CLT
UPDATE
Sunday, May 1, 2005
"Hit a pothole, thank a teacher"
The growing cost of a temporary pay raise for veteran
teachers has so alarmed officials at the state's biggest pension fund
that they have blocked payments to teachers in 18 school districts since
fall.
The pension fund, which oversees $17.9 billion for teacher retirements,
says the teachers in scores of districts statewide, 53 in Greater Boston
alone, have used these temporary raises to boost retirement payouts....
The additional funds can in some cases amount to $100,000 or more in
extra pension payments over a lifetime, depending on the specific plan,
the size of the raise, and a person's longevity.
With 73,500 teachers and other education employees in the state, the
impact on state-funded pensions could be felt for years to come,
according to fund officials.
The Massachusetts Teachers Association has launched legal appeals to
prevent the board from taking away this pension boost....
Pensions are funded by teachers' contributions, investments by the
pension plan, and state taxpayers. While taxpayers shoulder part of the
burden, no one specifically represents their interests when unions and
school committees negotiate a contract.
"It's manipulation," Dr. James Picone, superintendent of Burlington's
schools, said of the temporary pay increases. "I'd call it unjust
enrichment."
The Boston Globe
Sunday, May 1, 2005
Pension fund balks at raise for teachers
State panel blocks deal that boosts teacher pensions
Imagine being able to give yourself a raise.
For three years running.
And then have it count toward your pension plan.
Just because you could.
That's what some long-serving teachers and administrators in Brookline and
Somerville are doing under a little-known, but widely used, union perk....
But with teachers in at least 50 Greater Boston communities grabbing the benefit
since the late 1990s and many of them stitching the extra dollars onto their
state-subsidized pensions, the Commonwealth has been left -- to paraphrase a
popular song -- trying to catch the deluge in a paper cup....
For fiscal watchdogs, asking state taxpayers to pay for bonuses they were not a
party to at the local negotiating table is like sticking Joe Schmoe with a bill
for a plasma TV that he didn't order.
"Can we all do that -- party A and party B agree that party C will pay for
whatever we want?" says Barbara Anderson, executive director of Citizens for Limited Taxation....
Both school and union leaders note that the teachers pay into their own
retirement fund, so the Retirement Board shouldn't have a squawk.
But the Retirement Board says the teachers pension fund is not self-sufficient.
Indeed, according to a retirement official, the state this year has contributed
$682 million to the teachers fund.
The Boston Globe - City Weekly
Sunday, May 1, 2005
Teachers' perks
Costs rise for little-known benefit
The Massachusetts Federation of Teachers, which represents
the Peabody union, is following the lead of the Massachusetts Teachers
Association, which represents teachers in other denied communities, and plans to
file an appeal to the state Contributory Retirement Appeal Board....
Statewide, teachers are fighting the crackdown on Lexington Plan-style benefits.
Catherine A. Boudreau, president of the Massachusetts Teachers Association,
defended such plans as a legitimate benefit that was declared legal by the
Massachusetts Appeals Court in 1997 ...
The Boston Globe - North
Sunday, May 1, 2005
Teacher bonuses at issue
Battle brewing over timing of incentives
In the short term, [Billerica High School assistant principal
Collata McCarthy] stands to lose a few thousand dollars. But should she live to
be as old as her father -- who is now 89 -- the alternative longevity benefit
will compensate her more than adequately. It will amount to more than $220,000
extra on her pension....
"I'm essentially betting I'm going to be alive in five years," McCarthy said,
figuring how long it will take her to earn back the money she's giving up in
salary....
It's a win-win deal for Billerica and McCarthy, but state taxpayers, who had no
representative in the room when the package was negotiated, are picking up the
tab, including people from towns and cities who don't give such a deal to their
public employees. The idea of giving yourself a raise -- and having it pay off
the rest of your life in pension form -- may seem foreign to people who work
outside government, where pensions are declining, or more likely,
disappearing....
"It is a classic Massachusetts hidden benefit," said Michael J. Widmer,
president of the Massachusetts Taxpayers Foundation. "From a policy point of
view, it is troubling that teachers, or any public employees, can boost their
pensions in this fashion. The long-term costs are very serious."
The Boston Globe - Northwest
Sunday, May 1, 2005
Bonuses boost teacher pensions
Retirement board challenges practices
The benefit could cause financial problems for the pension
system in the future, if it is not brought under control, according to James H.
Salvie, general counsel for the Massachusetts Teachers' Retirement Board. A
teacher collecting an extra $6,700 a year in pension payments could receive a
bonus of $155,000 over a retirement lasting 23 years, he said, estimating how
long someone will live after retiring at age 57....
Next year, the state is expected to pump $682 million into the pension fund,
which works out to a $250 subsidy for retired teachers from every Massachusetts
taxpayer, according to state figures.
The Boston Globe - South
Sunday, May 1, 2005
State balks at boosted pensions
Retiring teachers face cut in negotiated benefit
Chip Ford's CLT Commentary
The CLT cash register went ka-ching this morning on
the "Where would
you cut ?!?" page on our website. The Boston Globe journalists
wrote excellent exposés with regional supplements
for the local impact. Now if the Boston Globe's out-of-touch
editorial board elites would only read their own newspaper they
might tumble down out of their ivy tower and rethink their fixation on
silly
tax-and-spend editorials.
And maybe Michael Widmer of the
so-called Massachusetts Taxpayers Foundation -- again troubled, shocked
at the latest waste and profligacy exposed -- might get a clue, finally
recognize that so long as our money is in the government's hands it will
be squandered.
How soon before we hear from the teachers unions
that this newly-exposed rip-off of taxpayers, $682 million a year going
straight into teachers' pockets, is only ... "for the children"?
Only last Sunday, in the CLT Update
"The
secret ticking time bomb: 'public service' pensions, health insurance
giveaways," I wrote:
As if the impending crash of Social Security and
Medicare isn't overwhelming enough for taxpayers, now comes news of
perhaps an even bigger threat to our financial survival -- and
especially that of younger workers and taxpayers and those not yet
born. The "public service" gravy train is soon to utterly bury us,
especially the younger generations coming up who'll have to pay the
staggering bill for government first and foremost taking care of
itself as usual.
This was in response primarily to
Fortune magazine's timely warning about overly-generous public
employee health insurance giveaways:
There is a time bomb quietly ticking away in the
netherlands of state and local government, and it is set to blow up in
the next few years. When it detonates, the damage will easily run into
the hundreds of billions of dollars—forcing tax hikes and public
service cuts that will affect the lives of millions of Americans
unless dramatic action is taken soon. Why? Because, unlike the private
sector, the majority of government employers — 48 out of 50 states and
more than half of all municipalities — still provide health-care
benefits for their workers after retirement.
On Mar. 7, the Boston Globe ["State
sees burden in Bush funding idea; President mulls tax on public workers"]
reported:
"There are 106 public retirement plans in
Massachusetts. Most of the public school teachers in Massachusetts,
for example, contribute to a pension plan that pays an average annual
benefit of about $27,000. State workers get an average pension payment
of $20,513. By comparison, Social Security pays an annual average
benefit of $11,400.... The state is now helping to make up for those
lower contributions, with much of the $1.2 billion from general
revenues going annually to support the fund that pays benefits to
teachers and most state workers."
Now we know that over half of that $1.2 BILLION
extracted from us taxpayers annually for public employees' platinum
parachutes -- $682 million of it every year -- goes directly just
to "retired" teachers, much of it to cover this newest scam.
You've seen the Education-Industrial Complex's
bumper-sticker, "You think education's expensive, try ignorance"? Our
ignorance for too long of this scam has certainly been expensive,
but the "education" alternative is to just keep paying more to the
rapacious teachers unions.
Then there's the one, "If you can read this, thank a
teacher." There are probably a lot of fat and happy retirees or
near-retired teachers out there wishing that we couldn't read
this exposé of
their gravy train.
Just Friday as Barbara and I drove through Salem bouncing
from one pothole into another, we were discussing how the state, cities
and towns weren't maintaining their roadways very well if at all any
more. All we hear is that money's too tight, so many traditional basic
services like decent streets and roads just "aren't affordable." I suggested that we need a
bumper-stickers of our own that reads: "Hit a pothole, thank a teacher!"
 |
|
Chip Ford |
The Boston Globe
Sunday, May 1, 2005
Pension fund balks at raise for teachers
State panel blocks deal that boosts teacher pensions
By Matt Carroll, Globe Staff
The growing cost of a temporary pay raise for veteran teachers has so
alarmed officials at the state's biggest pension fund that they have
blocked payments to teachers in 18 school districts since fall.
The pension fund, which oversees $17.9 billion for teacher retirements,
says the teachers in scores of districts statewide, 53 in Greater Boston
alone, have used these temporary raises to boost retirement payouts.
Officials of the fund -- the Massachusetts Teachers' Retirement Board,
which represents 17 of the 18 school districts -- say they are
scrambling to determine how many districts have negotiated these
increases, how many teachers have taken them, and what the cost will be
to the pension fund and to state taxpayers, who heavily subsidize the
system.
"We're seeing a proliferation of these plans and a noticeable increase
in the amounts at issue," said James H. Salvie, general counsel of the
fund, which has backed legislation to halt the practice.
The pay raise -- often called the Lexington Plan, because that's where
the raises were first used as a way to retain veteran instructors --
allows teachers to take annual raises for three straight years.
Because pensions are based on salaries over the three highest-paying
consecutive years of a career, a Lexington Plan raise granted during
those years boosts a teacher's pension payout for life.
The additional funds can in some cases amount to $100,000 or more in
extra pension payments over a lifetime, depending on the specific plan,
the size of the raise, and a person's longevity.
With 73,500 teachers and other education employees in the state, the
impact on state-funded pensions could be felt for years to come,
according to fund officials.
The Massachusetts Teachers Association has launched legal appeals to
prevent the board from taking away this pension boost.
It argues that the plan is a negotiated benefit between teachers and
school committees.
Pensions are funded by teachers' contributions, investments by the
pension plan, and state taxpayers. While taxpayers shoulder part of the
burden, no one specifically represents their interests when unions and
school committees negotiate a contract.
"It's manipulation," Dr. James Picone, superintendent of Burlington's
schools, said of the temporary pay increases. "I'd call it unjust
enrichment." Burlington teachers do not have the benefit.
The benefit has been established in many school contracts since the late
1990s. Most of the annual raises available to veteran teachers range
from $3,000 to $5,000.
Some teachers take them in midcareer, to pay for their children's
college tuitions, for instance.
But many take them at the end of their careers, as in East Bridgewater,
where 21 of 24 teachers took the raise just before they retired.
East Bridgewater's was one of the 18 districts in which the pension
board has refused the higher pension payments as a result of the
Lexington Plan.
Fund officials, struggling to track the number of school districts that
have the plan, can only project how much the benefit contributes to an
individual's pension, said Joan Schloss, the fund's executive director.
An East Bridgewater teacher using the plan, for instance, could increase
his or her pension by about $6,700 annually. If a teacher lives for 23
years after retiring at age 57, that translates into an extra $155,000.
In Billerica, school administrators can receive up to $7,600, which
amounts to about $174,000 over an average lifetime, Schloss said.
The pension board's decision to deny the higher payouts will mean $6,700
less a year to George McCabe, 58, an East Bridgewater history teacher
who is retiring in June. McCabe said he might have to get a part-time
teaching job at a private school to make up for the lost income.
McCabe praised the plan, saying it has helped to retain teachers in a
demanding profession.
"I'm of the school that maybe teachers do need something nice once in
awhile if you are trying to attract the best people," said McCabe, a
35-year teacher.
Catherine A. Boudreau, president of the Massachusetts Teachers
Association, said a 1997 court decision declared the benefit legal.
(Pension officials say they are rejecting only those benefit plans that
do not conform to the court ruling). Boudreau pointed out that teachers
have given up other benefits, such as pay for unused sick days, to win
the provision.
The pension fund refusal puts teachers in a bind, since they gave up
something for a benefit they are not fully receiving, she said.
State teachers, who receive an average annual pension of $28,000,
contribute 5 to 11 percent of their salary to fund their pension and do
not receive Social Security. Boudreau said the plan was not designed
specifically as a pension benefit, but as a reward for longevity.
Pension officials said the benefit could save money for local school
committees, because it's often cheaper for school districts to pay for
the longevity plan benefits than for costly unused sick days at
retirement.
For instance, Marshfield can pay up to $13,500 in plan benefits over
three years, while payments for a teacher's unused sick days ranged from
$20,000 to $25,000, said Superintendent Thomas J. Kelley. A Globe survey
last year found that communities in Greater Boston paid out $29.4
million for unused sick time in 2003.
Eric A. Hanushek, a specialist in education finance and a senior fellow
at the Hoover Institution at Stanford University, said local governments
that shift pension costs to the state violate the spirit of the pension
laws. "People find ways to game the rules and then work to their
advantage," Hanushek said. "The basic problem you're seeing here is that
local districts are not responsible for all the costs of running their
district.... People are very imaginative about taking advantage of that
and putting the cost on someone else."
'Lexington plan' school districts
These Greater Boston school districts have some form of the Lexington
Plan, a popular teacher benefit that gives teachers a longevity raise
for three straight years. The plan is under attack by the teachers'
pension fund, which says it can sometimes boost pensions excessively.
School districts:
Abington, Avon, Berlin-Boylston, Billerica, Blue Hills Regional
Technical School, Braintree, Bridgewater-Raynham, Brockton, Brookline,
Carver, Cohasset, Concord, Dedham, Dover-Sherborn, Duxbury, East
Bridgewater, Easton, Foxborough, Franklin, Freetown-Lakeville, Hingham,
Holbrook, King Phillip Regional School District, Lexington, Lincoln,
Mansfield, Marshfield, Mendon-Upton, Milford, Millis, Milton, Needham,
Newton, Peabody, Plainville, Plymouth, Quincy, Salem, Scituate, Silver
Lake, Somerville, Stoughton, Tewksbury, Tri-County Regional Vocational
Technical High School, Tyngsborough, Walpole, West Bridgewater,
Westborough, Weston, Westwood, Whitman-Hanson, Winchester, Wrentham.
The 18 school districts statewide in which the benefit has been denied
by the pension board:
Abington, Acushnet, Adams-Cheshire Regional, Ashburnham-Westminster
Regional, Billerica administrators, East Bridgewater, Holbrook,
Marshfield, Needham, North Brookfield, Northbridge, Northern Berkshire
Vocational Technical, Peabody, Quincy, Somerset, South Hadley,
Stoughton, Westborough.
Douglas Belkin of the Globe staff contributed to this report.
Return to top
The Boston Globe - City Weekly
Sunday, May 1, 2005
Teachers' perks
Costs rise for little-known benefit
By Ric Kahn, Globe Staff
Imagine being able to give yourself a raise.
For three years running.
And then have it count toward your pension plan.
Just because you could.
That's what some long-serving teachers and administrators in Brookline
and Somerville are doing under a little-known, but widely used, union
perk. Not so in Boston or Cambridge, however.
It's an easy sell to the local citizenry, as the annual net cost to the
municipality can be piddling -- $850 per teacher and midlevel
administrator in Brookline, or about $16,000 this year.
But with teachers in at least 50 Greater Boston communities grabbing the
benefit since the late 1990s and many of them stitching the extra
dollars onto their state-subsidized pensions, the Commonwealth has been
left -- to paraphrase a popular song -- trying to catch the deluge in a
paper cup.
Now, after projecting that some bennies could put as much as an extra
$155,000 into a veteran teacher's wallet during the retirement years,
officials with the Massachusetts Teachers' Retirement Board have filed
legislation to negate such temporary salary boosts.
For fiscal watchdogs, asking state taxpayers to pay for bonuses they
were not a party to at the local negotiating table is like sticking Joe
Schmoe with a bill for a plasma TV that he didn't order.
"Can we all do that -- party A and party B agree that party C will pay
for whatever we want?" says Barbara Anderson, executive director
of Citizens for Limited Taxation.
You can if you sign up for the Lexington Plan, which sounds like a trip
to the northwestern suburb to watch a Revolutionary War reenactment but
is really a longevity payment for educators.
It began in the early '90s as a supplemental cash bonanza for a small
group of longtime Lexington teachers. But since the move was upheld by
the Massachusetts Court of Appeals in 1997, the provision has spread
rapidly to other cities and towns.
With municipal budgets battered by cutbacks, both unions and school
officials have seen the light of incorporating Lexington Plan benefits
into teacher contracts.
Although they may have to give up other benefits, like cashing in their
unused sick days, teachers who choose the Lexington way during their
last three years of service are able to bump up their pensions, which
can be as much as 80 percent of their average salaries during their
three highest consecutive years of pay.
"It's a fair part of someone's lifetime earnings, it was negotiated,"
says Philip Katz, head of the Brookline Educators Association. "When it
comes to money, teachers are underpaid."
For school officials, it allows them to broker labor peace by showering
long-lasting gifts on teachers who forgo short-term pay increases,
without raising the dander of local taxpayers. They can also usher
younger teachers into the newly opened slots, sometimes at about half
the $60,000 salaries earned by many retiring vets.
In an urban system like Somerville, which estimates it will spend
$136,500 on Lexington Plan salary increases to 60 teachers and 10
adminstrators this year, officials use longevity rewards that expand
beyond the simple cost of $5,500 for teachers over three years to help
recruit new staff away from communities that pay higher wages.
"How do I attract teachers into our system -- the same bodies as other
systems?" says Tony Caliri, human resources manager for the Somerville
School Department. "I can give them new buildings ... technology." And
this: "Longevity -- it's the gift that keeps on giving."
Both school and union leaders note that the teachers pay into their own
retirement fund, so the Retirement Board shouldn't have a squawk.
But the Retirement Board says the teachers pension fund is not
self-sufficient. Indeed, according to a retirement official, the state
this year has contributed $682 million to the teachers fund, though the
money was not specifically earmarked for Lexington Plan payouts.
"It is a classic Massachusetts hidden benefit," says Michael Widmer,
president of the Massachusetts Taxpayers Foundation. "And it's not even
the municipalities that have to pay, it's the state."
But longtime Brookline School Committee member Marcia Heist, who is
leaving the board this month, defends the Lexington Plan calculus, even
if state taxpayers have to share the burden. After all, she says,
Brookline taxpayer money is part of the overall pot that helps sustain
more needy cities and towns.
"That's what a democracy is all about," she says.
Matt Carroll of the Globe staff contributed to this report.
Return to top
The Boston Globe - North
Sunday, May 1, 2005
Teacher bonuses at issue
Battle brewing over timing of incentives
By Alyson St. Amand, Globe Correspondent
Peabody teachers agreed to a contract last year that included a new
incentive: a three-year salary bonus of several thousand dollars for
longtime employees.
While the benefit could be taken at different times during their tenure,
most teachers planned to tap into it during their last years on the job
so that the wage increase would also end up boosting their pension.
It seemed to be a perfect benefit, one that was a minimal expense for
Peabody but offered a significant retirement benefit for teachers.
Dozens of school districts in Greater Boston, including Salem, already
had a similar plan in place, and several other districts north of
Boston, including Lynn and Newburyport, offer other types of bonus plans
to their teachers.
But the Massachusetts Teachers' Retirement Board, which oversees the
state pension fund for teachers, recently rejected the measure.
The pensions are calculated based on up to 80 percent of the average of
the three highest years of a teacher's salary. Such pensions, common
among government employees, are increasingly rare in the private sector.
The board has said it will no longer allow Peabody and 17 other
communities that offer such bonuses for teachers to count that money
toward pensions. That decision has prompted appeals from unions hoping
to keep the benefit alive. The Massachusetts Federation of Teachers,
which represents the Peabody union, is following the lead of the
Massachusetts Teachers Association, which represents teachers in other
denied communities, and plans to file an appeal to the state
Contributory Retirement Appeal Board.
Teachers like the plan because it can boost their pension if used during
the last three years on the job. A teacher's pension is a percentage of
the average of their last three years of salary. In negotiations,
teachers often gave up raises and such benefits as reimbursement for
unused sick time.
Some teachers take the raise in midcareer to pay for their children's
college tuitions, for instance. In that case, the raise does not affect
their pension.
"The way it was negotiated was to recognize the service and dedication
of employees and at the same time, save the city money," said Peabody
teachers union president Edward Sapienza, of what he called
"supplemental longevity."
The benefit in question, which is sometimes called "enhanced longevity"
or the "Lexington Plan" named for the town where it was conceived,
typically gives tenured teachers a three-year raise. The payment is
usually $3,000 for each of the three years, an expense covered by the
municipality. In Peabody, the payments range from $2,000 to $4,000,
depending on years of experience.
Retirement board officials said the increasing number of Lexington
Plan-style benefits among teachers unions and the number of teachers
taking that money at the end of their careers are raising concerns about
what the financial impact will be on the teachers' public pension fund,
which is the largest pension fund in the state with $17.9 billion in
assets.
Teachers hold their ground
Statewide, teachers are fighting the crackdown on Lexington Plan-style
benefits.
Catherine A. Boudreau, president of the Massachusetts Teachers
Association, defended such plans as a legitimate benefit that was
declared legal by the Massachusetts Appeals Court in 1997, when a
Lexington math teacher successfully won a case against the retirement
board to count his salary bonus towards his pension.
For now, the 1997 case protects districts with replicas of the Lexington
Plan.
But the retirement board is targeting school systems, including
Peabody's, that have slightly altered versions of the plan. Peabody's
plan, for instance, offers different bonuses depending on years of
experience as opposed to the Lexington Plan's flat $3,000 payment.
Boudreau maintains that Lexington plans were not designed specifically
to benefit retirement. The benefits are supposed to help retain
employees, she said. Boudreau said she knew of many instances where
teachers opted to use the incentive midcareer.
But administrators in Salem, which uses a replica of the Lexington Plan,
said the benefit appears to be used specifically for retirement.
Salem Superintendent Herbert Levine said he did not know of any teachers
in his district who took the three-year pay increase midcareer. Teachers
take the money at the end of their careers to increase their pensions,
he said.
Levine said salaries aren't enough to entice and retain teachers. A
bonus is necessary to successfully negotiate a contract.
Like many communities, Salem adopted the Lexington plan to get rid of a
sick-time buyback provision for teachers, which allowed teachers to be
paid for their unused sick time. Levine said he prefers the Lexington
Plan benefit to the sick-time benefit because it shifts the financial
burden from the community to the state.
"My job is to get as much and as many resources for my school district
as possible," Levine said.
While the retirement board has targeted these three-year plans, they
have not touched other, more common longevity plans.
Longevity bonus common
North of Boston, only Salem and Peabody have a version of the Lexington
Plan. Most of the region's other communities have so-called basic
longevity plans, which give teachers a bonus on top of their salaries
for the duration of their careers once they hit a certain level of
experience. These plans are not targeted by the retirement board because
the payments are made every year over a longer period of time, according
to administrators.
For instance, in Newburyport, teachers who have been in the district for
15 years receive an annual $2,200 pad to their salary. After 20 years,
the number goes up to $3,400. The maximum bonus is $5,800 annually after
30 years.
Lynn has a similar plan. While the city's municipal workers are
compensated for their unused sick time, a benefit that cost taxpayers
more than $1 million in 2003, educators are offered a longevity benefit.
The annual bonuses, which range from $2,227 for teachers with five years
of experience to $9,465 for teachers with 30 years of experience, are,
like Newburyport's benefits, counted as salary by the state when
calculating pensions.
Despite the controversy surrounding the Lexington Plan, some communities
are still considering using the benefit in contract negotiations.
Pentucket Regional Superintendent John MacLean, whose teachers receive a
sick-time buyback benefit, called the Lexington Plan "intriguing."
Revere Superintendent Paul Dakin said the Lexington Plan was brought up
in negotiations last year and the district is looking into the benefit
for the next teacher's contract, which begins for the 2007-2008 school
year. The school system does offer sick-time buybacks and already has a
basic longevity benefit for teachers, but these longevity bonuses are
lower than Newburyport's and Lynn's, and reach a maximum of $5,300 after
40 years.
Dakin said the Lexington Plan may be a much-needed incentive to retain
teachers.
"We lose good people all the time ... because of the lure of other
possibilities out there," Dakin said. "We've never had to look so hard
for math and science teachers before."
Newburyport assistant superintendent Deirdre Farrell said some extra
incentive is needed to keep teachers.
"The effort here is to retain teachers," she said of Newburyport's
longevity bonus plan. "Part of the ability to retain good teachers is
through longevity [bonuses]. It's become standard."
Matt Carroll of the Globe staff contributed to this report.
Return to top
The Boston Globe - Northwest
Sunday, May 1, 2005
Bonuses boost teacher pensions
Retirement board challenges practices
By and Matt Carroll, Globe Staff
Billerica High School assistant principal Collata McCarthy's parents are
both in their 80s and going strong, so when McCarthy, 60, started
thinking about structuring her finances for retirement, she wanted to
plan for the very long term.
Her solution? She applied for something Billerica schools call
"alternative longevity," which the administrators association hashed out
with the town in 2003. The plan allows employees such as McCarthy to
forgo a payout for sick time that she has not used over her career --
which in McCarthy's case amounted to more than $20,000 -- as well as a
mid-career pay hike. In return, McCarthy will receive a $9,500 per year
raise for the last three years of her career.
In the short term, McCarthy stands to lose a few thousand dollars. But
should she live to be as old as her father -- who is now 89 -- the
alternative longevity benefit will compensate her more than adequately.
It will amount to more than $220,000 extra on her pension.
The fine print in the deal works like this: Teachers pensions are based
on the average of the last three years of salary. By inflating her pay
$9,500 a year, McCarthy will add 80 percent of that raise, $7,600, to
her regular pension for the rest of her life.
"I'm essentially betting I'm going to be alive in five years," McCarthy
said, figuring how long it will take her to earn back the money she's
giving up in salary. "Anybody who takes this is betting that we're going
to live long enough that this is going to make a difference in our
pension."
All taxpayers bear cost
The catch for Massachusetts taxpayers is that the additional
quarter-million dollars McCarthy could collect over her lifetime won't
be paid for by Billerica taxpayers -- but by the Massachusetts Teachers
Pensions Fund, which is heavily subsidized by state taxpayers. In 2006,
the state will pump $682 million into the pension fund -- or $250 from
every taxpayer in the state, according to the state's Public Employee
Retirement Administration Commission.
It's a win-win deal for Billerica and McCarthy, but state taxpayers, who
had no representative in the room when the package was negotiated, are
picking up the tab, including people from towns and cities who don't
give such a deal to their public employees. The idea of giving yourself
a raise -- and having it pay off the rest of your life in pension form
-- may seem foreign to people who work outside government, where
pensions are declining, or more likely, disappearing.
"It's manipulation," said James Picone, superintendent of the Burlington
Schools, where the alternative longevity perk doesn't exist. "I'd call
it unjust enrichment."
5 area towns offer benefit
The practice is the latest wrinkle in a school-funding crisis that is
spreading across the state. Versions of Billerica's alternative
longevity plan are in five other communities covered by Globe Northwest
-- Tewksbury, Concord, Lexington, Tyngsborough, and Winchester. There
are 53 such plans in place throughout Greater Boston, according to a
Globe survey.
All are versions of a retirement plan that sprang out of the Lexington
School District in 1992. The subsequent onslaught of pension inflation
has prompted the Massachusetts Teachers' Retirement Board to raise
concerns that the cost and increasing number of such benefits among
teachers unions are spiralling out of control.
"It is a classic Massachusetts hidden benefit," said Michael J. Widmer,
president of the Massachusetts Taxpayers Foundation. "From a policy
point of view, it is troubling that teachers, or any public employees,
can boost their pensions in this fashion. The long-term costs are very
serious."
Union defends practice
Catherine A. Boudreau, president of the Massachusetts Teachers
Association, defends the Lexington plan as a benefit that was declared
legal by the courts in 1997.
Local teachers associations have bargained in good faith for this
benefit, she said, in some cases giving up pay raises or sick-time
buyback benefits, another process foreign to private-sector employees,
in which public employees can "bank" sick time over years, even decades.
(A Globe investigation last year found that local governments in Greater
Boston paid out $29.4 million in sick-time buybacks to local employees
in fiscal 2003.) Boudreau said the Lexington plan was not designed to be
a retirement benefit, but a longevity benefit. The money is given, she
said, to help retain employees. She also pointed out that public-sector
employees don't collect Social Security benefits, so this is their only
pension.
"For me, I hope it will amount to a car payment," said McCarthy, the
Billerica school administrator. "In 20 years, with inflation, it
probably won't even be that."
Legal fight looming
The Massachusetts Teachers Association, the state's largest teachers
union, with 100,000 members, including 65,000 teachers, is gearing up
for a legal fight with the teachers pension fund. About a half-dozen
school systems have had plans disqualified by the pension board.
Billerica is among them.
The Teachers Retirement Board will reject a plan if it believes, in
effect, it is acting as a retirement plan, that is, a vast majority of
the teachers take the bonuses in the last three years of their careers,
said James Salvie, general counsel to the board.
"We're not going to treat it as regular compensation," said Salvie. "If
we think there is a direct link between the provision and retirement,
then we think it will be appropriate to deny."
"They can say whatever they want, they've been taking our money,"
McCarthy said, when told the board was planning to deny the benefit. "We
researched this before we did it and I can't see how they're going to
deny us and not deny all the others."
Tom Hourihan, president of the Concord Teachers Association, which
represents teachers who work in kindergarten through Grade 8 and
negotiated a version of the Lexington plan last year, said he was aware
additional challenges were forthcoming when the plan was negotiated in
Concord and was advised to proceed with caution.
"From our standpoint, we want to give our members as many options as
possible," Hourihan said. Then, addressing the retirement board's
complaints: "They would benefit from no salary increases at all, but at
the end of the day, any increase in salary is going to be borne by the
taxpayer. It's public education."
Origin of plan
If the Lexington plan has a father, it's Phillip A. Crosby, who was
president of the Lexington teachers union in the 1990s.
Crosby, now 67 and retired to the former Fort Devens, said the union
faced tremendous pressure in 1990 and '91 over budget cuts. School
Committee negotiators wanted the teachers to give up a portion of a
negotiated salary increase, so he felt the need to be creative. While
doing research, he hit on the idea of improving longevity pay. The
school already paid longevity bonuses annually, which ranged from about
$500 to $700, based on years worked.
His idea was to compress the payment period for the smaller annual
longevity payments, which could be stretched out over decades, into
three annual $3,000 payments. That would put more money in the hands of
teachers over a short period of time, he figured.
Crosby, who taught chemistry and physics from 1968 to 1999, also saw it
as a way to provide financial help to married female teachers who were
forced to quit in midcareer, for instance, when a husband was
transferred. Those teachers lost out on the annual longevity bonuses.
The idea was adopted and the Lexington plan was born in 1992.
It was a success from the start. Crosby estimated half the teachers,
including himself, took it in midcareer, and the rest used it as they
headed into retirement. Crosby invested the money. Others who took it
early used it to smooth financial crises or to start a business.
Female teachers could now be certain of collecting at least $3,000 a
year for three years. The money was paid even after they left the school
system. It gave them peace of mind knowing there was a pool of money
they could tap, he said.
"I thought it would be a win-win for everyone, and I feel pretty good
about what I created," he said.
In Tewksbury, where another version of the Lexington plan was negotiated
in 2003, it was an immediate hit. There, any teacher with 30 years of
service has the option of taking $2,500 per year for three years and
applying it to their base salary. Only 10 teachers per year are allowed
to sign up; in the first year it was offered, 15 tried to get on, five
were placed on the waiting list.
In Billerica, McCarthy said the plan has been equally popular. The first
year it was introduced there was a waiting list to get on board. "It
will add a little something to my pension when I'm old and gray," she
said.
Globe correspondent Donna Novak contributed to this report.
Return to top
The Boston Globe - South
Sunday, May 1, 2005
State balks at boosted pensions
Retiring teachers face cut in negotiated benefit
By Michael Naughton, Globe Correspondent
Retiring teachers in at least six area school districts -- Abington,
East Bridgewater, Holbrook, Marshfield, Quincy, and Stoughton -- have
had portions of their pensions rejected by the Massachusetts Teachers'
Retirement Board, sparking a legal clash with their unions.
Officials at the public teachers' pension fund said they are cracking
down on the use of a benefit known as the "Lexington plan," named for
the school system where it became popular, that is designed to give
veteran teachers a temporary annual raise of several thousand dollars.
After three years, the raise disappears. The timing of the pay boost is
up to the teacher; it can be used in midcareer, for example, to pay for
a child's tuition or home renovations.
But if the raise is taken at the end of a career, when teachers most
often earn their highest pay, it can substantially boost pension
payments. For example, a teacher who takes a $5,000 Lexington plan raise
in the last three years on the job could boost his or her retirement
pension by $4,000 a year.
To pension board officials and others, the higher payments seem an
unintended and excessively generous consequence of the Lexington plan.
The benefit could cause financial problems for the pension system in the
future, if it is not brought under control, according to James H. Salvie,
general counsel for the Massachusetts Teachers' Retirement Board. A
teacher collecting an extra $6,700 a year in pension payments could
receive a bonus of $155,000 over a retirement lasting 23 years, he said,
estimating how long someone will live after retiring at age 57.
The board is seeking legislation to block the use of the benefit to
boost pensions, which are based on an individual's three years of
highest income.
So far, the board has targeted the Lexington plan in 18 school districts
statewide. At least 22 other local school districts also have such
plans, and some may eventually be challenged, depending on how their
plans are worded. A Globe survey found 53 Greater Boston school systems,
most in the southern and western suburbs, with Lexington plans.
Next year, the state is expected to pump $682 million into the pension
fund, which works out to a $250 subsidy for retired teachers from every
Massachusetts taxpayer, according to state figures.
The action by the pension board affects only the portion of a teacher's
pension based on the Lexington plan payments.
Gary L. Gilardi, president of the Stoughton Teachers Association, called
the action by the pension fund "a shame."
"It's a slap in the face for those who have 25, 30 years in the system,"
he said. "And it's discouraging younger teachers coming into the
system."
In Quincy, approximately 200 teachers have used the benefit since the
late 1990s and have increased their pensions by up to a maximum of about
$4,000 without protest from the pension fund, said school and union
officials.
But at least four Quincy teachers who have retired over the past few
months have had their pensions reduced by the board, said union
president Paul J. Phillips.
Arthur Svensen, a 61-year-old Quincy social studies teacher who retired
in November after 37 years, received his denial letter from the pension
fund in January. The Lexington plan would have increased his $36,000
pension by about $3,000 a year, he said.
"That's enough for the condo fee" on his home in Bourne, Svensen said.
Pointing out that the pension fund has $17.9 billion in assets, he said,
"They're after Quincy teachers for a few thousand bucks. I don't get
it."
Officials with the Massachusetts Teachers Association have appealed the
denials to the Contributory Retirement Appeal Board, which that hears
pension cases. Union officials defend the Lexington plan as a benefit
negotiated in good faith, pointing out that it has been used in
contracts since the late 1990s without a problem. For it, unions often
gave up other benefits, such as pay for unused sick days, they say.
School committees generally like the benefit. As part of contract
negotiations, boards can exchange a benefit that would be expensive for
the school district, such as paying for unused sick time, for the
Lexington plan benefit, which generally costs the system less money. For
instance, the payments for unused sick time for a retiring teacher in
Marshfield could reach $20,000 to $25,000, while the three years of
payments under the Lexington plan could amount to $13,500.
Salvie and Joan Schloss, the pension board's executive director, singled
out East Bridgewater for what they considered excessively high payments.
Teachers there can receive raises for three straight years equal to 15
percent of their salary, which this year would amount to a maximum of
$8,751 for a teacher with a master's. The raise could boost a teacher's
pension by about $6,700 annually, retirement board officials said.
"It is a classic Massachusetts hidden benefit," said Michael J. Widmer,
president of the Massachusetts Taxpayers Foundation, a public-spending
watchdog group. In contracts with teachers, he said, municipalities
exchanged relatively expensive short-term benefits for benefits that are
cheaper initially but will cost far more over the decades ahead.
Return to top
NOTE: In accordance with Title 17 U.S.C. section 107, this
material is distributed without profit or payment to those who have expressed a prior
interest in receiving this information for non-profit research and educational purposes
only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
|