OHNO report: Retire, then rehire

By Dennis J. WILLARD

Beacon Journal Columbus Bureau

For the past decade, Larry Morgan has been collecting a pension check from the State Teachers Retirement System and a paycheck as superintendent of the Stark County Educational Service Center.

He is paid $149,688 by the service center, a $6,000 supplemental salary, annual employer contributions of $10,000 to a tax-deferred annuity and life insurance.

He also is paid $1 a year as superintendent for 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 ran the vocational center since 1995.

On top of that is his pension check. That’s private, but could easily be into 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 critics call double-dipping. Absent the assurance that he could keep his full-time government job, Morgan said he probably would not have retired Aug. 1, 2000, when he was earning $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 of 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 bring home the bacon twice, and one in two educational service center superintendents are doing the same.

Allowing superintendents to retire early halts their contributions into the fund and pulls millions of dollars out at a time 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.

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.

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 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 many communities, school board members have told local residents that hiring a retiring superintendent saves money.

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 ESC 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,” said. “I could have gotten a job doing pretty much anything.”

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 ranks 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 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.

There is an even more exclusive group of 299 STRS retirees that earn more than six figures annually in their retirement while receiving a pension check of more than $80,000 on average. Their number has grown from only 19 in 2000.

The Ohio newspaper analysis of double-dipping superintendents showed that, among those checked, most make more in salary than they did prior to retiring. They also sign contracts with perks that make them consistently among the highest-paid public sector jobs in the state.

For example, many districts not only give the superintendent a pay raise, but they also pay both sides of the employer/employee contribution into 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, and insurance.

Why do they command these generous offers?

Forest Yocum retired in 2002 at age 56 from 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 are also potential out-of-state candidates and others currently working in education that could be groomed.

Scott Blake, an Ohio Department of Education spokesman, said 3,305 Ohioans have credentials 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 applicants would forward their application for a chance to run one the of most prestigious and envied public school districts in the state.

Freeman was earning $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 in 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 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 existing 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 applications from 25 or more individuals 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 retired eight years earlier from North Royalton and already was collecting a pension. He worked as an adjunct professor at Baldwin Wallace before returning as a superintendent to Brooklyn City schools in 2005 before getting 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.

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.

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, a Republican from Madeira. She proposed a six-month waiting period, effectively banning the practice of weekend retire-rehire for all the state pension funds.

State Rep. Bruce Goodwin, a Defiance Republican, 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 school superintendents and top governmental administrators.

In both bills, the Legislative Service Commission, which provides fiscal and legal analysis to lawmakers, noted its numbers 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 into 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.

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-care 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, the fund managers were warning that health care could not be continued in its current form. Then, losses on the markets hurt the pension accounts, too. STRS in particular found itself in a long-term solvency crisis.

All five pension plans want 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 for the funds.

STRS, as part of the long-term solution, wants lawmakers to require public employees to work at least 35 years or to age 60 or face significant benefit cuts.

Today’s report on Ohio’s pensions for public employees is a collaboration among the members of the Ohio News Organization, the state’s eight largest newspapers. Reporters from each newspaper are examining publicly funded pensions as Ohio’s lawmakers consider options for improving the solvency of these funds.

Information supplied by the pension funds enabled reporters to identify thousands of public employees who are working in public office and collecting pension payouts at the same time — known as “double dipping.” That list was matched with the most readily available public directory — Ohio school superintendents — to produce this report.

Though Ohio law prohibits the State Teachers Retirement System from releasing ‘‘any information identifying, by name and address, the amount of a monthly allowance or benefit paid to the individual,’’ a mailing list of those receiving benefits is available.

That list was checked by Akron Beacon Journal reporter David Knox against the names of Ohio’s more than 600 district and county school superintendents to identify those who are collecting STRS benefits.

Reporters representing Ohio’s eight largest newspapers confirmed their retirements and gathered additional information.

The eight papers participating in this report are the Akron Beacon Journal, The Blade of Toledo, the Canton Repository, the Cincinnati Enquirer, the Columbus Dispatch, the Dayton Daily News, The Plain Dealer of Cleveland and The Vindicator.

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