FORT MILL — Town Manager David Hudspeth is retiring Friday. But not for long.
Hudspeth
will be rehired by the town in his old position effective July 16 and
begin a new, two-year contract that pays the same $99,343 annual salary
he earned prior to June 29, when he “retired.” However, like other
public employees vested in the state retirement fund who changed their
status, Hudspeth, 48, will also begin collecting a monthly pension check
for life.
Anticipating drastic changes to the state retirement
system – the S.C. Legislature approved an overhaul Aug. 21 – Hudspeth
and others moved to take advantage of current rules that allow public
employees who have accrued enough time in the system to retire and,
after 14 days, become a
government worker again without forfeiting any
pension payouts.
“Once I started to get to eligibility, I started
making plans because [
state legislators] were talking about making the
kinds of changes to the retirement system that wouldn’t allow employees
to work and draw their retirement,” Hudspeth said.
Under the rules
that existed prior to last week’s overhaul by S.C. lawmakers, employees
needed 28 years of accrued service before they can start drawing their
pension. Hudspeth, who was hired as
Fort Mill Town Manager in 1997 and
had accrued public service time elsewhere in S.C., was actually about
six months short of the required 28 years, but the system allowed him to
“buy” the remaining time.
He said some his unused vacation time was used as part of the arrangement to get the required 28 years in the system.
The
Fort Mill
Town Council approved Hudspeth’s new contract on a 7-0 vote
at its May 14 meeting. Assistant Town Manager
Joe Cronin will be the
town’s
Interim Manager June 29-July 16.
“We’ll make sure the doors stay open, the lights stay on and hope nothing exciting happens,” Cronin joked.
“The
[state] legislation coming in was going to impact him (Hudspeth) in a
negative way and if we can find a way to help him, we wanted to do
that,” Fort Mill Mayor Danny Funderburk said.
“David has done an outstanding job for us and he certainly deserves it.”
Funderburk
also said he thinks it would be difficult to find a new town manager as
experienced as Hudspeth who would be willing to work for the same
salary.
“If we had to go out on the competitive market, we’d have to pay a lot more,” he said.
Officials
said there are no state or local laws they are aware of that would
require the town to actually post an opening for the town manager’s
position even though it’s technically vacant for two weeks.
“There’s
no
state law requiring a municipality to open its process if a vacancy
occurs. That’s all dictated by local procedures,” said Scott Slatton,
senior field service manager for the S.C. Municipal Association.
Lawmakers
also killed the controversial TERI program, which allows state workers
to retire and return to work for up to five years while they earn both a
salary and a retirement check. They also made it much harder for
public-sector employers to hire retired workers back to their old jobs.
Under the new law, retired employees who return to work would have to
forfeit their retirement checks once they earn $10,000 in salary in one
year.
And if those public-sector employees – state and local
government workers plus teachers – want to buy service time to retire
early like Hudspeth did, the price is about to go up significantly.
The
S.C. State Employees Association supported the bill but said the TERI
and return-to-work programs are not the boogeyman that lawmakers made
them out to be.
“TERI is an incentive to get quality employees to
come and work for the state,” said Carlton Washington, the association’s
executive director.
TERI will be phased out over five years. The
return-to-work changes and the “service time” requirements, which allow
workers to buy credit for additional years of service, will not go into
effect until Jan. 2, 2013. That gives current state workers who are
close to retirement six months to make up their mind.
And it could lead to an onslaught of retirement requests.
“What’s
the net effect on ‘brain drain’ on state and local agencies?” Slatton
asked, rhetorically. “It could prompt a wave of retirements and there’s a
dearth of experience around the state – maybe not Fort Mill, but
smaller towns for sure – and that means towns having a horrible time
finding managers and administrators because there are so few of them.”
Without
incentives, qualified workers who would otherwise be attracted to
public jobs might opt for the higher-paying private sector instead,
leaving many important vacancies in the wake of mass early retirements
from government.
“If it’s as widespread and broad as I think it
could be, it can point to a lack of people going into government
management. It’s good, stable work doing good thing for [the public];
TERI worked well for what it was intended to do,” Slatton said.
Lawmakers
have agreed to end the TERI program by 2018 as part of a broader bill
designed to encourage employees to work longer before retiring. By
working longer, state workers would withdraw less from the state's $25
billion pension fund -- which accountants estimate will run out of money
sometime over the next 30 years, falling about $15 billion short.
The
House approved the bill 88-9, and the Senate approved the bill 43-0. It
now goes to Gov.
Nikki Haley, who can sign it into law, veto it or
allow it to become law without her signature.
The bill means state
workers will pay more, but it should save taxpayers money. The bill
requires state workers to match any taxpayer increases to the system,
meaning taxpayers and state workers would share in any increases. Right
now, taxpayers have to pay for any required increases.
The bill also guarantees an annual 1 percent cost-of-living-adjustment for retirees, capped at $500.
Rep.
Jim Merrill, R-Berkeley, who lead the negotiations for the House,
called it "a wonderful bill both Democrats and Republicans can feel good
about."
However, Merrill was not pleased with all aspects of the bill.
The
bill also creates an 11-member Public
Employee Benefits Authority that
would govern the retirement system. Four of the members would be either
retirees or state workers, and all of the members would earn $20,000
annual salaries.
The authority would also make decisions about the
employee health insurance plan. Merrill warned that, because the board
would make decisions about non-retirement issues, the state Supreme
Court could rule the bill unconstitutional under the "one subject" rule.
"It endangers this bill, in our opinion," he said.
But Merrill said the Senate and Gov. Nikki Haley insisted on the authority, and the bill would not have passed without it.
The
state’s retirement fund has $25 billion in it. The state uses it to pay
monthly retirement checks to retired state workers, teachers, police
officers, firefighters and lawmakers. The money in the fund comes from
employee contributions, taxpayer contributions and
investment returns.
However,
over the last decade, the retirement fund has not been able to keep up
with the benefits it owes retired state workers for a variety of
reasons, including huge investment losses the system sustained during
the Great Recession.
Accountants predict that sometime over the
next 30 years the retirement fund will run out of money, falling about
$15 billion short. To avoid this, state taxpayers would have to pay
billions of dollars to make up that shortfall. That’s why lawmakers want
to change the law to make state workers contribute more to the system
and work longer before they retire.
Reporter Adam Beam of The State newspaper contributed.
