Two weeks ago the DDN reported, in “Kettering sees no reason not to retire-rehire Schoenlein,” that the Kettering Board of Education proposed to retire the school district’s superintendent, Jim Schoenlein, and to immediately rehire him at less money. The board argues that this is a win-win: by retiring and rehiring, the superintendent would make more money — $250,000 per year in salary and retirement — and, at the same time, the district would save $40,000 each year.
The district might save $40,000 each year, but, it seems to me that the retire-rehire strategy represents a total net cost to the taxpayer — not a net savings. The DDN indicates that of Schoenlein’s $250,000 total annual compensation, about $125,000 will come from the State Teachers Retirement System (STRS). Of this $125,000 yearly retirement amount, 41.7% comes from Schoenlein’s contributions and 58.3% ($72,875 each year) comes directly from tax money contributed, over the years, to the STRS on Schoenlein’s behalf, by the schools districts where he has been employed.
If Kettering Schools save $40,000 in tax money each year in this retire-rehire strategy, but $72,875 in other tax money is needed in order for the district to save $40,000, then to retire / rehire Schoenlein, there is a net cost to taxpayers of $32,875 each year. The school district may come out ahead, but in the long run, taxpayers will need to pick up the tab.
And, STRS is asking for more tax money. In January, the DDN reported, “STRS has proposed that both teachers and the districts that employ them increase their pension contributions by 5 percentage points — 2.5 more from teachers by 2016 and 2.5 more from the district by 2021. The proposal also calls for raising the retirement age.”
Here is how I calculate the 41.7% / 58.3% division of individual contribution / general tax fund contribution. Out of every Ohio educator’s paycheck, 10% is deducted and sent to the STRS. But, boards of education send STRS not only the 10% of the pay of each educator, but also an amount equal to 14% of each educator’s pay. This 14% is tax money that comes from the school district’s general tax fund and this 14% represents a significant part of every district’s budget. So, for every dollar an educator earns, 24 cents is sent to the STRS; 10 cents of the 24 cents, or 41.7%, comes from the earnings of the individual educator; 14 cents of the 24 cents, or 58.3%, comes from general tax revenues received in the school district’s general fund.
I’ve not seen this 10% / 14% distinction made in the DDN articles. One person writing in the DDN, on the “pro” side, defends double dipping as, “This is no different than a private employee retiring, collecting on his investments (401(k), IRA) and getting another job. These people invest in the pension system just like others invest in a 401(k). Most of it is their money.”
Another person, arguing for the “con” side, writes, “With 401(k)s, you put in a certain amount and only get out what you and your employer put in, plus investment growth. A public pension is a defined benefit. Regardless of how much you and your employer put in, you always get a set amount back until you die. Defined benefit plans are unsustainable.”
Schoenlein, himself, in the original DDN article, defends the “pro” side by saying, “School employees build up a retirement fund over their entire career, and that’s that individual’s money.” But, most of the money in the STRS is tax money contributed by local districts out of the general fund — the 14% of total salary paid by local districts for each educator — not money contributed out of individual educators’ paychecks.
The 10% the individual educator contributes to the STRS is, as Schoenlein says, “the individual’s money.” If a person quits teaching after a few years, he or she can “cash out” the 10% accumulated deduction. But he or she cannot cash out the 14%. STRS makes a distinction between the fund composed of the 10% contributed by the individual from his or her paycheck and the fund composed of the 14% contributed by the employer out of the general fund.
What a retirement deal that Ohio educators have! They are exempt from paying Social Security and instead have a system that gives them many advantages not available to Social Security retirees. This retire-rehire controversy increases public attention to the fact that one reason Social Security is facing shortfalls is that educators are not making any contributions to it.
If Dr. Schoenlein wants to take advantage of Ohio’s generous laws dealing with retiring / rehiring public school educators, then, of course he should do so. Who wouldn’t want to increase one’s annual income by $95,000? But, the Kettering Board of Education should not be part of the scheme. Legal, does not mean ethical. The retire / rehire proposal seems like the good old boy network at work. Taxpayers realize that if a public employee receives $250,000 in annual compensation, however it is sold, taxpayers are somehow picking up the bill.
Allowing Superintendent Schoenlein to “double dip” in Kettering, I believe, will further undermine the confidence of Kettering voters in the board’s leadership, and a loss of confidence in leadership is sure to result in a loss of votes for future Kettering school tax levies. As the DDN editorial said, Double-dippers invite voters to rise up
This is the kind of stuff that makes most people’s head spin & throb…and because of that, most people just throw their hands up in resignation. Glad someone is taking the time to look at these issues that are sold in ‘1984’ double-speak; “Look! we are spending MORE money but really it SAVES money!” “Ignore the man behind the curtain…”