The Beacon Journal addresses pension reform issues

From John Curry, June 23, 2010

"There is no need to abandon the defined-benefit approach, which at this scale can be operated more efficiently and effectively. Public employees should be alert to the frustrations in the private sector, many workers having to give up such pensions, their 401(k) plans hit hard by the Wall Street calamity. What private workers should keep in mind is that public employees do not participate in Social Security."

http://www.ohio.com/editorial/opinions/96859914.html

Double trouble

State lawmakers should end the practice of 'double dipping' in Ohio. Then, they should really repair the state's pension systems

Akron Beacon Journal (editorial), June 22, 2010

Here, in Ohio, the pay of school superintendents fits into that classic frame: The scandal isn't what is illegal. Rather, the trouble stems from conduct fully compliant with the law. Superintendents made the point in the series of articles published the past two days by the state's eight largest newspapers examining the Ohio's publicly funded pension systems. School officials stressed that the law allows superintendents to retire, start collecting their pension benefits and then return to running a school district — often with a larger pay package.

They're correct. All of it is legal.

And disturbing.

The concern isn't so much the money, at least within the larger context of the state's ailing pension programs. This practice of ''double dipping'' amounts to a tiny fraction of the overall financial problem. The difficulty is the perception. Most Ohioans do not reside in this realm, where you retire at nearly full pay and then jump back into the job and receive something akin to your same salary. The reporting revealed that once retired, superintendents return, in effect, as independent contractors, able to negotiate additional items, such as car allowances, travel money and overtime for working holidays.

Superintendents aren't alone. Other state employees double dip. The 27 percent of superintendents in the state's 614 school districts who collect both pension and pay checks do provide a glaring example. Proponents argue that a limited pool of talent makes the deals necessary. They ask: Why not hold onto proven, experienced performers? The response comes in the form of a question: Why not groom more effectively emerging leaders, even in an era of squeezing management layers to curb expenses?

This version of double dipping invites morale problems, beyond the frustration of managers at lower levels. Teachers aren't in position to strike such deals. Most important, the public may have reason to seethe. Yes, some superintendents are popular. Yet what are voters to think when a levy request appears on the ballot as the superintendent collects a taxpayer-driven pension, salary and perks?

All of this smacks of the wayward thinking about CEO compensation seeping into the public sector — the indispensable man or woman paid what the market supposedly requires.

The late Thomas Moyer rightly warned as chief justice of the Ohio Supreme Court that judges should resist double dipping or risk an erosion of public confidence in the courts. State lawmakers would do well to end the opportunity for double dipping, or narrow substantially the window. They should recall the Brookings Institution finding that the state ranks ninth in money poured into school administration and 47th in dollars directed to the classroom.

Again, lawmakers should keep the practice in perspective. Eliminate double dipping, and the state's five pension systems still will face severe financial pressure. In this case, Ohio isn't alone. Other states face even greater challenges. Many already have acted. Illinois has raised its retirement to age 67 and capped public pensions at $106,800 a year. Some states now require employees to work more years to gain pensions. New Jersey will not provide pension credit unless an employee works at least 32 hours per week. Colorado trimmed its annual pension increase from 3.5 percent to 2 percent.

In Ohio, the pension systems have proposed adjustments, three looking to increase the contributions from employers and employees, or taxpayers, ultimately. The Ohio Public Employees Retirement System has not proposed a contribution increase. In other ways, it has outlined an approach followed, more or less, by the other systems. The smart path involves small yet significant changes that steadily accumulate savings over the years. It makes sense, among other things, to raise the retirement age, alter the benefit formula, reset the cost-of-living adjustment and calculate based on the five highest calendar years of earning (instead of the current three).

What shouldn't be missed is the expensive presence of health-care coverage in these systems. The hope is, health-care reform will yield overall savings. Yet that hardly eases the tough choices facing the Statehouse and the pension programs. Simply, control these costs, or face insolvency.

The remedy can be achieved steadily and gradually. There is no need to abandon the defined-benefit approach, which at this scale can be operated more efficiently and effectively. Public employees should be alert to the frustrations in the private sector, many workers having to give up such pensions, their 401(k) plans hit hard by the Wall Street calamity. What private workers should keep in mind is that public employees do not participate in Social Security.

Put another way, don't judge public pensions as a whole by the presence of double-dippers. Insist on repairs to the excesses, and adjustments to hard realities, ensuring solvency over time.