percent between 1975 and 2005.
A central cause of these exploding costs is the fact that public school educators — the largest single employee classification in the country — have created a structure of job security, compensation, health and pension benefits far surpassing those enjoyed by the average American. As Colorado's PERA woes illustrate, this is unsustainable in its present form.
So, what is to be done? Can a different way of thinking identify a model of public education that's effective, cost-effective and sustainable? Assuredly yes. There are useful models near and far.
The largest private systems in the country are parochial schools, which deliver a basic and widely admired educational product at 62 percent of public school per pupil cost.
Look further afield at other industrial nations that are thrashing us educationally today and will thrash us economically tomorrow. The vibrant democracies of Singapore, Taiwan, South Korea and Japan average 68 percent of U.S. cost. Several European countries come in at 70 to 80 percent.
In the past, we never seriously looked at these alternatives because it was politically difficult — and, well, we didn't have to. Now, it will still be politically difficult, but reality is saying we have to.
William Moloney, now a Centennial Institute Fellow, was Colorado's education commissioner from 1997 to 2007.
Wednesday, 22 September 2010 06:45 by Admin
"Larger shortfall looms in Colorado budget, and schools are likely to feel the pain," shouted the headline on a Denver Post story this week. The timing could not be more appropriate for School Finance 2.0, a study group on sustainable budgeting for Colorado K-12 education, soon to be convened by the Centennial Institute.
William J. Moloney, a Centennial Institute Fellow and former Colorado Education Commissioner, 1997-2007, will chair the project. Analysis and recommendations are to be ready by December, for use by the next session of the Colorado General Assembly when it convenes in January 2011, said John Andrews, director of the Centennial Institute.
Read Moloney's prospectus for School Finance 2.0. Education Budget Study Sept. 2010.doc (30.50 kb)
(Denver Post, Apr. 18) “The British are coming,” Paul Revere’s alarm to the Massachusetts countryside on this day in 1775, conveys an urgency you don’t get from the equivalent warning of 2010, “The bankruptcy is coming.”
Fact is, though, fiscal implosion threatens the aging United States of today as grimly as the redcoats threatened the newborn nation of 235 years ago. The question is whether Americans will come awake as the patriots did on that historic night, or sleepwalk into the abyss. I fear for our country, optimist that I am, because the answer is not clear.
To stop blindly expanding entitlements we can’t fund and borrowing what we can’t repay, the country has to snap out of politics as usual. We need a brutally honest self-appraisal, AA-style. The Tea Party movement is doing that, but so far the old-line Democratic and Republican parties are not. America’s genius for self-correction has never been more needed.
We must save ourselves from a terminal case of debtor’s disease state by state, with Washington dragged in last. It will be Massachusetts setting a good example with Scott Brown after setting a bad one on subsidized health care. Illinois passing pension reform while California remains in denial. New Jersey’s Chris Christie stepping up as a budget-balancing governor as our own Bill Ritter whiffs.
In Colorado neither the legislative session nor the election campaign has yet risen above politics as usual. Democrats raised taxes rather than discipline spending. Republicans went for higher electric rates on dubious environmental grounds. Both settled for a bandaid on the PERA pension cancer. The House Speaker favors an ACORN election bill. Bipartisan senators plan another strike at petition rights.
Constitutional amendments initiated by the people, you see, are part of what ails Colorado in the view of some elected politicians. They want to make it twice as hard for you and me to revise our own charter of government. Such restraints on power as term limits in 1990 and tax limits in 1992 couldn’t be so readily imposed in the better future these visionaries offer us. No thanks.
In the US Senate race, meanwhile, Democratic momentum is with Andrew Romanoff, a friend of the big unions that worsen our fiscal and economic woes, and the Republican field is led by Jane Norton, who supported the easy-spending Referendum C back in 2005, sugar for Colorado’s budgetary diabetes. The Democrats’ likely nominee for governor, Mayor Hickenlooper, is an habitual taxer, yet his opponent Scott McInnis won’t sign a no-tax pledge. Come on, friends, pick it up a notch.
My colleague Richard Bishirjian of Yorktown University contends that part of the problem in Colorado is a “brain drain” due to term limits. The deficit I see isn’t brains but backbone – a spine decline. We’re in danger of being systemically corrupted as a whole people, as the Independence Institute’s Dennis Polhill put it.
Today’s imperative – sober up and man up, or the Chinese will own us – is less galvanizing than a midnight cry to wake up or King George will tyrannize us. But make no mistake, freedom is again at a tipping point. The ascent from bondage to faith to courage to liberty, traced by historian Alexander Tytler in the 1770s, tilts quickly from liberty to complacency to apathy to dependency, returning then to bondage. Ask yourself where we are on that scale.
The balance our Founders sought, wrote James Madison, was to “first enable the government to control the governed; and in the next place oblige it to control itself.” Two centuries on, badly under Bush and still worse under Obama, Americans are getting little of the one and way too much of the other. We have to turn this around. Will 2010 be the year?
Of all the fairy tales that liberal politicians seem to believe — such as man-made global warming or that more government health care spending will reduce the deficit — there one fable they seem unable to comprehend: "The Goose That Laid the Golden Egg."
Most will recall the story of the couple blessed by a goose that each day produced one golden egg and made them rich. Not content with their good fortune, the couple decided to cut the goose open and collect the bevy of golden eggs inside.
Instead, they found that, like other geese, their goose produced just one egg a day, and so by killing her, they failed to realize a bonanza of golden eggs and, or course, killed their goose.
In Colorado, we see the same short-sighted thinking, demonstrated by a legislature and governor who, in order to balance government's budget, chose to impose $130 million in higher taxes on the very businesses whose success is vital to a strong economy.
When minority Republicans argued that raising taxes on business during a recession is counterproductive, they were assailed by Speaker of the House Terrance Carroll, a Denver Democrat, who unfurled this blazing display of pious myopia:
"We're asking big business to pay their fair share so that we don't have to keep balancing the budget on the backs of teachers, police officers and firefighters, senior citizens and the neediest who depend on our safety net."
Speaker Carroll wasn't finished: "It's only the GOP and their special-interest cronies who have been complaining because we're rolling back corporate welfare and special interest tax loopholes."
If sanctimony and economic illiteracy were currency, the Speaker could buy his favorite professional sports franchise.
Where, pray tell, does he think the $7.5 billion in the state's general fund comes from? Overwhelmingly, it comes from businesses that make a profit, pay taxes and employ workers (who also pay taxes) only if they can produce something that consumers will buy. Contrast that with government, which produces nothing that people willingly purchase. That's why government must raise money through taxes and fees.
The state has less money to spend because business receipts are down. When business is booming, businesses pay more in taxes — happily — because sales volume and profits increase. When receipts are down, business not only pays less in taxes, but it spends less on payroll and production.
When government raises taxes during a recession, businesses have no choice but to cut costs further by reducing payroll and other investments that would have generated tax revenue. It's a vicious cycle, and short-sighted tax hikes inevitably backfire on legislators who view protecting government as their first priority.Speaker Carroll and so many of his colleagues seem to believe that Colorado is a government that supports an economy, rather than an economy that supports a government.
Perhaps if the Speaker had ever met a payroll, he would understand why these policies — and his rhetoric — are disastrous.
That's a problem — dearth of business experience — that increasingly afflicts the Democrat caucuses at the State Capitol, hence their view of business as just another "special interest." Democrat legislators' work experience comes predominately from government or non-profit fields that don't rely on their ability to efficiently produce goods or services but on the tax dollars or generosity of those who must.
In the House, 70 percent of Democrats come from government or non-profit fields; in the Senate, it's 57 percent. Among Republicans, only 26 percent of representatives and 28 percent of senators come from a government or non-profit background. (Incidentally, that's counting all attorneys in both parties as private-sector producers.)
Democrat legislators and Gov. Ritter landed in this predicament because they worship at the altar of government. That's why they can't resist spending every dollar they take in during good times, rather than setting some aside for hard times.
That's why, for the past two years, they've ignored pleas to budget cautiously and have made promises to schools and to seniors that they cannot keep. That's why they are willing to see just how much abuse the golden goose can take.
Centennial Fellow Mark Hillman was previously senate majority leader and state treasurer. To read more or comment, go to www.MarkHillman.com.
('76 Editor) I asked former Treasurer Mark Hillman what sort of genuine PERA stabilization bill he would file if the two of us were still state senators, in light of his concern expressed in the previous post that the current bipartisan Senate Bill 1 doesn't get at the root of the problem. He recommended the following three steps:
* Raise the retirement age to 67 for anyone who hasn't been in a PERA-covered job for more than 5 years.
* Give everyone the option to put their money into a DC plan.
* Put into statute that, from this point forward, if PERA's funds fail to meet the 30-year amortization requirement, that constitutes an "actuarial emergency" and it's up to the PERA board to produce permanent benefit reductions that restore the 30-year amortization schedule.
By the way, Hillman has just published an excellent overview of how Bill Ritter and Colorado Democrats have shredded both the budget and the constitution since 2006. The paper is called "A Billion Reasons Why Colorado Taxpayers Need Protection." He wrote it for the Rocky Mountain Foundation, the new group headed by our friend Tom Tancredo.
(Centennial Fellow) Rescuing the Public Employees Retirement Association (PERA) is nothing new for state lawmakers. Twice in the last decade, legislators have thrown PERA a lifeline, forcing the state, school districts, local governments and finally even workers to chip in hundreds of millions of dollars to keep the plan afloat.
As recently as four years ago, PERA and many employee groups refused to acknowledge the plan's peril, despite assets falling from 105 percent of the amount needed to pay benefits to just 70 percent from 2000 to 2004.
In 2008, PERA's funding ratio tumbled to below 52 cents for every dollar of promised benefits - a $30 billion deficit. After almost a year of cautioning lawmakers against acting hastily, even PERA's directors finally asked for help - a third rescue plan in just seven years.
PERA had little choice. Its $30 billion unfunded liability is enormous. For comparison, state government is expected to collect about $27 billion in taxes and "fees" over the next three years. Shutting down state government for three years in order to bail out PERA isn't exactly a viable option.
PERA's fix asks for more money from employers (taxpayers) and asks current employees to forego up to 5 percent of future wage increases.
More significantly, PERA abandoned its long-held legal argument that benefits once promised to its members can never be scaled back, no matter how unaffordable they become. PERA proposes an immediate reduction of cost-of-living adjustments from the current 3.5 percent per year to no more than 2 percent.
The current plan, Senate Bill 1, is criticized from the right for not doing enough to control the costs of PERA's generous benefit structure and from the left because - at long last - it requires PERA beneficiaries to shoulder a significant portion of the bailout's cost.
However, the cost of PERA will soon become too large to ignore, even for those hoping to retire on PERA. If this year's "fix" is approved -the alternatives aren't any easier - then the total cost of employing a PERA member will be more than 28 percent of that employee's wages:
** 8 percent deducted directly from an employee's paycheck,
** 15.15 percent contributed by employers, including a 5-percent bailout payment,
** And a 5-percent bailout payment from employees, which is, at least in theory, subtracted from wage increases.
Many scoff that these "foregone wage increases" are merely a ruse to create the appearance of employee contributions while still ultimately sticking it to taxpayers.
Those suspicions aren't unfounded, but the reality for most school districts, local governments and, even, the state is that they have nowhere else to find the money, given that personnel costs account for a large share of their budgets.
When the current economic crunch subsides, union leaders will most certainly lobby elected officials to fund both the PERA bailout and standard wage increases. If lawmakers, city councilors or school board members give in, then voters should throw them out.
Either way, the cost of funding PERA will soon become a tremendous, inescapable burden for government and for employees covered by PERA.
A PERA member whose job pays $50,000 will have $4,000 deducted and credited to his or her PERA account. The employer will send PERA an additional $5,075 as its employer contribution and another $5,000 for the PERA bailout.
Whether or not some of that money comes from foregone wages, year after year the employer is paying PERA $5,000 that otherwise could have been spent elsewhere. And because personnel costs are the largest part of most government budgets, employees would have undoubtedly received a share of that money if it wasn't bailing out PERA.
For current retirees, the bailout isn't so bad; aside from the reduced COLA, they aren't paying for it. But working PERA members will soon ask if the money their employer is sending to PERA will fix it once and for all - or if they're trading reduced wages today for more promises that PERA can't keep and more costly fixes in the future.
Centennial Fellow Mark Hillman was formerly Majority Leader of the Colorado Senate and Colorado State Treasurer.
There is a consensus that the desperate plight of higher education finances in Colorado calls not for tinkering around the edges but a radical re-examination of basic premises. The traditional solution of “Give Them More Money” is simply not an option given the perilous condition of the state and national economy. One proposal under consideration is the creation of more three-year bachelor’s programs as a means of achieving significant savings for students, parents, colleges, and taxpayers. Before opining on the virtues of this idea it would useful to reflect on where the notion of a “four year degree” came from and also what usages are found in other nations. In 1636 when the Massachusetts Bay Colony established Harvard as America’s first college they naturally looked to Oxford and Cambridge as models, and at that time both institutions viewed four years as a general norm for acquiring a bachelor’s degree. So, Harvard followed suit as did William and Mary (1696), Yale (1702), and subsequently virtually every American institution offering a Bachelor’s Degree. Then in the 17th century the British Parliament- experiencing a “budget gap” – directed Oxford and Cambridge to redesign their bachelor’s programs so that they could be successfully delivered in three years instead of four. Despite some protests they complied and created a highly credible three year bachelor’s program that has served their nation very well ever since. On this latter point I can offer some personal testimony. Following my “four year American degree”,I was a graduate student at Oxford, and the University of London. Any illusion I had that my “extra year” gave me an edge quickly proved unfounded. My relative deficiencies in speaking and writing the Queen’s English and my comparatively shallow store of general knowledge proved conclusively that while I had a longer undergraduate education, my English peers usually had better ones; Ever since I have found the important issue of educational quantity vs. quality to be riveting. Had the United States at least held the line at four years the current financial crisis would not be quite so dire, however as recently reported by Newsweek magazine, the average time of completion for a bachelor’s degree has ballooned to an astounding six years and seven months. For an in-state student at the University of Colorado spending $20,000 annually the difference between four and six and a half years amounts to around $50,000 not to mention the many thousands more that the state must pay in additional higher education subsidies. So, what explains this dramatic expansion of completion time. The reasons are as varied as the students themselves but those most frequently cited are unavailability of required courses, fewer students taking a demanding course load each year, and the attractiveness of the non-academic aspects of college life. The main reason is that higher education authorities allowed it to happen because it greatly increased their revenues and opportunities for discretionary spending. Many years ago a President of Oberlin College- Frederick Jackson Starr- in a much noted speech to college administrators stated that compelling reasons of equity and economics required that U.S. institutions should emulate the rest of the English speaking world and many other countries by making a quality three year bachelor’s program widely available. His peers generally viewed this as heresy and the criticism that descended upon Starr was immense. Similar voices subsequently fell silent. There is no question that the much feared revenue reductions entailed by three year programs could be matched by proportional reductions in expenditures presuming capable management prepared to make decisive choices. Clearly a three year degree is not for most students- for some four years remains a stretch- but simple equity demands that an approach that has long been a successful norm in other countries should at the very least be an option at all institutions offering the bachelor’s program. Today when spiraling higher education costs are breaking the financial backs of many middle class families, and slamming the door outright on countless poor and minority students the existence of a three year option could be the difference in getting or not getting that degree which is an increasingly vital passport to a better 21st century future.
Centennial Fellow William Moloney was Colorado Education Commissioner from 1997 to 2007. His columns have appeared in the Wall St. Journal, USA Today, and the Washington Post.