By David Harrison, Stateline Staff Writer
It sounded at first like the best of news for South Carolina. The $26 billion jobs bill passed by Congress earlier this month would send $143.7 million to the state, which has lost between 2,800 and 3,900 teaching jobs over the past two years.Instead, after taking a look at the bill’s fine print, state education officials found a flaw that could deprive them of that money. A set of provisions in the bill requires states to have kept up their level of higher education spending this year, something South Carolina did not do. The bill, which offers money only for K-12 schools, included the higher education funding requirement as a holdover from previous drafts of the legislation. “It appears to us that the only fix is going to be possible through Congress,” says Jim Foster, of the South Carolina Department of Education. U.S. Representative Rep. James Clyburn has promised to help once Congress reconvenes in September. Three weeks after the bill’s passage, several states are – like South Carolina – grappling with its ramifications. Sparking the confusion is language wedged into the U.S. Department of Education’s rules for allocating the money. While the provisions that could harm South Carolina were also present – and stricter – in the 2009 Recovery Act, the stimulus bill made it possible for states to ask Washington to waive those requirements. Thirteen states and Puerto Rico applied for waivers. But this month’s jobs bill does not offer waivers, which means that those states that have made drastic cuts to higher education could miss out on the windfall. The U.S. Department of Education has not identified precisely which states could run into a non-compliance problem. “We’re probably talking five to six states that will run into any problem,” says Mike Griffith, of the Education Commission of the States. “I would worry about California, I would worry about Pennsylvania, I wonder a little bit about Rhode Island and some of the New England states and other than that, maybe Michigan.” Despite the uncertainty, money has already started to flow. Given the general budget emergency at the state level, the Obama administration has been willing to send the funds out now and wait for administrators to prove their eligibility later. To speed up the process, the application form only asks a state’s governor to check one box and sign. This is a marked change from other grant programs, which ask states to send in all their paperwork before they get any money. It remains to be seen, however, if states that are found to fail the requirements, such as South Carolina, will have to return the money. The jobs bill offered the promise of extending the 2009 federal stimulus, which is set to expire this year, thus keeping state and local governments from laying off hundreds of thousands of teachers. About $10 billion of the funding in the bill was devoted to education, the rest to Medicaid. States can either use the money this year or hold onto it until next fiscal year if they’re anticipating further budget difficulties. With the school year already under way in many districts, some administrators have said they would rather use the money to preserve jobs next year. THE EDUCATION JOBS FUND State Projected funding Estimated postions created or saved Alabama 149,539,554 2,700 Alaska 23,540,399 400 Arizona 211,824,489 4,000 Arkansas 91,311,898 1,800 California 1,201,534,585 16,500 Colorado 159,521,991 2,600 Connecticut 110,486,654 1,500 Delaware 27,425,111 400 District of Columbia 18,072,658 200 Florida 554,821,008 9,200 Georgia 322,313,830 5,700 Hawaii 39,311,983 700 Idaho 51,641,026 900 Illinois 415,397,841 5,700 Indiana 207,058,122 3,600 Iowa 96,490,048 1,800 Kansas 92,457,070 1,800 Kentucky 134,945,560 2,300 Louisiana 147,031,839 2,800 Maine 39,068,602 700 Maryland 178,929,680 2,500 Massachusetts 204,016,907 2,900 Michigan 318,132,952 4,700 Minnesota 166,717,087 2,800 Mississippi 97,823,122 2,000 Missouri 189,727,725 3,300 Montana 30,737,469 700 Nebraska 58,890,974 1,100 Nevada 83,113,178 1,400 New Hampshire 40,988,015 700 New Jersey 268,104,738 3,900 New Mexico 64,869,642 1,100 New York 607,591,394 8,200 North Carolina 298,458,355 5,700 North Dakota 21,517,716 400 Ohio 361,179,690 5,500 Oklahoma 119,380,027 2,400 Oregon 117,949,095 2,000 Pennsylvania 387,815,661 5,900 Puerto Rico 129,371,097 3,100 Rhode Island 32,929,312 500 South Carolina 143,700,517 2,600 South Dakota 26,292,261 500 Tennessee 195,881,328 3,700 Texas 830,820,460 14,500 Utah 101,303,951 1,800 Vermont 19,304,177 300 Virginia 249,482,375 3,800 Washington 208,335,375 3,300 West Virginia 54,657,667 1,100 Wisconsin 179,650,099 3,000 Wyoming 17,533,686 300 Source: The U.S. Department of Education It’s almost impossible to estimate how many teachers have been laid off so far around the country but experts put the number somewhere between 100,000 and 300,000. U.S. Education Secretary Arne Duncan has said the new legislation would protect 161,000 jobs.The bill means school districts “won’t need to make those tough calls,” he said in a conversation with reporters the day the bill passed. “It is providing a financial lifeline for schools that are facing what might be the worst financial crisis since the Great Depression,” he said. Although South Carolina has not filled out its application yet, fearing it will be turned down, 11 states and American Samoa have already received money. They will now have 60 days to prove that they meet the maintenance of effort requirement. State education officials may face another obstacle just as serious as the higher education spending requirement. It is the likelihood that some fiscally troubled governors and legislatures will use the new money to patch holes in their general fund rather than distributing it to school districts. In Congress, Rep. Lloyd Doggett, an Austin Democrat, inserted a stringent Texas-specific provision into the bill that calls on the governor of the state to guarantee that it will maintain the same level of funding for K-12 schools for three years. Doggett has said his amendment was intended to make it impossible for the state to use federal education money to plug other budget holes. Earlier this summer, several education groups wrote a letter to Washington charging the state with misallocating stimulus funds. In some states, arguments are already taking place over how the money can be spent. Rhode Island Gov. Don Carcieri wants to use his state’s $32.9 million in education money to help plug a $38 million gap that opened up when the state banked on receiving more Medicaid money from Washington than was allocated. School advocates, led by Education Commissioner Deborah Gist, have asked him to send the money to school districts as intended. In New Hampshire, Gov. John Lynch has also said he would use the money for general budget purposes, rather than sending it to schools. Education advocates say that would not be allowed under the law. And in California, which is still struggling to pass a budget two months after the legal deadline, it’s impossible to say whether money from the bill will be used to supplant other state funding, says Rick Pratt, of the California School Boards Association. “There’s no debate,” he says, “in terms of what the federal expectation is. You can’t use it to plug holes in the budget or to restore state level reserves but measuring the extent that that happens is going to be problematic in California and the reason is we don’t have a budget.” Outgoing California Governor Arnold Schwarzenegger has proposed allocating $48.9 billion to K-12 education. Democrats in the state Assembly, in their budget proposal, upped that to $54.4 billion. A conference committee budget, still under debate, later set the figure at $52 billion. The state was the first to apply for the federal funds and has been awarded $1.2 billion, but how it will spend the money remains to be seen. California has lost about 20,000 school personnel in layoffs this year. Federal officials estimate the grant money would fund about 16,500 jobs. Contact David Harrison at dharrison@pewtrusts.org See related stories: Congress weighs stimulus for schools (April 20, 2010) States and schools: A race against time (June 9, 2010) U.S. House returns to approve aid for states (Aug. 10, 2010)

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A closer look at DPS’ pension finances

The confusion and concern over Denver Public Schools’ finances has shifted from a Wall Street transaction that went badly wrong in its first year to longer-term worries about the district’s funding of its employee pension plan.

Yet a handful of board members and outside critics who are now raising concerns about the district getting caught off guard in 2015 by a special “true-up” payment to Colorado PERA, the administrator of the district’s pension, are worried about the wrong thing.

DPS’ problem is not a potential surprise payment in five years. Instead, it’s what DPS has knowingly committed itself to, and what PERA is forecasting today:  an ever-escalating schedule of pension expenses that will likely see the district paying more than $100 million annually by 2013, more than $200 million annually by 2021, and nearly $400 million per year just over two decades from now.

The payments are twofold: One, the district must pay roughly $70 million per year until 2037 to retire a set of bonds it issued last year in order to boost the assets in the pension fund. And two, the district must make up in the future for pension payments it’s skipping right now.

It is, in a way, what was planned all along by Superintendent Tom Boasberg and his predecessor, Michael Bennet. They sought a way to relieve DPS of a crushing annual pension expense and put the money back into the classroom.

As a bonus, funding the Denver Public Schools Retirement System, or DPSRS, would ease a merger with the Colorado Public Employees’ Retirement Association, which would both get DPS out of the pension-administration business and make it easier for DPS to hire teachers from other school districts, all of which use PERA.

Their plan, however, was to fully fund the DPS pension, turn it over to PERA, and then cut the district’s annual contributions to save expenses. The DPS pension’s funding level would then deteriorate to the level of PERA’s own school division, which was 70.1 per cent at the end of 2008.

(This reporter, when with the Rocky Mountain News, interviewed Boasberg in February 2009 about the plan. When he said, “We’d like to be like the other 177 school districts in Colorado,” this reporter asked, “Underfunded?”)

An arrangement goes spectacularly wrong, at first

DPS issued what are called Pension Certificates of Participation, which pledged a number of the district’s buildings as collateral, and used the $750 million in proceeds to pump about $400 million into the pension plan and pay off a past pension-debt issue.

The district decided 30-year interest rates were unattractively high because of market tumult at the time. It instead chose to issue variable-rate debt, then fixed the rate with an offsetting transaction with a group of investment banks that “swapped” interest payments with DPS. That arrangement went spectacularly wrong in its first year when credit markets seized up, but has since moved back in the district’s favor.

Injecting money into a pension plan by issuing bonds was a no-brainer to Bennet and Boasberg, who said the district would effectively make money by borrowing at roughly 5.5 per cent interest, then investing it with an expected return of 8.5 per cent.

Critics of “pension obligation bonds” and similar vehicles point out that an 8.5 percent return is an assumption, and a long-term one at that. No one gets a smooth 8.5 percent every year from a portfolio; there are ups and downs, sometimes big ones. And what you experience after you put the money in matters a great a deal.

If the timing of the interest-rate swap was poor, the timing of the bonds, in retrospect, was worse. The DPSRS annual report for 2008 shows that the district put in nearly $435 million, including its annual contributions, compared with just over $40 million in 2007.

But 2008’s investment losses sucked almost $804 million out of the fund. And, as a result, a pension that was 87.7 percent funded at Dec. 31, 2007, was 84.3 percent funded at the end of 2008. Any “full funding” of the DPS pension was fleeting.

Those statistics understate the problem, because DPS, like most public pensions, employs a technique called “smoothing” that delays the recognition of both gains and losses. It takes four years for the funding ratio to fully reflect any given year’s gains or losses.

A 30-year bond to pay off, and higher-than-expected payments

To see what happened to a pension that didn’t pump in money during the period, look at PERA: Its funding ratio dropped from 75 percent at year-end 2007 to 69 percent at Dec. 31, 2008. And if you take away the smoothing effect, the funding ratio was just 52 percent at year-end 2008. (Numbers taken from the 2008 PERA annual report.)

All pensions had a much better year in 2009, but it was not nearly enough to make up for the previous year’s carnage. And this is where DPS stands now: With a 30-year bond issue to pay off, coupled with higher-than expected payments over the next three decades.

DPS board member Jeannie Kaplan, right, frequently questions the district’s pension numbers. At left is Mary Seawell, chair of the board’s finance and audit committee.

A subset of DPS board members, previously questioning and critical of the interest-rate swap deal, has now turned their attention to the funding level of the DPS pension, with particular worries about a series of  “true-ups” included in the legislation that authorized the DPSRS/PERA merger.

The “true-ups,” the first of which comes in 2015, are designed to ensure that the funding of the DPS pension does not fall behind PERA’s Schools division due to DPS’ under-funding of the plan. Every five years, a measure is taken, and the legislature is empowered to ask DPS for money to end any imbalance.

Their concern is based in large part on DPS’ current under-funding of its ongoing PERA obligations. Per the merger legislation, DPS gets a credit against its PERA contributions for the amounts it’s paying on its debt – quite a bit so in these first years after the bond offering.

For 2010, the statutory PERA contribution is $80.4 million; after a $74 million debt credit, DPS is putting just $6.8 million into PERA. In 2011, the contribution of $89.1 million is reduced to $20.6 million.

(Boasberg takes issue with the term “underfunding,” given DPS’ injection of cash last year. “It’s important when you start the clock. If you start it right after the $400 million funding, you’re right. If you start the clock one day before, it’s overfunding.”)

The calculation, however, is misunderstood. Board member Jeannie Kaplan, in a June 30 special meeting, expressed worry that all of those credits come payable five years from now:

“One of the questions I have is by the year 2015, when the first true-up from Senate Bill 09-282 occurs, we will be, according to our figures, $369 million short,” she said. “So my question is, is this not a debt that we’re building up and that we’re going to have to pay at some time?”

A 2015 “true-up,” but based on estimates for 2045

Not in 2015, however, because of the way the “true-up” is calculated. The primary statistic that will be used to compare the funding of the two plans is their unfunded actuarial liability – the excess of benefits owed, over the plans’ assets – as a percentage of payroll.

And the numbers will not be the then-current figures, but will be estimates for 30 years down the road. That means the 2015 true-up will be based on estimates of the plans’ health in 2045.

And even then, the legislation calls for the General Assembly to consider whether to adjust DPS’ contribution rates, which means any gap will be paid off incrementally over the following 30 years – not in one giant lump.

Use sliders at bottom and right to see growth in DPS’ pension expenses through 2040.

Even if DPS owed anything in 2015, predictions of a sudden, lump-sum payment in the tens of millions of dollars – or, as some hyperbolic anonymous commenters on The Denver Post website suggested, a billion dollars – are wrong.

And it seems unlikely that DPS will be found lacking in the first true-up, thanks to its massive lead in funding on the PERA schools division.

At Dec. 31, 2009, PERA’s School division had a 69.2 percent funding ratio and an unfunded liability of nearly $9.36 billion. The unfunded liability was 238.6 percent of the $3.92 billion in payroll.

While the DPSRS annual report has not yet been released, PERA reveals some of its numbers in its own documents: DPSRS has a funding ratio of 88.3 percent, and the unfunded liability is about $387 million, just 92 percent of a $420 million payroll.

It’s not the “true-up,” it’s the annual cash outlay

Again: In the key statistic used for the true-up, PERA’s schools division has more than twice the underfunding DPS does, giving DPS plenty of room to cut its contributions without worrying about a true-up.

Denver Superintendent Tom Boasberg

Instead, the big problem for DPS is simply the annual cash outlay. Annual pension expense – the debt payments plus PERA contributions – are projected by PERA to increase 10 per cent annually for the next six years, at a rate of 8 percent for the next two, and 6 percent annually until 2032. By the time the growth in pension expense flattens, DPS will be paying nearly $400 million per year.

(The PERA statistics were provided to Education News Colorado by DPS as part of a document that showed DPS’ relative funding strength. When questioned, Boasberg agreed they were the best available long-term projections of DPS’ pension costs.)

The raw numbers are shocking, but they are also reflect many years of inflation – as we all know, a dollar today is worth more than a dollar in 2040. If DPS’ payroll grows by 4.5 percent per year, it will quadruple by 2040 to more than $1.6 billion.

Still, the pension expense as a percentage of payroll will also rise, from a level below 20 percent today to more than 30 percent by 2026. It will fall again by 2033, but remains above today’s levels in every year of the PERA projections.

In short, DPS’ pension costs are likely going nowhere but up. What, exactly, will make DPS able to meet pension payments tomorrow that it didn’t want to pay today?

“All school districts in Colorado are facing the exact same issues over the next several years,” Boasberg said, attempting to minimize concerns. “For all of us, the payments are going to be challenging.”

David Milstead wrote about corporate finance at the Rocky Mountain News for eight years until it closed in February 2009. He previously worked at the Wall Street Journal, among other publications. He now writes for the Report On Business section of The Globe and Mail, Canada’s national newspaper. He passed the Level I exam in the Chartered Financial Analyst program in December 2007.

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By Peter Marcus, THE DENVER DAILY NEWS

Democratic incumbent U.S. Senate candidate Michael Bennet’s campaign said yesterday that opponent Ken Buck wants to do away with federal student loans.

But Buck’s campaign says, “Usually incumbents run on the record, but Bennet is running away from his.”

The Buck campaign says the Weld County District Attorney does not want to do away with federal student loans, but does oppose a “government takeover of the student loan market.”

When referring to a “government takeover of student loans,” Republicans are referring to recent federal legislation that requires all student loans originated after July 1 to be done through the U.S. Department of Education’s direct loan program. For 45 years prior to the legislation, private banks and lenders received a federal subsidy for making government-guaranteed college loans. The Congressional Budget Office has estimated that the change will save taxpayers about $61 billion over 10 years because the government won’t have to pay a subsidy to banks anymore.

Bennet’s campaign said Buck has called for a plan that includes shifting federal student loans over to private loans. Switching to solely private loans would double interest rates and prevent many students from receiving a college education, said Bennet’s campaign.

“Michael believes every student deserves the opportunity to attend college regardless of financial circumstances,” Bennet campaign spokesman Trevor Kincaid said in a campaign e-mail. “Ken Buck’s extreme position would repeal student loans and the dream of a college degree for hopeful students all over Colorado who wouldn’t be able to attend college without financial aid.”

Bennet joined students yesterday on the Auraria Campus where he rallied for federal funding for higher education. As the former superintendent of Denver Public Schools, Bennet has made education a focus of his campaign and work in the U.S. Senate.

Bennet says private student loans are not guaranteed by the federal government and therefore are not regulated to protect students.

“By any measure, federal loans are a much better deal for students and families than private loans,” states a Bennet campaign e-mail. “Federal loans have low, fixed interest rates, while private loans often have variable interest rates that fluctuate wildly quarter-to-quarter, forcing students to engage in risky and unpredictable financing. The policy Ken Buck has suggested would force students to rely on private loans and extreme interest rates in order to pay tuition, leveraging their future and gambling with their hope of a better life.”

The average private student loan has a 12 percent interest rate, about twice that of the most expensive federal student loan, says the Bennet campaign.

But Buck’s campaign fired back, arguing that Bennet voted against lowering student loans from 6.8 percent to 5.3 percent as part of a motion to the Health Care and Education Affordability Reconciliation Act of 2010.

“This rubber stamp vote might have helped him in his caucus, but it hurt Colorado families,” said Buck campaign spokesman Owen Loftus.

Buck holds a narrow three-point lead over Bennet, according to the latest Rasmussen poll released yesterday.

The Bennet campaign says the U.S. Senator is focused on providing affordable higher education to students. They say federal direct loans offer more flexibility in setting up repayment plans and are more widely available to students of all financial backgrounds.

“The benefits and protections provided by federal loans are virtually non-existent for private loans, and financial experts and student financial aid counselors strongly advise students only to rely on these risky financial products as a last resort when all other sources of aid have been exhausted,” said the Bennet campaign in a policy e-mail. “And for those students unable to obtain private loans, the only recourse would likely be crushing credit card debt.”

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By Peter Marcus, THE DENVER DAILY NEWS
Democratic gubernatorial candidate John Hickenlooper yesterday unveiled his plan for state education reform, promising to replace CSAP testing in his first term if elected.
Standing with his running mate, CSU Pueblo president Joe Garcia, at Arapahoe Community College, Hickenlooper called for a more “modern, useful and timely” student assessment test.
“It’s the 21st century,” said Hickenlooper. “It shouldn’t take months to get test results. We should be able to get results quickly when we test our young people in order to empower our teachers and administrators to adapt.”
Hickenlooper’s education plan also includes:
— Expanding broadband access to integrate mobile learning with classroom-based instruction;
— Supporting public-private efforts to create online courses to supplement core programs;
— Building an online course content library at a secondary level to be shared by districts and schools; and
— Focusing on the importance of planning for postsecondary education.
The Denver mayor also highlighted priorities for the Colorado Commission on Higher Education, including:
— Enhancing public-private relationships in higher-ed;
— Increasing flexibility across the state’s higher-ed systems;
— Encouraging public-private collaboration and concurrent enrollment;
— Developing new funds through private sector and federal partnerships; and
— Collaborating with career and technical education, trades apprenticeships and the Colorado Department of Labor and Employment.
“It’s important that we collaborate with all the educational stakeholders — teachers, parents, students and business — to continue to create an improved, 21st-century education system,” said Hickenlooper. “I want to be a leader in making sure we provide the best education system for students.”
Republican opponent Dan Maes’ campaign said yesterday that it is important to maintain CSAP testing because the state needs a tool to measure student progress. Campaign spokesman Nate Strauch said the CSAP will only continue to “evolve.”
Maes himself said in a statement e-mailed to the Denver Daily News that Mayor Hickenlooper is offering “great talking points with no substance.” He then switched his attention to education funding and union involvement.
“Coloradans have heard enough sound bites and we’re sick of politicians whose only solution is to throw more tax dollars at the problem,” said Maes. “We need a governor who will stand up to the teachers’ union and demand that our least effective teachers be removed from the classroom.”
“We need a governor who will work to level the playing field among public, private, charter and home schools to increase competition,” continued Maes. “As governor, I’ll stop banking on the federal government’s handouts, and instead increase the transparency of K-12 budgeting at the state level, so we can see exactly which dollars are being used effectively.”
Strauch suggested that Hickenlooper’s announcement yesterday was an attempt to “pander to the teachers’ union.”
Hickenlooper holds an eight-point lead over Maes thanks to a divide within the Colorado Republican Party over conservative Tom Tancredo’s third-party run on the American Constitution Party ticket.
LaShanda Jones, the parent of a first- and third-grader at Vista PEAK P-8 Exploratory School in Aurora, said she believes Hickenlooper is making education a priority.
“I want to know that our leaders are focused on providing a world-class education to the students in this state,” she said. “That’s why I’m so appreciative that John Hickenlooper has made education a priority for his campaign.”

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By Todd Engdahl, EDUCATION NEWS COLORADO

Education funding will remain tight, Democrat John Hickenlooper warned today as he unveiled his plans for education if he’s elected governor.

“We’re not going to throw money at the problem,” the Denver mayor said during a news conference at Arapahoe Community College in Littleton with running mate Joe Garcia, president of Colorado State University-Pueblo. “There is no appetite” among the public for new taxes, Hickenlooper said.

Still, the pair presented a seven-page education policy brief that ranges from testing to teacher improvement to better coordination of the higher education system.

In several places the brief promises to continue and complete education initiatives started by Gov. Bill Ritter and the legislature in the last three years. As befits a campaign document, the brief covers a lot of ground but doesn’t offer detailed specifics.

Despite supporting education reform work that has been done to date, Hickenlooper expressed a note of frustration when he noted there’s “so little to show for it.”

Criticizing the CSAP tests, whose demise was called for in 2008 legislation but which probably won’t be replaced until 2014, Hickenlooper said, “We will do everything we can to give it [the changeover] greater urgency.”

He also called for greater use of online education, more public-private partnerships in education and better coordination and integration of higher education in particular and the whole system in general.

“We have to continue blurring those lines.”

Asked if Garcia would play the same role in education as Lt. Gov. Barbara O’Brien has played for Ritter, Hickenlooper said, “It’s premature to think about specific roles,” but quickly added, “I’d be a fool not to give him tremendous responsibility and authority.”

Garcia also has been president of Pikes Peak Community College and active in some Ritter-era education reforms, including serving as co-chair of the governor’s P-20 Education Coordinating Council.

“Education is going to be at the core of everything we do,” Hickenlooper said, noting that education consumes more than half the state’s general fund budget.

“I want to be a leader in making sure we provide the best education system for students. The fiscal situation of the state makes it harder to do so, but it is important for our kids and our economy to make sure that Colorado is leading the way in education,” Hickenlooper said.

In addition to campaign workers, reporters and curious students, Hickenlooper’s audience include a group of Colorado Education Association officials, including executive director Tony Salazar, and representatives of the business-based reform group Colorado Succeeds, including President Tim Taylor and board chair Zack Neumeyer. Sen. Mike Johnston, D-Denver and author of the new educator effectiveness law, and Van Schoales of Education Reform Now also were in the audience.

The CEA-affiliated Public Education Committee gave Hickenlooper’s campaign $5,300 in the reporting period ending July 6.

Hickenlooper’s opponents haven’t yet offered major statements on education.

Republican Don Maes has five paragraphs about the subject on his website, saying, “Reform is an ongoing process and the school leadership must recognize the need for constant improvement. … More competition between schools and transparency in educational funding and results will produce more productive teachers, better students and administrations.”

Maes testified against adoption of the Common Core Standards at a recent State Board of Education meeting.

Renegade Republican Tom Tancredo, now flying the flag of the fringe American Constitution Party, doesn’t mention education on his website. Tancredo was a middle school civics teacher when elected to the legislature in 1976, and he later became regional representative of the U.S. Department of Education under the Reagan and first Bush administrations. Tancredo significantly downsized that office and then went on to be president of the Independence Institute and a congressman.

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Colorado’s failed bid for $175 million in federal Race to the Top funding was hampered by concern about the state’s flat achievement data and fear that union opposition would prevent the spread of reform, Education News Colorado reports.

Evaluators also docked points for what they describe as the state’s vague plans to ensure effective teachers and principals are in the neediest schools.

U.S. Education Secretary Arne Duncan on Tuesday announced winners of the federal grant competition, awarding nearly $3.4 billion to nine states and the District of Columbia. Colorado placed 17th out of 19 applicants for Round 2 of the Race to the Top; the state also was a finalist, but not a winner, in Round 1 of the contest earlier this year.

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By Todd Engdahl, EDUCATION NEWS COLORADO

Colorado has lost its second bid for $175 million in Race to the Top funds.

According to The Associated Press, U.S. Department of Education spokesman Justin Hamilton said this morning the winners are Florida, Georgia, Hawaii, Massachusetts, Maryland, New York, North Carolina, Rhode Island and Washington, D.C.

Colorado’s application proposed a detailed program for using the money to implement major but unfunded education reforms, including the Colorado Achievement Plan for Kids and the new educator effectiveness law.

Lack of federal funding is likely to extend the implementation timetable for those programs further into the future, given that the tight state budget situation will make it difficult to find extra funds for the projects outlined in the R2T application.

State officials were scheduled to meet with reporters later this morning.

The 18 states and the District of Columbia designated as finalists in July included Arizona, California, the District of Columbia, Florida, Georgia, Hawaii, Illinois, Kentucky, Louisiana, Maryland, Massachusetts, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island and South Carolina. Thirty-six states applied for round two.

Total requests came to $6.2 billion.

Finalists met in person with reviewers two weeks ago. Education Commissioner Dwight Jones said reviewer questions focused on Colorado’s ability to actually implement the reforms it’s proposing (see story).

Delaware and Tennessee were the only two round one winners; the other 14 finalists in that round made the cut in round two.

There were different tiers of possible award amounts based on state populations. Colorado asked for $377 million in the first round, during which tier limitations did not apply.
Details of Colorado’s application

The state’s 193-page application for $175 million pitched Colorado’s history of education reform measures, including the new educator effectiveness law that links student achievement with teacher evaluations.

The bulk of the funds would have been used for implementing new content standards and tests at the district level, creation of new educator evaluation systems, encouraging effective principals and teachers to work in low-performing schools and providing turnaround help for the state’s most struggling schools.

About $90 million of the $175 million would have gone directly to participating districts, as the program requires at least half the funds go to local education agencies.

The department signed memoranda of understanding (formal agreements to participate) with 114 districts and other education agencies, 64 percent of the 180 in the state. Those districts include 89.9 percent of the state’s students, 84 percent of schools and 91 percent of poor students. For the first round application, the state had agreements with districts including about 95 percent of the state’s students. The only two notable non-participants in round two are the Pueblo County and St. Vrain districts.

The Colorado Education Association participated in round one but boycotted round two because of concerns about the educator effectiveness law, SB 10-191, which it opposed. The Colorado unit of the American Federation of Teachers, which represents primarily the Douglas County Schools, signed on to round two.

In broad terms, the state’s application focused on these goals, as required by the federal government:

* Increase student learning through teacher mastery and delivery of common standards and assessments.
* Use, learn, and leverage high quality data to drive increased student performance.
* Ensure all students have access to effective teachers and principals.
* Turn around persistently lowest-achieving schools.

A state also is required to demonstrate how it will build a statewide system of accountability and support to accomplish and sustain those goals.

Colorado’s application promised, by 2014, to increase:

* College enrollment from 62.9 to 70 percent
* College retention from 66.3 to 75 percent
* 4th grade National Assessment of Education Progress math proficiency from 45 to 55 percent
* Higher school graduation rate from 74.6 percent to 90 percent
* 4th grade NAEP reading proficiency from 40 to 60 percent
* 8th grade math NAEP proficiency from 40 to 60 percent
* 8th grade reading NAEP proficiency from 32 to 52 percent
* Overall CSAP math proficiency from 54.5 to 85 percent
* Overall CSAP reading proficiency from 68.3 to 85 percent
* Reduce the achievement gap among all subgroups from 30 to 10 percent
* Those goals raised skepticism in some quarters, but state education leaders argue that Colorado has the infrastructure for reform in place but needs the funds to implement those programs.

Here’s a breakdown of how the state proposed to spend the $175 million:

* $13.6 million – Statewide implementation and administrative costs, primarily at the state Department of Education.
* $13 million – Funding the Content Collaboratives and Regional Support Teams to roll out new content standards and assessments to school districts, creation of an instructional improvement system on the department’s SchoolView website and extra support for small and rural districts.
* $5.8 million – Subsidies and incentives for districts to create and share curricula, for purchase of formative and interim tests and for state review of available interim tests.
* $15.2 million – Build out and support of an expanded SchoolView system, including teacher, principal and administrator portals; expansion of Colorado Growth Model data; and incentives for effective educators to provide instructional materials to others.
* $8 million – Money for state personnel and outside consultants to help districts develop and implement new educator evaluations systems and to identify measures of educator effectiveness, especially in currently untested grades and subjects.
* $5.1 million – Funding for the State Council for Educator Effectiveness and for districts to implement evaluation systems.
* $4.1 million – Development of effective teachers and principals with a focus on low-performing schools, including residency programs, increased numbers of national board certified teachers and hiring of Teach for America members.
* $4.3 million – Expansion of the department’s School Leadership Academy, including a Turnaround Leaders Academy.
* $3.2 million – Expansion of the number of students who take Advanced Placement classes and of the number of under-represented students who take college-prep classes.
* $884,000 – Funding for the department’s existing dropout prevention and student re-engagement program.
* $11 million – Creation of a school Turnaround and Intervention Unit within CDE to help districts conduct successful turnarounds of low-performing schools.

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By Todd Engdahl, EDUCATION NEWS COLORADO
Race to the Top reviewers Tuesday pressed Colorado’s delegation for details on how the state can successfully implement its ambitious education reform plans.
Education Commissioner Dwight Jones, interviewed by Education News Colorado after the delegation’s 90-minute meeting with reviewers, said, “I felt good about the session overall. … It seemed like the review panel liked Colorado’s plan and felt it was very ambitious.
“They liked the ambition but had quite a few questions about how you implement it in a local-control state,” Jones added.
Colorado, 17 other states and the District of Columbia were named round-two R2T finalists on July 27, and delegations representing each finalist met with reviewers in Washington this week.
Jones, Lt. Gov. Barbara O’Brien, Aurora Superintendent John Barry and Colorado Department of Education executives Nina Lopez and Diana Sirko represented Colorado.
In response to the implementation question, Jones said, “We really kind of stuck to how we outlined it in our plan,” emphasizing the regional support teams, content collaboratives and other structures that Colorado has proposed to implement new standards and tests, improve teacher performance and help struggling schools if the state wins R2T funds.
The bulk of the funds, if Colorado wins a grant, would be used for implementing new content standards and tests at the district level, creation of new educator evaluation systems, encouraging effective principals and teachers to work in low-performing schools and providing turnaround help for the state’s most struggling schools. About half the funds would go to participating school districts.
Colorado was an unsuccessful finalist for round one of R2T last spring and went through a similar interview process. Jones said he felt the first reviewer panel didn’t understand the strategies as well as the second panel did.
Jones also said the second five-member panel “spent a lot of time talking about SchoolView,” the state’s Web data portal. Colorado’s application proposes to rely heavily on SchoolView as a communications tool with districts and teachers.
The panel seemed impressed by the state’s new educator effectiveness law (Senate Bill 10-191), and Jones said O’Brien talked at length about that and other recent reform legislation during Colorado’s presentation. (The delegation had 30 minutes to make its case, followed by an hour of questions from reviewers.)
Jones said the presentation was similar to the pitch CDE leaders made to school districts around the state earlier this summer as they tried to sign up local participants in the state plan.
The reviewers seemed comfortable with the percentage of students represented by participating districts (about 90 percent) but also asked “how this would go with the unions,” Jones said.
The Colorado Education Association supported the state’s first application but boycotted the second because of SB 10-191. The Colorado unit of the American Federation of Teachers supports the second application. Jones said the panel told reviewers CEA has promised to support implementation if Colorado receives a grant.
Asked how the panel felt after the session, Jones aid, “I think the feeling was very cautiously optimistic, [but] it’s anybody’s guess as to what ultimately happens. Praising his team, Jones said, “I really felt like Colorado was well represented at the table.”
Colorado has requested $175 million in R2T funds. About $3.4 billion is available, but the 19 applications total more than $6.2 billion. All finalists scored above 400 on a 500-point scale. Scores may be adjusted up or down following the interviews. Winners are expected to be announced in early September.

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By Peter Marcus, DENVER DAILY NEWS
The Colorado Board of Education yesterday narrowly backed adopting controversial national education standards in language arts and math despite pleas from dozens of citizens not to back the proposal.
Critics say the board’s 4-3 decision to adopt the Common Core Standards will erode local control over education, setting the stage for a national curriculum. Critics also do not believe it was necessary for the board to back the national standards in an effort to better position the state to secure $175 million in federal education grant money.
Supporters, however, say the issue is not just about helping Colorado compete in round two of the Race to the Top federal education grant competition. They say the issue is about helping America compete on a global level.
Federal education officials offered 20 points out of a 500-point scoring system for the Race to the Top competition if states adopt the national standards. Colorado last week was named one of 19 finalists in the second round of the competition.
State Sen. Mike Johnston, D-Denver, an outspoken proponent of education reform at the Capitol, testified yesterday in favor of the national standards. He said following the vote that the issue is about developing assessment systems that allow Colorado to compare its students to the nation and the world.

Saving money?
Johnston said Colorado stands to save about $100 million by adopting the national standards because it won’t have to rebuild the Colorado Student Assessment Program (CSAP), an assessment system that is widely believed to be in need of reform.
“The only interest is for us to be able to make better comparisons and learn better about what’s working and what’s not,” said Johnston, who this year spearheaded a successful measure that created some of the toughest teacher tenure reform in the nation.
Supporters say there is nothing in the adoption of the national standards that would compromise local control. They point out that Colorado helped to write the Common Core Standards as a participant on the Council of Chief State School Officers and the National Governors Association. Colorado aligned by about 90 percent with the national standards.
The vote yesterday followed a recommendation from Commissioner of Education Dwight D. Jones, who supported adoption of the Common Core Standards.
Board members Peggy Littleton, R-Colorado Springs, Marcia Neal, R-Grand Junction, and Board Chairman Bob Schaffer, R-Fort Collins, voted against the proposal. Board members Elaine Grantz Berman, D-Denver, Jane Goff, D-Arvada, Angelika Schroeder, D-Boulder, and Board Vice Chairman Randy DeHoff, R-Littleton, supported the proposal.
DeHoff called his vote to support the national standards one of the “most difficult decisions” in his 12 years as a board member.
The board meeting yesterday was open to the public and included 34 speakers. Of the 34 speakers, 30 spoke in opposition to the proposal.
But DeHoff said, “Not one critic has said anything directly critical of the common core.”
“If anything, they strengthen our standards,” he said of the Common Core Standards.

Leading to national curriculum?
Littleton had led the opposition to the proposal, arguing above all that the national standards will limit Colorado’s local control over its schools. She said yesterday following the vote that the move is leading toward a national curriculum.
“I’m disappointed. I just hope that my worst fears about curricular choices don’t come true,” said Littleton. “I hope that we are actually able to maintain a sense of local control with our curriculum in our school districts. Only time will tell.”
“I hope that we didn’t act in haste only to repent at leisure,” she concluded.

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By Todd Engdahl, EDUCATION NEWS COLORADO

The committee assigned to craft a new strategic plan for Colorado colleges and universities moves into a new phase of its work this week when it sits down to review recommendations from four subcommittees and plan next steps.

The Higher Education Strategic Planning Steering Committee has scheduled a six-hour “retreat” Tuesday at Auraria’s Tivoli Student Union.

The 14-member panel, initially created by Gov. Bill Ritter late last year and then formalized by a 2010 law, hopes to have a report ready for the lame-duck governor and the Colorado Commission on Higher Education by Nov. 4. Before then, the committee hopes to hold a series of meetings around the state and gather comments from the broader higher education community. The steering committee currently is scheduled to meet four more times before Nov. 4.

Four subcommittees have focused on specific issues and have made draft recommendations to the main group.

The subcommittees include both steering committee members and outside experts. The membership of all five groups is heavy on current and former CCHE members, college administrators and business and civic leaders. There are no students, faculty or elected officials on the committees, although there has been some outreach to those groups.

To provide a sense for what the steering committee will be working with, here are highlights of subcommittee recommendations and links to full texts. (Recommendations are those available on the committee’s website as of July 30.) Many will spark tough discussions by the steering committee.

The toughest issues likely will be financial, including suggestions that state support be shifted from the current enrollment-based system and instead be based on the particular needs of individual campuses and/or institutional ability to meet state-mandated goals, like completion rates.

Accessibility Subcommittee

This panel was assigned to develop recommendations concerning to accessibility of higher education for all kinds of students.

It is suggesting a better integrated higher ed system, some revisions in the current “tiered” system of schools based on selectivity, more flexibility in funding of individual schools so as to better support underserved groups of students, increased financial aid, automatic acceptance of qualified students at state schools, easier transfer among campuses, 100 percent financial aid for qualified low-income students and increased efforts to ensure more students complete college.

One implication of the recommendations is the idea that state funding should be concentrated at four-year schools and community colleges, with universities being allowed to rely more on tuition. This likely will be one of the toughest issues facing the steering committee.

• Recommendations (PowerPoint)
• Committee assignment and membership

Mission Subcommittee

This group studied issues of how the state higher ed system should be structured and the appropriate missions of various institutions.

Its recommendations include keeping the current structure of institutional and system boards but giving more power to CCHE, including the ability to allocate money to campuses based on how they meet performance goals set by the commission.

The panel also recommends reallocation of state support to increase enrollment at state colleges that are less selective and that have lower per-student costs.

During discussions in this committee and others it has been repeatedly noted that Colorado higher ed enrollment is unbalanced, with most students concentrated at the lower (community colleges) and higher (universities) ends of the spectrum. There’s smaller enrollment in the middle, at the state’s four-year colleges.

Some of those involved in the planning effort believe that expanding enrollment in those colleges would be a good way to get more underserved students into college.

• Recommendations (PDF)
• Committee assignment and membership

Pipeline Subcommittee

This subcommittee was responsible for issues such as the number of high school grads who don’t continue into postsecondary education and high remediation rates for those who do.

Its recommendations include various ideas to address those problems, including earlier and easier access to college-level courses, improved remediation programs and efforts to get more adult learners into higher education.

• Overall recommendations (PDF); detailed recommendations (Excel)
• Committee assignment and membership

Sustainability Subcommittee

This is the “money” panel, assigned the ticklish task of proposing solutions for higher ed’s daunting financial challenges.

Its proposal include $760 million a year as the minimum, maintenance level of annual state tax support for higher ed, with reasonable future growth; use of performance measures to allocate state funds among colleges; a continued emphasis on efficiency, and local tax support of community colleges.

The group also studied possible new revenue sources for higher ed, including increased income or sales taxes, a services tax, minerals taxes and statewide and local property taxes (summary).

• Recommendations (PDF)
• Committee assignment and membership

The higher education system is at a crossroads because of state revenue pressures that have forced use of federal stimulus funds and increased tuition to compensate for cuts in state support. There’s little question that higher ed will receive less direct state support than the $620.8 million in the current budget, and cuts could be deeper.

Colorado has a long history of committees studying the future of higher education but a mixed record of implementing their recommendations. Studies were done for 1993-98, in 2001-02 and in 2003.

The 2010 steering committee’s ultimate recommendations will be launched into an uncertain political and financial future.

The panel’s creator, Ritter, leaves office in January, and the November elections could change the composition and even control of the legislature. If state revenue problems don’t ease, broader financial issues could overshadow discussion of higher ed’s future.

And any new tax revenues for colleges and universities or a broader state fiscal fix would require voter approval.

While a number of civic groups and policymakers have talked about crafting a proposal for the 2011 November ballot, no specific proposals have been floated. The exception is two 2011 ballot titles filed under the auspices of the Colorado Fiscal Policy Institute. Among other provisions, they would lower state sales taxes but extend that tax to services and create a graduated income tax structure.

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