It’s the holy grail of pension maximization: getting enough overtime to retire at full salary, rather than the half-salary usually promised to people in the state retirement system.
But some Schenectady police and firefighters have managed far more than just a full-salary retirement: They ended their careers with a pension far higher than their final salary, and the amounts are crushing the city financially.
Schenectady is now spending one-twelfth of its budget on pension payments. This year, the city budgeted $6.3 million for pensions, the majority of it for police and firefighters, and that number is expected to rise even though the city has reduced staff and cut back on overtime.
Schenectady’s top 5 pensioners
• Police Investigator Daniel Moran, $84,649. Base salary: $63,769
•Deputy Fire Chief Rodney Rosate, $82,894. Base salary: $71,589
•Fire Capt. Peter Zeppetelli, $81,310. Base salary: $54,481
•Police Lt. John Hamilton, $80,242. Base salary: $65,098
•Fire Lt. Joseph Morgalis, $78,879. Base salary: $59,014
Meanwhile, other workers are retiring with $15,000 or less in their pensions because their positions did not offer any chance for overtime.
Schenectady Councilwoman Barbara Blanchard gets $12,000 for her 20 years as a child protective department supervisor for the county. Blanchard, who is now disabled from a stroke, must rely on that money to help pay for caregivers.
Her husband, Art Edelstein, said the $80,000 pensions drawn by police and firefighters are deeply unfair by comparison.
“It’s offensive to every worker like Barb and myself whose income is fixed” because there were no opportunities for overtime, he said. “I can’t tell you what a sore point it is for me. I consider it inappropriate and unfair.”
Blanchard is also receiving pay as a councilwoman until the end of the year, when her term expires.
The problem goes beyond fairness. The pension system is underfunded because of the way in which workers increase their pensions.
It’s the result of hard work — grueling overtime over the course of several years — and a careful calculation many police officers and firefighters can do in their heads.
Depending on their tier in the retirement system, they can only increase their salary by 10 to 20 percent each year, so they have to build up overtime pay over the years, pay that could more than double their pension.
The trouble is that much of the increase happens in the last few years of their career, taking the pension system by surprise and leaving it underfunded. The pension system was designed to invest money over the course of decades.
Municipalities send money to the pension system every year to invest in each worker’s retirement, with the goal of fully funding that retirement by the end of the worker’s career. They calculate the amount needed each year based on the worker’s actual earnings.
But when a worker suddenly accelerates earnings, there isn’t enough time left for the city’s payments to grow before the worker retires. To keep the system’s investments healthy, municipalities have been required to contribute more and more. Schenectady now pays $6.3 million; nine years ago, it paid $4.8 million.
Public Safety Commissioner Wayne Bennett said the state can’t retroactively change benefits that were promised to workers years ago.
“Like it or not, a lot of these agreements were negotiated in better times,” he said. “Times have changed, but you can’t take them back.”
Still, he’s sensitive to the financial problem.
“We have cut the overtime in this department significantly,” he said. “We’re aware of the budget crisis. We don’t want money to be wasted.”
Gov. Andrew Cuomo has criticized police and firefighters for using overtime to take home much larger pensions that the system was designed to pay out. While the pension fund also lost money in its investments during the recession, Cuomo blames much of the underfunding on extreme overtime.
He calls it “pension padding” and has instituted new tiers with stricter limits on the amount of overtime that counts toward a worker’s pension. Instead of a limit of 20 percent of the previous year’s total income, new workers’ pensionable overtime is capped at 15 percent of base salary every year.
That means workers won’t be able to ratchet up their pensionable income over the course of a few years. No matter how much overtime new workers perform, only a small portion will count toward their pension.
But those limits will only affect workers hired after 2009, so the city won’t see any change in costs until at least 2030. For now, Assistant Police Chief Michael Seber said, maxing out pensions through overtime is a constant temptation.
He called it the “carrot right in front of them” and said many police officers do the calculations necessary to determine how much overtime will help their pensions.
“Before you go to retirement, you start to think about the financial numbers,” he said. “It obviously helps them financially.”
Firefighters make the same calculation. Of the city’s top-paid pensioners, firefighters make up seven of the top 10.
Fire Capt. Peter Zeppetelli managed to retire in 2006 with an annual pension that was $27,000 more than his full salary. He had been paid $54,500; his pension is $81,300. He benefitted from a retirement program that based his pension on his income in his last year of work, allowing him to pour on the overtime for just 12 months to increase his pension for life.
The state and city provided retirement and salary records to The Sunday Gazette in response to a Freedom of Information Law request.
The records show that maxing out a pension isn’t new — as far back as 1988, firefighter Thomas Norris managed to retire with a pension just $700 less than his final salary. But getting more than their final salary was so difficult that city Personnel and Benefits Administrator Kathy Finch was startled to hear anyone had managed it.
Even the state booklet on the retirement system suggested employees would probably never hit the 20 percent income limits, which stop employees from maxing out their pension with just one year of extreme overtime.
“A 20 percent increase from one year to another is unusual. Therefore, most Tier 1 members are not affected by this limitation,” the booklet said.
It’s not easy, but dozens of Schenectady police and firefighters have hit that limit, year after year. Still, managing to earn a pension higher than the worker’s final salary isn’t easy. Police Detective Arthur Zampella, who led the city’s overtime pay lists for years because he routinely answered middle-of-the-night calls, didn’t hit his salary when he retired. He came close, but he fell short by $300.
Seber remembers Zampella’s dedication to the job, not his pension.
“He answered the bell any time, any day,” Seber said. “We don’t have a lot of those officers now.”
Zampella was the department’s go-to man for the hardest investigations, including interviews of children who had been sexually abused. He often worked two shifts a day, coming back to work whenever detectives needed his unique skills. But he couldn’t lift his pension over his salary.
Other police found ways to get there.
The top pensioner in the city, police Investigator Daniel Moran, retired in 2011 with a pension of $84,600. His salary had been $63,800. Moran, who worked for 38 years, was one of the last officers in Tier 1. That tier promised officers a pension worth 75 percent of their final salary.
He picked up the additional $36,200 through overtime, paid by the federal government because he was assigned to a federal task force.
Others lifted their pay through a few calculated years of overtime. In some cases, they also benefitted from injuries.
Police Lt. John Hamilton retired a year before Zampella, in 2008. He has a pension of $80,000. His last salary was $65,000.
He put in three years near the top of the city’s extreme overtime list. From 2002 through 2004, he worked the equivalent of 30 extra hours a week, every week.
The retirement system uses the worker’s top three years’ pay to calculate the pension. Three years was all he or Zampella needed to boost their pay.
While Zampella finished with a much higher overall income and more years of service than Hamilton, Hamilton got a higher pension because he retired under the accidental disability system, which allows a 75 percent pension.
Saving up vacation time helps, too. Workers get a payout upon retirement, and that money counts toward the pension calculation.
Edelstein, the retired state worker, said he’s getting an additional $2,000 a year in his pension because he didn’t take all of his vacation time.
“That’s what they tell you: make sure you max out unused vacation time,” he said.
Mayor Gary McCarthy said some of the complaints about high pensions come from those who wish they could have done the same thing.
“I think some people view things with envy,” he said, “even though you want people to be well paid. That built the middle class.”
He’s happy with the new tiers and their restrictions.
“The governor has changed things, so we’re moving in that direction,” he said.
But he said police and firefighters will ultimately be judged by their performance, not their pensions.
“When there’s a fire, we put a piece of apparatus in front of that house in 180 seconds,” he said. “At that point, I’ll tell you, you really don’t care what the pension levels are.”