Wednesday, December 28, 2016

Paff: Middletown taxpayers must reimburse teachers pension fund $3.8 million.

From time to time I've posted press releases from the NJ Foundation for Open Government (NJFOG) and when appropriate I've reposted from the John Paff blogs, "Random notes on NJ government" and "NJ Open Government Notes".  John Paff and NJFOG advocate for open and transparent government and work to ensure that government agencies are following OPRA and OPMA laws.

Besides being an advocate for open government, John Paff also writes about noteworthy issues and recent court cases on his blogs, that bring to light issues that may normally be overlooked.

One such case that might have gone over overlooked if it weren't for John Paff writing about last week was a December 22, 2016, decision of the NJ Appellate Court, that stated the Middletown Board of Education must reimburse its pension fund  $3.8 million for passing out unapproved "illegal" early retirement incentives to school district employees in 2007.

Last week, during the rush leading up to Christmas, a time when a story like this can be easily missed, the Middletown Patch picked-up on it and word began to spread.

I first saw the Patch article posted on Facebook a December 23rd and made a mental note to myself to go back later and read any comments.  I later shared John Paff's blog post to the Middletown New Jersey Facebook page. It has since been shared 17 times and has dozens of reactions and comments.

Reprinted here is John Paff's original posting from his blog "Random notes on NJ government":
An appeals court today affirmed a ruling requiring the Middletown Board of Education (Monmouth County) to reimburse its pension fund $3,815,600 for offering Board employees an "illegal" early retirement incentive.

According to the Appellate Division's December 22, 2016 opinion, the Middletown school board approved a "sidebar agreement" with the local teachers union on October 22, 2007 that offered tenured teachers who retired or resigned prior to June 30, 2008 $225 for each unused sick day up to a maximum of $40,000. The agreement similarly offered non-certified union members $125 per sick day up to a maximum of $20,000.

The next day, an Audit Supervisor with the Division of Pensions and Benefits, who had heard about the offering, said that the offering needed to be reviewed by the Division and asked the Board for specific information which the Board provided on November 5, 2007. By then, five teachers and a secretary had exercised their rights under the sidebar agreement.

On August 1, 2008, the Division informed the Board that the early retirement benefit was "impermissible" and directed the Board to "provide a final list of all individuals" that had taken advantage of it so that a Division actuary could "develop the acceleration cost of this incentive which in turn will be billed to [the Board]." Although the Board responded to the Division on August 11, 2008, the Division did not get back to the Board until February 6, 2014. On that date, the Division informed the Board that it was "responsible for the additional pension liabilities created" by its unauthorized early retirement incentive. The Division calculated the present value of those pension liabilities at $5,429,900 and invoiced the Board for that amount.

The Board appealed the Division's decision and invoice to Teachers' Pension and Annuity Fund (TPFA) Board of Trustees. On December 14, 2014, the TPFA affirmed the Division's ruling that the early retirement incentive was illegal but reduced the assessment to $3,815,600 and allowed the Board to pay that amount over a five year period at no interest.

The Board filed another appeal which was resolved by the TPFA's March 13, 2015 written decision. That decision held that 41 employees ultimately took advantage of the sidebar agreement's early retirement incentive and that those early retirements burdened the pension fund.

The Appellate Division rejected the Board's appeal of the TPFA's ruling. The court found that the Board "approved the Sidebar Agreement without consulting the Division or obtaining approval and then implemented the Sidebar Agreement after receiving a letter from the Division stating approval was required before such a plan could be implemented." The court also noted that the Board failed to provide any actuarial evidence to contest the findings of the Division's actuary.

Keep in mind that this case is nearly 10 years old. Other than Joan Minnuies, no other current BOE member was there at the time, that of course, will change when Lenora Caminiti rejoins the BOE when it reorganizes next month. She was there as well back in 2007 and her and Joan Minnuies have some explaining to do.

Now the questions are; What does the newly constituted 2017 Middletown Board of Education do about this issue and what will the plan for reimbursing the pension fund be? At this time it's anyone's guess. I'm sure there are or will be intense discussions going on.

I would hope that whatever decision is made, it will be the least disruptive to taxpayers and repayment spread out over a reasonable amount of time. The last thing I'd like to see however would be some sort of bond issue to repay the pension fund. That would only cost taxpayers more in the long run with fees and interest.

1 comment:

Anonymous said...

Did members of the board have authority to make decisions such as this, without regard to legal advice and legal ramifications? Was legal advice involved? Truly stunning disregard of common sense, let alone legal considerations.