68 Mesa schools retirees face pension reductions
The problem? Mesa counted those payments as part of their salaries.
The error goes back nearly a decade. Only administrators and supervisors are affected, the audit found. That includes former principals, superintendents and assistant superintendents for the biggest district in the state.
Three former administrators told
The Republic that they were contacted about the situation, but did not know if they were affected. Joyce Cook, a former district principal, said she knew very little about the impact the error will have on her pension benefits but that taking vacation time as extra pay instead of time off is common for administrators with busy schedules.
“Principals don’t get to take vacation because you don’t have time to take vacation,” she said.
Administrative and supervisory
A Mesa Public Schools accounting error led to pension-benefit overpayments for 68 retirees, who now face reduced pensions.
The state retirement system is expected to slash their monthly benefit paymentsto correct the mistake, according to a plan the school board approved Nov. 14. The district will likely dole out at least $300,000 in funds to offset some of the hit to the retirees.
“The Governing Board and district administration regret that the retirees will have an overpayment liability,” Heidi Hurst, a district spokeswoman, wrote in an email to The Arizona Republic.
“The district has reached out to each retiree personally.”
Administrators who don’t use their vacation or sick time can have a portion of it paid to them annually.
The problem? Mesa counted those payments as part of their salaries. This created two issues:
1. The district and the employees contributed a percentage of the payment to the state pension system, as they do with regular salary payments.
2. It inflated the annual salary amounts, which pension payments are based on.
The district fixed the problem in July 2016, but the impact on the Arizona State Retirement System wasn’t realized until a May audit by ASRS.
district employees are allowed payment for up to six unused vacation days a year, according to the audit. The district can compensate a maximum of 220 sick leave days for eligible administrators, according to district spokeswoman Helen Hollands.
In an email, David Cannella, a spokesman for ASRS, said the system will recalculate each former employee’s retirement benefit “using the proper ending salary figures.”
“While those individuals will receive a return of the overpaid contributions, most will find their benefit reduced somewhat because of the lower ending salary,” he wrote.
They will also have to repay ASRS for past pension overpayments.
From fiscal 2012 to 2015, the district paid administrators and supervisors from $311,000 to $450,000 annually for unused sick and vacation days, according to district data provided to The Republic.
Michael Cowan, the district’s superintendent who is set to leave at the end of this school year, was paid $23,185 during fiscal year 2014 in unused vacation or sick leave. In all, he received more than $100,000 from 2007 to 2015.
The superintendent is allowed to sell back more days than other administrators based on his contract, Hurst said. Cowan declined raises for three straight years to show solidarity with teachers who said they were not getting the raises they deserved.
In fiscal year 2012, Bruce Cox, a former associate superintendent now working in another district, received $27,259, the single highest annual payout an administrator received in a single year.
The second-highest, $25,526, went to O’Connor Elementary School Principal Scott Eshman in fiscal year 2014.
Most other payments for unused sick and vacation days hovered from about $1,000 to $4,000 per administrator annually.
The retirees impacted by the district’s accounting blunder averaged $19,374 in vacation and sick leave wages erroneously reported to ASRS, according to the audit.
A fix is underway.
ASRS will return the money that employees contributed to the pension plan for ineligible salaries. However, the retirees will have to turn around and repay ASRS for past pension-benefit overpayments that were based on the improperly inflated salaries.
“For a retiree who retired recently, the employee contribution amount may be sufficient to pay off his or her overpayment liability. In most cases, however, the retirees have a more substantial overpayment liability,” reads the plan approved by the board. “They face the prospect of having to use their savings to pay off the overpayment liability.”
To alleviate the burden on the retirees, the district will use the money it had contributed for ineligible salaries to the retirement plan, about $300,000. The district will distribute this money equally to retirees, although the distribution will not exceed the individual’s liability to ASRS.
The district does not yet know the total ASRS liability the retirees will face. The board may have to authorize more money in the future, the plan states. Retirees also have to sign documentation promising that they won’t appeal the audit or file a claim against the district.
It’s unclear when the plan will go into effect.
Mesa’s school district is the third-biggest employer in the state retirement system, with nearly 8,500 eligible employees total.
The audit found other problems with the district’s retirement contributions.
From 2007 to 2014, the district improperly included health-insurance reimbursements to its Superintendents Executive Team in calculating pension contributions.
In all, employees and the district contributed $43,777 in ineligible payments. About 18 employees are affected.
The district was also lax in enrolling members into the pension system, the audit said. About 648 employees weren’t properly enrolled in ASRS. More than 230 enrollments sat incomplete because of district inaction — some as long as three months.