CalPERS moves to exclude privately-run charters
(Calif.) New eligibility requirements for participating in the California Public Employees’ Retirement System exclude private operators of charter schools, officials at the California Charter Schools Association said Wednesday.
The new requirements were adopted earlier this year in anticipation of changes to federal tax law that would tighten the definition of a government entity participating in a public pension. That is, whether an applicant is truly an agency or political subdivision of the state – a test private charter operators apparently can no longer meet.
Charter advocates charge that five recent applicants – all of which are controlled by a private, non-elected board have been rejected by CalPERS for enrollment under the new policy.
They call the action premature and argue it violates the rights of charter schools under current law.
“Nowhere else is this sort of policy being even considered,” said Myna Castrejon, senior vice president of government affairs for the association. “It is jeopardizing the security and retirement of charter school employees and we’re urging that the board to reverse this decision and return to the policy of admitting all public charter schools and their employees into the system.”
If left unchallenged, the move could pose an enormous problem to the charter movement nationally given that CalPERS manages the second largest pension funding in the U.S. and is well known as a trend setter.
At issue are proposed changes to the definition of a “government plan” being considered by the Internal Revenue Service and the Treasury Department. The two agencies offered draft regulations two years ago aimed at updating the code.
According to a CalPERS staff report made to the Pension and Health Benefit Committee Tuesday, the new rules require that public pension managers ensure new participants conform under a list of eligibility tests. The questions include: who controls an entity’s board; who bears fiscal responsibility; and the entity’s authority to exercise “sovereign powers of the state” such as taxation.
Pension staff reported that although the IRS regulations are not final, the new rules are based on existing guidance and reflect current law. They also noted that allow even one non-governmental entity to be included in CalPERS “could jeopardize” the system’s status.
Castrejon noted that no similar action is being considered at the California Teachers’ Retirement System, which continues to accept all credentialed employees at charter schools.
Further, she said, that every other state that authorizes charter schools either requires or permits charter school participation in the state’s retirement system.
Finally, she said, after hearings held across the country about the proposed tax rules – charter schools made strong objections to the proposed language, generating more than 2,000 critical comments and letters in opposition from nearly two dozen members of Congress. “Yet, in February, CalPERS decided to revise its procedures, making it the only state retirement system in the country to do so,” Castrejon said.