More on Louisiana Retirement Systems Abuses

The following is from the James Hartman Associates web site ( It includes material on the New Orleans Water and Sewerage Board retirement system. These abuses exist at all levels of government, all! They will continue until we the people demand change.

S&WB ratepayers funding exec’s $1M retirement plan

23 February 2012 No Comment

New Orleans— “The Sewerage and Water system is not the problem. You guys are the problem. Lack of leadership, and accountability, that’s where the problem is at.”That’s the message of one concerned ratepayer at a recent public meeting, called to discuss a pending rate hike byNew Orleans’ Sewerage & Water Board. This problem agency wants to double your rates.“I never thought the day would come where I’d see my water bill more than my light bill,” the resident told meeting attendees.

While New Orleanians face rising costs to run their water and flush their toilets, what ratepayers don’t know about the Sewerage & Water Board has one statewide leader almost at a loss for words.

“I think people should be insulted by it,” says state Representative Kevin Pearson ofSlidell.

You see, while the Sewerage & Water Board wants you to pay more — a lot more — the agency’s executive director has made a move to line herself up for a lucrative retirement. While you will likely pay more for water, you’ll also be funding quite a bit of money for Marcia St. Martin’s retirement.

St. Martinhas already locked in her retirement benefit. Whenever she steps down as executive director of the Sewerage & Water Board, she’ll receive $175,000 a year — every year, as long as she lives — mostly funded by ratepayers.

But there’s more.

The Sewerage & Water Board says, in February of 2010, St. Martinentered the Deferred Retirement Option Plan, also known as a DROP plan.

Here’s how that works. When she entered DROP, the Sewerage & Water Board calculatedSt. Martin’s retirement benefit, so any future raise cannot be used to get her more retirement money.

WhenSt. Martinentered DROP, she continued to collect her yearly salary. But in a separate account,St. Martinhas also started to collect her retirement money through DROP. Each month, the Sewerage & Water Board deposits a nearly $15,000 check in her DROP account.St. Martincan stay in DROP for five years. If she does, when she officially retires, she’ll receive a big payment: $877,000.

So think of it this way. IfSt. Martinretires in 2015, she’ll receive that $877,000 lump sum payment and, for her first year of retirement, her benefit of $175,000. So in her first year of retirement, ratepayers will mostly fund more than $1 million of payments to the current executive director.

“It is a very significant, very generous arrangement compared to what most people in the private sector, who are actually paying a lot of the bills, are able to get themselves,” says Janet Howard, who heads the Bureau of Governmental Research, a non-profit research group. BGR has spent more than a year looking at retirement systems in the metro area and expects to release a comprehensive report in the spring.

“I think what really is troublesome for people who are not in public sector is… they look at their own lives and how long they’re going to be having to work to hold it together. It just raises questions about the fairness, raises questions about the sustainability,” Howard says.

All state retirement plans have DROP programs. Not many will have as lucrative a lump sum payment asSt. Martin. Janet Howard says 131 current S&WB employees are participating in DROP.

Representative Pearson has led the charge statewide to overhaul retirement systems. “I think we can fix it,” he says. “I can’t say I know we can.”

He says the example with Marcia St. Martin is one of many that can be used inLouisiana, that he says shows a system that needs to be reformed.

“You’re abusing the taxpayers,” says Pearson, “because they are the ones that going to ultimately fund this.”

Just look at a few more examples we dug up where taxpayers are funding retirements. In these examples, people still working in government are also earning retirement income.

State Insurance Commissioner Jim Donelon makes $123,077 a year in his elected job. But separately, from his days as a state lawmaker and state employee, he also collects a retirement benefit of $93,090. So right now, his income totals $217,000 a year.

New Orleans Mayor Mitch Landrieu makes $143,500 a year, but also collects retirement of $80,704 because of his days as a lawmaker and lieutenant governor. Landrieu’s yearly income comes to nearly $225,000.

State SenatorJohnAlario earns income from three separate public sources — $36,873 from his elected position, $37,230 from the teachers retirement system and $30,837 from the state retirement system — for a total of $105,000.

And here’s one more. Burl Cain, the warden atAngola, has a yearly salary of $175,494. Cain also collects retirement money — $35,354 — to bring his yearly income to almost $211,000.

Overall,Louisiana’s retirement systems are in a huge hole. The state’s systems are short $18 billion in benefits owed to employees present and past.

The Sewerage & Water Board’s retirement system appears to be in better shape than many statewide. But taking a look at some of the plans’ paperwork raises some questions.

Janet Howard says, after 34 years and five months as an S&WB employee, you can retire with 100 percent of your highest three-year salary, paid to you for the rest of your life. By contrast, teachers must be employed for 40 years to get full retirement.

“The Sewerage & Water Board also pays into Social Security, as does its employees” says Howard. “So an employee who’s been there for the long term can actually end up making more income when they’re retired than they have when they’re working.

In 2010, Sewerage & Water Board employees contributed four percent of their salary to the retirement system. The employer, or S&WB, was supposed to contribute more than 28 percent to the system.

Rep. Pearson confirms, it’s a huge disparity, one that a private business simply could not handle. “The abuses that have just gone on for so many years are the avoidance of things, the avoidance of, maybe, scaling back benefits.”

But records show the Sewerage & Water Board didn’t contribute that 28 percent in 2010. So somewhere down the road, ratepayers will have to come up with that money to fund the retirement for Marcia St. Martin and hundreds of other employers, at the same time New Orleanians have been asked to double their rates.

“If these things didn’t cost much – again, as you say, 28 percent of someone’s salary is going into the retirement system — what if it was like private industry, and maybe an employer might provide, you know, six and a quarter percent for Social Security, plus they might provide a four percent, five percent match?” Pearson wonders. “That’s about 11 percent, or somewhere in that area. What would you do with that extra 17 percent of someone’s salary? It could probably fix some roads, potholes or some of the drain protection that we really need.”

Marcia St. Martin has a salary around $201,000 a year. Janet Howard saysSt. Martin’s job performance never gets reviewed by the board.

The S&WB said they would schedule an interview for us for comment and clarification. After two weeks, they never got back to us with a date or time.

Marcia St. Martin is just an example we used — every system we reviewed offers DROP.  The Sewerage  Water Board offers a five-year DROP, while some others offer only three years.

And the amount of money obviously differs betweenSt. Martin, who makes $200,000 a year, and a teacher who would likely leave DROP with less than $150,000 in the bank.