Early Retirement Stipends

The link to the list of this year stipend payments is at the bottom of this article.

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Stuck with stipends
Early retirement payouts may reach $100 million
By Julian Emerson
Leader-Telegram staff
Eau Claire school district taxpayers could fork out as much as $100 million in early retirement stipends by the time those payments to district employees end in about 30 years.

The payments to qualifying district employees - started during the 1976-77 school year as a way to induce teachers age 55 and older to retire - have escalated in recent years as health care costs have skyrocketed.

This school year the district will pay $2.38 million in early retirement stipends, which are disbursed to qualified district employees in monthly installments for five consecutive years once they retire. Payments to 179 ex-teachers receiving the stipends total $1.9 million while 20 former administrators are being paid $479,000.

The escalating stipend payments are occurring as the district battles an increasingly difficult budget situation. Last year the board cut teacher positions and programs for students. Classes have grown as student programs have begun to dwindle.

District Executive Business Services Director Dan Van De Water acknowledged total stipend payments "are a huge dollar amount" and said they imperil the district's financial future.

"I would say it very well could be an unsustainable situation," Van De Water said of the district continuing to pay stipends in the future amid other budget concerns. "I don't know that we would have the dollars to continue this."

Total stipend payments vary depending on an employee's salary. Teachers' total stipends typically range from $40,000 to $60,000, while stipends for administrators retiring in recent years are mostly close to or more than $100,000. Those payments are in addition to Wisconsin Retirement System payments those employees and other public sector workers in the state receive.

Stipends to retired teachers and administrators this school year include:

-$44,217 ($221,085 total for five years) to interim Deputy Superintendent Gregg Butler, who also is making $132,000 this year. Butler retired last year and was rehired for the interim job in July.

-$38,179 ($190,895 for five years) to former Executive Director of Curriculum and Instruction Laurie Hittman.

-$36,661 ($183,305 for five years) to former district Charter School Administrator Holly Hart.

-$34,135 ($170,675 for five years) to former administrator Tom Fiedler, who is making $55,000 this school year working as New Auburn school district interim superintendent.

Other administrators will be paid less during the year. Teacher stipends this year generally were between $10,000 and $12,000.

Those figures angered a district resident asked about them Thursday. "I can't believe this," Terri Slattery said. "The crazy thing is none of this money even went to classrooms."

Stipends are attracting scrutiny in the wake of an April 19 Leader-Telegram story detailing the alteration of former superintendent and current Northstar Principal Bill Klaus' contract so he could obtain his early retirement payments before they were allowed.

District officials said Klaus didn't ultimately receive any of his $225,000 stipend early after the school board voted in October to deny those payments. The school board and police are investigating the matter, and on Wednesday Klaus was placed on paid administrative leave.

District officials said the stipend is in place in some of Wisconsin's other large school districts and is a helpful incentive in recruiting quality teachers and administrators. But they acknowledge the early retirement payments have outgrown their intended purpose, and now pose financial risks.

Jo Burke, president of the Eau Claire Association of Educators, said teachers realize the financial pinch the district is in. That's why four years ago they gave up the stipend - meaning teachers hired after July 1, 2004, don't receive it - in exchange for a higher starting salary. Teachers hired prior to that date qualify for future stipend payments when they retire.

"We recognized that times have changed," Burke said. "We just couldn't keep that in place any longer."

Likewise, last month administrators decided to forgo stipend payments, Van De Water said. Administrators working for the district before that are eligible for stipends if they work here for at least 10 years and reach retirement age.

"The administrative group said they have to step up to the plate and be part of the solution," he said.

Burke commended that action but noted the stark difference between teacher and administrator stipends. Teacher stipends include various factors but generally are based on 25 percent of starting teacher pay. Administrator pay is based on a percentage of an employee's final salary. An analysis of stipends this year shows teachers generally received about one-half to one-third of what administrator's receive in stipends.

Top administrator salaries continue to outpace teacher salaries and "the gap has gotten outrageous," Burke said.

Stipend savings

Like many U.S. school districts, Eau Claire began stipends to teachers age 55 or older with at least 15 years in the district three decades ago as a means of reducing district expenses.

The stipend plan went something like this: Schools would provide a monetary incentive to convince older teachers to retire and replace them with younger teachers making less money. Administrators were brought into the fold as stipends were added to their contracts.

For a while the plan worked. But with health care costs rising significantly, stipends pose a risk to the school district's financial future.

For instance, in 1976-77, Eau Claire teacher retirement stipends were based on an $8,100 starting pay, and a health insurance family plan cost $450. Today stipends are based on a $36,050 starting salary, and a family plan costs about $1,500.

"When stipend payments were started, they made sense financially," Executive Personnel Director Jim Kling said. "But that's certainly not the case anymore."

Changing times

District officials have decided to act in the face of high stipend and health insurance payments. Administrators have adopted a health savings account plan to reduce those costs, and teachers are considering that option as part of a contract union members could approve next week.

That option seems to make sense, given a projected health insurance increase of about 30 percent, Burke said.

The district also is conducting a study to determine its unfunded liability - future costs such as stipends and health insurance.

The hope is the health insurance change will reduce costs and stave off budget reductions, Van De Water said.

Revenue limits cap spending increases at about 3 percent annually, so increases above that figure will prompt further budget cuts.

http://www.leadertelegram.com/NewsLinks/PDFs/Early%20Retirement%20stipend_07_08.pdf