Comments from RH Jones

From RH Jones..... January 23, 2011
Comments on Fw: Bob asks, did the STRS Management do a "snow job" on the Board?

John Curry, Bob Buerkle and all:

Some additional points: (1) If the all the "new hires" are put into "Defined Contribution" (DC) type of pension funding, this would create a system that will not be able to pay current retiree's benefits; and, if the stock market goes down, the "new hires" will lose their pension security, as well. And further, (2) Ohio will lose the effect of this money from the Defined Benefits (DB) to smooth the economy in down times when a "shot in the arm" is needed. Therefore, the (3) the employer contribution would need to be raised even higher than if the employee had been on the DB. This is because there would be fewer employees paying into the funds to make up for the deficits. An increased employer contribution is inevitable due to the fact that good public schools make the state attractive for businesses and their private sector employees; but, also, are essential to Ohio's quality of life.

RHJones, retired Ohio teacher
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Comments on "pickups"

John Curry and all:

Of course the OEA should be concerned with teachers and administrators getting pick-ups packed in on their final average (for the computation of their STRS pension). The active OEA membership will be retired some day also. Will they want their pension system to be fully funded for themselves? I think so. But the OEA leaders understand this can be a personal gain for themselves. But it does come at the expense of the OEA and the 8 independent systems' membership if the "pick-ups" happen to come at the last 3-yr final average. I may be wrong, but if they had a pick-up over a long period of time it should be considered in their retirement compensation. Over time, they paid it into STRS, and deserve it. Many of them put in far more hours than the average teacher and function at a higher level and degree of responsibility and accountability. This should not be allowed; however, personally,

At times, when a teacher is in their last 3-yrs of employment, it may become necessary to take a teacher out of their classroom and put that teacher into a job that has a "pick-up" of the employer's contribution, but it should never be used as part of the final average salary. That hurts the STRS system.

My thinking,

RHJones

From John Curry, January 23, 2011
Subject: Hey school systems....wanna save some money and have all employees pay their fair share (of their retirement contributions)?

Then....quit picking up the pick up!

CHILLICOTHE -- Many public school administrators pay nothing toward their own pensions. But the perk doesn't stop there.

A lucrative deal allows 84 percent of Ohio superintendents to retire with a higher pension than they otherwise would have earned -- all at additional taxpayer expense, according to an analysis of public records by CentralOhio.com and the Chillicothe Gazette.

About half of Ohio districts also give this "pickup-on-the-pickup" benefit to other certified administrators, although it's far less common for other school employees -- only 29 of Ohio's 613 school districts statewide give the perk to teachers or classified staff.

The districts in Ross County don't offer pickup-on-the-pickup to teachers, but they still incur voluntary pension costs that come at additional taxpayer expense.

Huntington and Adena spend the most locally on the benefit because they extend the offer to other staff beyond just superintendents and treasurers.

Huntington spends close to $60,000 annually covering pickup-on-the-pickup for the superintendent, treasurer, three school principals and an administrative assistant.

Adena, meanwhile, spends just shy of $56,000, with the benefit extending to the superintendent, treasurer, special education coordinator and three school principals.

In pickup-on-the-pickup, school districts pay the employee share of the individuals' retirement contribution, and then consider it extra salary for pension purposes at a total cost of 26.4 percent of the employee's salary. Only 14 percent of that cost is mandatory. Another 10 percent covers what normally is the employee's contribution.

While practiced widely at many schools, this method has received virtually no attention on the state level. Many close to the public pension system process are unfamiliar with the practice, and apparently it has never been the focus of statewide legislation.

It is only offered in the pension funds for school employees. Ohio's other three retirement funds decline to participate.

HOW IT WORKS

Pickup-on-the-pickup does not put extra money in the workers' pocket immediately.

But for a school superintendent retiring on a $100,000 base salary, it means an extra $169,620 after retirement over 20 years because the pension is based on a reported salary of $110,000.

The extra cost to the employer amounts to 2.4 percent of the employee's annual salary, in addition to making the 10 percent employee contribution.

"It's kind of like a hidden increase in salary," said Bill Parkinson, treasurer of Strongsville City Schools. "You can go out and say, 'Hey, I didn't change the base salary.'"

Most schools offer the benefit to administrators because they're in competition for candidates, said Tom Ash, director of governmental development for the Buckeye Association of School Administrators. If a district were to roll this back, it would likely have to increase salary to either attract viable candidates or appease current administrators, Ash said.

When the Zane Trace school board separated its administrators' and teachers' contracts, board members surveyed local school districts and found that pickup-on-the-pickup was fairly standard in the area.

"We looked at it as a way to be competitive and also -- if there's not a salary increase -- as a way give additional compensation. As a board member, I make sure that we are competitive," Toni Brooks said.

Brooks said there was discussion about the benefit, but no disagreement.

For future administrators, Brooks would consider phasing in the benefit, starting at 5 percent and using increases as performance incentives, she said.

Union-Scioto Local Schools Treasurer John Rose first learned about pickup-on-the-pickup while auditing schools for the state auditor's office. Now he receives the benefit as part of his own contract.

Based on his experiences, he found the practice to be common statewide.

Putting together a competitive compensation package, Rose said, "is a fine balance, because you don't want to overpay, but you want to be able to remain competitive."

Rose and Adena Local Schools Treasurer Shaune Anders said the concept should be communicated and explained to the public.

"I just don't think that the public understands that we got it instead of a raise," she said.

Between January 1998 and January 2001, Anders did not receive an increase on her base salary, but pickup-on-the-pickup was phased into her contract.

"It was considered our raise," she said.

While a raise would have put extra money in Anders' pocket, she won't see the returns from pickup-on-the-pickup until she retires. She didn't mind at the time, she said, because until that point she hadn't received a pickup of any kind.

"That was still an amount that didn't come out of my paycheck," said Anders.

WHAT ABOUT THE TEACHERS?

Andy Jewell, a researcher for the Ohio Education Association, said most local bargaining units for teachers have not pursued a pickup-on-the-pickup. When they do propose it, it's just another item on the table in the collective bargaining process. The union has no official policy on the pickup-on-the-pickup, he said.

This summer, the Chillicothe Education Association negotiated a new contract with Chillicothe City Schools, securing a 1 percent base pay increase in the process.

One bargaining chip that wasn't on the table? Pickup-on-the-pickup.

"I don't know a lot of teachers who would look for something like that," said union president Wil Vickery. "I think we would rather see ourselves getting the money up front as opposed to anywhere from five to 35 years down the road."

Jeff Kurtzman, president of the Shelby City Schools' teachers union, said pickups are just one piece of the compensation puzzle. His teachers get half of their retirement contributions paid by the district, with teachers with more than 15 years also getting the pickup-on-the-pickup.

"To really understand what teachers are being paid, you have to look at the whole package," he said. "We may have pickup on the pickup, but another district may have a better health care plan."

HOW DID IT BEGIN?

The Ohio Supreme Court ruled in 1980 that once earned, sick time could not be taken away from public employees. In doing so, the ruling expanded what could be considered salary.

"It should be obvious that sick leave credits, just as other fringe benefits, are forms of compensation," the court's opinion stated.

Language officially made the ruling part of state law in 1986, opening the door for overtime, sick and vacation time, certain fees and commissions and disability leave to be considered salary for pension purposes.

Each of Ohio's five pension funds is governed by a different section of the Ohio Revised Code. They all have similar definitions of earnable salary. None mention pension pickups, but all give the pension funds the final authority on what can and cannot be counted toward one's final average salary.

The pension systems representing teachers and school employees then allowed pension pickups to be considered salary.

The systems representing state and municipal employees, and police and fire employees declined.

Mary Beth Foley, legal counsel for the Ohio Police and Fire Pension Fund, said that once an employee share is picked up, it becomes part of the employer share. The employer share does not count toward the worker's salary, she said.

When asked why the Public Employees Retirement System didn't allow it, spokeswoman Julie Graham-Price simply said: "It's a school system practice."

Pickup-on-the-pickup was permissible in the State Teachers Retirement System starting in 1982. That year, former executive director James Sublett asked former Attorney General William Brown for a legal opinion on the practice. Although he had ruled to the contrary in 1979, Brown reversed that opinion, citing the 1980 Supreme Court case.

"The rationale was that this was compensation," Ash said.

One of the first districts to allow a pickup, and one of the few that give a full pickup to teachers, is Osnaburg Local Schools in East Canton. The pickup came out of a change in the health insurance program in the 1980s, said Larry Morgan, currently the superintendent of the Stark County Educational Service Center. Teachers got the pickup-on-the-pickup as a trade-off for having to pay more for health care, Morgan said.

SOME DON'T WANT IT

Even with a majority of public school superintendents in Ohio receiving pickup-on-the-pickup, there are bound to be exceptions.

Pike County has two.

Cheryl Francis of Waverly Local Schools and Todd Burkitt of Scioto Valley Local Schools do not receive the benefit, and they said it doesn't bother them.

"I receive all the same benefits as other employees (in the district)," Francis said. "I'm comfortable with my compensation."

Burkitt said that when it comes to benefits, what's fair for a teacher or staff member is fair for him.

"With school funding up in the air and asking folks to do more with less, I'm not going to ask for something that other people don't get," he said.

Just as important to Francis, she said, is that taxpayers can easily understand how much she makes.

"If someone wants to look at my contract, it is what it is," she said.

Or as Burkitt called it, "easy math."

NO ATTENTION FROM THE STATE

It is highly unlikely that pickups will be addressed in any Ohio pension legislation soon. In fact, employee share pickups have never been the focus of statewide legislation.

While local employers are required to notify the pension funds of pickup plans, the involvement ends there.

"STRS Ohio's only focus is on making sure both member and employer contributions are correct and received on schedule," spokeswoman Laura Ecklar said in an e-mail.

Tim Barbour, spokesman for Ohio's School Employees Retirement System, agreed.

"We only need employers to provide notice as to whether there is a pickup so that we can account for the contributions," Barbour said in an e-mail.

State Rep. Dan Dodd, D-Hebron, is a member of the Ohio Retirement Study Council, which oversees the pension funds. He said lawmakers view the pickup-on-the-pickup as a local issue.

"We expect local districts to do things that are in their own best interest financially," he said.

Rep. Lynn Wachtmann, R-Napoleon, another member of the Ohio Retirement Study Council, is advocating for major cuts to public employee pension benefits. As for pickups? He thinks they should be outlawed.

Wachtmann said the Legislature has never addressed it because most lawmakers see it as a local control issue.

"It's long overdue that we looked at it," he said. "These issues could be solved by taxpayers refusing to vote for levies."

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AFT Article - A Union of Professionals - Let's Get the Facts Straight About Public Pensions

http://www.aft.org/newspubs/news/2011/011411pensions.cfm