Garner Cleveland Record

Judges dismiss school district lawsuits against NC state retirement system

An administrative law judge has dismissed one of the Johnston County school board’s lawsuits against the state retirement system, which claimed the system was being unreasonable and erratic when it issued the school district a $435,000 bill for its outgoing superintendent’s pension.

Meanwhile, a Wake County Superior Court judge dismissed another lawsuit that claimed the retirement system violated the state’s Administrative Procedure Act when it set the formula for determining the cap on retirement benefits.

Lawsuits brought by Wilkes County, Union County and Cabarrus County against the retirement system were also dismissed.

A judge had previously decided to deny the state retirement system’s motion to dismiss the cases in the N.C. Office of Administrative Hearings in July. But after an appeal of that decision, Administrative Law Judge Selina Malherbe Brooks ruled in the retirement system’s favor and dismissed the lawsuits.

Wilkes and Johnston counties were splitting the attorney fees for the lawsuits. The Johnston County school board will decide in the coming week what its next move will be, said its attorney Michael Crowell.

“The school system can appeal the decisions, and there also are some other options we might consider for reviving the challenge,” Crowell said.

In Wake County Superior Court, a judge ruled that the school system did not pursue all avenues before filing a lawsuit against the retirement system.

“I think that’s a good thing,” said Richard Rodgers, executive director or the N.C. Retired Governmental Employees’ Association. “I’m glad to hear that that has transpired. And hopefully that will settle these issues that the county has had with the spiking law.”

The retirement system says Johnston County owes it $435,000 because additions to former 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.

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 $208,000 to $590,700. Those bills represent the amount above what the state can pay their superintendents under the new cap, according to the retirement system.

Croom 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, and the fact that he retired at a relatively young age, 50, 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 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 basically 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. Although the retirement system requires agencies to pay within 12 months, most have already paid. Johnston County Schools and Wilkes County Schools have not paid their bills.

A spokesperson for the State Treasurer’s Office declined to comment Friday, citing a pending legal matter.

Jonathan M. Alexander: 919-829-4822, @jonmalexander

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