The Johnston County Board of Education will decide in the coming weeks whether it will appeal two judges’ decisions to dismiss lawsuits it filed against the State Retirement System.
The lawsuits stem from a nearly $436,000 bill the retirement system sent the school board following the retirement of Superintendent Ed Croom, for exceeding a state cap created to keep governmental agencies from spiking pensions of highly-paid employees.
Last week, Michael Crowell, the attorney representing the school boards in the lawsuits, said the school board can appeal the decision. He said there may be some other options it could “consider for reviving the challenge.”
However, the lawsuit has already cost the board $19,202.81 in legal fees. An appeal would add more to that, on top of the bill they currently owe the retirement system.
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“The Johnston County Board of Education will need the opportunity to review the decisions of the judges and review all of their options,” Larry Strickland, school board chairman, said in a statement. “After due deliberation, the board will make a decision based on legal counsel’s guidance.”
School system officials have not said where the money to make the pension payment would come from.
The legislature gives governmental agencies up to 12 months to pay the full amount owed. Croom retired March 1, so the school board now has less than six months to pay the $435,913 bill.
“The retirement system has been flexible in the past with those,” Brad Young, a spokesman for the treasurer’s office, said. “The payment plan is there to create flexibility for the school system.”
In less than two months, there will be at least two new members on the Johnston County school board. Current school board members Keith Branch and Donna White are giving up their seats to run for the Johnston County Board of Commissioners and N.C. House, respectively. Another seat could open if Strickland, the board’s chair, is successful in his bid for the General Assembly.
Peggy Smith and Mike Wooten are both running for re-election for the school board.
Why the bill?
The retirement system says Johnston County owes it $435,913 because additions to Croom’s salary and benefits in recent years triggered a new state pension cap designed to keep high-earning employees from inflating their pensions as they near retirement.
School districts in Wilkes, Cabarrus and Union counties faced similar situations because of their superintendents’ contracts. The bills sent to those school districts range from $208,400 to $590,690.
Those bills represent the amount above what the state can pay their superintendents under the new cap, according to the retirement system.
So the school districts sued the retirement system, claiming the amount was unreasonable, among other allegations. But the cases were dismissed last week – one in Wake County Superior Court and the other in the Office of Administrative Hearings.
Croom, 50, was allowed to convert roughly $44,000 in benefits to salary and also received two $25,000 payments as part of a contract extension the school board approved in late 2014.
Those increases, plus a $36,600 payout for unused vacation and bonus days in his final month on the job, and the fact that he retired at a relatively young age, triggered the new state pension cap, according to the retirement system.
His current monthly pension is $11,954, or $143,436 a year. He will also be paid a one-time 1.6 percent pension supplement.
Most state and local pensions are based on an employee’s four highest consecutive years of employment. A 2013 News & Observer series, “Checks Without Balances,” showed some community college boards had converted tens of thousands of dollars in perks to salary for college presidents as they neared retirement. As a result, their pensions were inflated.
Such moves are not illegal but do result in the rest of the state and local employees and their governmental entities subsidizing those pensions. The series prompted state officials to pass a law that shifts the pension burden for those spikes to the governmental agency where the employee worked, which is what the counties are objecting to.
Nearly 50 other governmental agencies were also sent bills, the majority having already paid.