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Regulation and Compliance > State Regulation

Broken Budgets and Double Dippers (AP)

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This story is the latest installment in a joint initiative by The Associated Press and Associated Press Media Editors on the fiscal crisis facing U.S. states and cities, how state and local governments are dealing with severe budget cuts, and how American lives will change because of it.

DALLAS (AP) — At a state agency in Texas, the executive director is receiving a $123,000-a-year salary even as he is drawing a government pension, as he has for the past eight years. In a struggling Michigan school district, 10 administrators retired, started drawing pension checks and returned immediately as contract employees. A school administrator in Illinois makes a combined $409,000 a year in pension payments and salary for overseeing a public boarding school.

Double-dipping — the well-established practice of public workers collecting government pensions and salaries at the same time — has become a hot topic for lawmakers around the country during these times of severely strained budgets and increased focus on the benefits provided to government employees.

Yet even as some states have begun curbing the practice, a review by The Associated Press found tens of thousands of state and public school employees across the country drawing government salaries along with their pensions. In five states alone — California, New York, Texas, Florida and Michigan — at least 66,000 government retirees also receive taxpayer-funded paychecks.

The practice has come under fire not just because of the cost of paying both a pension and a salary to the same person. It also can strain public pension funds because the rehired retirees draw from them but do not contribute while taking the place of workers who otherwise would be paying into the system.

Of particular concern are people who retire early, only to take another government job and draw pension annuities for many more years than they otherwise would.

State governments already have a combined $690 billion in unfunded pension liabilities, meaning they do not have enough money coming in to meet their future obligations.

“I don’t see any private entity that would allow this to happen, and I don’t see why government should allow it to happen,” said Kenneth Sheets, a state representative in Texas who tried unsuccessfully to end the practice in his state earlier this year.

Some states have dealt with the issue by imposing lengthy waiting periods on retired public employees seeking to return to their positions, in hopes the jobs will get filled before retirees get a chance to re-occupy them. Others have placed limits on how much of their pensions retired employees can receive if they come back to work.

No single agency collects data on government retirees who also are receiving public paychecks, and many states do not provide the information publicly.

To get a snapshot of how widespread the practice is, the AP reviewed a sampling of states of varying sizes, including several in which double-dipping has generated a public backlash.

Available data showed nearly 71,000 double-dippers in California, New York, Texas, Florida, Michigan, Georgia, North Carolina, Pennsylvania and Arkansas. In Illinois and Ohio, populous states with a strong union presence, there appears to be no reliable way to determine double-dipping figures for government retirees.

Aside from data not being available everywhere, the methods used by states to assess the practice vary widely, making comparisons difficult.

In Michigan, for example, data was available for double-dipping educators but not for other state employees. Texas provided data for state employees but not teachers. States that did provide figures typically had data for state government workers or teachers but not for city and county employees.

Defenders of the practice say double-dippers have become easy targets, particularly in states that have allowed pension funds to drop dangerously low.

One of them is Maury Roos, who retired in 2000 after 43 years as an engineer with the California Department of Water Resources. Within weeks of his retirement, he was asked to return part-time. According to the California Public Employees Retirement System, his annual pension is more than $113,000.

Roos said the additional income allows him to travel to engineering conferences. In exchange, he said, the state gets an experienced engineer at a bargain price.

“It actually saves them quite a bit of money as opposed to hiring someone new because there’s no overhead,” he said.

California had more than 6,000 government retirees back on the payroll as of last December, at pay rates ranging from as little as $8 an hour to as much as $8,437 a month.

Most government retirees collect relatively modest sums when they return to work. Yet critics cite examples of retirees who collect pensions and government paychecks well into six figures and say double-dipping of any kind sends the wrong message in tough economic times.

In Michigan, for example, more than 11,100 school retirees drew both annuities and paychecks in 2010. They received pension payments totaling $227 million in addition to salaries totaling $71 million, according to data compiled for the AP by the state Office of Retirement Services.

Most of the retirees, some 7,700, already were double-dipping before a law limiting the practice took effect in July 2010. Among them were 10 administrators from a suburban Detroit school district who retired and immediately returned to their jobs as contract employees.

Superintendent Victor Mayo of the Hazel Park school district defended the decision to rehire them, saying it can save the financially strapped district $400,000 a year, or about $5 million over the life of the administrators’ contracts. He said that’s because the district doesn’t have to pay health care or retirement benefits to the rehired administrators.

One, assistant high school principal Ronald Mermuys, draws an annual pension annuity of $53,231, according to district records. Officials did not immediately respond to requests for his salary as assistant principal, and employee salaries were not posted on the district website, as required by state law.

Mermuys, 57, said his decision to retire early and return as a contract employee saved money that was used to retain administrative positions that otherwise would have been eliminated. It was “the best thing for the kids and the district at the time,” he said, while also acknowledging the potential pitfalls of double-dipping.

“If (too many) people do what I do, too, the retirement system is not sustainable,” he said.

In Illinois, the governor recently signed legislation banning double-dipping between the state and municipalities — meaning, for example, that someone cannot work full-time for the city of Chicago while drawing a pension from the state.

Accounts of large pension and salary combinations prompted lawmakers and the governor to act, including that of a retired school superintendent who draws a $184,000 annual pension while making $225,900 a year as president of a public boarding school.

Glenn “Max” McGee said he understands opposition to double-dipping. But he said in his case, others also benefited from his 2007 retirement as superintendent of the affluent Wilmette School District north of Chicago.

He said he took a $40,000 pay cut to become president of the Illinois Mathematics and Science Academy, a first-of-its-kind statewide public boarding school, and accepted $10,000 less than the board offered him.

“The way I look at this, if I’d (continued to work) full-time at Wilmette, the (academy) would be paying somebody more than me … and I would be getting a bigger pension,” he said.

In Florida, more than 12,500 workers in government or public education jobs received pensions totaling nearly $232 million in 2010, according to data compiled for the AP by the Florida Department of Management Services. To discourage the practice, lawmakers passed a measure in 2009 requiring retired public employees to wait six months instead of 30 days before returning to work.

Data compiled for the AP by the state comptroller in Texas show that more than 6,100 people who held positions in state government last year also were receiving $145 million in pensions. Double-dippers comprised about 10 percent of the employees in four state agencies, an AP analysis of the data found.

At the Texas State Board of Public Accountancy, Executive Director William Treacy retired in July 2003 and returned to his position a month later. He now earns a $123,600 salary in addition to a pension for which data was not made public.

Andy Homer, director of government relations for the Texas Public Employees Association, said a 2009 law requiring state retirees to stay out of government service 90 days before returning has been adequate and that no further restrictions are needed.

Retired government workers in New York under age 65 who return to public employment are prohibited from receiving pension payments when their annual earnings reach $30,000. Even so, 2,345 retirees were on the state payroll and receiving pensions as of May, according to data compiled by the state comptroller.

Yet the state is unable to keep tabs on the thousands of double-dipping employees in city and county governments who are subject to the same regulation and are part of the state pension system. New York Comptroller Thomas DiNapoli said a bill signed into law this summer will allow his office to track those employees through a centralized system and shut off what he believes is a major avenue for fraud.

“With all the concern about government spending and adequate funding for pensions, we can’t afford to squander any of this money in any way,” he said.


Webber reported from Chicago and Jackson reported from Harrisburg, Pa. Associated Press writers Emery P. Dalesio in Raleigh, N.C., Bob Lewis in Richmond, Va., Shannon McCaffrey in Atlanta and Adam Weintraub in Sacramento, Calif., contributed to this report.


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