Homewood-Flossmoor District 233 found itself on the wrong side of two court decisions involving former Superintendent Laura Murray. The district was forced to pay an additional $225,884 to the Teachers Retirement System (TRS) after giving two 20 percent raises to Murray during her final two years with the district.
Despite making that payment in March 2009, school board members still find themselves explaining their actions. A story in the Chicago Tribune in May 2015 reported how giving raises above a 6 percent ceiling set by the Illinois legislature has forced hundreds of Illinois school districts, including H-F, to cover “excess salary increases” to TRS.
As questions persist about Murray’s pension — and what led up to it — the H-F Chronicle examined documents, including board minutes from her last few years in office. They show a school board that revered Murray so much that its members agreed to grant her pay hikes and bonuses giving her one of the highest pensions in the statewide TRS system.
The H-F board issued a statement at its June 16, 2015 meeting saying it took attorney advice when it decided to fight against making that payment, and that because of court rulings the district has made changes in its compensation rules.
Letter of the law
H-F board members in 2006 believed they met the letter of the law when giving Murray 20 percent raises during her final years in the district. She had a contract for the period of 2001-2006. When Murray gave notice in 2006 of her intention to retire in 2008, that contract was extended for her final two years — 2007 and 2008.
Pensions in Tier I of TRS, which covers Murray, are based on the “final average salary, and that number is the average of the member’s four highest, consecutive salaries in the member’s last 10 years of service,” according to Dave Urbanek, director of communications at TRS.
Urbanek said Murray’s current annual pension is $288,471. She was credited with 36 years of service in TRS, but her pension is based on her last four years as superintendent at H-F. It jumped substantially because of those two 20 percent salary bumps. She is one of 12 TRS members receiving a pension over $250,000 annually.
The district knew the Illinois Legislature in 2005 had passed a law that it hoped would rein in excessive salaries. The law stipulated that raises more than 6 percent to retiring teachers and administrators would require extra payment to the Teachers Retirement System for pension compensation.
But District 233 believed giving Murray her two hefty raises were actions grandfathered in as exemptions to the 6 percent rule because Murray’s contract was first written in 2001, well before the change in law.
“That (grandfather) exemption was there, and actually was for up to three years,” said Jodi Bryant, director of human resources and public relations at H-F, “and so it was felt that this would be grandfathered and so (the board) proceeded in good faith.”
But TRS argued the district owed TRS an “excess salary payment” because of those 20 percent raises.
“The law does not limit the size of any raises that can be granted by any school board,” Urbanek said. “All the law says is that if a district does grant a raise in excess of 6 percent to a teacher close to retirement, the school district is responsible for the long-term cost of the pension created by the portion of the raise above 6 percent.
“Those raises (to Murray) came after the enactment of a 2005 state law that requires school districts to pay the long-term actuarial cost of any portion of a TRS pension created by a raise in excess of 6 percent, if that raise affects a member’s initial pension calculation. These raises for Dr. Murray met that criteria,” Urbanek explained.
“There was no error on the part of District 233. The contribution rates are set in state law and must be made,” Urbanek added. “Dr. Murray made all of her required retirement contributions to TRS – 9.4 percent of her salary per year. District 233 made all of its required retirement contributions to TRS for Dr. Murray – 0.58 percent of her salary per year.”
H-F’s court challenge
District 233 hired two law firms in 2008 when it first was notified by TRS that it owed the money. After examining the question of contract language and the implications of the 2005 law, both law firms came back saying District 233 was correct in its assessment, Bryant stressed.
The board first appealed to TRS. Then it went into court. Homewood-Flossmoor Community High School District 233 v. Teachers Retirement System of Illinois was filed in Illinois’ 7th Circuit in Springfield. When the school district lost, it filed an appeal with the Illinois Appellate Court, 4th Judicial Circuit, but lost again.
“Obviously at the time of the new law there wasn’t guidance, there wasn’t case law. (The board members) felt they had made the best decision and the right decision, but obviously now it’s more clear for our district and for many districts,” Bryant said.
District 233’s lawsuit against the Teachers Retirement System is now precedent.
Urbanek said the payment to TRS is not a fine or a penalty, although when District 233 made the payment it said it was doing so under protest and District 233 board president Richard Lites refers to it as a penalty.
Bryant said the district has worked to ensure “that all the salaries for the teachers and administrators remain under that 6 percent. We have a look-back time. When someone puts their letter (of retirement) in, we look back to what they did the year before, and do all the calculations for four years out and sometimes it can be limiting.“
For example, a stipend for serving as a club sponsor or a coach could put a retiring faculty member over the 6 percent rule.
“It creates all kinds of challenges and checks. There’s a lot in the district now that ensures that (going over 6 percent) doesn’t happen,” Bryant said.
Related story:
H-F Board provides position on 2005 pension policy violation (HF Chronicle, June 18, 2014)