Time to limit excessive NC pensions
The federal government puts limits on public pensions – for good reason. A pension is designed in theory to provide a measure of security for long and good work. It is not supposed to provide a retired worker with the same income received when he or she was working.
But in 1996, Congress gave public pension systems the chance to arrange for some retiring employees to get more than the standard as state systems found some employees bumping against the limit.
In 2013, North Carolina did just that, setting up a supplemental fund to pay some retirees a sum on top of their regular earned pensions. Presumably, this was to keep top employees working on, knowing they would earn higher pensions, rather than quitting when they hit the limit.
That might be a worthy tradeoff if a Nobel Prize-winning scientist was running, say, the state Department of Health and Human Services and designing cures for diseases. But in the vast majority of cases, public pensions in North Carolina are quite generous. And typically, those who are working and in a position to receive them are compensated beyond what they’d get in a pension if they kept working.
In North Carolina, there are 900,000 state and local employees in the state retirement system. They contribute 6 percent of their salaries to retirement, and their employers contribute 7 to 9 percent. There are 240,000 retired state employees. Those who put in 30 years get roughly 55 percent of their annual pay in retirement, a nice figure, and it’s a secure figure as well, considering North Carolina’s system is quite solvent.
So why, then, should some highly paid employees draw from this supplemental fund? To give them an incentive to keep working? Their salaries should be adequate for that. And their pensions would astound most of the regular working folks in North Carolina.
Consider: Former Wake County schools Superintendent Del Burns draws a total yearly pension of $162,000. Of that, he gets a nice kick of $13,500 from the supplemental fund. Eric McKeithan, former president of Cape Fear Community College, gets a pension that in 2014 was $172,000, of which $39,000 came from the supplemental fund. (An earlier installment in The News & Observer series, “Checks Without Balances,” showed that McKeithan was among public employees who had their perks such as car and housing allowances rolled into their salaries to boost their public pensions, a bad practice.)
But the big winner from the supplemental fund is former UNC-Chapel Hill Athletics Director Dick Baddour. Of his astonishing pension of $281,000 in 2014, some $64,000 came from the supplemental fund.
No wonder the UNC system wants to continue the supplemental fund rather than let it expire. The system employs more highly paid workers than any other public entity.
But it ought to put the greater public interest before its own, and the public interest is in ending this supplemental fund. All state workers should be under the same formula. Those with higher salaries will get higher pensions, and that should be enough. State Sen. Tom Apodaca, a Republican from Hendersonville, is co-chair of the Senate’s committee on pensions and retirement, and he wants to sunset the law so the state’s not on the hook to pay supplements to pensions that exceed the federal limit.
He says if the university system wants to boost pensions, it should pay for that out of a fund it sets up in-house. He should have added that no public money should go into such a fund.
Apodaca rightly sees fairness as an issue here. Common sense is in there, too. The state has a good system with a simple formula, and it should stay with that system for all employees. Setting up the fund might have been well-intentioned, but it has turned out to be a bad and increasingly costly idea. And it’s an idea whose time never should have come, but definitely has gone.
This story was originally published January 6, 2015 at 6:56 PM with the headline "Time to limit excessive NC pensions."