State Politics

N&O series prompts calls for pension reform

Jim Perry, chairman of Wake Tech’s trustees, right,  defends the salary of the college’s president, Stephen Scott. “The $352,000 is, in my opinion, right in the window of where it ought to be,” Perry says.
Jim Perry, chairman of Wake Tech’s trustees, right, defends the salary of the college’s president, Stephen Scott. “The $352,000 is, in my opinion, right in the window of where it ought to be,” Perry says.

State officials want to review pension laws after salary maneuvers by some community college presidents and their boards created the potential for significantly increasing the presidents’ retirement pay at public expense.

A News & Observer series, “Checks Without Balances,” revealed last week that four community college presidents and their boards used elimination of a state cap on presidents’ salaries to convert tens of thousands of dollars in perks such as car and housing allowances into salary money. One president retired two years later; the rest are all nearing retirement age.

State pensions are based on the four highest consecutive years of pay, which means the perks-to-salary conversions could boost those pensions by as much as $52,000 a year. Such pension spiking is legal under state law.

Action by state lawmakers in 2010 gave community college boards the discretion to spend as much local money on salaries as they wanted.

“Obviously, we expect the folks who are given that additional authority to act in good faith and use good judgment,” said Senate leader Phil Berger, an Eden Republican. “It does raise concerns with me and I know with other legislators about how that additional authority has been utilized in this instance.”

Attorney General Roy Cooper also criticized the way the community college boards boosted pensions.

“That’s not the best way to handle that,” said Cooper, a Democrat considering a run for governor in 2016. “The whole process should be re-examined. You’ve got to make sure there’s fairness in the pension system.”

State Treasurer Janet Cowell last week sent letters to Berger and House Speaker Thom Tillis asking them to pass legislation next year intended to reduce employees’ ability to dramatically increase their pensions. A House bill in last year’s session that would have more closely tied pensions to employee and employer contributions did not get out of that chamber.

Cowell, a Democrat, oversees the state’s $80 billion pension fund. A report by Buck Consultants, released last month, did not find a significant risk of fraud or abuse but said current state laws and regulations create the opportunity for pension spiking.

“This practice negatively impacts the funding status of the pension plans, thereby potentially impacting current and future retirees,” she wrote. “While not widespread, pension spiking is both unfair and unwise policy – and legal under current law.”

Concern in Raleigh

The four colleges that converted the perks to salary were Cape Fear, Central Piedmont, Sandhills and Wilkes. Wake Tech President Stephen Scott has acknowledged he was considering asking his board to convert money for perks such as car and housing allowances and additional retirement pay into salary.

His annual total pay has grown to nearly $352,000 in his 10 years running the fast-growing college, the state’s largest. That pay includes perks not eligible for pension purposes totaling roughly $95,000.

The local funding for presidents’ pay comes from county governments. Two Wake County commissioners said last week that they did not know how much Scott had been paid. Neither criticized Scott’s performance as president, but one was concerned that the board was not paying close enough attention to pay matters.

“This is obviously county money going into it, but this is a statewide community college system, and I would hope that we could get some guidance from the state about the recommended levels of pay ... as opposed to relying on the appointed board of trustees,” said Commissioner Tony Gurley, a Republican. “A lot of times, the boards and the presidents of these organizations, it is a cozy situation, and they a lot of times feel like they are working together to accomplish the same goals.”

The N&O series also examined high pay among public housing authority directors. The Raleigh and Greensboro directors were among the top 30 in the country in compensation, according to a federal Housing and Urban Development survey of 2010 pay.

Raleigh Mayor Nancy McFarlane said she has requested data about how Raleigh Housing Authority director Steve Beam’s pay is set. The N&O reported that Beam’s compensation has grown as high as $280,690 in 2011 – higher than that of outgoing Wake County Manager David Cooke, who oversees a much larger staff and budget.

She said she’s waiting on that information before weighing in on whether Beam’s pay is appropriate. “Right now I just know that the board hires him and sets his salary,” she said. “I don’t think we have any oversight of that board.”

Under the housing authority’s bylaws, the mayor is responsible for appointing the agency’s board members, but McFarlane hasn’t appointed any members since taking office in 2011. She says two members’ terms are set to expire next year, and she plans to consider how to balance the “institutional knowledge” of longtime members with the need for “a fresh pair of eyes.”

Neither McFarlane nor other Raleigh City Council members knew how much Beam was paid until they read the N&O report, they said.

Councilman Russ Stephenson said the council hasn’t talked much about the housing authority board’s makeup since he was first elected in 2005.

“I’m certainly aware that (Beam) has been in that position a long time and has a very strong reputation in terms of running a tight ship and being productive in his role,” Stephenson said. “It’s a tough call when you’re on one of those boards to know what it’s going to take to keep a top performer from leaving.”

Beam and Tina Akers Brown, Greensboro’s executive director, make tens of thousands more in compensation than Congress and federal housing officials wanted. After reports of high pay for public housing directors in other cities, Congress voted in 2012 to limit the federal government’s share for a director’s salary to no more than $155,500.

Akers Brown made at least $242,000 in 2012, but she has not provided a full accounting of her compensation. The HUD survey said her total compensation was $285,000 in 2010, and she produced a record showing that pay included $35,000 in additional retirement pay. She has not said whether that pay continues.

The housing authority was created by the city of Greensboro, and its board is appointed by the mayor. But city officials said they had limited control over the board’s actions, making it difficult to compel Akers Brown to report all her compensation, which is public record under state law. She could not be reached for comment Friday.

U.S. Rep. Howard Coble, a Greensboro Republican, said he was troubled by her compensation and her lack of accountability.

“I’m concerned in that it seems rather strange that the person in charge of locating decent housing for poor people would have a salary which appears to be excessive, and there have been some questions about the deferred compensation issue as well,” he said. “This needs to be cleared up. The transparency needs to be forthcoming.”

Some of the pay decisions in community colleges and both housing authorities could not be determined from board minutes. Although officials can discuss employee performance in closed sessions, Cooper said the law requires pay decisions be voted on in open session and recorded in the minutes.

“I don’t know all the specifics of how the different votes ... were taken,” he said, “but it shows that we need even more awareness and training for staff and public officials when it comes to open meetings and public records laws.”

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