MCEA Testifies at State Pension Commission

On Monday November 15th, MCEA President Doug Prouty testified before the Maryland Commission on Employees' and Retirees' Benefit Sustainability about the importance of preserving the long-term financial health of the state pension plan. Reprinted below is his testimony.

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TESTIMONY

before the

Maryland Commission on Employees' and Retirees' Benefit Sustainability

By Doug Prouty, President

Montgomery County Education Association

On behalf of

The Maryland State Education Association

Thank you for the opportunity to speak with you today. The members of MSEA appreciate your hard work to gain an understanding of the complexity of the issue that face us; the General Assembly, the participants in the state pension system, and those who fund it.

The Commission’s title rightly identifies benefit sustainability as the primary purpose of your work. There are some in this debate that define the problem as that of excessive benefits. The average annual benefit under the Maryland State Teachers Pension Systems was about $17,500 last year- hardly a lavish lifestyle to rely on in retirement. Nor is it the cause of the current problem.

To answer the question of sustainability, we must first understand how we got here:

• In 2000, the Maryland State Teachers Retirement and Pension Fund was fully funded, largely due to investment gains in a strong market.

• In 2002, the legislature voted to partially offset the cost of a statewide tax cut by changing the funding formula for the pension plan. The state's contribution rates were frozen at FY2000 levels as long as funded status was between 90% and 110%. That's the "corridor". And if the funding status fell below 90%, the state only had to increase its annual contribution by 1/5 of the shortfall each year – allowing the underfunding to continue to accelerate .

In the subsequent eight years, several things have happened:

• 'Corridor funding' decreased the amount that the state government put into the pension plan each year.

• In 2006, the legislature voted to improve the pension plan’s benefits; moving the Maryland plan from one of the worst in the nation to the national average. Participants increased their annual contribution to the plan from 2% to 5% of salary.

• The recession caused a massive drop in both the value of the plan's assets and its annual investment income - as was true for every other investment fund in the nation. Reports indicate that the losses in investment income and value due to the recession account for 85% of the current shortfall.

Just as it was ill-advised for the legislature to approve the “corridor funding” rule in 2002 on the heels of a bull market, it would be ill-advised in 2010 to slash plan benefits on the heels of the most recent bear market.

Chatter about eliminating the current defined benefit is a solution in search of a problem. It’s not as if$25,000 is an exorbitant annual retirement benefit. Nor was it benefit levels that caused the current shortfall in the plan; it was the recession.

Add to that the fact that changing from a defined benefit plan to any alternative is more costly for a number of years and one has to wonder why such a change would even be suggested. It is worth noting that two states- Arkansas and West Virginia- are abandoning defined contribution plans after having switched because anticipated savings are unrealized.

Any changes considered in the plan or its funding must reflect the complexity of the circumstances in which we find ourselves. What are the goals of the state pension system? Ultimately, they are to assure a reasonable standard of living upon retirement to the participants in the plan and to help attract and retain the highest quality employees to Maryland and its schools. The teacher pension system does an adequate job at achieving the first goal at present- it is average when compared to the rest of the country. It is certainly little to expect that an average system not be changed in a way that would make it worse. Any changes you may consider recommending need to have the second goal in mind as well.

Simply shifting part of the cost of the Plan from the state to the counties does nothing to address either of these goals. Nor does cost-shifting do anything to address the long term financial sustainability of the Plan, unless one believes that counties need greater ‘fiscal discipline’ to slow the growth in salaries.

If the only question being asked is “how to make the state budget look balanced”, then passing off costs to the counties makes oddly narrow sense, but does nothing to address the long-term sustainability of the Plan. It doesn’t do much for taxpayers either, since it just shifts the tax burden to local governments who will have to take the hard votes to raise taxes in lieu of the state legislature.

At least a decade ago, when the state passed off the cost of teacher social security payments onto local governments, the state granted additional local taxing authority. This time a shift would be even tougher on local governments, since there is no additional increase in taxing authority.

The ramifications of shifting part of the costs of teacher pensions to the counties are multiple, and none are good. Teachers- like all those who work in our public schools, libraries and community colleges - do incredible work with decreasing resources every day. It is the most difficult job that I have ever held and has become more so in the past decade. Over time, teachers will leave Maryland or even leave the profession. Restoring cuts in positions that have occurred around the state would also be made more difficult. There are fewer reading support teachers, for example, who assist our most at risk students. Class sizes will continue to increase.

What about the smaller and the less wealthy counties that will have the least ability to absorb these additional costs? With less ability to generate local tax revenues, will cost-shifting exacerbate the gaps between the haves and the have-nots?

Such an action will also make it more difficult to attract the best employees to Maryland’s public schools, as stagnant wages make a career in public education less attractive.

If the changes to the system being advocated by some also occur, public education, and therefore the students who benefit from this most basic right, would be damaged. The current plan encourages teachers to stay in Maryland and in the profession. Any change to a hybrid or defined contribution plan in an era when increasing attention is being paid to the importance of having an expert teacher in each classroom- indeed , research has shown that this is the most important factor in student achievement - would discourage the best and the brightest from considering our schools as a place to work.

Such a change also places those in the system at risk of outliving their savings and becoming dependent on social services, for which the funding comes from the same source- the state coffers.

Finally, it is also a solution to the wrong problem- we know that the most significant factor in the current underfunded state of the pension system is the dismal performance of the stock market.

We can fix the system to be sure that we achieve its goals without causing harm to the students of Maryland and the professionals who care for, instruct, and challenge them every day. The proposals to move away from ‘corridor funding’ and extend the period of time over which investment losses can be smoothed out are a good start.

Thanks for all of your time, energy, and hard work in helping to arrive at a solution

Diane Ravitch on "Waiting for Superman"

Diane Ravitch was Assistant Secretary of Education under President George H.W. Bush. She was an early proponent of the No Child Left Behind Act, and the focus on testing, accountability, and choice that framed NCLB. Her recent review of Waiting for Superman in the New York Review of Books is an insightful reminder that slogans and educational fads do not always match the realities in our schools.

The Myth of Charter Schools

Diane Ravitch, The New York Review of Books

November 11, 2010 —

Ordinarily, documentaries about education attract little attention, and seldom, if ever, reach neighborhood movie theaters. Davis Guggenheim’s Waiting for “Superman” is different. It arrived in late September with the biggest publicity splash I have ever seen for a documentary. Not only was it the subject of major stories in Time and New York, but it was featured twice on The Oprah Winfrey Show and was the centerpiece of several days of programming by NBC, including an interview with President Obama.

Two other films expounding the same arguments—The Lottery and The Cartel—were released in the late spring, but they received far less attention than Guggenheim’s film. His reputation as the director of the Academy Award–winning An Inconvenient Truth, about global warming, contributed to the anticipation surrounding Waiting for “Superman,” but the media frenzy suggested something more. Guggenheim presents the popularized version of an account of American public education that is promoted by some of the nation’s most powerful figures and institutions.

The message of these films has become alarmingly familiar: American public education is a failed enterprise. The problem is not money. Public schools already spend too much. Test scores are low because there are so many bad teachers, whose jobs are protected by powerful unions. Students drop out because the schools fail them, but they could accomplish practically anything if they were saved from bad teachers. They would get higher test scores if schools could fire more bad teachers and pay more to good ones. The only hope for the future of our society, especially for poor black and Hispanic children, is escape from public schools, especially to charter schools, which are mostly funded by the government but controlled by private organizations, many of them operating to make a profit.

The Cartel maintains that we must not only create more charter schools, but provide vouchers so that children can flee incompetent public schools and attend private schools. There, we are led to believe, teachers will be caring and highly skilled (unlike the lazy dullards in public schools); the schools will have high expectations and test scores will soar; and all children will succeed academically, regardless of their circumstances. The Lottery echoes the main story line of Waiting for “Superman”: it is about children who are desperate to avoid the New York City public schools and eager to win a spot in a shiny new charter school in Harlem.

For many people, these arguments require a willing suspension of disbelief. Most Americans graduated from public schools, and most went from school to college or the workplace without thinking that their school had limited their life chances. There was a time—which now seems distant—when most people assumed that students’ performance in school was largely determined by their own efforts and by the circumstances and support of their family, not by their teachers. There were good teachers and mediocre teachers, even bad teachers, but in the end, most public schools offered ample opportunity for education to those willing to pursue it. The annual Gallup poll about education shows that Americans are overwhelmingly dissatisfied with the quality of the nation’s schools, but 77 percent of public school parents award their own child’s public school a grade of A or B, the highest level of approval since the question was first asked in 1985..... continue reading the full article. 

Understanding the Debate over Maryland Teacher Pensions

Now that the election is over, Annapolis watchers are turning their attention to the upcoming state legislative session (Jan-April) and the ongoing debate over funding teacher pensions. An MCEA member recently asked about proposals to 1) eliminate "corridor funding" and 2) pay off investment losses over 10 years rather than five. Understanding those proposals is a good way to understand the debate.

Background on Maryland Teacher Pensions

In 2000, the Maryland State Teachers Retirement and Pension Fund was fully funded, largely due to investment gains in a strong market.

In 2002, the legislature voted to partially offset the cost of a statewide tax cut by changing the funding formula for the pension plan. The state's contribution rates were frozen at FY2000 levels as long as funded status was between 90% and 110%. That's the "corridor". And if the funding status fell below 90%, the state only had to increase its annual contribution by 1/5 of the shortfall.

In the subsequent eight years, several things have happened:

1. The 'corridor funding' accounting rules decreased the amount that the state goverment had to put into the pension plan each year.

2. In 2006 teachers won a significant improvement in pension benefits; moving the Maryland plan from one of the worst in the nation to the national average. Teachers increased their annual contribution to the plan from 2% to 5% of salary.

3. The recession caused a massive drop in both the value of the plan's assets and its annual investment income - as was true for every other investment fund in the nation.

"Corridor Funding" and Smoothing Investment Losses

The proposal to phase out corridor funding is strongly in the interest of pension plan participants. Corridor funding is an accounting gimmick that allows the state to put in less than it's share of plan contributions. (Remember - teachers have increased their contributions.)

A proposal to pay off investment losses over 10 years instead of 5 also sounds like a wise move.

Decisions affecting the long term stability of the pension plan should not be made on the basis of short-term market swings. Just as it was a mistake in 2002 - on the heels of the market boom of the late 1990s - to cut back on the state's contributions: it would be a mistake in 2010 to slash benefits because of the short-term investment losses of the recent recession.

Currently, the swings in the market are "absorbed" over 5 years. It's a means of smooting out the impact of swings in the market. Shifting to a 10 year smoothing formula lessens the immediate impact of wide swings in the investment markets.

Combining the two proposals is an intriguing concept. More importantly, it is shifting the discussion to the real issue of how to ensure the long term financial stability of the pension plan. Last year's debate in Annapolis over shifting the costs from the state government to local governments was a side show. Cost-shifting does nothing to address the underfunding of the pension plan.

A statewide "Commission on Employees' and Retirees' Benefit Sustainability" is due to issue an initial report in December, prior to the legislative session. Montgomery County is represented on the Commission by both State Treasurer Nancy Kopp and businessman Aris Mardirossian. A number of very informative briefing papers have been prepared for the Commission.

Here in Montgomery County, MCEA is meeting regularly with an "Ad Hoc Pension Work Group" designed to coordinate the County's strategy on the state pension issue. Led by State Senator Rich Madeleno, the Work Group includes state senators, state delegates, members of the county council and board of education, as well as representatives of the county executive, Montgomery College, and the school system - and college - employee organizations.

This issue will be one of several important debates in Annapolis this winter that will have serious implications for educators, public education, and taxpayers in Montgomery County.

Tom Israel, MCEA Executive Director.

General Assembly Reins in MSDE

The General Assembly's "Administrative, Executive and Legislative Review Committee" (AELR) deserves credit for its 12-3 vote late yesterday blocking implementation of proposed regulations on teacher evaluation drafted by State Superintendent of Schools Nancy Grasmick.

The Committee's legal counsel had prepared a detailed analysis of how the proposed regulations conflicted with the Education Reform Act of 2010, which was passed by the General Assembly last spring. She concluded that "the regulations seem to be noncompliant" with the intent of the General Assembly on four substantive matters:

1. The law required that the State Board of Education "solicit information and recommendations from each local school system and convene a meeting" to discuss the issue before proposing regulations. This was not done.

2. The law charges the State Board of Education with developing "general standards", but left the specifics to local Boards of Education. The proposed state regs go far beyond "general standards".

3. The proposed regulations conflict with the law's requirement that teacher evaluations be based on "multiple measures".

4. The State Board's "arbitrary assignment" of a 2012 implementation deadline was not consistent with the statute passed by the legislature.

There can be little doubt that the proposed regulations went way beyond what the law intended. The General Assembly very clearly put the responsibility for developing teacher evaluation systems on local boards of education. The State Department of Education was only to develop "general standards". Yet the propose regulations went into great detail to prescribe exactly what the teacher evaluation systems needed to look like in every school district in the state.

If there was any question as to whether the State Department of Education exceeded its authority, one only needs to listen to the State Board of Education. Kate Walsh, an influential member of the State Board, recently had the temerity to admit that is exactly what was intended. In an article in the fall issue of a publication called "Education Next", Walsh wrote the following:

Nancy Grasmick willingly took on the Maryland legislature in order to be more competitive in Race to the Top, using her regulatory power to interpret a new state law on teacher evaluation much differently than the union-friendly legislature intended.

Set aside for the moment Walsh's loaded use of the phrase "union-friendly". Walsh was bragging about  MSDE intentionally interpreting state law differently that what the legislature intended. Now I learned in Civics 101 that it was the legislative branch that writes laws and it is the job of the executive branch to implement those laws. Something is amiss in Maryland if the State Department of Education thinks it can ignore the intent of the legislature.

At the same hearing, MCEA President Doug Prouty, MCPS Superintendent Jerry Weast, and Gary Bartee, Vice-President of MCAAP (the principals association) all testified about the strength of the MCPS teacher evaluation, and their concerns that the future of this successful system was uncertain in light of MSDE's proposed regulations. Prouty shared a 2005 case study that describes how student results are included in teacher evaluations in Montgomery County without "a reductionist numbers game tied to test scores". He pointed out that MCPS has been including student results in teacher evaluation for more than 10 years - long before the current fad of trying to simplistically tie teacher evaluations to student test scores.

One final observation about Race to the Top (RTTT). MSDE leaders - as well as some in the mainstream media - are claiming that changing the proposed regulation requiring that 50% of a teachers evaluation be linked to student test scores would cause Maryland to lose it's $250 million RTTT grant. Chicken Little said the sky was falling, but that didn't make it true.

Six of the twelve states that won RTTT grants did not have the 50 percent student growth requirement; they relied on a lower threshold or simply said "significant" - like the Maryland General Assembly called for. The actual scoring rubric used by the US Dept. of Education on the RTTT applications awarded up to 5 points for use student growth measures in teacher evaluations. Maryland's application earned 5 points. But Delaware's successful application earned 4.4 points on this indicator and they did not propose a 50% rule.

Overall, Maryland's RTTT application received a score of 450 out of 500. It is difficult to believe that the difference between Maryland and Delaware's proposals on this indicator (0.6 points) would change the outcome. Would a score of 449.4 instead of 450 really kill the application?

Just to be safe, the Committee's motion called on Governor to contact the US Dept. of Education to let them know that "corections to regulations proposed in order to implement Maryland’s Education Reform Act of the 2010 session need to be made and that these changes may result in the need for minor changes to Maryland’s Race to the Top application."

Montgomery County has a teacher evaluation system that has received national recognition and praise, and a record of improving student achievement that few districts can match. There is much work left to be done. But we should not allow an unproven, ideological agenda emanating from the Maryland State Department of Education to disrupt a school system that is working better than most.

Tom Israel

MCEA Executive Director.

Progress on Mathematics Reform

Two years ago, MCEA members were raising serious concerns about acceleration and sequencing in the mathematics curriculum. Discussions were held by MCEA's Councils on Teaching and Learning with representatives of the MCPS administration. As a result, the Deputy Superintendent created a "K-12 Mathematics Work Group" to explore the various and complex issues involved.

MCEA's President - first Bonnie Cullison and subsequently Doug Prouty - was a continuing participant. In addition, MCEA members were represented by six classroom teachers as well: Teresa Brown, Viers Mill ES; Karen Emmerich, West MS; Jeff Flowers, Poolesville HS; Natalie Howard, Strathmore ES; Ed Hsu, Magruder HS, and Dawn Lemon, Montgomery Village MS. Numerous parent representatives, principals and administrators also participated. They all put in untold hours researching and discussing best practices and national standards.

The Work Group Recommendations are being presented to the Board of Education on Tuesday 11/9. You can view the entirety of the Work Group's report online. The 11-page Executive Summary provides an easily accessible overview.

The recommendations were also reported on in last Thursday's Washington Post:

Montgomery County admits kids were pushed too hard in math
Washington Post, Valerie Strauss
     The highly-touted Montgomery County Public School system in Maryland has just admitted that it has been pushing a lot of kids to do accelerated math when they weren’t ready for it, and now will stop it.
     Many thanks to all the MCEA members who contributed to this system-wide assessment of the K-12 Mathematics program. Through surveys, focus groups, and feedback sessions, hundreds of educators helped identify the concerns and shape the recommendations.

There is still much work to be done. But this Report marks a significant step in responding to the concerns MCEA members began raising almost two years ago.

Tom Israel
MCEA Executive Director.