Schools spent $22 million on retirement benefits last year
17 percent of schools’ budget goes to retired employees
By Kyle Barnett - Aug 29, 2013
St. Charles Public Schools paid out over $22 million last year alone in pension payments and healthcare benefits for retired employees.
Pension payments and healthcare costs have risen dramatically for the school district over the last 10 years, said Jim Melohn, chief financial and administrative officer for St. Charles Parish Public Schools.
“In general, health insurance and retirement have been the two fastest rising costs of the school system,” he said.
Of the schools system’s $127 million budget last year, around 13 percent went towards retirement benefits while healthcare costs for retired employees weighed in at about four percent of the overall budget.
Melohn said although the retirement benefit system comes at a cost to the school system, it serves as a good recruitment tool that provides incentives for teachers to stay for the long term.
“I think that is something that we do try to preach. When you look at the public sector, the salaries don’t necessarily compare to the private sector, but we are able to offer a good benefits package,” he said.
Last year, if a teacher had a salary of $60,000, the school system put an additional $16,200, or the state mandated 27 percent, into their retirement fund. That teacher is then responsible for putting $4,800, or 8 percent, into that fund. Those payments are put into the retirement fund each year the teacher works for the school district.
Although the amount paid into the retirement funds by St. Charles Parish Public Schools changes from year to year, only a few years ago the amount required to be paid by school districts was much lower.
Melohn said before a constitutional amendment was passed a decade ago, the rates stayed steady at around 12.5 percent each year, but in recent years they have grown substantially to 27 percent.
“I think everybody thought the state was going to fund that, but what they actually did was shift the burden to all of the local districts to pick it up. So our retirement percentage went up,” he said.
Teachers, clerical workers and administrators, which make up the bulk of the system’s employees at more than 1,000, belong to the Teacher’s Retirement System of Louisiana.
Using that system, teachers who retire after 25 years will get 50 percent of their salary each year for the rest of their lives. Teachers who put 40 years into the system are eligible for 100 percent of their salary after they retire.Teachers can even retire in as little as 10 years and get 20 percent of their salary.
Someone like 63-year-old former Superintendent Dr. Rodney Lafon, who made $170,282 in his last year alone, will get somewhere close to that salary for the remainder of his life.
Teachers hired within the last two years do have a chance to take their pensions early, but those who take their pension before age 65 will not receive the full amount.
For all of their contributions, the teachers’ retirement fund can result in a nice-sized payoff in the end.
Around 650 school district employees belong to the Louisiana School Employees’ Retirement System. Those employees include bus drivers, custodians and cafeteria workers and their benefits are different than those of the teachers, administrators and clerical workers.
They accrue retirement benefits much faster and the amount paid in by the school system is 3 percent higher, but they aren’t eligible for 100 percent of their salary when they retire.
After 10 years, those employees get 30 percent of their salary. After 30 years, they max out at 90 percent of their salary.
In addition to retirement benefits, all school employees also receive healthcare benefits.
Melohn said the decision to pay healthcare benefits for retirees was made long ago.
“In 1968, before I started working here, there was an agreement with the Retired Teacher Association and the School Board when they had passed a 1 cent sales tax and part of the funding of the tax would be used for healthcare,” he said.
For those retiring with between 10 and 20 years of service, the school system pays between 50 to 75 percent of healthcare costs. Those with more than 20 years of service receive 100 percent of their healthcare costs. Currently, St. Charles Parish Public Schools pays healthcare benefits for 806 retired employees.
In contrast to pensions that are mandated by the state, healthcare benefits are granted by the School Board. Last year the board decreased benefits for new employees, limiting their healthcare benefits to 50 percent of the cost after they retire. Employees hired before July 1, 2012 are grandfathered into the previous system and can receive up to 100 percent of their healthcare costs.
Melohn said despite a large portion of the budget being put in the retirement fund each year, the school district and its employees do not pay into Social Security.
“Louisiana is one of the very few states that is not part of Social Security. The benefits we offer are in lieu of Social Security,” he said.
Social Security is paid at a rate of 6.2 percent of the salary amount by both employees and employers for a combined rate of 12.4 percent per year, however, the eventual benefits kick in at a later date and are substantially lower than those offered by the retirement accounts utilized by school employees.
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