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The legal ins and outs

Two state laws are at play in the issue of recent state purchases of PERSI service for certain retiring employees: 67-5342, which bans any severance pay to a state employee who leaves voluntarily, and 59-1363, which covers purchases of additional membership service by a PERSI member. That statute states, “The member shall be solely responsible for the costs of such purchased service, except that an employer may participate in the costs at its option.” Employers who are part of PERSI include not only the state, but local governments, some of which permit severance and have established early retirement incentive programs. Purchases of service by employees have become increasingly common in recent years, according to PERSI Director Don Drum, particularly as retiring employees opt to roll the money from their 401K accounts into PERSI as they retire. Purchasing service is an expensive proposition, he noted; the employee must pay the full actuarial cost so that PERSI is not providing them with an enhanced benefit, they are purchasing an enhanced benefit. Click below to read more.


In the course of reporting my article in Saturday’s Spokesman-Review, I asked Drum if those two statutes conflict. He said the deputy attorney general at his agency says they don’t, because in a purchase of service, the money is paid directly to PERSI, not to the employee. Last Wednesday, I asked Gov. Butch Otter about this issue after his speech to the Associated Taxpayers of Idaho. “I have to refer that to the A.G., because I was asked that same question by an agency, ‘Can we do this,’ and I said I have no idea, I don’t know what’s legal,” Otter said. He said it’s something he’s looking into. Asked if he’d want more agencies to make such purchases of service, he said, “Well it depends upon if they’re doing it legally, if they’re doing it legally. And I don’t know if they’re doing it legally until I hear from Lawrence.”

I then contacted the office of Attorney General Lawrence Wasden to see if the attorney general had yet issued a legal opinion, but was informed that none had been requested. The next day, I received a call from Wayne Hammon, Otter’s budget director, who informed me that he personally had spoken with two deputy attorneys general about the issue, but the governor’s office had not requested a formal attorney general’s opinion. “Purchasing of PERSI time does not result in a payment to an employee, therefore it is not severance,” Hammon told me. “No money is given to them.” He said based on his conversations with the deputy attorneys general, “The statute that applies is 59-1363, which says an employer may participate in the cost at its option. It gives clear discretion to the employer to make that decision.”

In the course of my reporting, I provided both statutes, plus PERSI’s interpretation, to another attorney who’s also a state legislator, and who reached a different conclusion. I also spoke with several other legislators who said their concerns about the practice went beyond legality to questions of precedent, fairness and cost. I also collected large amounts of additional information in reporting my article, but of course, not all of it fit in the story. An example: I conducted an extended interview with Patti Tobias, administrator of the state court system, about why the judicial branch has purchased PERSI service for magistrate judges. That occurred under a separate, specific state law that set up a program, funded by a special $6 fee on court costs, to provide an incentive to magistrate judges to serve as part-time “senior judges” after they retire. That’s part of a strategy in which the courts are increasingly utilizing senior judges rather than adding more judges. That information was reduced to a footnote in the box accompanying my article, and then the footnote was trimmed out for space, so it ended up not being mentioned at all.

Interestingly, the severance ban applies specifically to an employee, whether classified or exempt, who leaves state service “of his own volition and not under duress.” Two of the three state purchases of PERSI service in the past year were for employees who weren’t leaving state service voluntarily - one was being terminated for disciplinary reasons, and the other was being laid off. The purchases of service allowed the two to retire instead. Only in the case of the head of the Human Resources Division, Judie Wright, was a purchase of service made for an employee who was leaving voluntarily, something Hammon stressed. “Judie brought this idea to us - it was not like we were looking to get rid of Judie, not at all,” he said. “She’d announced her retirement earlier, two years ago, and the governor had asked her to stay on.”

Hammon said when Wright proposed an early retirement as a money-saving move that could avoid a holdback-driven layoff at DFM, he thought it was a good idea. “If it’s legal, it’s salary savings, and it’s going to save someone’s job, it seemed like a good idea,” he said. “so that’s why I recommended it to the governor - Judie and I did, the two of us recommended it.”


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Betsy Z. Russell covers Idaho news from The Spokesman-Review's bureau in Boise.

Named best state-based political blog in Idaho for 2013 by The Fix

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