The next big story: Double dipping | Arkansas Blog

Wednesday, July 22, 2009

The next big story: Double dipping

Posted By on Wed, Jul 22, 2009 at 12:33 PM

State Rep. Allen Kerr (R-Little Rock) may be onto Arkansas's next big political story. It will be easy to understand if it pans out. It will be about double-dipping elected officials.

It has long tentacles. They could strangle some cogs in the Democratic political apparatus. And the strangling, if it's done, would be the duty of Attorney General Dustin McDaniel, who'd like to have friends in county courthouses not only for his likely promenade to re-election in 2010, but his race for governor in 2014.

Here's the deal:

(UPDATE FOR COMMENTERS: This is about ELECTED officials. There are many legal ways for public employees to retire and be rehired. The McDaniel opinion makes clear that retirement of an elected official means vacating the office, not just skipping some checks so they can start double-dipping. This is outrageous and it's huge if it's bigger than the lucky three already nailed in Garland County for this slimy practice.)

Kerr won't name names yet, but he thinks he has solid information of a scheme of elected officials, primarily at the county level, to draw both their regular pay and retirement pay for the same elected job. Put politely, you could say these officials think they found a loophole to exploit. Put another way, you could argue that they are defrauding taxpayers.

Here's how it worked. These elected officials would stop drawing their paychecks for 90 days. They would keep working, however, and would not resign from their elected offices. But then they would apply for retirement benefits, under the theory that they had "retired" for the statutory 90 days required in a 1999 law to begin drawing retirement. (The recent legislature extended the retirement period to six months.)

According to Kerr, officials at the Arkansas Public Employees Retirement System told him that they did not check if employees had actually left work before beginning retirement. PERS Director Gail Stone commented to me, "Why would a rational person work for free?"

Kerr is worked up. "There are a lot of people who aren't making one good paycheck and these guys are making two?"

He said it would be one thing if a public officials actually vacated the office, took retirement and then sought appointment or re-election to the same position. Then, at least, the double dipping would be legal, transparent and subject to voter approval or disapproval.

So where do we stand? The Retirement System, in concert with Legislative Audit, is compiling a list of "retirees" who never really vacated office. Kerr has also talked to Attorney General McDaniel and received an official opinion that says, in essence, that employment must be terminated for someone to qualify for retirement . The "plain meaning" of termination, the opinion says, "seems to contemplate an actual end to the employer-employee relationship for the given period." He'll be talking to McDaniel again this week. As attorney for PERS, McDaniel will have to recommend a course of corrective action, if one is necessary.

This will be interesting to watch unfold. How many people learned of the "loophole" and exploited it? (Surely no legislator has tried this gimmick.) How vigorously will McDaniel go after the situation if it's confirmed that the practice is widespread? Is loss of the retirement check enough? Should benefits be repaid? Is there fraud to consider on the part of "retirees" or the people who certified they were retired if they had reason to know they were not?

A spokesman for McDaniel said: "The Attorney General has no personal knowledge of any fraudulent or otherwise improper attempts by elected officials to obtain retirement benefits.  Representative Kerr’s opinion request was the first time the AG was generally aware that the issue was being discussed.  The AG contacted Representative Kerr yesterday to determine whether there are any specific situations wherein retirement payments were improperly obtained.  Kerr declined to reveal any specifics at that time, although he stated he would be back in touch.  It is our understanding that legislative audit is reviewing APERS’s records in an effort to identify potential improper benefits.  Certainly, that is the proper entity to be conducting that type of inquiry at this time.  However, if Legislative Audit, Representative Kerr, or anyone else, presents the AG with facts suggesting improper conduct, we consider all options available to the State and determine the proper course of action. The AG specifically told Rep. Kerr that he should share any evidence he had of wrongdoing, but Rep. Kerr asked for more time to investigate on his own."

Stone, director of the Public Retirement System, says her agency is not an "auditing" agency. Under terms of the law, pay agents merely have to certified that a public employee has not been on a payroll for 90 days (now 180) for the person to qualify for beneifts.

Stone said legislative auditors were going to review two years' worth of retirees to see if a pattern of false retirements had occurred. Then, the review could go deeper. Stone said payment of retirement benefits is not considered public information. But the Hot Springs Sentinel Record reported today that three county officials there had gone off payroll for three months. Stone has not confirmed that they are also drawing state retirement while remaining in their elective positions. Stone said she'd heard a great deal of talk about the alleged practice since McDaniel's opinion was issued, but had no direct knowledge.

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