Volume 68, No. 2, General Election 2008
Double Dipping The System
By John Olekszyk,
AFT Michigan Retiree Network Chairperson
As the Public School Employees retirement Pension Fund is being battered by the recent Wall Street and Banking crisis, several other situations have developed which will also affect the long-range stability of the pension fund.
One, which I outlined in an article last year, was the increasing number of charter schoolteachers who do not pay into the system. As those numbers increase, the number of public school employees decrease and the revenue stream for the pension system declines.
A second factor is the increased use of "contract" substitutes in districts throughout the state. Seven districts in Macomb County alone use contracted subs who are now outside of the pension system that they contributed to in the past.
A third factor was highlighted by a recent article in the "Warren Weekly" (Sept. 10, 2008) which gave us a clear look at a growing and costly phenomenon within the school employee pension system.
Two associate superintendents in the Warren Consolidated School District "retired" from their respective positions and were immediately hired as consultants to work "much in the same capacity as they had been working with the district" before their retirement. One of the retiree's contract was for $225,000 and the other was for $277,000. Both of the contracts were for two years.
The district was pleased with this change because the district significantly lowered their costs in that they no longer had to pay their contribution to the retirement system and provide medical benefits for the two men. The retirement cost savings to the district is estimated at $80,000 and the health care costs savings would be in excess of $15,000 for the two positions over the life of the contracts.
Some people would applaud the district for its cost cutting efforts but there is another side to this scenario which does not reflect well on our two retirees and the pension system.
Although the district was able to save some money, the cost to the pension system could very well exceed $250,000 for that same period.Assuming that our two retirees had worked their minimum 30 years within the system and had reached the appropriate age, the first retiree would be eligible for a minimum pension of $50,500.00 per year while the second would be collecting $61,325.00 per year. In addition they would be getting full health benefits paid for by the pension system.
So our two new "retirees" who are receiving a MPSERS Pension are now making a total of at least $165.000 and $199,000 per year plus what other perks that would be part of their contract simply by "retiring" and becoming contract employees.
This type of situation has been happening on a regular basis in districts throughout the state and is expanding as the "cost" of administrators has increased. The overall cost to the pension system cannot be determined because we cannot identify the total number of "retired consultants" we have working in districts but it is estimated that it could well cost the pension system tens of millions of dollars as the practice expands.
This type of financial impact upon the pension system cannot be tolerated into the for seeable future. As the number of new employees entering the system continues to decline and the number of retirees continue to increase, the impact of this kind of double dipping will be significant. And we might suggest that it reflects badly on administrators (and others) who "scam" the system and the pension system in this way.
AFT Michigan, the MEA as well as other school retiree groups have expressed concern about this growing problem to ORS and to state legislators. Hopefully we will see some action and/or reaction to this type of abuse of our pension system. retirees should feel free to discuss this problem with their state representative or senator by letter or in person.