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Legislators, Cuomo Agree on Pension Reform Package

June 24, 2008

By Sandra Peddie, Newsday, Melville, N.Y.

Jun. 23–State legislators and New York Attorney General Andrew Cuomo have agreed on a sweeping package of pension reforms that increase the penalties for pension fraud and close the loopholes that have allowed some retirees to collect six-figure salaries on top of six-figure public pensions.

“No more pension schemes, no more gaming the system,” said Assemb. Robert Sweeney (D-Lindenhurst), one of four state legislators who joined Cuomo in a hearing on public pension abuses in May.

The reforms, which follow a series of Newsday stories on pension abuses, are expected to be announced today. Although the legislation still has to come up for a vote within the next few days, insiders said they expected it to pass and called it one of the most important achievements of the session. Both Assembly Speaker Sheldon Silver and Senate Majority Leader Joseph Bruno have been involved in months of negotiations, Cuomo said.

Several legislators said they were prompted to act, in part, because of an onslaught of letters, e-mails and phone calls from constituents furious about pension abuses.

“That’s what we’re elected to do, to respond to our constituents,” said state Sen. Dean Skelos (R-Rockville Centre), the deputy majority leader who helped hammer out the agreement.

The legislation bars lawyers from being treated simultaneously as employees and as independent contractors for school districts or for a Board of Cooperative Educational Services (BOCES). Although Internal Revenue Service regulations bar a person from being treated as both an employee and independent contractor for the same work, the new provision would make anyone reported as both for a school district in order to collect a pension guilty of a felony. In addition, a violator could be subject to a fine of up to three times the amount earned.

That reform follows Newsday stories about private lawyers, who were paid thousands in legal fees and secured public pensions and health benefits by being reported as employees by school districts. The attorney general’s office launched an investigation that found more than 90 lawyers doing so statewide, and has negotiated substantial settlements with a number of them.

Assemb. Harvey Weisenberg (D-Long Beach) said he pushed for that particular reform because, as a retired teacher, “everybody from all over the Island was calling me.”

The stiffer penalties are important, Cuomo said, because they increase the likelihood of local district attorneys prosecuting such cases.

The legislation also requires school districts and BOCES districts to file annual reports on lawyers they hire, report the earnings of all retirees working for them who are making more than the state cap. Currently, retirees seeking to make more than the state cap of $30,000 must get a waiver from the state. The proposal also requires districts to post online the compensation of school administrators.

Because superintendents often have pay packages that include private annuities, cars and insurance on top of their salaries, it’s important to disclose them to the public, said state Sen. Kenneth LaValle (R-Port Jefferson Station).

“Given where we have superintendents having a greater salary than the governor, the public needs to know how their CEO is being compensated,” he said.

In regard to retirees collecting salaries on top of pensions, the legislation requires that school districts make a concerted effort to hire nonretirees for unexpected vacancies. It also bars retirees from returning to the same or a similar job for one year after retiring.

Rosemary Jones, president of the Suffolk County Superintendents Association, said that barring retirees from returning to work for a year could create problems for school districts. “I just know that districts across Long Island have many, many openings that they absolutely cannot fill.”

But Cuomo called the reforms “a dramatic and sweeping piece of reform legislation.

“The system can work,” he said. “It’s not impossible to get change done.”

THE STORY SO FAR:

–FEB. 14-17 Newsday reports five Long Island school districts falsely reported private attorney Lawrence Reich was a full-time employee. Grand jury in Suffolk opens investigation. FBI subpoenas districts’ financial records. State comptroller’s office says it will audit four of the five districts.

–FEB. 18-21 State attorney general starts investigation. Newsday reports six more districts listed attorneys as employees.

–FEB. 26-29 Newsday reports attorney Carol Hoffman solicited Roslyn and Glen Cove districts, asking to be put on payroll.

–MARCH 6-7 State Comptroller Thomas DiNapoli announces Reich will have to pay back pension he’s collected since 2006.

–MARCH 28 Newsday reports that 23 school districts on Long Island improperly reported private attorneys as employees.

–APRIL 3 Newsday reports state retroactively gave Valley Stream real estate lawyer Albert D’Agostino 21 years’ credit in state pension system. State Attorney General Andrew Cuomo says “multiple acts of fraud” were committed. Cuomo expands probe to include towns and villages. DiNapoli moves to recoup improperly awarded pensions, and says he will require districts to recertify anyone who does not appear to be an employee.

–APRIL 4 Newsday reports DiNapoli, while chairman of the Mineola school board in the 1970s, voted to put attorney Henry Weinstein on the district payroll.

–APRIL 10 Cuomo says his office has found more than 90 attorneys statewide, including 20 on Long Island, who received pensions because of “potentially fraudulent” claims. He says he may charge the lawyers.

–MAY 5-22 Newsday reports extensively on retired school administrators collecting six-figure pensions and earning additional six-figure salaries, such as Malvern Superintendent James Hunderfund, who collects a pension of $316,000 — the largest public pension in New York — as well as a salary of about $200,000 a year.

–MAY 22 Attorney General Andrew Cuomo holds hearing in Farmindale on pension abuse at which state Education Commissioner Richard Mills announces that the practice of retired school officials getting both their state pensions and paychecks in interim appointments would be suspended for two months.

–TODAY State legislators and Cuomo set to announce a package of reforms to increase penalties for pension fraud and close loopholes that led some retirees to collect six-figure salaries on top of six-figure public pensions.

THE KEY POINTS: The proposed reforms dramatically increase the penalties for pension fraud and abuse.

–Bars lawyers from simultaneously serving as both employees and independent contractors of school districts or BOCES and makes any violation of that a felony. Also makes it subject to a fine of up to three times whatever the violator was paid;

–Requires school districts and BOCES to report annually all lawyers who were hired, what they were paid and whether they were treated as employees;

–Requires school districts to break out all compensation and benefits paid to school administrators and to post that information on their Web sites;

–Requires school districts and BOCES to report to the state comptroller earnings of retirees

–Compels any school district to demonstrate an urgent need when it seeks to hire a retiree and show the detailed efforts it had made to hire a nonretiree;

–Prevents a retiree in any public-sector job from returning to work in the same or similar position for one year;

–Changes the criminal penalty for pension fraud from a misdemeanor to a felony.

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Copyright (c) 2008, Newsday, Melville, N.Y.

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