Should all Colorado substitute teachers be members of PERA? The question is headed to court.

A group of five Colorado school districts has turned to the courts to fight a new policy that would allow substitute teachers they hire through outside staffing agencies to benefit from the state’s retirement system.

The policy, school districts say, could cost them millions of dollars worth of retirement contributions for substitutes and make the already difficult task of finding enough subs to cover classrooms even harder.

The school districts joined two staffing agencies, Kelly Services and ESS West, LLC, in filing a lawsuit against the Colorado Public Employees’ Retirement Association on June 27 in Denver District Court.

The lawsuit raises questions about the way that subs should be classified as employees and the kind of retirement benefits they are eligible to receive. Some Colorado school districts, including plaintiff Aurora Public Schools, have started working with outside staffing agencies in recent years to create a reliable pool of subs at a time it has become increasingly difficult for many districts to hire and retain a stable group of subs. The state has recognized those subs as employees of the staffing agencies that contract with districts, meaning the subs and agencies pay into social security. 

PERA, however, wants all school employees who are critical to schools to be PERA members, including subs who come from outside staffing agencies. The retirement system is pushing to classify those subs as employees of school districts rather than as employees of outside staffing agencies. The new policy would force school districts to make retirement contributions to PERA for those subs.

“The Districts have not budgeted for such contributions, nor do they have the resources to effectively fill substitute positions without staffing agencies,” the lawsuit states.

Other district plaintiffs in the lawsuit are Adams County School District 14, Englewood Schools, Harrison School District 2 and Littleton Public Schools.

PERA spokesperson Patrick von Keyserling declined to comment on the lawsuit, citing pending litigation.

PERA on June 30, 2023, made all school districts aware that it would begin regarding subs as PERA members and that districts would have to begin making retirement contributions to PERA for subs starting July 1, 2024, according to the lawsuit.

Last fall, a number of school district officials complained about the policy change to the state legislature’s Pension Review Subcommittee. Committee members, however, declined to authorize a bill draft reversing the policy, saying they were worried it would lead to school districts turning to contract labor to avoid paying the benefits owed to public employees.

The lawsuit noted that the retirement association originally agreed to respect Aurora Public Schools’ decision to name subs as employees of Kelly Services after the district shifted from hiring its own subs to contracting with the staffing agency for the 2016-17 school year.

“However, PERA reserves the right to challenge APS’ classification of the substitute employees in the future,” the lawsuit states, citing a 2016 letter written to the district from Gregory Smith, PERA’s executive director at the time.

With help from Kelly Services, Aurora Public Schools now relies on about 700 subs per year to step into classrooms temporarily or to fill long-term vacancies, according to the lawsuit.

Working with an outside company has helped the district dramatically boost its success placing subs in classrooms, which can be particularly tough given how much school districts compete with each other and with other industries for hourly workers, Brett Johnson, chief financial officer for Aurora Public Schools, told The Colorado Sun.

The temporary and “transient” nature of subs further complicates districts’ ability to staff classrooms, Johnson said, as some subs want to work only a couple days a week or every other week while others fill in every day.

Should the new policy be adopted, Aurora Public Schools would likely have to return to directly hiring subs and appoint a full-time staff member for that job, which would set in motion a series of financial and operational hardships, he said.

“A concern on our end is that in the likely event that our fill rates plummet again, that puts a lot of strain on school operations and ultimately kids,” said Johnson, who previously served on PERA’s board. “We may have to just decide to scrap third-party providers altogether and be upfront with our community and our teachers and our kids that teachers are going to have to do more and kids are going to have to expect disruptions in their learning.”

That might mean schools must combine classrooms for a day or ask teachers to skip their planning periods in order to cover a class, adding more demands to their already full workloads, Johnson said.

He estimates that making retirement contributions to PERA for subs could cost Aurora Public Schools between $3 million and $5 million in a single school year.