North Canton City Schools saw retirement numbers triple in 2012, and Treasurer Todd Tolson expects the pace of retirements to escalate as pension reform is phased in. Other school districts are planning for the same.
Even before state lawmakers passed reforms to the state’s five pension systems, North Canton City Schools Treasurer Todd Tolson watched a mass exodus of retirement-age teachers.
In 2012, the district lost three times as many teachers than the year before without offering any retirement incentives.
Pension reform, which took effect Jan. 7, has already pushed the likes of Perry Local Schools Superintendent John Richard, Stark County Parks District Director Robert Fonte and Canton Parks System Director Doug Perry into retirement. Richard, 52, will collect his pension and begin a new job with the Ohio Department of Education, and Fonte will collect and return to work as the park director, collecting both a salary and his pension.
The changes impact cost-of-living adjustments, increase employee contributions and establish new age and service-year requirements. All five pension systems underwent unique changes.
MORE TO COME?
Some school district officials, like Tolson, believe that pension reform already has nudged some veteran educators toward retirement.
Tolson believes even more will retire this year and in the years to follow — when all of the changes to the State Teachers Retirement System (STRS) and School Employees Retirement System (SERS) take effect.
Teachers who retire before July 1 will be eligible to receive a 2 percent cost of living increase in 2014. Those who wait to retire won’t be eligible for the increase until 2018. They also will see a 1 percent jump in their contribution, which will continue each year through 2016. In 2015, new age and service requirements take hold.
The Jackson Local School District also saw a jump in retirements, as 29 teachers opted to collect their pension in 2012 as opposed to 16 in 2011.
Tolson said teachers typically begin notifying the district of their intentions starting in April.
“We will see definitely more people that will take advantage of the current retirement,” he said. “...Even last year, we started to see a higher number of individuals taking their retirement earlier because of the reform. People that retire this year will still receive their cost-of-living adjustments that were built into it in the past.”
IN THE MAKING
In 2009, the Ohio Retirement Study Council urged all five of the state’s pension systems to propose reforms. In September, Gov. John Kasich signed into law five bills that changed the pension systems. The changes are not uniform.
“We knew even before the investment downturn that some of the demographic trends — the longer lifespan of teachers and payroll growth numbers — were starting to push our funding outside that 30-year amortization period we need to stay in,” said Nick Treneff, spokesman for the STRS. “But when the recession hit, it exacerbated the need to make some changes. Our fund was not in a healthy position.”
The Ohio Public Employees Retirement System (OPERS) saw an 81 percent jump in retirement applications in the last three months of 2012 over the same period of 2011. Many of the changes brought by pension reform will be phased in.
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Canton City Schools Treasurer Jeff Gruber said earlier this month that he couldn’t attribute a jump in retirements in recent years to the changes. But Gruber is planning for what’s to come.
“I’ve mapped it out and between now and when the changes take full effect in July 2015, we have 125 people that meet that criteria,” he said. “Are all of them going to choose to go? I don’t know.”
On the local level, the reforms will mean that the average age of the teaching workforce will get younger. Larry Morgan, superintendent of the Stark County Educational Service Center, said that will result in lower health care costs for districts, since younger teachers are typically healthier, and lower wages.
He’s not worried about the quality of education going out the door with the veteran teachers who opt to leave.
“We value experienced people,” Morgan said. “In some instances you’re losing your very best, but there will be a supply of very competent people to maintain the valuable programs we have.”
Tolson said school districts don’t realize a savings until at least a year after a teacher retires. Districts could see an immediate spike in severance payouts that they’ll eventually recoup.
But other districts will miss the expected bump.
Perry and Plain local schools offered an early retirement incentive in 2010 and 2011. Perry Business Manager and former Treasurer Sheryl Stewart said the incentive package means fewer teachers in the district will be affected by the changes.
“Fortunately for us, this is not going to have a huge effect on us because we had that (early retirement incentive),” she said. “It’s going to be nice, because you have these huge severances that others have to pay.”
Eighty-six employees retired over the two-year span, as compared to a combined 29 in the year before (2009) and after (2012) the incentive was offered. Stewart said 15 are eligible to retire this year.
Plain Local Treasurer Kathy Jordan said a similar incentive means the district won’t feel the pinch of high severance payments this time around.
“It’s stacking up right now to be a normal year for us,” she said. “There’s certainly nothing different at this point.”