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Sept. 7, 2011 — PART II: Community Colleges

Tough Lesson Plan: Paying Big for Community College Retirees

Thousands of ex-employees are reaping bounteous pensions that often greatly exceed what they have actually paid into the system. What’s more, the cost to taxpayers will spiral out of control unless major public pension reforms are made in Illinois.

For many students, community colleges are a low-cost alternative to expensive state and private universities.

But Illinois taxpayers aren’t getting a break when it comes to paying for benefits awarded to thousands of retired community college administrators and teachers, according to a Better Government Association (BGA) investigation.

Some ex-employees are reaping bounteous pensions that often greatly exceed what they have actually paid into the system. For example, two former community college presidents at local schools have received almost $2 million each; nearly 20 percent of the more than 8,000 Chicago-area community college pensioners garnered retirement payments in excess of $500,000 apiece and almost 500 retirees are enjoying annual six-figure payments, according to a BGA examination of state pension data.

These pension payouts come at a time when Illinois is struggling to meet its bills and is legally obligated to pay billions in unfunded public employee pension obligations. Under the state constitution, community college professionals are legally guaranteed these benefits.

What’s more, the cost will continue to spiral as additional workers exit the school system because none will be affected by a recently enacted state pension reform law, which only impacts new employees’ pensions.

"I would bet that not one in 10 Illinois taxpayers knows these community college retirees are getting such rich benefits," says William Zettler, a suburban Chicago pension consultant who is also an advocate for public pension reform and overhauling the system.

SURS logoThe BGA reviewed pension data provided from State University Retirement System of Illinois (SURS) in response to a Freedom of Information Act (FOIA) request. The pension list includes information effective mid-June, 2011 and includes more than 8,000 retirees from community colleges in Chicago, Cook and its collar counties DuPage, Kane, Lake, McHenry and Will.

The BGA inquiry found:

The highest paid among Chicago area community college retirees is former Waubonsee Community College President John Swalec, who collects $223,891 a year from SURS. His payout is calculated based on contributions of $146,673 for a 27-year period, according to SURS data.

Swalec has collected a total of $1.94 million since retiring 10 years ago.

"I did not take advantage of the system," the 77-year-old Swalec says.

He adds that there’s an unfair perception that retirees are gouging taxpayers when it’s the state that didn’t fulfill its obligation to regularly contribute to the state employee retirement system. Indeed, over the years the State of Illinois has taken a number of so-called pension "holidays" and did not meet its annual payment into the system.

"The state was not putting in their share as originally promised," Swalec says. "It’s not money being taken out of the taxpayers’ pockets."

The second-highest paid retiree is George Jorndt, the former president of Triton College with an annual pension of more than $215,000 a year.

He’s collected a total of $1.86 million after contributing $180,700. He’s credited with more than 27 years of service, SURS data show. Jorndt didn’t return a call seeking comment.

Russell Peterson, a former executive vice president for educational affairs at College of Lake County, is the third-highest paid pensioner among local community college retirees. He receives less than $197,000 a year and has collected $1.25 million. He contributed almost $216,000 for a 31-year period. Peterson declined to talk specifically about his own pension.

"Pensions should be fully funded," Peterson says. "I know it's difficult for the state, but they should be funded."

Faculty members also draw large pensions.

Peter Remus, a retired mathematics department chairman at Harold Washington College in Chicago draws almost $175,000 a year in benefits. So far, he’s collected $581,104 after contributing $183,100. He’s credited with 36 years of service.

Remus, who retired in 2008, didn’t return a BGA call for comment.

Other community college leaders who are making six-figure salaries while still on the job, are in line to collect impressive pensions once they retire. They include:

  • Robert Breuder, the president of College of DuPage. For the 2012 fiscal year, which began July 1, Breuder has a salary of $274,070, a 2.8 percent increase from the prior year. He also gets an annuity of $27,170, a housing allowance of $19,640, an auto allowance of $9,166, professional development allowance of $9,166, life insurance gross up of $9,166 and $2,136 for his cell phone, according to figures provided by the college.
  • Vernon O. Crawley, the president of Palos Hills-based Moraine Valley Community College. For fiscal year 2012, Crawley is making a base salary of $343,906, a 6.6 percent raise over the prior year, according to figures provided by the college. He receives $62,521 in benefits, $22,000 in annuities and extra duty pay of $5,000. He has 42 vacation days and 30 sick days. (Unused vacation and sick days are figured into pension calculations at retirement.) Crawley declined to comment.
  • Girard Weber, the president of College of Lake County. Weber, 60, also will be eligible for a sizable pension. He's paid $230,625 for the 2012 fiscal year, the same base salary he received for fiscal 2011, according to figures provided by the college. He also gets $53,091 in benefits, which includes a housing allowance of $15,000 and insurance benefits of $10,216. He gets 25 days of vacation and 25 days of sick leave. Weber is contributing $27,875 toward his state pension this fiscal year, according to the school.

Weber says the debate too often villainizes the people receiving the benefits rather than the state lawmakers who didn’t properly fund the retirement plans. Weber suggests that adjustments can be made to preserve pensions while addressing the issue of underfunding. He also believes the potential fixes to the pensions should be assessed fund by fund.

For data on other community college presidents’ salaries and benefits,
see the Illinois Community College Board website.

The BGA examination of Chicago-area community college pension data found that almost 500 retired community college administrators and faculty are drawing $100,000 or more in annual pensions as well as health care benefits.

Already, 168 community college faculty and administrators have raked in more than $1 million in total pension payouts with suburban College of Lake County leading the way with 39 pensioners who are in the millionaires club. More than 1,400 retirees received total payouts between $500,000 and $999,000 with City Colleges of Chicago at the head of the class with 520 retirees in that category, according to the BGA findings.

Combined, the number of retirees who have already received more than $500,000 makes up almost 20 percent of the more than 8,000 community college pensioners as of June, 2011.

That pool of recipients is expected to expand in the coming years as more community college workers leave their jobs—putting greater strain on the SURS, which also includes employees of Illinois’ public four-year state universities and is just 46 percent funded.

In the private sector, any pension below 60 percent funded is considered troubled, according to federal pension law. Those underfunded private pensions are required to take steps to increase funding and face restrictions, including a requirement that they halt cost of living increases for annuitants.

The BGA investigation also found:

  • There are 492 pensioners currently receiving more than $100,000 a year, according to BGA estimates. The annual payments were calculated by BGA using monthly payment data provided by SURS and multiplied by 12 monthly payments.
  • The colleges or systems with the greatest number of $100,000-a-year pensions are: City Colleges (110), College of Lake County (93), College of DuPage (79) and William Rainey Harper (48) in Palatine.
  • The breakdown for pensioners who have received at least $1 million is: College of DuPage (29), City Colleges (22), William Rainey Harper College (21) and Oakton Community College (14).
  • After City Colleges’ 520 retirees, the breakdown of the $500,000 to $999,000 group is: Triton College (119), Harper (115), DuPage (110) and Moraine (87).
  • Seven of the 10 top-paid community college retirees (based on monthly payments) in the Chicago area were presidents or interim presidents of their schools; three of the top 10 were from the College of Lake County. The majority of the highest paid retired faculty and administrators are from suburban schools.

Community colleges fund salaries and operations largely from local taxes and tuition, while the state kicks in a smaller amount of money.

Faculty contracts are usually negotiated with various unions representing the different schools. Those contracts outline raises and working conditions, including the terms of how much class time a professor has to work.

For example, a review of the City College faculty contract shows that teachers are expected to teach 15 hours a semester. (English composition faculty teach 12 hours.) In addition to the class time, teachers are expected to reserve a minimum of seven hours a week for student conferences and advising.

At College of Lake County, faculty are expected to teach a minimum of 15 hours a semester and keep 10 office hours a week.

Community college presidents receive benefits in addition to their salaries, including car and housing allowance and other expenses. The local board for each college decides the salary, benefits and expense packages for their presidents.

Anyone hired before January 1 of this year can retire at 55 with eight or more years of service or at 62 with five or more years. With at least 30 years of experience in the system, a person can retire at any age.

Most SURS participants contribute 8 percent of their income annually to the pension fund.

One trade-off for the state retirement benefits: SURS pensioners don’t receive Social Security.

No matter how a deal is reached, the state guarantees the school employees that their pensions will be paid, an assurance that private workers don’t enjoy.

undefinedIf a private company can’t fund its pensions and a benefit plan is taken over by the federal Pension Benefit Guaranty Corporation (PBGC), retirees are only promised a portion of their retirement savings. The maximum guaranteed PBGC pension amount is $4,500 a month, or $54,000 a year, for workers retiring at age 65 in 2009, 2010 or 2011.

Nonetheless, Illinois state employees are constitutionally guaranteed to get a full pension no matter the financial condition of a state fund such as SURS.

"In the private sector, such guarantees would not exist," contends Zettler. "The price of the pension is part of the cost of doing business and should not be negotiated locally and then off-loaded to the state."

(Full disclosure: In the past, Zettler has worked on a fee-basis as a pension consultant to the BGA.)

Illinois public pensions are in dismal financial shape and running short by almost $80 billion to fund long-term pension obligations. The state’s five major pension plans aren’t even half funded. It’s a critical issue for the state as pension liability takes money away from primary and secondary education as well as social programs and raises the likelihood of future tax increases.

And last year’s pension reform law won’t put a dent into those guaranteed pension payments.

Ready for Reform?

cross madigan1
Minority Leader Tom Cross (left) with Speaker Madigan

A bi-partisan pension reform package surfaced in Springfield last spring. It was designed to change the benefit structure of current employee pensions and was backed by House Speaker Michael Madigan (D-Chicago) and House Minority Leader Tom Cross (R-Plainfield) during the last session of the legislature.

However, that effort died after failing to attract support from rank and file lawmakers.

Public employee unions staged an aggressive campaign aimed at killing the initiative, which would have required higher employee contributions to pension plans. It is possible the Madigan-Cross plan will re-emerge during the upcoming fall veto session.

Part of that plan called for requiring higher contributions from the employees currently paying into the pension systems, a strategy that other states are attempting to help fund their obligations, says Syl Schieber, a Maryland-based pension consultant.

"If you’ve got a system—whatever it’s costing—every extra dollar you can get participants to put in, is a dollar the taxpayer is off the hook for," Schieber says. "If you start the process right now and get money in the bank today, that starts to accumulate some returns."

Brett Chase is a Chicago-based freelance reporter and BGA investigator. Additional reporting by Robert Reed, BGA Director of Programming and Investigations.

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Related links

Cook County Treasurer's Office
» Research: Impact of Local Government Debt

The Civic Federation
» Research: Illinois State Public Pensions

Institute of Government & Public Affairs
» Report: Pensions and the State Fiscal Condition

CBS 2 Chicago
» Follow-Up: Daley Set To Collect $184,000 Annual Pension

Taxpayers United of America » Report: Top 50 GA Pensions Reveal Million-Dollar Payouts as Tax Increase Looms

Center for Tax and Budget Accountability
» Illinois Retirement Security Initiative

Pew Center on the States
» Report: State Pensions and Retiree Health Benefits: The Trillion Dollar Gap

Rescuing Illinois

With this investigation, the BGA continues its "Rescuing Illinois" project—an ongoing series of in-depth reports about improving and reforming state government.

The project will conduct a comprehensive analysis of the inner workings of state government to identify irregularities and efficiency problems and to propose responsible solutions and reforms.

 

 

 

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