Schools spend $1m to rehire retirees

Pay is in addition to pension benefits

The Boston school system, struggling with a deficit that could lead to shuttered schools, is spending more than $1 million this school year to rehire retired employees who are each already receiving tens of thousands of dollars in annual pension payments.

It is a legal practice that has grown in recent years with too little oversight, leaving the door open for abuse and waste at a time when the school system is pinched for cash, according to a city watchdog agency.

"They were hiring people they had worked with, and they were kind of doing them a favor," said Jeffrey Conley, executive director of the Boston Finance Commission, which reviews all city contracts worth $10,000 or more that are offered without public advertising. "It was just getting out of control. As these contracts escalate in number, everybody's thinking, 'Wow, this is a pretty good little deal.' "

Conley, who first raised concerns about the practice to school officials last year, said that in some cases, the contracts appear to run afoul of a state law that bars returning retirees from earning more, pension and contract combined, than the current salary of the last position they held. The Finance Commission rejected dozens of contracts this school year because the school system did not provide documentation of retirees' pension benefits when calculating their wages.

Conley estimated that in the past two years the school system was prepared to pay retirees a total of $150,000 to $200,000 more than what they were legally eligible to earn.

John McDonough, chief financial officer for the city schools, adamantly denied Conley's accusations, saying that he personally checked each contract to make sure none violated state limits.

"None of this is done lightly or without thought," McDonough said. "We are rigorous at this point in time. In my mind, there is nothing untoward here at all."

The difference in opinion, McDonough said, stems from how one calculates what retirees earn. The state law refers to how much is earned in a calendar year; but these contracts normally span a school year, which spreads the cost over two calendar years.

But Conley said that is a technicality.

"They clearly are violating the spirit of the law, and it's a growing practice that needs to be nipped in the bud," Conley said. "It is financially irresponsible for the taxpayers to be paying those people in excess of what they earned when they were working full time."

The Boston public schools have at least 91 retirees on their payroll, mostly principals, teachers, and other administrators, who as a group earn more than $3.6 million in pension benefits on top of $1.2 million in wages, according to data provided to the Globe under a public records request.

The district's reliance on retirees has grown in the past five years, prompted by an early retirement program the state offered to public employees. At the same time, the school district went through layoffs, leaving gaps that had to be filled. The amount spent on such contracts has increased nearly eight-fold since 2003, McDonough said.

While denying any wrongdoing, McDonough acknowledged there are inefficiencies. He and Superintendent Carol Johnson, who inherited the school system in August, recently vowed to trim the amount spent on such contracts in half and more closely monitor the practice of keeping retirees on the payroll, as part of their overall efforts to close a $31 million budget deficit.

The state law that restricts retirees' salaries also bars them from working more than 960 hours per year, but imposes no restrictions on how many years they can continue working.

Caroline LaCroix, a retired curriculum program director, has a $27,500 contract this school year to help design districtwide math tests and train teachers. By law, she is only eligible to make about $20,000 in a calendar year, according to paperwork filed with Conley. But coupled with her $69,470 pension, LaCroix would take in $96,970 - more than $7,000 above what she would be earning if she had not retired.

McDonough noted that LaCroix's earnings fall under the legal limit in a calendar year, but recognized that were her contract to be renewed, her wages would need to be adjusted downward next school year.

"This is my 38th year," LaCroix said. "They're getting a lot of expertise for their money." She said she sat in on several candidate interviews to fill her post, but none had the proper state certifications for the job.

Conley raised questions about nearly a dozen other contracts that appeared to promise retirees more money than they were legally entitled to earn. But in each case, McDonough said the school system ended up paying the retiree less than the contracted amount and stayed within the parameters of the law.

While some returning retirees provide valuable expertise to the school system, their work, in many cases, was meant to be temporary and ease the transition after their retirement. Some whose positions had been cut during the school system's last fiscal crisis in 2003-04 continue to hold portions of their former work responsibilities and stay on indefinitely as contractors, McDonough said.

This is problematic, he said, because the school system continues to pay them to do a job that should have been transitioned to someone else - a less expensive, younger hire - or absorbed by existing staff. While McDonough said transitions should occur in less than three years, Conley recommends a one-year limit.

Alan Butters, who makes nearly $36,000 helping the chief operating officer and the office of labor relations, is in his fifth year as a contractor since his job was cut in 2003.

He was rehired part time until the school system could figure out who would take over some of his responsibilities overseeing school accreditation. Butters did not return a call for comment.

Richard Stutman, president of the Boston Teachers Union, said that by relying heavily upon retirees to return to their old jobs, the school system risks never training a new generation of workers. The union has filed grievances in about a dozen cases where retirees were rehired to conduct special education evaluations.

"Institutionally, it's a weak way to replace your skilled employees," Stutman said.

Conley wrote a series of letters to the mayor last year outlining his concerns about the school system's lack of oversight in checking legal pay limits, contracts being renewed year after year, and the lack of competition for qualified candidates.

Dot Joyce, spokeswoman for Mayor Thomas M. Menino, said the mayor is concerned and trusts Johnson to correct the problems.

"The new superintendent has done a great job in terms of reforms," Joyce said. "This is one of the things she is looking at and she should be doing that."

In some instances though, contracting with retirees can be an efficient way to provide services at a lower cost, McDonough said. Instead of paying union salaries and benefits for a full-time academic coach, for example, some principals have hired retired teachers willing to work part time at a lower wage.

But Conley said he cannot endorse the practice when it appears to him that the school system does not have a system of verifying that contracts fall within the limits allowed by the law.

"If the school system is awarding contracts without advertising, it seems reasonable that they would do their homework," he said.

As the school system faces a fiscal crisis that will require belt-tightening for years to come, McDonough said the district is in the midst of establishing systemwide protocols about the use of retired contractors.

Officials are working on developing guidelines governing who gets contracts, for what types of jobs, and at what pay rates to make sure that contracts issued are financially beneficial to the school system and educationally beneficial to students.

Now, he said, contracts submitted to Conley for approval should have the requisite paperwork certifying that the school system has checked to make sure a retiree is not being paid more than allowed.

But just recently, Conley said, a $15,000 contract request landed on his desk to rehire a retired cafeteria manager. There was no indication that a salary verification had been done.

Tracy Jan can be reached at tjan@globe.com.