Sunday, June 26, 2011

Six-figure pensions for CA school administrators soar 650%...

Thousands of newly retired school administrators will earn more during retirement than most Californians will make during their working careers.

The number of educators receiving $100,000-plus annual pensions jumped 650 percent from 2005 to 2011, going from 700 to 5,400, according to a Bee review of data from the California State Teachers' Retirement System.

Though they make up just 2 percent of CalSTRS pensions, six-figure payouts are a focus of pension reform discussions under way at the Capitol. Six-figure retirees eat 7 percent of CalSTRS benefits and can ultimately get millions more than they put into the system.

Booming administrator salaries are largely behind the trend. Public school superintendents, on average, earned $168,000 in base pay last year, roughly 56 percent more than they did 10 years ago, according to data from the California Department of Education.

"Top-level management … start their careers at a higher wage level, see larger percentage increases than their classroom colleagues, and they still manage to work long careers," said CalSTRS spokesman Ricardo Duran.

A series of benefit enhancements a decade ago also explain the rise. Experienced teachers and administrators can now make a pension equal to 2.4 percent of their highest pay for each year of service, up from a flat 2 percent. Largely as a result, more than a third of the state's six-figure pensioners earn more each year in retirement than they ever did on the job.

The number of six-figure pensions will likely continue to rise as more highly paid baby boomers reach the end of their careers.

CalSTRS is the nation's second-largest public pension system, trailing only its cousin, the California Public Employees' Retirement System, which, as reported by The Bee earlier this month, also has seen a surge in $100,000 pensions. CalSTRS serves teachers and administrators in the state's community colleges and school districts.

Like other public pension systems, CalSTRS has financial problems. The value of its assets isn't enough to cover what it has promised in benefits. System officials estimate CalSTRS will be unable to fund benefits in about 30 years unless the Legislature implements higher contribution rates for school districts, employees or the state.

Investment losses, broad pay raises and benefit boosts, not six-figure pensions, are the primary cause of CalSTRS' troubles. Most CalSTRS retirees are teachers, and the average annual benefit for those who retired last year is $49,000.

Big pensions are a drag, though, and they will hamper the system if they continue to grow exponentially. Already, six-figure CalSTRS retirees get $645 million in annual benefits – almost as much as the combined pay of Sacramento County's 11,000 teachers.

"The system says (six-figure pensions) are a tiny percentage of all pensions," said pension reform advocate Jack Dean, who runs the blog. "They are, but they keep growing. I look at it as the tip of the iceberg, and every day it seems to grow."

The $100,000 club

Several of the best-known former superintendents from the Sacramento region earn close to $200,000 a year in pensions, including:

• Sacramento City Unified superintendent Mary Carrillo Mejia, who will earn about $195,000 in pension benefits this year.

• San Juan Unified Superintendent General Davie, who will earn about $181,000.

• Sacramento County Office of Education Superintendent David Meaney, who will earn about $192,000.

Meaney retired in 2004 with 42 years of service, including two years he received free as a retirement incentive. His annual salary increased about 90 percent to $188,302 during his last 10 years on the job, CalSTRS records show.

Asked about his pension, Meaney noted that CalSTRS members generally don't get Social Security benefits. Meaney paid into Social Security when he moonlighted teaching college classes, but he was not able to draw much because of his participation in CalSTRS.

"So people are taking a hit. That is a downside of retiring under STRS in California," he said. The maximum Social Security benefit for a worker retiring at Meaney's age is about $21,000 annually, or about one-ninth of his annual retirement benefits.

In contrast to booming supervisor salaries, average teacher pay – about $68,000 last year – grew only slightly faster than average pay for all California workers during the last decade, state data show. In the Sacramento region, teachers constitute less than 20 percent of educators earning six-figure pensions.

"Teachers are working their entire career," said Jennifer Baker, an advocate for the California Teachers Association. "They're not working to get rich but they know they have a secure, solid retirement they can count on."

When teachers do make the $100,000 club, it's typically at the lower end of the spectrum, and because they've had long careers. Most $100,000 pensioners have put in more than 30 years on the job and retired after age 62.

Sometimes, it's even a mistake. Marilyn DeVore, 64, of Yuba County draws a $101,000 pension, even though her highest salary as a teacher was $84,000. When she retired three years ago, CalSTRS erroneously gave her 53 years of service credit, said Duran, the CalSTRS official.

But the pension system never contacted DeVore about the mistake, she said, and she was surprised when The Bee informed her that her pension was based on the wrong count of her years worked.

"I would have immediately caught that," DeVore said. "I'm a math teacher."

She said all the paperwork she signed at the time of retirement showed she had 43 years of service credit, the amount she says she earned during a 40-year career that included many years of extra duties coaching sports and teaching night school.

DeVore appears to be one of more than 22,000 CalSTRS retirees who were overpaid last year, costing the system $43 million, according to a recent CalSTRS report on erroneous payments to beneficiaries.

"In no way was I knowledgeable about this," DeVore said. "And I will in good conscience make it right with STRS."

Her benefits will soon be lowered and she'll have to slowly start paying back the extra money she received, Duran said.

Reforming the funding

Administrators defend large raises and high pensions by noting that leading a school district got tougher in the last decade as accountability programs such as No Child Left Behind took effect.

Superintendents and principals are at risk of losing their jobs if student test scores don't meet benchmarks, said Bob Wells, executive director of the Association for California School Administrators.

In addition, Wells said, districts underpaid administrators in the 1990s and California was losing some of its best school leaders to other states.

"School boards keep an eye on those things," Wells said. "When you realize you need a great superintendent in order to run a big school district, you have to compete around the country."

Other states do offer administrators generous salaries and pensions. In New York, about seven educators earn $100,000-plus pensions per 10,000 students, according to data from SeeThroughNY, a public watchdog. That's almost the same rate as in California.

At the same time, though, most other teacher pension systems are, like CalSTRS, inadequately funded. A recent Manhattan Institute study found that U.S. teacher pension plans need almost $1 trillion more in funding to pay promised benefits.

Because of funding difficulties in CalSTRS and CalPERS, debate over large pensions has grown during recent months. Leaders in the Capitol are discussing pension reform as part of a possible state budget deal – and a potential ballot initiative that would force big pension changes.

The CalSTRS governing board entered the fray this month, asking legislators to limit the amount of compensation that would count toward pension benefits.

The board proposed a limit of $147,000 that would float upward with inflation. Earnings above that amount would go into a supplementary pension program that is akin to a 401(k) plan.

The CalSTRS board stipulated that the measure should not apply to current members, so its impact largely wouldn't be felt for decades. The current federal cap is $245,000, but applies only to those hired after 1996.

Some board members made clear they didn't care much for the idea of a cap, but they wanted a voice in the burgeoning discussion, lest legislators approve something more draconian.

"It's not like it's going to work," said Rich Zeiger, who represented State Superintendent of Public Instruction Tom Torlakson at the CalSTRS meeting. His comments were greeted by chuckles.

"You will drive people out," he said. "There will not be superintendents in the system. They will go to CalPERS. They will go in another system. Or they'll set up their own."