Jonathan Small & Mike Brake | August 22, 2018
Retirement provision boosts superintendents’ pensions
Jonathan Small & Mike Brake
It’s long been known that several Oklahoma public school superintendents earn more than the governor, but a provision of the Oklahoma Teacher Retirement System (OTRS) assures that some of them will get fatter pensions as well.
That provision gives many retiring educators a pension boost by figuring their retirement benefits based on a relatively narrow earnings window. As a result, some highly paid superintendents could receive pension payouts that total many times the contributions they originally paid into the system.
For example, according to OTRS data compiled in this data tool, retired Union Public Schools superintendent Cathy Burden was earning $270,157 when she retired at age 65 with 41 years of service in education. Her pension totals $192,998 per year, a hefty $16,000 a month.
During her years in education, OTRS data showed Burden contributed slightly more than $342,000 to the pension plan, while the districts that employed her contributed somewhat more. If she lives to a typical age, she will reap more than $3.1 million in pension benefits.
Not only was Burden’s top pay some $123,000 more than Gov. Mary Fallin’s salary of $147,000, her pension payout will be larger as well, even when you factor in the special pension provisions Fallin will be able to take advantage of as a former elected official.
According to a 2015 investigation by Alex Cameron of News 9, that provision which allows elected officials to include prior state employment in the final calculation of their retirement payout will pay Fallin about $176,000 annually after she completes her second term. Former attorney general Drew Edmondson, who contributed $185,188 to the pension plan during his years of public service, now draws $149,934 annually.
There are other examples of school superintendents cashing in lucrative retirement payouts. David Goin retired as Edmond superintendent at age 61 with an annual salary of $239,784. His annual pension is listed as $174,325. He could collect more than $3.6 million in pension benefits.
When Lloyd Snow retired as Sand Springs superintendent at age 65, he qualified for an annual pension of $157,156.
Mid-Del superintendent Pamela Deering retired at age 63 and draws $132,849 annually.
Stillwater superintendent Ann Caine retired at age 58 and draws $109,557 annually.
Hilldale superintendent D.B. Merrill retired at age 58 and draws $101,314 annually.
Dickson superintendent Larry Case retired at age 58 and draws $82,226 annually.
Sperry superintendent James Sisney retired at age 54 and draws $73,463 annually.
These generous pensions, and those of many other OTRS retirees, are at least partly the result of a system that computes pension payouts on only the top three or five years of service, depending on the retiree’s original date of employment.
OTRS has a simple formula for determining how much those enrolled in its pension plan will receive at retirement. Enrollees have traditionally been fully vested in the plan after five years of service (raised to seven years in 2017). If they were employed before 1992, they can retire at age 62 or whenever their age and years of service total 80, which is often called the “Rule of 80” by public sector employees. So, a teacher who began work prior to 1992 at age 21 could retire as early as age 51 with a pension equaling 60 percent of his or her top salary.
Those hired after 1992 must accumulate 90 years of combined age and service, and changes in 2011 mean that those hired after that date, while retaining the “Rule of 90,” will reach full retirement age at 65.
In addition, pension plan enrollees can acquire additional service time credit in several ways, including transferring work credits from another state pension system, with prior military service, and even by purchasing additional credits for cash. They also get credit for another year of service if they have at least 120 days of sick leave accumulated at retirement.
OTRS members are awarded two percent of their average final salaries for each year of service. But unlike Social Security, which uses the average of one’s best 35 annual salaries to compute pension payouts, OTRS uses the top three years for Rule of 80 participants and the top five years for those under the Rule of 90.
There are also different retirement options and provisions allowing early retirement, both of which can reduce monthly benefits, but for the purposes of analysis this article focuses on the basic straightforward retirement formula cited above. One factor that boosts pensions for many retiring school administrators is the relatively narrow window that allows them to base their pension payout on a few peak earning years.
So, an OTRS participant could conceivably work for 37 years for no more than $50,000 per year, be promoted to a $200,000 job for the final three years of service, and retire with a $160,000 pension. As unlikely as that is, the system is still heavily tilted to award payouts based on a limited number of earning years that may not accurately reflect the actual salary histories (and employee contributions) of many workers.
Of course, few education employees accumulate retirement packages like those cited above. With average teacher pay before the recent raises in the $45,000 range, and OTRS data showing the average age at retirement of 59.7, it is not surprising that the average annual pension paid to OTRS retirees is $20,602.
Tom Spencer, executive director of OTRS, noted that “other public funds around the country were probably all around three-year salary averaging when they got started. Many states have increased to five- or seven-year averaging.” He noted that most OTRS retirees are career classroom teachers who don’t see dramatic jumps in pay at any point in their careers.
The most recent OTRS annual report notes that most education retirees take their pensions after somewhere between 20 and 34 years of service. Typical monthly pensions run in the $1,500 to $2,500 range.
But school administrators rate higher pay and consequently heftier pensions. According to OTRS, there are 1,432 retirees currently drawing monthly pension payments of $4,000 or more, most of them former administrators.
According to the 2015-16 data report of the State Department of Education, the average salary of the 3,595 school administrators employed during that year was $79,182. Those numbers include school principals, assistant principals, and district-level administrators below the rank of superintendent, so it is safe to assume that the average Oklahoma public school superintendent is earning at or above $100,000 annually.
So, school superintendents who work for 30 years, even if most of those years were spent in lower-paid positions, are due typical pensions of at least $50,000, while their peers with 40 years are likely to be awarded pensions of $70,000 or more. Even those who may have spent much of their careers laboring as classroom teachers can be assured that those early years of comparatively lower earnings won’t count when their final pensions are computed.
Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.
Mike Brake is a journalist and writer who recently authored a centennial history of Putnam City Schools. A former reporter at The Oklahoman (his coverage of the moon landing earned a front-page byline on July 21, 1969), he served as chief writer for Gov. Frank Keating and for Lt. Gov. and Congresswoman Mary Fallin. He has also served as an adjunct instructor at OSU-OKC, and currently serves as public information officer for Oklahoma County Commissioner Brian Maughan.