Double dipping
Published: Sunday, December 04, 2011
0diggsdigg
COLUMBUS (AP)— Ohio government employees who retire and then take another state job would not be allowed to draw their pension and a taxpayer-funded salary at the same time under a bill introduced last week.
The Dayton Daily News reports that the measure would suspend retirement benefits for public employees if they return to work for the government. Benefits would still continue to build while an employee returned to work.
Sponsor state Rep. Rex Damschroder tells the newspaper that a pension is meant to replace a paycheck.
School systems and local governments have made the argument that qualified employees are hard to find and sometimes re-hiring some retired employees can be cheaper.
Damschroder says he doesn’t fault current employees who use the system, instead blaming state government for allowing it.
=====
Many top educators double dip the system
Growing number retiring only to get rehired at same job or another district, collecting pension as well as a paycheck
By Dennis J. Willard
Beacon Journal Columbus bureau
Published on Sunday, Jun 20, 2010
He also is paid $1 a year as superintendent of the county’s R.G. Drage Career Technical Center. When he stops working or dies, according to his contract, Morgan or his heirs will be paid $5,000 for each year he has run the vocational center since 1995.
On top of that is his pension check. That’s private, but the annual amount could easily be in six figures.
Morgan, 68, will spend about a fifth of his career collecting pension checks from the state retirement fund while receiving full pay as a superintendent, a practice often called double dipping. Absent the assurance that he could keep his full-time government job, Morgan said, he probably would not have retired on Aug. 1, 2000, when he was making $129,969.
Morgan may be cashing in on the system more than others, but he is hardly an anomaly in Ohio.
He is a member in an exclusive club of superintendents who retire and return to their same job or rotate to another school district after signing lucrative contracts.
An analysis by Ohio’s eight largest newspapers found:
• One in four public school leaders in Ohio’s 614 districts brings home the bacon twice and one in two educational service center superintendents is doing the same.
• Allowing superintendents to retire early halts their contributions into the fund and pulls millions of dollars out at a time when the fund’s long-term viability is at risk.
• Superintendents point out that the practice is legal and that it would be foolhardy not to take advantage of a pension system that permits them to retire and return to work.
• While many superintendents claim that this practice is justified because of a shortage of qualified candidates, the Ohio Department of Education says there are thousands of licensed individuals who meet state standards to run school districts.
• And this is part of a larger state issue. About 32,000 state and local employees collected more than $1 billion in pension payouts last year on top of their paychecks. Three-fourths of those dollars went to STRS members.
Cutting deals
More than 150 (about 27 percent) of the state’s 613 superintendents are collecting paychecks and pensions at the same time. The ratios are higher among the heads of the Educational Service Centers, the former county school districts that were merged in 1995 to create 56 support centers for local school districts.
For the past decade, a growing number of school chiefs have cut deals to retire, collect a lucrative public pension and return to work, often in the same job.
In a single weekend, these superintendents increase their earnings often by as much as 80 percent.
In many communities, school board members have told their residents that hiring a retiring superintendent saves money.
In the Gahanna-Jefferson Local School District just northeast of Columbus, the school board touted the savings in rehiring Superintendent Gregg E. Morris because his health insurance would be picked up by STRS.
In 2009, STRS acknowledged that paying health care for double dippers was too expensive and ended the practice, so Gahanna once again paid for Morris’ health care.
Morris left Gahanna this year to become superintendent at Clark-Shawnee. He replaces Debbie Finkes, who was paid $95,188 a year. Morris signed a three-year contract paying him $110,000 annually.
Luci Gernot, Wood County Educational Service Center superintendent south of Toledo, retired after 28 years in 2007 from another school district. That provided her with about $56,000 a year in pension benefits.
She is paid $115,000 in her Educational Service Center job.
Gernot said she could have gotten another job in any number of industries but decided to stay in education. Either way, she said, she’s entitled to the pension benefit.
”It’s something I’ve earned,” she said. ”I could have gotten a job doing pretty much anything.”
The deals between superintendents and their school boards have left some residents feeling betrayed.
In Cuyahoga County, William Zelei retired in 2005 as superintendent at South Euclid-Lyndhurst at age 56 with 23 years in public service.
He was making about $140,000 annually and came back to work in the same job with an agreement to be paid $30,000 less a year.
After a levy passed in November 2008, the board agreed in February 2009 to extend Zelei’s contract and residents believed he would receive no pay raise. After teacher contracts were settled with minimal raises, the board voted 3-2 that August to raise Zelei’s salary 24 percent, or about $32,000.
Residents packed the board meeting to protest the move that would pay Zelei $164,077 by the 2011-12 school year.
Suddenly, he was the second-highest paid superintendent in the area and in his fourth year of collecting a pension at age 60.
Ohio criticized
It is difficult to put a price tag on the impact of these deals, but Ohio was criticized for spending more money on administration than classroom instruction by a Brookings/Greater Ohio Policy Study Center report released in February.
The study found Ohio ranks 47th among states for putting money into classrooms, but ninth in tax dollars spent on administration.
Brookings also reported that Ohio’s share of spending on administration was 49 percent higher than the national average.
STRS has more working retirees than any of the five state pension systems and paid out $741 million in 2009 to 15,857 retirees, with an average benefit of $46,800. Before the 2000 law change, teachers had to wait 18 months to return to public service. The forfeiture period was reduced to two months, in line with other public employees.
Since then, STRS has seen an enormous growth in the number of double dippers, as teachers return to work on a full- and part-time basis and as adjunct professors at universities.
In 2009, about 1,100 STRS members received on average $67,000 in pension pay while making $70,000 to $100,000 in their post-retirement job at a school district.
There is an even more exclusive group of 299 STRS retirees who earn more than $100,000 annually in their retirement while receiving a pension check of more than $80,000 on average. Their number has grown from just 19 in 2000.
The Ohio newspaper analysis of double-dipping superintendents showed that, among those checked, most make more in salary than they did before retiring. They also sign contracts with perks that make them consistently among the highest-paid public-sector employees in the state.
For example, many districts not only give the superintendent a pay raise, but also pay both sides of the employer/employee contribution to the retiree’s annuity to STRS. This, in effect, is a 10 percent pay increase on top of the base salary.
Districts also often pay the 1.45 percent of salary to Medicare as well as a car allowance, training and travel money, overtime for working holidays and any days not stipulated in the contract, plus insurance.
Quality of candidates
Why do they command these generous offers?
Forest Yocum retired in 2002 at age 56 from the Pickerington City School District before being hired as superintendent at Southwest Licking east of Columbus at $132,000.
”The problem facing a school board is the number of people available,” Yocum said. ”There are not that many top-quality candidates.”
Yocum and other superintendents said that there is a limited pool of qualified applicants trained, experienced and prepared to assume the demanding role of running a school district.
But the Ohio newspaper analysis found that there are thousands of licensed Ohioans available for the superintendent jobs. There also are potential out-of-state candidates and others currently working in education who could be groomed.
Scott Blake, an Ohio Department of Education spokesman, said 3,305 Ohioans are credentialed to be superintendents. An additional 1,204 are inactive.
Ten years ago, Mark Freeman retired as superintendent at Shaker Heights near Cleveland. It would seem that a large number of educators would apply for a chance to run one the of most prestigious and envied public school districts in the state.
Freeman was making $149,675 annually when he retired with a pension that was nearly 88.5 percent of his income.
Shaker Heights rehired Freeman without publicizing the opening or interviewing one other candidate.
He received a pay raise on his first day back on the job to $156,546, to go along with the money from his public pension.
Deals like this led lawmakers in 2003 to require school boards to conduct a job search before rehiring recently retired superintendents.
Now, a district must post the job opening 60 days in advance, hold a public hearing on rehiring the superintendent to determine whether there is any opposition in the community and then vote publicly to rehire.
These rules have not stopped a small cadre of superintendents from continuing to monopolize the positions.
Jennifer Sinisgalli, Strongsville school board president, said her district received 25 or more applications when the superintendent’s job was open in 2009. The district retained Jeffery Lampert, who had taken the job mid-school year on an interim basis in December 2008.
Lampert had retired eight years earlier from North Royalton and already was collecting a pension. He worked as an adjunct professor at Baldwin-Wallace College before returning as a superintendent to Brooklyn City schools in 2005, then was out of the business again when Strongsville came calling in late 2008.
Sinisgalli said Strongsville did a full job search with applicants from Georgia, Florida and other states, interviewed five or six candidates and ultimately decided to continue with Lampert.
She said complaints about a weak applicant pool were unfounded in her experience.
”I was quite surprised because I heard the same thing, that districts would have trouble finding qualified candidates. We had heard it, but we were thrilled with the response we had,” Sinisgalli said.
Gary Burtless, a senior fellow at the Brookings Institute, has studied pension funds for 30 years.
He said there is nothing wrong with a school district rehiring a retired superintendent, but there should be a system in place to reassure the public that a thorough search was conducted to find the best candidate.
There are no statistics to explain how many qualified employees are waiting to ascend to a superintendent’s job, but are held back because a double dipper is occupying the office.
But the clog factor exists at a time when school districts are laying off teachers and Ohio’s unemployment rate hovers around 11 percent.
Consider Batavia Schools’ departing superintendent, Barbara Bradley. With school board permission, she engineered a retire-rehire arrangement as assistant superintendent in West Muskingum schools near Zanesville in 2004.
But in 2005, her boss, then-Superintendent Marvin Wourms, got a new five-year contract after he had ”retired.”
Bradley then had to move to Batavia to accomplish her professional goal of leading a school system.
Bradley said it’s the nature of the game to move if one wants to be a superintendent, but there are numerous opportunities each year.
Double standards
There seem to be double standards.
In 2009, Massillon City Schools in Stark County adopted a policy that basically told administrators, not counting the double-dipping superintendent, that they could come back to work after retiring, but at 75 percent of their base salary.
In the Milford School District in Clermont County, Robert Farrell made $136,000 this year after retiring in 2007 when he was 53 years old.
Farrell also receives a $6,000 annual car allowance and a $20,000 annuity paid by the district.
Teachers wishing to return to work at Milford do not fare as well. They are hired on a year-to-year basis, cannot re-establish their tenure and must accept the equivalent salary of a fifth-year teacher, according to the school treasurer, Randy Seymour (also a double dipper).
This is not unusual. The Ohio newspaper analysis found numerous examples of double-dipping superintendents presiding over contracts with teachers that provided far fewer benefits to the classroom instructors.
In this decade, there have been several legislative efforts to address this issue, including a bill introduced in 2007 by former state Rep. Michelle Schneider, R-Madeira. She wanted a six-month waiting period, effectively banning the practice of a weekend retire-rehire in all state pension funds.
State Rep. Bruce Goodwin, R-Defiance, introduced legislation the same year to require double dippers to take a 40 percent pay cut before returning to work. The proposal was aimed at superintendents and top government administrators.
In both bills, the Legislative Service Commission, which provides fiscal and legal analysis to lawmakers, noted that its number crunchers could not determine whether double dipping cost taxpayers money, but they concluded that delaying retirement reduced STRS liabilities.
That’s because STRS members who work beyond 35 years continue to contribute to the fund and its solvency.
On the other hand, superintendents who retire at 30 or 35 years halt their contributions into the general pension fund while possibly drawing down more than $1 million before reaching age 65.
This runs counter to pension logic, which provides participants with higher income if they work longer — as does the Social Security System.
Job enablers
There are two early-retirement enablers.
Many superintendents would not retire as young as 52 without a guaranteed job.
In addition, early retirement is possible because all five state pension systems provide health benefits. If this benefit were not available, retirees would have to wait until age 65 to retire with Medicare.
When the state legislature created STRS in 1920, health care was not part of the package. In 1973, STRS and the four other state pension plans convinced state lawmakers that they could afford to offer health care, but it is not a mandated benefit.
Before the stock market collapse in 2008, fund managers were warning that health care could not be continued in its current form. Then losses in the markets hurt the pension accounts, too. STRS in particular found itself in a long-term solvency crisis.
STRS has asked state lawmakers to tap taxpayers for more money by gradually increasing the contributions by a combined 5 percent of payroll from employees beginning in 2011 and employers in 2016. Five additional percentage points is effectively a 21 percent tax increase in payroll contributions.
Long-term solution
STRS, as part of the long-term solution, wants lawmakers to require public employees to work at least 35 years or to age 60 and 30 years’ service or face significant benefit cuts.
This comes a decade after STRS and the other funds said too many employees were retiring after 30 years, placing a financial burden upon the system. As a solution, STRS in 2000 persuaded lawmakers to provide a generous 11.5 percent bump in benefits for those working to 35 years.
The plan was flawed because it also opened the door to thousands of teachers still retiring early. By 2004, in its annual report, STRS warned of trouble, and among the long-term causes were rising health costs, early retirements occurring at a rate faster than projected and the continuing trend of members living longer.
STRS wants to eliminate the 11.5 percent enhancement, which means an educator will have to work as many as 39 years to reach a similar payout. The plan also reduces from 3 percent to 2 percent the cost-of-living adjustment (COLA) — a provision that offers a sense of long-term security to retiring early.
STRS estimates that pushing retirement to 35 years and eliminating the 11.5 percent bump will each remove nearly $1 billion from the $40 billion in unfunded liabilities. The COLA reduction would be huge, cutting another $8 billion.
All of these measures are designed to strongly encourage STRS members to pay into the system longer before they begin to withdraw funds in retirement.
But that fix understates the gravity of STRS’ trouble. In 2006 — two years before the market crash — STRS called for the 5 percent increase in contributions for a different reason: To cover shortfalls in the health account.
Laura Ecklar, an STRS spokeswoman, said the proposal developed before the Great Recession would have generated $500 million annually for the health fund.
Ecklar said STRS has dropped that proposal. The new plan addresses only pensions.
”The board recognizes that a separate solution will be needed for the health-care fund. In fact, this fall, the board will begin a strategic planning process to evaluate its options for the health-care fund,” Ecklar said.
Ecklar acknowledged that delaying retirement eligibility would reduce health costs by shortening the time period before Medicare begins to provide coverage at age 65, but that’s not good enough.
”Unfortunately, the health-care fund has only about 11 years of solvency left,” she said. ”Changing the retirement age is not the solution to the health-care fund’s solvency. Pension fund solvency and health-care fund solvency are two separate issues that will require different solutions.”
Pension’s purpose
At the same time lawmakers and fund managers are examining plans to ensure the pensions are financially sound beyond the next 30 years, the question of the purpose of a retirement system is being asked.
Connie Yingling, a Mason school board member, voted to rehire Superintendent Kevin Bright after news spread in the community that he was a candidate for a top job at a district near Columbus.
Yingling said she believes a pension’s purpose is to provide an income for employees after they stop working.
She said if the employee has fulfilled the retirement requirements set forth by the fund, then they are entitled to the money.
”If the rules allow someone to qualify for those benefits before they actually stop working, then you can debate the rules, but the original purpose still stands,” Yingling said.
Former board member Jennifer Miller was the lone vote against hiring Bright as superintendent after he retired. She lost a bid for re-election last year.
Miller believes the rules should be reconsidered for collecting a pension while working. ”I think that law probably needs to be reconsidered. I think too many administrators and teachers are taking advantage.”
Beacon Journal Columbus Bureau Chief Dennis J. Willard can be reached at dwillard@thebeaconjournal.com or 614-224-1613.
Publicly funded pensions under the microscope
Many top educators double dip the system
School chiefs get better deal than teachers
Educators benefit from retiring early
How the superintendents were indentified
An Ohio newspapers special report
Timeline: Changes in benefits in the STRS
PDF: Which Ohio counties have the most retired superintendents
PDF: Pension formula pushes early retirement
Graphic: How State Teachers Retirement System pensions are determined
Graphic: Ranks of rehired retirees growing
Graphic: Number of retirees earning top dollar skyrockets
Graphic: Retired superintendents much more likely to be still working
Beacon Journal Columbus Bureau Chief Dennis J. Willard can be reached at dwillard@thebeaconjournal.com or 614-224-1613.
.Cinti Public School supt Mary Ronan will retire, then be rehired at just over half her salary. The school board is set to approve the move at tonight’s meeting.
.Ronan made $189,000 base salary and a $5,000 bonus. She will be making $99,000 under her new three-year contract. District officials did not immediately have data on how much she will be receiving in retirement pay.
.Retiring and then being immediately rehired is sometimes referred to as “double-dipping” and can be controversial because of the pressure that early retirement payouts put on the states pension fund.
Double-dipping is not new or rare. A 2010 analysis by Ohio’s eight largest newspapers found that more 150, or 27 percent, of the state’s 613 superintendents were collecting paychecks pensions at the same time, including Gary Gellert in North College Hill and Kevin Bright in Mason.
.Source: CPS votes today on administrative cuts. By Jessica Brown The Enquirer 3/19/12 C1
“Retired in Dec., rehired in January. Brayshaw gets pension, paycheck” By Sharon Coolidge The Enquirer 1/11/12 p A1
Double-dipping common among public workers
Some states trying to limit strain on pensions
By Danny Robbins, Tammy Webber and Peter Jackson Associated Press
THE ENQUIRER 10/16/11 A19
Excerpts
A school administrator in Illinois makes a combined $409,000 a year in pension payments and salary for overseeing a public boarding school.
Double-dipping – the well-established practice of public workers collecting government pensions and salaries at the same time – has become a hot topic for lawmakers around the country.
The practice has become under fire not just because of the cost of paying both a pension and a salary to the same person. It can also strain public pension funds because the rehired retirees draw from them but do not contribute while taking the place of workers who otherwise would be paying into the system.
“I don’t see any private entity that would allow this to happen, and I don’t see why government should allow it to happen,” said Kenneth Sheets, a state representative in Texas, a state representative in Texas who tried unsuccessfully to end the practice in his state earlier this year.
No single agency collects data on double-dippers, and many states do not provide the information publicly.
Available data showed nearly 71,000 double-dippers in California, New York, Texas, Florida, Michigan, Georgia, North Carolina, Pennsylvania and Arkansas. In Illinois and Ohio, populous states with a strong union presence, there appears to be no reliable way to determine double-dipping figures.
Accounts of large pension and salary combinations prompted lawmakers and the governor to act, including that of a retired school superintendent who draws a $184,000 annual pension while making $225,900 a year as president of a public boarding school.
Data from the state comptroller in Texas show that more than 6,100 people who held positions in state government last year also were receiving $145 million in pensions.
To Do
Source: Double-dippers’ swamp county. Rush of retirements overruns pension fund By Sharon Coolidge and Dan Horn. ENQUIRER EXCLUSIVE. The Enquirer, 8/14/11 A1
August 24, 2005
DOUBLE-DIPPING EPIDEMIC
Most taxpayers probably don’t know how good a pension deal many public employees get. Unlike your 401(k) that your employer may or may not contribute to and all you can expect from it is whatever it’s worth by the time you retire, most public employees get a defined-benefit pension. Typically a public employee receives for the rest of his life a fixed percentage of his top salary upon leaving his job, provided that he has served a certain number of years. For example, an employee of the City of Grand Rapids is entitled to receive one-quarter of his salary as a pension after only ten years’ service with the City.
That’s a swell deal. Even better is that once you qualify to receive a City pension, you can quit your job with the City and then the City hires you back as a private consultant at your old salary minus benefits. So now you receive both a paycheck and a pension check from the City! We reported on this double-dipping scam a few months ago regarding the City Engineer.
Double-dipping is not restricted to the City of Grand Rapids. A lot of the public school districts in the area do the same thing. Senior administrators retire, begin drawing their pensions, and resume their old positions under a private consulting contracts. The practice isn’t cheap. The annual salaries paid out can exceed $100,000, while the pension may be as much as $50,000 a year. This is the sort of deal GRPS Superintendent Bert Bleke has set up for himself when his pension vests after only five years on the job.
The lame excuse that school superintendents give for this crap is that it saves the school district the cost of paying benefits to a retired administrator while retaining his experience. What they never explain is why the re-hired administrator is allowed to draw his pension in the first place, which typically costs the taxpayers double the savings from not paying benefits — which, by the way, overlooks the fact that these pensioners often do receive retirement health plans and the such. Another lame justification is that businesses do this. Of course, if a business owner miscalculates he loses profits or may even go bankrupt. There is no such discipline in a public school district. If the taxpayer cannot be tapped for more to cover double-dipping by senior administrators, then they can instead cut programs for the students.
It is uncertain how many school district condone the double-dipping practice. The Grand Haven public school district is a particularly aggressive promoter of double-dipping with at least eight administrators drawing two checks from the taxpayers. Other area school districts that have double-dippers are Allendale, Caledonia, Wyoming, and Zeeland. The superintendent of the Forest Hills district, Mike Washburn, is pushing double-dipping although he knows how obnoxious the practice is to taxpayers. (Interesting how normally craven public officials become profiles in courage in the defense of lavish compensation.) Also, as indicated above, it appears that the Grand Rapids public school district has no objections to double-dipping if it allows Bleke to do it a year from now.
Meanwhile, kudos to Kentwood Superintendent Mary Leiker who has flat out declared double-dipping to be unethical and absolutely will not permit it in her district.
Posted on August 24, 2005 at 04:32 PM in Public Schools | Permalink
The Local Area Watch. Reporting the news the news won’t report in Grand Rapids, Michigan.