Big hikes in public salaries need a legislative fix

Editorial by News and Observer, November 24, 2013.

Public employees gain secure jobs with a pension, health insurance and other benefits. They also usually give up higher pay and incentive bonuses they might earn doing similar work in the private sector.

Tight public spending in recent years has pressed that arrangement with many public employees. Their jobs are not as secure and their pay increases are paltry. But some people with public jobs are managing to tilt the balance the other way, receiving generous salaries and big bonuses. Some are allowed to pad their incomes to create inflated pension payments once they retire.

Last week The News & Observer revealed this bloated upper edge of public pay in the series“Checks Without Balances: Big pay in tough times.” The three-day series was based on the analysis of data for more than 435,000 employees from 1,216 state and local agencies.

While the agencies are public, they often are obscure. In some of those agencies, insular arrangements have allowed pay to balloon and the state pension system to be abused. The most egregious cases tended to occur in situations where boards had friendly relationships with the executives they oversee and routinely approve big hikes in pay and perks. Often the arrangements are made in closed sessions with scant public record keeping.

Pension fraud?

Among the worst offenders were several boards overseeing community colleges. While state employees and teachers have gone five years with only a 1.2 percent pay increase, some community college presidents are having their compensation larded with ever richer additions. Some are making more than $300,000. One impressive example is close to home. Stephen Scott, Wake Tech’s president since 2003, is paid $351,917 in salary and benefits.

Worse yet, some boards have allowed perks such as car allowances and housing allowances to be converted to salary for purposes of pension calculations.

The several community college presidents who were allowed the conversion never paid into the pension fund based on the perks’ value. Letting the value of the perks become salary in their final years of service means others in the system must subsidize their inflated pension payments.

State Treasurer Janet Cowell, who oversees the state pension fund, said the perk-to-salary conversions are legal, but suspect. She has unsuccessfully sought legislation to curb the practice. Her opposition is appropriate, but she should have been making more noise about the conversion practice.

And board members at community colleges and other agencies shouldn’t let such inflated compensation occur in the first place. Instead of representing the public’s best interests, board members in these cases are serving their own. When board members have an executive who is doing well and could go elsewhere, they often approve compensation increases to avoid the trouble of searching for and adjusting to someone new. That’s fine up to a point, but there has to be a point.

What’s too much?

That appears to be the case with Steve Beam, executive director of the Raleigh Housing Authority. He has done good work since becoming director in 1996. His agency has had 26 clean audits in a row. The agency’s work managing more than 5,000 public housing units is important. But through Beam’s longevity his compensation has outgrown his position. His total compensation last year was $271,812. That puts Beam on par with the Raleigh city manager and the Wake County manager, who oversee much larger staffs and budgets.

In other cases, public employees are compensated through private-sector-style incentive arrangements that are inappropriate for public servants. Sean Ferreira, the manager of Cary’s 29-court tennis center and 25 courts in other parks, has a salary of $60,000, a reasonable amount. But his total compensation was $131,377 due to a bonus arrangement that ties his pay to how much revenue the tennis center generates.

Ferreira appears to have done an excellent job in managing and developing the center, but the town should pay him what it thinks he’s worth – not how much he can make himself worth.

The series focused on surprisingly generous public salaries, but that pay stands against a backdrop of most public employees whose pay is too low or barely adequate. Pension rules should be tightened to avoid salary padding in the final four years. Beyond that, the General Assembly needs to study public pay – its broad lows and its peculiar highs – and find better ways to give enough, but not too much.