Oregon’s traditional public schools may be struggling with escalating pension costs, but some charter schools aren’t worried. They’ve figured a way out.
Oregon’s charter school law says public charter schools are public employers, so teachers and staff are required to participate in PERS, the Public Employees Retirement System.
For charter schools, that has traditionally meant teachers and staff were required to contribute a percentage of their pay to PERS and the employing agency had to match these contributions with a percentage of total payroll. The problem is employer contribution rates have been escalating, imposing an increasing burden on charter school budgets.
In early 2011, after PERS announced an increase in the employer contribution rate, Kings Valley Charter School, sponsored by the Philomath School District, worried that increases would force the school to reduce its operations or even close.
In Sept. 2000, an opinion from Oregon Attorney General Hardy Meyers declared the following:
- Under ORS chapter 338, may a public charter school contract out its operations to a private, for-profit entity? Yes, assuming that the contract is consistent with the terms of the charter and all applicable laws.
- Would contracting out a public charter school’s operational responsibilities to a for-profit entity violate the Oregon Constitution because it would result in the loss of governmental accountability for the performance of governmental functions? No, but in order for a public charter school’s contracting out of the school’s operations to a private, for-profit entity to be constitutional, the public charter school must :(1) maintain a right of control over delegated governmental functions; (2) provide procedural safeguards to affected members of the public in relation to those aspects of the school’s operations that constitute the governmental function of providing a public education.
A non-profit group, People Sustaining Kings Valley (PSKV), was formed to come to Kings Valley’s rescue as an independent contractor. At the start of the 2011-2012 school year, the school contracted with PSKV to have it hire 35 of its 36 employees, everybody but the school’s director. The school subsequently agreed to pay PSKV $973,637 for specified services that school year, including providing instructors and teacher assistants.
With that move, the teachers and staff, as private employees of PSKV, were no longer required to participate in PERS, saving the school about $80,000 a year in PERS contributions.
This also allowed teachers and staff to participate in a pension program provided by PSKV. Under the new system, PSKV automatically contributes 6 percent of the employee’s salary to a 403b retirement plan and the employee can decide whether to contribute more.
“The school has received considerable positive feedback from the teachers and staff regarding the new arrangement,” reported a Jan-Feb. 2013 Charter Starters Newsflash, though it wasn’t at all clear whether the end retirement benefit with the 403b, which would vary with the market, would be better or worse than a PERS benefit.
As for PERS itself, the impact of decreased member participation resulting from any PERS employer engaging “independent contractors” who are not eligible for PERS participation rather than “employees” who are eligible for PERS participation is somewhat neutral, PERS says.
Generally speaking, to the extent any public employer has more “employees” participating as members of PERS it would help to decrease the unfunded actuarial liability (UAL) in the short term because of the corresponding contribution payments. However, it would also increase the future pension liability in the long run because of the increased benefit obligations accrued by those members. Conversely, if a public employer has less employees participating in PERS it would not help decrease the UAL in the short-term, however, neither would it increase the future pension liability.
Logos Public Charter School, sponsored by the Medford School District, has a similar arrangement with a private company, Western Collegiate Consulting (WCC). On its website, WCC says it is “a state certified Professional Employment Organization (PEO) that was specifically created to provide charter schools in Oregon… qualified teachers and staff …”
WCC registered with the Oregon Secretary of State as an Eagle Point, OR business on Oct. 28, 2015. In a rather interesting relationship that could pose a conflict of interest, the Chief Executive Officer of WCC is Joseph D. VonDoloski, who was a principal organizer of Logos and served as its Executive Director until Aug. 2017. VonDoloski left Logos and simultaneously, as CEO of WCC, hired all its teachers and staff.
Logos entered into a 30-page contract with WCC on August 1, 2017, according to Cassie Zimmerer, WCC’s Chief Human Resources Officer. Logos’ former business manager, she is the daughter of Logos’ current Executive Director, Sheryl Zimmerer.
“As part of the agreement, WCC onboarded the majority of Logos’ previous existing employees and hired approximately 10-15 more individuals to fit the school’s needs for next year,” Cassie Zimmerer said. She added that WCC WCC offers a benefit package to it’s employees which includes a 401k matching program (up to 6%) that employees are fully vested in day #1.
The Medford School District subsequently raised the conflict of interest issue. It also questioned whether Logos had complied with state contracting statutes when it contracted with WCC. Those statutes, Medford asserted, require Logos to show using WCC is more cost effective than using its own personnel and resources or that it wasn’t feasible for Logos to use its own personnel.
According to the Oregon Government Ethics Commission, the Medford School District has filed an ethics complaint with the Commission over the situation and the Commission is currently conducting a review.
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