Sick-time bonuses healthy hits
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NASHUA – If you retire as a cop, firefighter, teacher or from some other city jobs, you might be able to cash in your unused sick and vacation days for a nice parting check.
That’s good for you and your family. What’s better is that the check counts as earnings in your final year of work and factors into the size of your state-managed pension.
In a list of 226 city workers who retired since 2008 and cashed in unused sick and vacation days, all but 60 received more than $10,000. The vast majority of those retirees – 120 – were teachers. The public list of retirees requested by The Telegraph also included 24 Police Department employees and nine firefighters.
Two police officers left the department with checks for more than $40,000 in unused days.
Mayor Donnalee Lozeau is one of many municipal leaders calling for removing non-salary wages like unused vacation and sick time and special detail pay that can cause pension payouts to balloon.
“The public supports a reasonable pension for dedicated public employees, but we’ve gotten away from that with all these extras, special duty pay, sick leave, vacation leave, that all get rolled into the calculation of someone’s retirement,” she said.
Lozeau said she has two concerns about the retirement payouts. One is “sustainability,” she said – the costs are budget backbreakers that can’t hold up in the long run.
The second is that payouts are calculated into the pensions that workers receive when they retire, Lozeau said.
That has a “significant” impact on the city budget, Lozeau said.
Retiring workers or supervisors from the city’s Division of Public Works have less of a budgetary impact.
As with other employees, a retiring DPW employee can cash in unused sick days. For example, the former street superintendent received a check for $30,0000 when he retired in 2009.
However, the cash-in doesn’t count toward his pension.
A DPW worker retiring after 30 years receives a pension equal to 65 percent of his final year’s salary.
Public Works employees, unlike teachers, cops or firefighters, receive pensions managed by the city public works pensions trustees. Those trustees include two members of the rank and file, an alderman, a banker and a Board of Public Works commissioner.
Police officers and firefighters, on the other hand, receive pensions managed by the state. To remove money they receive for unused sick days from pension calculations would mean changing state law.
The bulk of the Nashua School District’s severance costs are determined by what was negotiated in the current teachers contract.
In 2009, the district spent $1.77 million on severance packages. Of that, $1.65 million went to pay for the severance packages of 52 teachers who retired that year. The average severance package that year was $31,695. Severance packages are payouts for unused sick time.
Although the cost was $1.77 million, administrators had only budgeted $800,000.
Because of a change in the contract formula, the average payout has increased significantly. In the previous contract, teachers could receive a payout of up to 121 accrued sick days, but paid at the starting salary rate. In the new contract, approved in 2008, teachers can cash in 100 sick days, but those are paid out at the teachers’ current salary rate, which is typically the highest step on the salary scale.
For example, in 2009, a veteran teacher had built up 163 sick days but could only cash out 100. Using a per diem rate of $342.52, or $63,024 divided by 184 days, that teacher received a one-time severance payout of $34,252. Under the old formula, the payout would have been $24,836. The change in formula resulted in a 38 percent increase in this case and similarly sized increases across other payouts.
One of the beneficiaries to the change in the formula was Nashua Teachers Union President Bob Sherman, who retired in 2009. He collected a severance package of $35,395. Although he is retired, Sherman has maintained his role as union president.
Severance costs to the district had been going up from 2005 to 2009. In 2005, the district spent $626,000. Over the next four years, the district spent $1 million, $1.23 million, $1.25 million, followed by the $1.77 million in 2009. In the $3.36 million deficit that occurred in the 2008-09 budget, underbudgeting for severance was cited as one of the primary causes.
However, how much the district will spend in severance is also entirely unpredictable. After underbudgeting in recent years, the district responded by initially setting aside $1.8 million in this year’s budget for retirees. As is turned out, only $400,000 was needed.
Superintendent Mark Conrad said of the reasons for the spike over the past few years, in addition to the change in the formula, was the state offering an incentive for employees to retire by putting a deadline on a medical subsidy. That deadline came in 2009, when the district saw its highest severance costs.
After overbudgeting this year, the district was able to use some of the money to restore teaching positions. In addition, $615,000 was set aside in a city reserve account to be used in the event severance costs spike beyond what was budgeted in the future.
But the process used for determining which teachers are going to retire each year has been a point of concern for some school officials. The process, as outlined in the contract, requires teachers to submit a letter of intent to retire by February. However, that letter is nonbinding, and teachers have until essentially the start of the next year school to decide whether to actually retire.
“It’s difficult to predict,” Conrad said. “Many individuals will submit their letters over several years before they actually retire.”
Meanwhile, the district has to develop a budget not knowing how much will be needed to pay severance packages. Severance packages for teachers who retire over the summer are paid out of the next year’s operating budget.
Because changes to the process are part of ongoing contract negotiations, Conrad declined to comment on what he’d like to see done differently.
“We have expressed some of those concerns in the past,” Conrad said.
Sherman also declined to comment on what changes should be made to the retirement process.
“All of that is subject to negotiations,” he said.
Michael Brindley can be reached at 594-6426 or firstname.lastname@example.org. Patrick Meighan can be reached at 594-6518 or email@example.com.