NJSBA Survey Offers Insight into Early Retirement Incentives
Governor McGreevey signed legislation (A-2640) on July 15, 2003, that gives school boards, educational service commissions and jointure commissions the ability to offer an Early Retirement Incentive Program (ERIP) as a cost-saving measure.
Last year NJSBA surveyed the 93 districts that participated in the similarly structured ERIPs in 1991 and 1993. Areas surveyed included level of employee participation, cost, savings and overall satisfaction. The research may be valuable to local school officials who need to decide whether to offer an early retirement program. The survey elicited the following responses:
Employee Participation Districts indicated a wide variation in the level of staff participation, with the number of employees participating ranging from one to 100. The average level of participation was 24.7 employees. Expressed as a percentage of total staff employed at the time the plan was offered, the average was 8.2 percent.
Sixty-one percent of the districts reported that these early retirements did not result in a reduction of the overall number of staff. Thus, as is often the case with school districts, vacated positions needed to be filled.
Costs Additional costs incurred by school districts for ERIP participation varied tremendously, based on the level of employee participation, from $89,541 to more than $11 million. On average, the reported cost was more than $2 million. Of special note, some 36 percent of the districts indicated that actual costs were greater than anticipated.
Under the 1991 and 1993 ERIPs, districts could choose to repay their financial obligation over an extended period of time. According to the NJSBA survey, repayment times varied from four to 37 years, with the average being 18.3 years. The survey asked districts repaying on an extended plan, if these "installment" payments are creating any current budgetary difficulties. Half of the responding districts reported that these payments were still causing a financial hardship.
Savings Districts reporting no significant savings through early retirement plans clearly outnumbered those that said they saved money. Half of the responding districts reported no significant savings, 39 percent reported savings and 7 percent were unsure. Of further note, districts reporting savings indicated that those savings occurred, on average, within the first five years.
Satisfaction Districts were asked if they would participate in an ERIP again. Eleven percent indicated they would, while 29 percent indicated that they would not. However, the largest percentage, 61 percent, were unsure.
Districts were also asked to report any operational or educational problems that resulted from ERIP participation. Most concerns related to costs.
Comments included the following:
Staffing issues were not the concern in the early 1990s that they are today. Nonetheless, several districts that participated in the 1991 and 1993 plans reported staffing difficulties. One district stated that "replacing 20 percent of staff was difficult in such a short period of time."
The responses to the Association’s survey underscore the fact that each district’s experience will differ based on its particular circumstances. Even with these differences, an overview of districts’ past experiences, as illustrated by the survey, may be helpful information to boards’ as they assess the pros and cons of participating in a 2002 ERIP.
"NJSBA thanks all of the districts that responded to the survey," said Executive Director Edwina M. Lee. "Their experiences and insights will be helpful as we face the possibility of another ERIP."