Columns » John Brummett

Political meddling in public retirement



The biggest problem with public employee retirement systems has always been that they are vulnerable to legislative meddling. That exposes them to the politics of personal favors, meaning inconsistency and whim.

Your local legislator can get asked to help a constituent who is a public employee and wants a little special consideration on retirement. If the legislator can get a general-sounding but specifically targeted bill ushered through a little legislative retirement committee that few pay attention to on account of its activity being boring and complicated, the deal is done.

The issue is likely to be couched less in strict financial or actuarial terms than as a political accommodation in a good ol' boy culture.

Speaking of retirement politics, we now confront — among two or three double-dipping controversies in state and local government — the matter of whether members of the Teacher  Retirement System broke the law over several years and ought to be made to pay back benefits amounting perhaps to $10 million.

That would be for retiring from one Teacher Retirement System job, usually the public schools, and taking both retirement pay and a new full-paying job with another participant in the system, usually a state college.

We had this state law that we couldn't, or wouldn't, enforce. It said you had to take reductions in your teacher retirement pay if you accepted such a job at another place offering that teacher retirement. Only now does the state have a new enforcement mechanism in place to identify these people.

A few weeks ago, the Teacher Retirement System director, former state Sen. George Hopkins, was saying all the bold things about identifying these double-dippers and getting the system's money back. But now he's saying that his investigation and research have raised new complications and that he's not sure anymore what he'll do.

This, naturally, has led some — one lonely pundit from the blogosphere, actually — to raise concerns about political pressure being brought to bear on Hopkins, perhaps by potent forces. By that he means former public school teachers and public school administrators who might be doing a little post-retirement work at, say, the community college, and who are scared to death they might be made to set up a mechanism to repay the retirement system for several years of benefits that should have been reduced but weren't.

Hopkins says that, yes, of course, there's been political pressure. But he says he wouldn't have stuck his neck out in the first place if he'd been afraid of that.

What's happened, as he told Gov. Mike Beebe in a meeting Monday, is that, naturally, a policy uncertainty has arisen from old legislative meddling.

In the mid-1990s, a state representative got a bill passed saying colleges and universities would not be considered Teacher Retirement System member employers for purposes of determining benefits.  Two years later, a state senator got a bill passed repealing that law because he thought it was outrageous.

But there's this thing in retirement benefits law called the “lock box theory.” It means generally this: If a retirement system extends a promised benefit at any time to a vested member, it cannot come along later and take that benefit away.

The college exemption existed for two years.

So now Hopkins is thinking this: It may be that he should not try to collect retirement benefits paid out to double-dippers, but, quite to the contrary, he might ought to pay back reduced benefits to the smaller group of people who actually complied over the years with the unenforceable law.

Hopkins has asked a private law firm, the Mitchell Williams firm in Little Rock, to give him an opinion on whether the “lock box” theory applies here.

If the opinion says that it does, Hopkins might go to court seeking a declaratory judgment as to which set of retirees needs corrective action — those who double-dipped because they thought their benefits were in a “lock box” or those who abided by the operative state law and didn't know about any “lock box.”

Meantime, Hopkins came out of his meeting with Beebe saying he would refer that question — as well as two or three others, such as whether the statute of limitations has run on all this anyway — to the attorney general's office for a formal opinion.

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