From John Curry, June 20, 2010
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As such, they have three advantages — unavailable to teachers and other STRS members — that dramatically improve their financial prospects in retirement:
• Superintendents are much more likely to be rehired full time while collecting retirement benefits.
• As independent contractors, they can negotiate perks and fringe benefits worth tens of thousands of dollars.
• Their salaries — on which retirement benefits are based — average six figures.
School chiefs get better deal than teachers
Superintendents obtain advantages instructors don't to improve financial prospects in retirement
Ohio.com, Jun 20, 2010
By David Knox
Beacon Journal staff writer
One out of every four.
That's the number of superintendents drawing state pensions who have been rehired to work full time as chief executives of the state's more than 600 public school districts.
Surprised?
Tim Calfee isn't. He's one of them.
Calfee, superintendent of Ravenna schools since 2001, retired at age 57 on Friday, Aug. 1, 2008. The following Monday, he was back at his desk as head of the about 3,000-student district in Portage County.
He was rehired with a $2,273 raise, bringing his salary to $115,515.
Calfee could have waited to start collecting his pension, but the financial benefits offered by Ohio's State Teachers Retirement System (STRS) are almost impossible to turn down.
''I would be crazy if I hadn't have done it,'' he said.
That judgment is hard to dispute.
Calfee and other STRS members with 35 years of service are eligible for annual retirement benefits equal to nearly 90 percent of the average of their highest three years of earnings.
But Calfee and the other superintendents aren't like the more than 400,000 teachers and other education workers, both retired and employed, covered by STRS. They are executives managing multimillion-dollar enterprises employing hundreds and dwarfing most private businesses in their communities.
As such, they have three advantages — unavailable to teachers and other STRS members — that dramatically improve their financial prospects in retirement:
• Superintendents are much more likely to be rehired full time while collecting retirement benefits.
• As independent contractors, they can negotiate perks and fringe benefits worth tens of thousands of dollars.
• Their salaries — on which retirement benefits are based — average six figures.
Superintendents contend their lucrative contracts are commensurate with the responsibilities of a tough job.
But that claim doesn't answer one tough question: Given their higher pay and other advantages, is it fair that superintendents' retirement benefits are calculated according to the same formula used for rank-and-file teachers and other education workers who earn so much less?
Higher earnings
The average teacher was paid about $55,500 last year, according to state Department of Education records.
Superintendents of urban schools averaged more than twice that: $118,066. The statewide average for all superintendents was $101,400.
Those higher earnings directly translate into bigger monthly pension checks.
For example, when Calfee retired in 2008, he was eligible to receive $95,130 annually, based on his average earnings of $107,492 for the previous three years, multiplied by the ''income replacement factor'' of 88.5 percent.
To offset inflation, the benefit would be increased by 3 percent the following year and then by that same dollar amount each subsequent year.
The exact size of Calfee's monthly pension check isn't available because retirees can opt for a partial lump-sum payment, with reduced monthly benefits.
Calfee declined to explain the details of his pension package, saying, ''My personal finances are not public records.''
While Ohio law does make the records of individual retirees confidential, some statistics are available.
They show the vast majority of re-employed STRS retirees — more than 70 percent — work part time. They make less than $20,000 a year and receive pension benefits averaging $42,899.
''A lot of the people go back to be substitute teachers,'' said Laura Ecklar, spokesperson for STRS.
In contrast, superintendents and other high-paid employees pulling down $100,000 and more make up less than 2 percent of all rehired retirees. But their numbers exploded in the past decade, from 19 in 2000-01 to 299 in 2008-09. In addition to the biggest paychecks, this group also got the highest pension benefits: an average of $80,542 a year.
Fueling the upsurge was a 2000 change in Ohio law that spiked the retirement checks by 11.5 percent for those with 35 years of service.
The change was designed to encourage teachers to work five years beyond the minimum 30 years because of a feared teacher shortage. But STRS officials now say paying a premium to keep retirees on the job doesn't make sense when many cash-strapped districts are laying off teachers.
Teacher opportunities
Today's tight school budgets mean retired teachers have fewer opportunities to keep their jobs.
Ravenna, which has about 190 full-time teachers, is typical of districts across the state.
''A few years ago, I think we had five who were retired and rehired,'' Calfee said. ''Now we're down to three,'' two counselors and a music teacher.
Not only are they fewer in number, but they're also paid much less — about $36,000, or about half of what they earned before retiring.
''They're on one-year contracts and they're on the first-year of the salary schedule,'' Calfee said.
''We used to rehire them right into their same positions, same responsibility and for the same pay. Now the teachers union contract limits them to one-year contracts at reduced pay.''
The Ravenna teachers union pushed for the changes. It's a statewide trend.
''They didn't want retired teachers to hold onto their jobs in case there were cutbacks — people getting laid off,'' Calfee said.
Ravenna hasn't laid off teachers, but Calfee said some jobs — fewer than 10 — have been eliminated through attrition.
But unlike teachers, superintendents who retire are still in demand.
Liberal state
The 2000 change in the law made it easier for school districts to keep superintendents on the job by eliminating an 18-month waiting period to return to work after retiring.
Calfee had to stay off the job for a single day.
Other states don't make it so easy.
''In some states, you can't work in the system you're retired from,'' Calfee said. ''Some states absolutely ban it.
''Ohio may be the most liberal state in the country for their retired-rehire programs under STRS.''
STRS makes it easier for members to reach the minimum years of service needed to retire by allowing members to get credit for years worked outside the system. They do that by retroactively paying the full cost of contributions — both employee and employer shares — plus accrued interest for those years.
Calfee was able to reach 35 years of service at age 57 by ''buying'' two years he taught in the South Pacific island nation of Papua New Guinea and a year at a university in China.
Ohio law allows all STRS members ''to purchase service credit for certain types of past employment and leaves of absence.''
Superintendents have an added benefit available to few teachers: School districts ''pick up'' — that is, pay for — their 10 percent employee contribution to the pension fund, in addition to the employer's 14 percent share.
For a superintendent making $100,000 or more a year, that's a benefit worth more than $10,000.
Ravenna pays the pension contribution for all 22 administrators in the district, including principals and assistant principals. No teachers get that perk.
The pickup clause was included in Calfee's contract when Ravenna hired him in 2001. Since his retirement, the district pays the contributions to a second pension fund — a 401(k)-style annuity — that STRS provides re-employed retirees.
That has become the norm, according to a survey of 400 districts in the state's major urban and neighboring counties by the Ohio News Organization, a cooperative of the state's eight largest newspapers.
''Almost every superintendent has their employee's share picked up,'' Calfee said.
Ravenna also pays for Calfee's health insurance.
Joanne L. Newhauser, president of the Ravenna Board of Education, said covering his pension contribution and health care is the price school districts must pay to keep quality superintendents such as Calfee.
''I'm sure if he wanted to leave Ravenna, somebody would jump at the chance to hire him because of what he has accomplished in his nine years here,'' she said.
Newhauser credited Calfee with leading the successful 2006 campaign for a $16.1 million bond issue for a new high school and a 1.5-mill additional levy for permanent improvements.
''We had tried before to build a new high school,'' she said. ''He has done a good job, and we need to keep him.''
Providing superintendents generous pensions also can make economic sense as a form of deferred income, according to Anthony Webb, associate director of research at Boston College's Center for Retirement Research.
But that works only if superintendents ''pay for'' their better retirement benefits by agreeing to somewhat smaller salaries.
''By accepting lower earnings than they otherwise would have accepted in the absence of those pension benefits, nobody loses out,'' Webb said. ''If the taxpayer is getting an absolute wonderful superintendent at a rock-bottom salary, then I really don't care if he has a big pension.''
The Ohio News Organization survey found the median salary for retired superintendents was $103,000, compared to $110,000 for nonretired superintendents — about 6 percent less. But that finding might only reflect somewhat smaller raises for retirees. The survey found few superintendents who said they took a pay cut when rehired.
Furthermore, Webb said, the complexity of such tradeoffs in superintendents' contracts can hide their full price tag.
''The problem is that the true cost of the pension benefits is to some extent hidden from the taxpayer,'' he said.
Fringe benefits, such as cars or travel allowances, life insurance policies and additional annuities further obscure the bottom line, Webb said, as well as creating ''opportunities for all kinds of corruption.''
Calfee doesn't get fringe benefits beyond the pension contribution pickup and paid health coverage. But the father of two grown children and three grandchildren doesn't criticize superintendents who have bargained for additional perks.
As long as they play by the rules, he said.
The same goes for staying on the job after retirement.
''Retiring and being rehired is a legal, acceptable practice for STRS,'' he said. ''That's why a number of superintendents are choosing to do it.''
Question remains
But rules can be changed.
And the basic question of whether the same formula should be used to calculate the benefits of teachers and superintendents — despite the disparity in their incomes, fringe benefits and job opportunities — remains.
There's certainly precedent for doing it differently. Social Security, the retirement system most Americans pay into, doesn't treat all workers the same.
The percentage of income Social Security replaces varies widely, from as much as 60 percent for low-income wage earners to less than 30 percent for those with big paychecks, according to government figures. The average is about 40 percent.
Social Security — to which STRS members make no payments and receive no benefits — increasingly has become the sole source of income for retired Americans.
While the government stresses that Social Security isn't intended to be the only source of retirement income, the latest statistics show more than half of all workers don't have private pensions.
Calfee recognizes how much better his retirement package is.
How would he answer someone who complained, ''I don't have anything near that good''?
Eight seconds passed in silence.
''I don't know,'' he said. ''I'm blessed to be in a position where this retirement and rehire was available.
''That's all I can say.
