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State school chiefs paid more than meets the eye

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Indiana's nearly 300 school superintendents are receiving more compensation than reported in their contracts, with extra payments for benefits such as health insurance counting toward their overall salaries for pension purposes, a newspaper's investigation has found.

The Evansville Courier & Press examined 275 superintendent employment contracts from across the state and found that many school boards were keeping published salaries low by providing the full cost of health insurance in cash, providing extra money for retirement accounts and making more than $400,000 in mandatory payments annually on their behalf to a state pension fund.

School leaders say the simple accounting maneuver is a common practice as districts try to keep good superintendents at a time when education funding has dropped.

"There were some folks that were trying to stretch budgets and still reward people and encourage people to stay," said Evansville Vanderburgh School Corp. Superintendent David Smith, whose contract lists his salary at $160,000 a year. Smith also receives $20,000 each year, which he said he invests.

The practice is legal and falls within the guidelines of the Indiana State Teachers Retirement Fund, which at retirement will average the five highest years of compensation to calculate monthly pension payouts. The money paid for benefits can result in higher retirement checks.

But one lawmaker says the practice may need revisiting, A study of superintendent pay and benefits done by the nonpartisan Legislative Services Agency is slated to go to a study committee that is considering capping school chief salaries and benefits using student enrollment as a denominator.

Republican Rep. Jeff Espich of Uniondale, chairman of the budget-writing House Ways and Means Committee, said the practice abuses the intent of the retirement system and that lawmakers should consider stopping it.

"It's not the schools' problem. They're paying the money either way. Frankly, if the superintendent is buying his insurance, he's spending the money either way. The loser is the state teacher retirement fund, who's paying higher benefits than would be otherwise justifiable," Espich said.

Mike Pettibone, superintendent of Adams Central Community Schools in Monroe, questioned how offering superintendents' base salary numbers alone, without expensive taxpayer-funded extras, is different from what happens with private sector jobs.

"It's the same thing, the guy working at General Motors," said Pettibone, whose contract lists his salary at $94,320 but gives him an additional $15,012—the cost of a family health plan. "How much do you make? I make $24 an hour. But they don't say, 'How many benefits do you get? How many days of vacation do you get? What kind of retirement do you get?' "

Pettibone's $15,012 goes into an annuity that he can claim as part of his annual salary for pension calculation purposes. He said paying him an annuity that he can use to increase his pension later, instead of paying the same amount for his health insurance now, "doesn't cost the school district a penny more."

John Ellis, executive director of the Indiana Association of Public School Superintendents, said such payment arrangements allow school districts to make up for education cuts by paying their leaders at the end of their careers and sending the bill elsewhere.

"People aren't getting big salaries, they aren't getting big benefits because there's no money in the system for education right now," Ellis said. "Some of those benefits are a way to more cheaply compensate [superintendents] because there just isn't a good way to pay them salary right now."

John Ketzenberger, president of the Indiana Fiscal Policy Institute, said the teachers' retirement fund isn't threatened by the higher pension payments but said the practice will have to be examined at some point.

"The truth is, at the bottom of all this is tax money that's collected by the state and redistributed. Whether it goes into pension funds or school formula, that's a function of distribution. It all comes from Hoosier taxpayers."

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