ST. LOUIS • For 32 years, Annette Bailey spent 5 percent of her salary on a pension that offered a modest but comfortable living when she retired in the early 1990s.
But Bailey’s pension of about $1,500 a month has not increased much since then. Some months it barely covers food, utilities and rising health costs, she says, leaving the former elementary school teacher scraping to make ends meet.
Her sentiment is felt by hundreds of other retired ºüÀêÊÓƵ Public Schools educators who have increasingly locked horns with the district over a pension system that has granted just one cost of living adjustment in 10 years.
“A lot of teachers spent much of their own salaries to make things right in order to teach,†said Bailey. “We just expected when we retired to have a peaceful and relaxing retirement.â€
People are also reading…
But retirees aren’t the only ones feeling the strain.
As the ºüÀêÊÓƵ school system shrinks, the school district is spending a larger percentage of its budget to maintain the ºüÀêÊÓƵ Public School Retirement System.
The spike will require the district to spend $28 million, or 10 percent of its operating budget, on pensions this year. In 2009, those obligations were $16.8 million, or 5 percent of the budget.
But at a recent public forum, pension recipients dismissed Rick Sullivan, chief of the district’s special governing board, when he told the crowd that rising pension costs could sap the district of money needed for classrooms.
Nor do they buy an argument from Andrew Clark, executive director of the retirement system, who says pension recipients never contributed enough of their salaries to fund a cost of living adjustment, or COLA, and that someone ultimately would have to pay for it.
Meanwhile, critics say, ºüÀêÊÓƵ Public School Retirement System has squandered pension funds on travel and a $2.2 million office building in Midtown’s Grand Center, rather than increasing benefits.
Tensions over the pension system have brewed for years. But they came to a head this month when the district announced that its contribution would need to increase by about $7 million this year alone.
The sudden spike is largely attributed to changes in the tables used to predict how long retirees and their spouses will live, and what it will cost the pension fund to support them. The system now has more retirees than employees paying into it — a trend that could further strain the district in the future.
After employees contribute their 5 percent, the school systems and charter schools must pay the remaining liability.
ºüÀêÊÓƵ Superintendent Kelvin Adams said rising pension costs are part of the overall budget constraints forcing the closure of two schools next fall — Sherman Elementary and L’Ouverture Middle.
The district’s pension obligations, Sullivan said at the forum, “cannot be used to educate students. It cannot be used to pay teachers. The money cannot go into the classroom where many think it should be invested.â€
Retired educators bristle when school officials pit them against the children they once taught. They say if they had invested their pension money on their own, they would have access to the investment gains and dividends.
“We were not given the option to invest the money,†said Delores Mills, who retired in 1990 as a high school Spanish and English teacher. “Had I invested that money 30 to 40 years ago, I would have access to the dividends. That’s what the COLA represents to us.â€
A SEPARATE SYSTEM
The Public School Retirement System of the City of ºüÀêÊÓƵ is made up of more than 11,000 current and former employees from the city school system and charter schools. The Missouri Legislature created the system in 1944, as well as a similar one for Kansas City. Two years later, it created the Public School Retirement System for educators across the state.
All three teachers pension systems are faring much better than the underfunded Illinois Teachers’ Retirement System, which could go broke, some warn, if the Legislature doesn’t come up with a solution soon.
The Missouri teachers pension system allows an automatic cost of living adjustment tied to the Consumer Price Index. But teachers also pay 14.5 percent of their salaries into the fund, and retire without Social Security.
In contrast, ºüÀêÊÓƵ educators pay 5 percent of their salaries into the fund, plus retire with Social Security. Any increase in pension benefits must be approved by the school district’s governing board, which hasn’t granted one since the 2.5 percent increase in 2006.
“Are we ever going to get a COLA? Are we ever going to get one?†Connie Costello asked the retirement board this month. “The retirement board seems to be doing real well. The stock market is up.â€
During the bullish 1990s, pension funds across the nation became increasingly flush, prompting many pension boards to grant larger retirement payouts. In ºüÀêÊÓƵ, a string of adjustments to the public school pensions between 1997 and 2001 fueled expectations among city teachers that their monthly payments would continue to rise.
In 2005, retirees questioned the pension board’s decision to spend $2.2 million from the fund to build a three-story office building on Olive Street in Grand Center for its eight employees. The board bought the property from Owen Development, the developer that also would construct the building, and had paid $122,000 for the property from Grand Center four days earlier.
The president of Grand Center was Vincent Schoemehl, who also was serving as a member of the retirement board.
Mills and other retired teachers cried foul.
“That building was to take care of the ‘friends network,’†Mills said this week.
But the pension board defended its decision as a long-term, cost-savings measure to avoid spending the roughly $80,000 it had been spending a year on rent. In addition, the board expects to get more than $138,000 this year in lease payments from Veterans Affairs.
The board has long argued that Schoemehl’s dual role in the deal posed no ethical violation.
“Management believes that no conflict of interest exists in relation to the purchase since the president of Grand Center, Inc. refrained from participation and discussion of the purchase,†a note in the retirement systems’ 2005 annual report states.
Initially, the board was to pay Grand Center to manage the property but got out of that arrangement, Clark said. The board will pay the firm CB Richard Ellis $12,720 this year to manage the building.
Retirees call the building a waste.
“That was a cost of living increase right there,†Mills said.
Clark says not entirely. If retired teachers were to get a 2 percent increase, he said, “it would be $2 million a year and that doesn’t go away.â€
LEGISLATIVE RESPONSE
In ºüÀêÊÓƵ, the average pension for retired educators is around $1,800 a month, according to Clark. The amount takes into consideration years of service, the average of three years of highest salary, and a 2 percent pension factor. For most retirees, this amounts to about 40 percent of final salary.
Any changes to the pension’s structure must be approved by the Missouri Legislature.
Several bills this year do address public pensions. The one backed by the school district would require ºüÀêÊÓƵ educators to shoulder greater pension costs by requiring them to contribute an extra half percent of their salaries a year until their contribution reaches 7.5 percent in 2018.
The current funding structure “is no longer sustainable for the school district,†said Steve Carroll, lobbyist for ºüÀêÊÓƵ Public Schools. “We’re just trying to make some corrective changes.â€
Leaders at American Federation of Teachers Local 420 say they don’t support this.
“We already have an issue with attracting and retaining qualified teachers,†said Byron Clemens, regional vice president of American Federation of Teachers ºüÀêÊÓƵ Local 420. “Reducing someone’s salary is not incentive to attract them to the profession.â€
The bill would also allow educators to retire earlier. And it would require that the pension system be 100 percent funded for cost of living adjustment to even be considered. The fund hasn’t been 100 percent funded in at least 20 years, if ever.
The change many retirees are advocating is not in any proposed bills — removing the requirement that school district governing boards have a final say in pension benefits. And discontinuing the practice of having a school board representative also serve on the pension board.
“We shouldn’t have to fight,†Mills said. “And we shouldn’t be the only retirees in the state of Missouri not getting cost of living increases.â€
