Those unfamiliar with Denver school board politics may not know Theresa Pena, the former Denver Public Schools school board president. Pena came to her seat after having been appointed in 2003. She then won a solid victory in 2007. She will serve through 2011.
Pena has used her seat on the school board to spring herself into the highest echelons of Colorado politics. She meets with Bill Ritter. She is close to the mayor. She consistently has the superintendent's ear. She is senator Michael Bennet's campaign treasurer.
Pena's relationship with the former Denver Public Schools superintendent could be described as "cozy." She bowed to Michael Bennet's every wish, never once contradicting him at a school board meeting. She defended him from any questioning or debate by the Board of Ed, with an iron fist. As board president, she would not allow discussion of any subject that did not put the district in good light. If board members approached her with a topic that she did not find favorable, she told them, Let me know when you have 4 votes, the number needed to pass something on the board.
Apparently, this is the style of leadership that appeals to Michael Bennet. Pena became his campaign treasurer at the outset of his senate career. It is unclear what Pena actually does in this role, as she has a strong background in bookkeeping for a veterinary business, but not much else. I doubt she has any familiarity with campaign finance law, reporting requirements, expense tracking and allocation, or any other requirement most campaigns would have for a run at the U.S. Senate.
After accepting the position as campaign treasure, Pena remained in office on the DPS school board. She was no longer the board president. That spot was taken over by Nate Easley. Apparently, Pena sees no inherent conflict of interest in the role she plays on the board. Her fellow board members have been known to grumble about it, but they have never publicly called her out, especially when discussing past DPS financial dealings. Of course, many of these dealings were led by now U.S. Senator Michael Bennet, and, to some extent, Pena herself.
So Pena sits reading books during school board meetings or texting while her fellow board members speak. She meets quietly with Tom Boasberg, the now DPS superintendent and good friend of Bennet's going back to his childhood in DC. She is above the fray, unless something unsavory comes up.
Well, recently, something unsavory has come up.
Last week, as part of discussions related to DPS' 2010/2011budget, DPS Chief Operating Officer David Suppes sent the board of education a spreadsheet that details DPS' expected payments to the Colorado PERA system for the next 28 years. The spreadsheet was prepared by Brett Fuhrman, DPS' former Chief Financial Officer. (Brett left just recently to work at a school in Boston.) Fuhrman put the spreadsheet together for who knows what reason, but he provided it when Jeannie Kaplan and Andrea Merida asked for documentation of what DPS was paying to PERA.
To say the least, the spreadsheet is illuminating. It shows the percent of payroll that DPS should be paying to the pension system, the actual anticipated payroll for the next 28 years, the deduction DPS is taking for servicing its pension related debt (more on this to come), and what DPS will actually pay through 2038, when its pension debt is paid off.
For example, in 2010, DPS should pay 17.45% of its payroll to PERA. DPS' payroll in 2010/2011 is anticipated to be $491,749,509. Therefore, DPS should be paying just under $43 million for the last six months of 2010. Instead? DPS has budgeted to pay $6.9 million in this time frame. At the same time, DPS' employees will pay $19.7 million into the pension.
Any sane person would ask, how can this be? The answer isn't simple. (Is it ever?)
The legislation governing the merger between DPS' retirement system and the Colorado state retirement system allows DPS to take an 8.5% deduction based on loans taken to fund the pension. On these, DPS owes $750 million, 8.5% of which is $63.75 million. This is the amount DPS can deduct from its PERA contributions each year.
How this mess came to be is a long story that I will not go into here. However, the fact that this is DPS' planned contribution for 2010, a contribution rate that holds steady into 2015, has caused great concern on the PERA board of directors as well as with former members of the board of the DPS retirement system.
According to actuaries at PERA, DPS may never be able to fund its pension fully by 2040, as required by a bill passed in the Colorado state senate last year. In fact, doing the math using the numbers in DPS' spreadsheet shows that, at its current rate of contribution and the $386 million funding shortfall as of December 2009, DPS will build a $1 billion liability by 2015.
That's right: $1,000,000,000. In just 5 years. And DPS will have to pay that back using taxpayer money.
In 2015, when DPS is supposed to have a true up to determine what its contribution rate will need to be to fully fund the pension by 2040. PERA and our state legislature will likely decide to raise DPS' contribution rate to staggering levels. The rate will more than likely be a system-killing figure. One member of DPS' retirement system came up with about $170 million per year starting in 2015. DPS' annual budget is $720 million.
Kaplan and Merida understand this fact of life, and are asking hard questions. At the school board meeting held on Thursday, June 30th, Kaplan dug in and put the issue plainly. A video is provided below. (Warning: it is 10 minutes long, but is crucial to understanding this issue.)
[This video has been removed from the reference site. I am trying to get it reposted by Monday PM.]
As Kaplan says, this is an issue of taxpayer fidelity. She and her fellow board members have a responsibility to Denver residents. In this case, however, I would argue she has a responsibility to all of Colorado's taxpayers.
If you made it to the end of the video, you saw Theresa Pena reply to Kaplan and Merida. Placed in the context of Pena being Bennet's treasurer, the statements are incredible. She will have none of this discussion. In fact, she is disappointed in Kaplan and Merida for bringing the issue up. This budget should be a chance to celebrate, she says! DPS is the only district in the state with a balanced budget. Further, Kaplan's questions are causing a stir, making people uncomfortable. Pena says DPS is absolutely in fine fiscal shape.
From a bookkeeper's point of view, this statement is probably true. From the point of view of an elected official who has a responsibility for future budgets and taxpayers money over the long haul, it is patently not true.
The only reason DPS' budget is balanced is, unlike other school districts in Colorado, the district has a pass on its pension-related debt. Pena is correct: DPS is contributing what it is statutorily required to by Colorado law. The law allows DPS to use its pension contributions to PERA to pay its debts to JP Morgan and the like. Jefferson County Public Schools? They're stuck paying the bills and their teachers' pension at the same time.
If you are a little lost here, I don't blame you. Look at it like this: if you fell behind on your mortgage by 6 months, you'd be in real trouble. You'd have to pay those 6 months off and continue paying your mortgage each month along the way. Just because you make up the 6 months of back payments does not mean you never have to pay you mortgage again, right?
That is not true for DPS. It was behind on its pension payments. It made those up in 2008, but then the Colorado legislature said, "You don't have to pay your pension costs moving forward, at least not until sometime in 2015, if then." Badda boom, badda bing, DPS' budget is balanced!
But guess what? PERA will get its pound of flesh, but not until DPS has racked up a $1 billion debt. That is what Kaplan and Merida are worried about. They know DPS could choose to pay the full amount of its pension obligations each year, or some portion of it. They are asking that DPS look at these options so as to avoid the cliff that is waiting. It is a cliff every DPS retiree should be worried about, and anyone who is paying into the pension now.
Keep in mind, when the legislation allowing this deduction was crafted, Bennet was at the helm of DPS, working with the state senate to craft the legislation. Further, he entered into the financing transaction to pay off the original debt. Now, 2 years later, he has Pena guarding his back to make sure none of this ever comes to light.
Do you see the conflict of interest? In covering up for Bennet, Theresa Pena is selling Denver's schools, teachers, and taxpayers down the river. Covering Bennet's mistakes is likely why Pena remained on the school board while also serving as Bennet's treasurer . In doing so, she isn't representing you or me. She is representing herself, and Michael Bennet, of course.
Denver's citizenry should be outraged. We need to stand up and say, hell no! Teachers, retirees, parents, students all have a stake in this, clearly. But all of us have a stake in it, even if you have no kids in DPS.
If DPS' current course of pension funding continues, one of three things will likely happen:
- DPS will default on its PERA obligation, putting DPS retirees at great risk and PERA itself in a very bad spot. PERA will sue the District, and who knows what happens from there.
- DPS' ability to provide education resources to the kids of Denver will be crushed under the weight of its pension obligations. There will be almost no education service DPS can afford. Honestly, DPS will have to cut the number of Denver schools in half, reduce its salaries to the bare minimum, have 45 kids in a classroom, and never have art, special education, student counseling, athletics, or probably lunch, again.
- DPS will have to default on its pension debt, and you and I will have to pay the debt in our property taxes. Of course, with the demise of public education in Denver, our property values will fall though the floor, thereby reducing the tax base. Our Denver public schools will start to look like Detroit's. Of course, if all 600,000 residents stay in Denver to tough it out, each of us will owe $1,666 to fix this fiasco. Even this won't guarantee DPS' solvency, however. The District will still have to pay its pension costs going forward, costs that will be staggering.
Now, if you didn't watch the video before, go back and listen to Pena's statements. Put them in context: she is working for Michael Bennet but she is supposed to be representing you. Think about the callous disregard with which she is approaching her responsibilities as a DPS board member. Then ask yourself what you intend to do about it...
before it is too late.