Denver dad and former school board candidate Christopher Scott argues that Denver school officials should be held accountable for poor student performance and the rising cost of the district’s debt.
One of the core principles of the contemporary education reform movement is the concept of accountability. In fact, Denver Public Schools’ Board Policy A – Policy Framework for Accelerating Gains in Academic Achievement for all Students, which the board adopted in 2009, states that “accountability for performance by all adults matter.”
But it must not be clear to DPS’ current sitting school board what their predecessors meant by “all adults.” Two events from the past week make this fact painfully clear.
Last week, the Colorado Commission of Higher Education released its annual report on student remediation needs – a direct indicator of how well a district is preparing its students for college.
Of DPS’ graduates enrolling in Colorado’s higher education system in 2011, 60 percent needed to take remedial course work in one or more subjects. Though the district will surely tout that the percentage has declined slightly over the past several years, DPS’ drop from a rate of 63.6 percent to 60.4 percent means that 46 fewer kids required remediation this year than last.
The week before the remediation numbers were announced, the Denver board directed district staff to refinance $537 million in bonds. The backstory is complicated, but here’s a quick summary: in 2008, DPS used a complex derivatives-based financing scheme to fund its $400 million unpaid pension liability. This debt was refinanced in 2011, taking half of the $750 million principal and moving it to fixed rate debt (like a mortgage) and leaving half of the debt in a derivative-based variable rate financing. Three weeks ago, the board of education directed DPS staff to move the remaining variable rate debt to fixed-rate financing.
Each of these events came at a cost, however:
- In 2008, DPS borrowed an additional $350 million to refinance debt that would have been paid off in 2017, thus extending payments by twenty years.
- Over five years, DPS paid more than $200 million in fees and interest on this debt. None of the debt’s principal was paid off, however, because of the deal’s structure.
- When the district refinanced the debt in 2011, it spent $40 million in something called swap termination fees.
- When DPS refinanced again in April 2013, the swap termination fees paid were $140 million on the remaining $392 million variable rate debt.
As of the end of 2011, DPS had rebuilt its unfunded pension liability to $600 million, or 1.5 times more than the liability in 2008, when DPS said its pension funding level was a crisis.
And, when all was said and done, the Denver Business Journal reports that DPS’ interest rate on its now $1.03 billion debt is 6.7 percent. This rate is very close to what DPS could have achieved in 2008, without the derivatives scheme that has directly cost taxpayers almost $250 million.
The short version of this story is this: the District now owes $1.6 billion on a debt that was $400 million.
DPS claims that the 2008 financing deal was necessary to its retirement system’s merger with PERA. But DPS closed the deal a year before the law requiring the merger was signed. And the DPS pension system was again under-funded by $387 million when merger took place in 2010.
Accountability for performance by all adults matters. If this is true, how is Denver’s board of education handling accountability for the fact that 60 percent of DPS graduates who make it to college are unprepared? What about the use of $1 billion in District funds — $250 million more than DPS’ annual operating budget — to fund a $400 million debt, a debt that is now $600 million three years later?
Put another way, let’s say DPS is a corporation. What would happen to the CEO if 60 percent of the company’s product failed once the consumer purchased it? And what if this same CEO put the company $1 billion in debt to fund a $400 million liability, all the while allowing that same liability to regrow to $600 million?
The Board of Directors would fire the CEO, that’s what would happen. And if not, the board of directors would face shareholder lawsuits from every angle, and rightly so.
In this story, the Denver taxpayers are the company’s shareholders. And as one of those shareholders, I am asking, is our company holding true to the proposition that “accountability for performance by all adults matters?”
If not, I am calling my lawyer. So should you.
About our First Person series:
First Person is where Chalkbeat features personal essays by educators, students, parents, and others trying to improve public education. Read our submission guidelines here.