By Dennis J. Willard - Akron Beacon Journal
The practice promotes early retirement which contributes to a drain on the system. The fund now has $40 billion in unfunded liabilities and is seeking a taxpayer bailout.
A taxpayer-funded state pension system encourages career teachers and administrators to retire in their 50s tap the fund and return to work.
If the educators dont retire at that relatively young age after 30 years of service they are likely to receive far less income in both their working careers and retirement. And much is at stake - for both educators and taxpayers.
A superintendent earning $100000 when he retires at age 52 will receive about $64000 in the first year he taps his pension. If he is rehired to his same job as happens regularly and he receives regular 3 percent raises and other benefits afforded most superintendents he could retire at age 65 with a pension package totaling $1.6 million.
While thats good for the public servant the practice is contributing to a drain on the State Teachers Retirement System which also has suffered from Wall Street investment losses and significant increases in health-care costs.
The STRS fund now faces $40 billion in unfunded liabilities and is in need of a taxpayer bailout.
STRS officials and some legislators say the retirement formula also needs a tune-up to discourage retirement at a young age. Superintendents who retire after 30 years of service rather than after 35 years each cost STRS about $465000 in expenses and contributions. Its less for teachers.
An analysis by Ohios eight largest newspapers of a system that encourages educators to double dip by retiring and immediately returning to work found:
- One in four public school leaders in Ohios 614 districts collect both pensions and paychecks and one in two superintendents of educational service centers are doing the same.
- When superintendents retire after 30 years it halts their contributions into the pension fund and pulls out millions of dollars at a time when the funds long-term viability is at risk.
- About 32000 state and local employees collected more than $1 billion in pension payouts last year on top of their government paychecks. Three-fourths of those dollars went to State Teachers Retirement System members.
No one can stop educators from retiring at a young age and superintendents say they would be fools not to take advantage of a pension system that permits them to retire and return to work.
Retirees ranks swell
Although school superintendents represent a fraction of the states double dippers they are among the easiest to document and are by far the most visible in their communities.
More than 150 of the states 613 superintendents collect paychecks and pensions at the same time. The ratio is higher among heads of the educational service centers the former county school boards merged in 1995 to create 56 support centers for local school districts.
For the past decade a growing number of school chiefs have arranged to retire collect a public pension and return to work often in the same job. These superintendents almost instantly increase their earnings by as much as 80 percent.
In many communities school board members have told residents that hiring a retiring superintendent saves money. In the Gahanna-Jefferson Local School District 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 began paying for Morris health care. He left Gahanna this year to become superintendent at Clark-Shawnee near Springfield. He replaced Debbie Finkes who was paid $95188 a year. Morris signed a three-year contract paying him $110000 annually.
Luci Gernot superintendent of Wood County Educational Service Center south of Toledo retired after 28 years in 2007 from another school district. That provided her with about $56000 a year in pension benefits. She is paid $115000 in her new job. Gernot said she could have gotten another job in any number of industries but decided to stay in education. Either way she said shes entitled to the benefit that was invested on her behalf.
Its something Ive earned she said.
Practice criticized
Critics say double dipping costs taxpayers untold millions of dollars because it encourages people to retire early and collect pensions for a longer period.
Some public employees would opt against early retirement if they didnt expect full-time high-paying positions to await them upon retirement the critics note.
The chief overseer of Ohios public pensions said the practice doesnt cost taxpayers anything because pension systems contribute the same toward a re-employed retiree as they would toward someone who had not retired at a relatively young age.
We see this as a perception issue not a (financial) issue for the pensions said Aristotle L. Hutras director of the Ohio Retirement Study Council. As far as were concerned its cost-neutral.
The Ohio Retirement Study Council last analyzed the cost of double dipping in October 2007. At the time the panel was weighing the impact of a bill that would require retirees to forfeit pension benefits if they returned to the same position within 180 days of retiring. The bill did not pass.
The council concluded that double dipping was costing the pension systems little if anything. Its report said curbing pensions for double dippers would result in savings too small to measure reliably.
Although putting a price tag on the impact of these deals is difficult Ohio was criticized this year for spending more money than other states on administration and less than other states on classroom instruction. Those were the findings of a Brookings/Greater Ohio Policy Study Center report released in February.
The study ranked Ohio 47th among states for putting money into classrooms but ninth in tax dollars spent on administration. Brookings also reported that Ohios share of spending on administration was 49 percent higher than the national average.
STRS has more working retirees than each of the other state pension systems paying $741 million in 2009 to 15857 retirees with an average benefit of $46800.
Before a state-law change in 2000 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 returned to full- and part-time work in the schools or as adjunct professors at universities.
In 2009 approximately 1100 STRS members received an average $67000 in pension pay while returning to work and earning $70000 to $100000 in their post-retirement jobs at school districts.
An even more exclusive group of 299 STRS retirees collects more than six figures in annual pay while receiving a pension check of more than $80000 on average.
For this story the Ohio Newspaper Organization reviewed the records of many double-dipping superintendents and found that most now make more in salary than before they retired. They also sign contracts with perks that make them consistently among the highest-paid public servants in the state.
For example many districts not only give the superintendents pay raises but they also pay both the employee and employer contributions into the retirees annuities with 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 and insurance.
The practice of hiring double-dipping superintendents can save or cost districts money depending on how the contracts are written. In some cases the costs are no different than hiring someone who is not taking a pension.
Experience sought
Forest Yocum retired as superintendent of Pickerington schools in 2002 before taking the same job with Southwest Licking schools in Pataskala.
Yocum now 64 had been with the Pickerington district five years before retiring and previously had served as superintendent of Tiffin City schools near Findlay and at Fort Recovery schools in Mercer County.
He said his collection of a pension check and a paycheck never was an issue with Southwest Lickings school board which he said was looking for someone to help manage growth as he had done in Pickerington. While some refer to such employees as double dippers he said the negative connotation associated with that phrase belies the experience retirees bring to the job.
The problem facing a school board is the number of people available Yocum said. There are not that many top-quality candidates.
The Ohio newspaper analysis found thousands of licensed Ohioans available for the superintendent jobs. And there are out-of-state candidates and others working in education who could be groomed.
Scott Blake an Ohio Department of Education spokesman said 3305 Ohioans are credentialed to be superintendents. An additional 1204 are inactive.
During his career Yocum has served as a teacher principal transportation administrator and superintendent. He said he uses all of that experience in his day-to-day job managing Southwest Licking schools.
He makes about $132000 a year as superintendent and said he does not know how much his state retirement brings in annually. He made $102000 in his last year at Pickerington according to news reports.
David Engel a Southwest Licking school board member who was president when Yocum was hired said the fact that Yocum was drawing a pension made almost no difference in the boards decision or in the offered compensation package.
Despite the fact someone is receiving a wage from the state or some other source does not mean they should be paid less than another person with the same qualifications Engel said.
Engel said Yocum was and is a good fit for the district not only for the length but also the variety of his experience.
Ten years ago Mark Freeman retired as superintendent at Shaker Heights near Cleveland. It would seem that a large number of candidates would forward their applications for a chance to run one a top public school district.
Freeman was earning $149675 annually when he retired on pension payments greater than 88 percent of his income.
Shaker Heights rehired Freeman without publicizing the opening or interviewing any other candidate.
He received a raise his first day back on the job making his pay $156546.
Contracts such as Freemans led lawmakers in 2003 to require candidate searches before districts rehire recently retired superintendents. Now a district must post the job opening 60 days in advance hold a public hearing to learn whether the community opposes rehiring a retiree and then vote publicly to rehire.
Gary Burtless a senior fellow at the Brookings Institute who has studied pension funds for 30 years said there is nothing wrong with a school district rehiring a retired superintendent. But he said there should be a system in place to reassure the public that a thorough search was conducted to find the best candidate.
Some districts appear to have different standards for teachers administrators or superintendents.
Massillon City Schools adopted a policy in 2009 that basically told administrators they could come back to work in the Stark County district after retiring but at 75 percent of their base salary. The double-dipping superintendent was exempted from that rule.
Teachers in the Milford School District in Clermont County who retire and wish to return to work there 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 who double dips.
Milford Superintendent Robert Farrell made $110000 this year after retiring in 2007 when he was 53 years old. He also receives a $6000 annual car allowance and a $20000 annuity paid by the district.
The Ohio newspaper analysis found numerous examples of double-dipping superintendents leading districts that provide teachers with fewer benefits than superintendents receive.
Reforms attempted
State legislators have taken aim at double dipping several times in the past 10 years.
A bill introduced in 2007 by former state Rep. Michelle Schneider R-Madeira proposed a six-month waiting period effectively banning the practice of overnight retire-rehire for all the state pension funds
State Rep. Bruce Goodwin R-Defiance introduced legislation the same year to require double dippers to take 40 percent pay cuts before returning to work. The proposal was aimed at school superintendents and top government administrators.
In both bills the Legislative Service Commission which provides fiscal and legal analysis to lawmakers noted their numbers-crunchers could not determine whether double dipping cost taxpayers money.
Two things make double dipping easy: a guaranteed job after retirement and full health-care benefits in retirement.
Many superintendents would not retire as young as 52 without guaranteed jobs. They would stay in their jobs longer.
And all five state pension systems provide health-care benefits.
If this benefit were not available retirees would have to pay for health care or 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 dive in 2008 the 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 found itself in a long-term solvency crisis.
All five pension plans want state lawmakers to tap taxpayers to maintain the benefits for retirees. They want to gradually increase contributions - by a combined 5percent of payroll from employees beginning in 2011 and by employers in 2016.
As part of the long-term solution STRS wants lawmakers to require public employees to work at least 35 years or to age 60 with 30 years service or face significant benefit cuts. And it wants to drop a cost-of-living adjustment which helps the pension payments keep pace with inflation from 3percent to 2 percent.
STRS estimates that the proposed changes will remove nearly $10 billion from the $40 billion in unfunded liabilities. The measures are designed to strongly encourage STRS members to pay into the system longer before they begin to withdraw funds in retirement.
Laura Ecklar an STRS spokeswoman said a separate proposal is needed to make the pension funds health-care account healthy. She acknowledged that delaying retirement eligibility would reduce health-care costs by shortening the time before Medicare begins providing coverage for retirees at age 65 but thats not good enough.
Unfortunately the health-care fund has only about 11 years of solvency left she said.
Parma Superintendent Sarah Zatik 53 who retired and was rehired two years ago said residents are angry when they learn of her collecting a paycheck and retirement money. She said people in other industries retire and take other jobs but only public employees are villainized.
It happens everywhere but of course were the ones who are focused on as being greedy Zatik said. I think its unfair. I think people do not understand it. Youre not paying me twice for this job.
She is leaving the district this month and plans to teach courses in school administration at local colleges. She still will receive her STRS payments whether or not she works.
Though she has taken in a lot of money with her salary and retirement payments from the state the past two years it hasnt been worth it she said.
If I could do it over again I would just leave.
