From Education Consumer's Clearinghouse:

ANOTHER SCAM UNCOVERED: SCHOOL SUPERINTENDENTS WHO JUICE THEIR SALARIES WITH EXTRA BENEFITS IN ORDER TO GET MORE MONTHLY BENEFITS FROM THE TEXAS RETIREMENT SYSTEM

By RICK CASEY, Houston Chronicle, September 18, 2004
Copyright 2004 Houston Chronicle

The final contract of retired school superintendent Rick Berry makes Pasadena Independent School District look like a piker when it comes to manipulating numbers to enhance pension benefits.

As reported this week, Pasadena gave Superintendent Rick Schneider a contract paying unused vacation time out as salary to the tune of about $46,000 over his past two years for the purpose of increasing his pension benefits. These benefits are based on the average of a retiree's highest three years of salary.

But in January of 2003, the Cypress-Fairbanks ISD gave Berry a contract that juiced his retirement benefits by defining as salary the following benefits "for the purposes of calculating the contribution to the Teacher Retirement System of Texas":

•$4,028 in health and dental premiums paid by the district.

•$4,000 for life insurance premiums paid by the district.

•$9,600 for auto allowance (which the superintendent received in addition to mileage).

•$1,200 for cell phone allowance.

A creative double dip

•$11,000 for 457(b) contribution. (This is similar to a 401(k) in the private sector. This was a clever double dip. The district not only put $11,000 into Berry's tax-deferred retirement account, but defined it as counting to increase his pension as well.)

•$55,080 for 54 days of unused vacation, paid at a rate of $1,020 a day.

The total of these items is $84,908, jumping Berry's "salary" from $255,000 to $339,908. Plugging that amount and Berry's 37 years of school work into the TRS formula means a $24,000 addition to his pension.

At his age of 59, that could total a lot of money. If Berry selected an option continuing the pension for his wife (a retired teacher) after his death, the annual amount would be somewhat lower, though the total might be higher.

A wayward counselor?

It was a great deal for Berry, and a great deal for the district. Berry received no raise his final year and also gave up nearly $18,000 in payments for unused sick days, said Cy-Fair trustee Bill O'Brien, who was president of the school board when the contract was arranged.

Since the $84,908 was money the district was obligated to pay anyway, its only cost was a modest contribution to TRS on the additional "salary."

There are only two problems.

One is that teachers, bus drivers and other lower-paid employees (to whom such creative schemes are not offered) together with taxpayers have to pick up the tab for what could be 20 or 30 years at $24,000 a year.

The other problem: State law and the TRS say none of the benefits listed above can be counted toward retirement.

So where did Berry get the idea to ask for this contract?

"I went in for a counseling session (with a TRS counselor) like everybody does when they are contemplating retirement," Berry said in a phone interview Friday. "This was back in January 2002.

"As we were going through my application, she brought up that there had been a change and that she could tell from my salary I was a superintendent."

The "change" appears to have referred to the dropping of TRS Rule 25.30, which required TRS to exclude items such as those listed above from retirement calculations.

Berry said the counselor suggested turning those benefits into pension benefits.

"I asked how it worked and she explained it to me," he said. "She said you could make your contribution based on that and it was salary. I checked it out by calling some people the next few days. I called the superintendent's association. They checked with TRS and got back the same answer, that it was correct."

Berry said he could not remember the name of the TRS counselor, but he "probably has it somewhere."

So with the help of his lawyer and the school district's lawyer from the firm of Bracewell & Patterson, the deal was struck.

But Berry says now the TRS is backing off. He said they called him a few days ago to tell him they were reviewing his contract.

"They are not going to count the accumulated vacation and they may not count any of the benefits," he said. He added that he has yet to receive his first pension check, though his retirement date was June 30.

A TRS spokesman said Friday that the agency "explains its laws, rules, and policies regarding creditable compensation in a manner that is consistent" with state law saying such benefits do not count toward one's pension.

"In order to determine what an individual counselor may have told an individual member, further investigation will be required," he said.

So what's the truth? Did a TRS counselor lead Berry and other superintendents down the primrose path? Or is this just another case of scheming lawyers and bureaucrats?

If I learn the answer I'll let you know.

Correction: Friday's column said if Pasadena Superintendent Schneider quit tomorrow he would receive the remainder of unused vacation that had been "converted to salary." He would not.

Rick Casey: P.O. Box 4260, Houston, TX 77210, or e-mail him at rick.casey@chron.com.


For the last several months, investigative reporters from The Dallas Morning News and The Houston Chronicle have turned up one scam after another involving public school superintendents. A few of these are as follows:

TRS invited pension deal, lawyer says

Are retired school chiefs bilking fund?

Fee to former superintendent raises issues
Group financed by Coca-Cola paid Moses $6,000

Why did Katz scat?

Superintendents get $2,000 consulting fees to hobnob with vendors

Board ought to herd Katz

Save energy by operating in the dark

It is amazing how almost the same "players" seem to surface over and over again in these scams: lawyers from TASA (Texas Association of School Administrators), Bracewell & Patterson law firm, contracts negotiated by superintendents' attorneys, unethical private consultancies, and now a new one: a loophole in the interpretation of Texas Retirement System regulations.

Texas superintendents have the help of TASA and such firms as Bracewell & Patterson to negotiate their contracts. Dallas' ex-superintendent Mike Moses not only made the highest superintendents' salary in the U. S., but he also worked as a private consultant for Bracewell & Patterson. According to The Dallas Morning News article on July 29, 2004, Moses walked away from Dallas ISD with a huge severance package ($480,850) which will amount to more than $18,700 per amonth from TRS for the rest of his life. Since Rick Berry, the Cy-Fairbanks ISD superintendent mentioned in the article below, used Bracewell & Patterson to negotiate his severance contract and Moses worked for Bracewell & Patterson, it seems highly probable that Moses' severance package was negotiated by Bracewell & Patterson lawyers, too. If this is the case, then Moses' contract may fall under the same questionable category as Berry's. Hopefully TRS is also looking more closely at Moses' pension plan to make sure it meets the requirements of the law.

When classroom teachers retire, they have no specially trained lawyers who negotiate contracts by looking for TRS loopholes. Teachers are all treated the same by TRS, and the rules are applied equally across the board.

I wonder how many members of the TRS Board of Trustees are ex-superintendents. If TRS Rule 25.30 was dropped, who made that decision? Was it the TRS Board of Trustees? How much are these overly priced superintendents' severance packages costing TRS in monthly payments? Can TRS continue to expect the Texas Legislature to keep putting more and more money into TRS if the money is being squandered through careless enforcement of regulations?

Notice the following quote taken from Rick Casey's story today:

So with the help of his (Rick Berry -- Superintendent of Cy-Fairbanks ISD) lawyer and the school district's lawyer from the firm of Bracewell & Patterson, the deal was struck.

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