The Johnston County school board is suing the Teachers’ and State Employees’ Retirement System, after the system sent the board a $508,000 bill for its outgoing superintendent’s pension.
The retirement system says the county owes that money because additions to Superintendent Ed 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.
The $508,000 represented the amount above what the state can pay Croom under the new cap, according to the retirement system. The bill has since been lowered to $436,000, but the school board still isn’t interested in paying.
Michael Crowell, the attorney representing Johnston County in two lawsuits over the matter, said the cap shouldn’t apply in Croom’s case because the county did not raise his income much in his final years.
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“Dr. Croom’s compensation and total compensation didn’t change significantly over his years as superintendent,” Crowell said.
Crowell said Croom worked for many years as a teacher, with a much lower salary, and got a big raise when he became superintendent. He said the law penalized the county for that.
“It’s a mistake to characterize the law as just pension spiking,” Crowell said. “You can have someone who has no significant increase in salary the last few years and still be affected by the law.”
Croom retired March 1 after seven years as superintendent. Under his contract, he was able 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, and the fact that he retired at a relatively young age, 50, triggered the new state pension cap, according to the retirement system.
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 basically shifts the pension burden for those spikes to the governmental agency where the employee worked.
The school board announced Monday that it had filed two lawsuits against the state retirement system. One was filed in the Office of Administrative Hearings. The school board believes that the Retirement System did not follow correct procedure and “acted arbitrarily and capriciously” in its assessment of the Johnston County Schools.
The other was filed in Wake County Superior Court. The school board claims the retirement system violated the state’s Administrative Procedure Act when it set the formula for determining the cap on retirement benefits.
The school board has said that the law was put in place after it had given Croom his contract, and that it should not be subject to a penalty.
“The law attempts to make government employers like the Johnston school board liable retroactively for retirement benefits that were solely the obligation of the Teachers’ and State Employees’ Retirement System at the time Dr. Croom was employed and his salary set,” the school board said in a statement. “Because of the retroactive nature of the law, there is nothing the Johnston County Board of Education could have done at the time Dr. Croom was employed, or even after the law was passed, to avoid the assessment.”
Brad Young, a spokesman for the State Treasurer’s office, declined to comment, citing a pending legal matter.
Staff writer Dan Kane contributed to this report