School chiefs find way past pension law
Seek higher salaries after 2009 reform
By seeking and winning salary increases, school superintendents across the state have maneuvered around a new law aimed at closing a loophole that had allowed employees to boost their pensions by counting fringe benefits as part of their salary.
The loophole, closed as part of the 2009 pension reform law, was famously employed by former University of Massachusetts president William M. Bulger, who successfully included his housing allowance in his pension calculation, enhancing his retirement pay by $17,000 to $196,000 a year.
The change hit superintendents, among the highest paid public employees, hard, because they can no longer include annuities, insurance payments and travel allowances in their pay to calculate their pension. In the years since, many have sought increases in their base salaries to offset some of what they stood to lose.
But critics of the salary increases say the superintendents are sidestepping the intent of the law, which was meant to create more transparency and save taxpayers money by reining in pensions.
Superintendents in Lexington, Medfield, and Essex Agricultural and Technical High School have all received significant increases in their base salary in exchange for getting rid of their annuities and other allowances.
The superintendent of Minuteman Regional Vocational Technical High School is negotiating with his school committee to convert his annual $20,400 housing benefit and $6,000 annuity into a raise of his annual salary.
The Massachusetts Association of School Superintendents estimates that, since 2009, between 50 to 75 superintendents close to retirement have persuaded their school systems to amend their existing contracts. Most younger superintendents are less concerned at this point in their career about their pensions and have preferred to continue receiving annuities, which are tax-deferred investments that they can draw on for retirement.
Most school committees have made the transition without controversy, said Tom Scott, executive director of state’s superintendent association.
“I think it’s all part of a more predictable system,” Scott said.
Total compensation is not changing, school committee members argue, they are simply replacing one salary item for another.
Not everyone agrees.
Converting perks into base salary to enhance a superintendent’s pension is not in the taxpayers’ interest, said Vincent Basile, a member of the Essex Agricultural and Technical High Board of Trustees. Basile has twice voted against moving Essex Aggie superintendent Roger Bourgeois’s $24,300 in annuities, travel expenses, life and long-term disability insurances into base salary to help enhance his pension allowance.
“To me it’s like coming in the back door,” Basile said.
The Legislature in 2009, under pressure to curb pension abuses, limited the definition of what counted as compensation for pension purposes to only base salary.
Pension payments are based on age, years of service, and, for most employees, a three-year salary average. An employee’s maximum pension payment is 80 percent of the salary average. The superintendents, who belong to the state teacher retirement system, do not receive Social Security benefits.
The amount that school systems pay superintendents in annuities and other allowances vary by community. But, for example, by converting a $10,000 annuity into base salary, a school committee ensures that a superintendent’s pension check increases by as much as $8,000 a year.
Lexington Superintendent Paul Ash approached his school committee in June 2009, a month before the new law took effect, to ask that he receive his annual $14,000 annuity and life insurance payments as salary, said Margaret Coppe, chairwoman of the town’s School Committee.
The change, plus a separate pay hike, increased Ash’s base salary by more that 13 percent that year, she said. But she stressed that the increased cost to the taxpayer was minimal.
“There was no problem with it,” Coppe said of converting his benefits to his base salary. “There was no cost to the town.”
The town had always planned to pay for Ash’s perks, expected them to count toward his pension, and thought the change was fair, Coppe said.
“By shifting all compensation to salary, the superintendent’s salary is more transparent,” Ash said in an e-mail. Ash’s current annual salary is $254,594.
The Medfield School Committee also rolled Superintendent Robert Maguire’s annuity payment into his base salary after the pension reform law passed, said chairwoman Debra Noschese. “We felt if that was going to benefit him, that was OK,” Nochese said.
Maguire, who could not be reached for comment, earned an annual salary this past year of $197,904, according to school officials.
Minuteman Superintendent Ed Bouquillon, meanwhile, is trying to convert his annuity and unusual housing perk into money in his regular paycheck.
Bouquillon lives in a school-owned house in Lincoln and pays $1,000 a month in rent, even though the rent on the house is appraised at $2,700. Minuteman also spent $114,000 that the school had collected from facilities rentals, to renovate the 1980s-era student-built house. The total cost of the housing benefit is $20,400 annually.
Bouquillon has said he is seeking the same pension benefits that other superintendents have received since the 2009 law went into effect.
“I didn’t take any increases in salary, because [of] what was pensionable,” said Bouquillon, whose base salary is $152,770.
Educators contribute 11 percent of their pay to their retirement.
Bourgeois said that his own contributions to the retirement system were based on his salary, annuity, long-term disability, and life insurance.
In addition to the teachers’ contributions, the state’s taxpayers also contribute millions of dollars to cover the gap between the retirement system’s assets and the cost of payments.
“After the law changed, I renegotiated subsequent contracts to move compensation benefits into salary and restore my pension eligible compensation to its previous level,” Bourgeois said in an e-mail.
The Essex Aggie board first converted Bourgeois’s $15,000 annuity to a pay increase in 2010. Then last month, the board incorporated Bourgeois’s annual disability and life insurance payments in his base pay. The board also tacked on Bourgeois’s $4,800 in travel expenses into his base pay, further growing his pension.
By converting all his fringe benefits to salary, Bourgeois’s base pay has jumped by 18 percent since 2009.
Bourgeois said that, with all benefits now paid as salary, his total compensation is comparable to other vocational education superintendents. Under his new contract, Bourgeois’s total pay is $164,300.
The migration of annuities and allowances into base pay is legal, though unexpected, said Joe Connarton, the executive director of the Public Employee Retirement Administration Commission. “I don’t think the Legislature took into consideration the impact of the change on new contracts,” he said.
More recent pension legislation prevents public employees from significantly spiking their base salaries close to retirement and should limit efforts by workers to boost their pension checks at the end of their careers, Connarton said.
Still, said Michael Widmer, the president of the Massachusetts Taxpayers Foundation, superintendents already receive generous state pensions because of their high salaries.
The cost to taxpayers of the new superintendents contracts may not be significant, since the number of superintendents is limited, but the appearance is of an “end run” around pension reform efforts, Widmer said.
“This kind of action thumbs its nose at the legislative action,” Widmer said. “It ignores the reality that we’re in a new era, and it’s important to earn the trust of the taxpayers.”