Washington Legislature Attempts To Curb Pension Abuses

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A Washington State Senator's discovery that Seattle-area school administrators were receiving monetary "percs" from their school boards designed to inflate their pension levels has resulted in passage of a bill by the state House to curb such abuses and a pledge from a subcommittee of the state Senate to conduct a statewide investigation into the problem.

The widely publicized finding, the result of a survey of 40 administrators in two suburban Seattle districts by Senator King Lysen, has aroused considerable public controversy in Washington, which this year had to trim education spending by more than 10 percent--a particularly severe cut in light of the fact that the state provides up to 90 percent of local education support.

The pension abuses are "rampant," charged Senator Lysen.

'Ballooning' Salary Increases

Local school boards, he said, expand the state's pension burden through such practices as "ballooning" final salary increases 14 to 15 percent when the average increase among district employees is 7 to 8 percent; paying retiring principals several thousand dollars each year to write two-page papers on such topics as their philosophy of life or the process of closing schools; adding as much as $3,800 annually to an administrator's salary in lieu of providing a car; and failing to set reasonable limits on vacation days that may accumulate and count as income on which pensions are calculated.

One superintendent in the survey had lifetime earnings of $600,000. He retired at 54, Senator Lysen said, and if he lives to be 84, will collect $1 million under the current pension rules. "He now collects just under $2,900 a month," explained the Senator.

The bill passed by the state House this month and under discussion in a Senate committee last week would: prohibit school boards from adding to school administrators' salaries in lieu of providing fringe benefits such as health insurance and travel allowances; prevent boards from granting salary increases conditioned upon retirement; force districts to pick up retirement costs resulting from pay increases larger than the average increase granted over the last two years of employment; and limit to 30 days the number of accumulated vacation days that count toward retirement-income calculations.

The bill has a good chance of being enacted, said Representative Robert Williams, its author; the Senate committees have promised to give it early hearings, and heavy press coverage of the abuses in the Seattle area has helped assure public support.

Mr. Lysen's findings led to the formation last November of a state Senate "Select Committee on Pension Abuses," which hopes to develop a bill of its own to combat the problem of overinflated benefits.

A state senator active for more than six years in pressing for pension reform said that while passage of the House bill would be a step in the right direction, the bill still treats only the symptom, not the cause, of the problem.

That cause, contends Senator A.N. "Budd" Shinpoch, is a 1956 Washington Supreme Court decision (Bakenhus v. Seattle) that says that since pensions are to be treated as binding contracts between the state and its employees, a pension agreement cannot be reduced or eliminated unless an equal offsetting benefit is included.

A 1977 legislative "reform" curbed abuses involving administrators hired after that date, but was not retroactive. As a consequence, most of the state's school administrators continue to receive the costly benefits.

According to Dion Fisher, assistant director of operations for the state's department of retirement systems, 54,000--or 86 percent--of the active and retired members in Washington's teacher-retirement system, which includes school administrators, are still under the original plan.

The state's general-fund contribution to the system last year was $96.8 million, $90.6 million of which was for members under the old plan, said Keith Lowry, fiscal officer for the department. The new plan uses the highest five consecutive years' salaries to compute the average salary on which pensions are based. The original plan used the highest two years' salaries. Further, the 1977 plan prohibits adding to the average salary figure both lump-sum payments of accumulated employee contributions and accumulated annual leave compensation, and it bars the addition of the cash value of non-monetary benefits.

Constitutional Amendment

His committee needs to find a way around the court decision that now prevents legislators from amending the old plan, said Mr. Shinpoch. "I think we might propose a constitutional amendment to change the basis on which the court made that decision. But the House bill may be the fastest way to go."

Since 60 percent of the state's general fund goes to schools, Senator Lysen said, and since every dollar of ballooned pension "takes $4 out of the general fund, the schools are having to pay for the abuses." Such "rampant waste" is one reason the state is bankrupt, he added.

Howard Coble, the director of the Washington Association of School Administrators (wasa), said that what the legislature has been calling abuses are simply customs that have been followed for years and years.

Districts have no responsibility for the pension increases that result from benefits they grant, he asserted.

And in the face of declining enrollments and school closings, he said, "it is not all that bad to pay small incentives and encourage people to retire."

Nonetheless, he said, wasa supports the House bill, especially the provision to limit accumulated leave days. "Accumulated leave is a universal practice," he explained. "The other items are rather isolated."

The Senate Select Committee intends to determine whether the other items are indeed "isolated" by extending the survey to districts throughout the state. It hopes to have results back in time to take action before the legislature adjourns in mid-March, Mr. Lysen said.

Vol. 01, Issue 23

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