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Cut costs with PERS fixes, charter schools

The Portland public school system is in a financial death spiral. Most commentators think it's just a revenue problem, but it's not. There are three related trends that are sapping the lifeblood from the district: declining student enrollment, a growing collection of underutilized buildings and skyrocketing costs of employee benefits. If those trends are not addressed, no amount of new revenue will matter.

We've already tried the usual fixes Ñ lobbying for more money, electing new school board members, hiring new superintendents, holding mayoral summits and drafting new 'vision documents.' But none of them worked because we didn't address the underlying problems.

The district needs to do two things, quickly: (1) Attract new students, and (2) reduce the cost of employee benefits.

One innovative strategy would be to convert every one of Portland's 90 traditional schools into a charter school, and encourage the formation of new ones. This would give Portland a big marketing advantage. Charter schools have the feel of private academies, but are public. They tend to be small, and Portland has a lot of empty small buildings. Because charter schools encourage innovation, parents are more likely to find exactly the right kind of school for their children.

Oregon's charter school law allows up to 50 percent of the faculty at charter schools to be nonlicensed, so principals would have the opportunity to blend existing staffs with new faculty who may be experts in their fields even if they don't possess state teaching certificates. This is very attractive to parents looking for specialized instruction.

Portland can't 'out-suburb' the suburbs, so it shouldn't try. But if we create an urban charter district, Portland would have something unique to sell, enticing parents who want school choice but don't want to buy a home in another district just to get it.

The Portland school district applied for a federal planning grant to study this concept back in 1996, so there is already some familiarity with it. Jack Bierwirth, the superintendent at the time, suggested that we 'rethink the rules that make sense for a public school system.' He wanted to turn Portland into the nation's first charter district.

Bierwirth never implemented the concept, but the state Legislature subsequently passed Oregon's charter school law in 1999. The law has been fairly successful at fostering new schools: There are now about 60 charter schools in Oregon, and the list grows almost monthly.

This strategy would inject some much-needed innovation into the system, but it does not fully address the other key problem, which is the expense of public employee benefits. Charter school employees are still public, and therefore the district would have to pay for the cost of unionized employee benefits, which are unsustainable.

For example, the cost of paying for district retirement benefits under the Public Employees Retirement System has increased by 71 percent in just the last two years; it will be 14.4 percent of base salaries for the 2006-07 year. The cost of total employee benefits will go from 42 percent of salaries in 2004-05 to 50 percent in 2006-07. There is no plausible revenue scenario that can keep up with these kinds of increases.

If the state Legislature is unwilling (or unable) to reform PERS, the charter school law should be amended so that charter schools can be run on contract to public entities, with employees classified as private. This alone would close most of the gap between revenue and expenses in Portland.

Creating an urban charter district would not solve every problem, but it would put PPS on a road to fiscal recovery. That's a pretty good start.

John A. Charles Jr. is president and chief executive officer of Cascade Policy Institute, a Portland research center.