Take Two: A Primer on Double-Dipping Retirement in Arkansas (Updated!)

Recent reports that two highly compensated state employees (here and here) are joining the ranks of “double-dippers”—that is, “retiring” briefly, collecting pension benefits, and then returning to their positions to collect both a paycheck and a state pension—have brought this issue back to the front burner.

It’s perhaps the most shameless and indefensible practice in Arkansas state government. And while efforts have been made to shut down double-dipping, it just keeps coming back.

“It’s the living dead; it won’t go away,” said Rep. Allen Kerr, a Little Rock Republican who’s been the scourge of double-dipping in the legislature. Last week, Kerr requested an interim study from the Bureau of Legislative Audit to determine the full scope of the problem.

Although the legislature moved in 2009 to contain double-dipping, the law grandfathered in a large number of state employees (more than 1,800, Kerr says) who will still be able to exploit the loophole that allows workers to return to their jobs after retiring, he said.

Perplexed? Worry not! Here’s a helpful compendium of resources to get you up to speed on double-dipping:

Wait, what? How on earth is this legal?

Let’s look at the paper trail: Double-dipping as we know it was birthed by Act 1460 of 1999, ostensibly as a way to retain experienced and knowledgeable state employees whose expertise would be lost to retirement.

When abuse of the practice came to light, Act 657 of 2009 was enacted to limit the practice by expanding the required retirement time from 30 days to 180 days. However, that law exempted many high-level employees currently in the system (which is why we’re seeing, and will continue to see, fresh rounds of news stories about double-dippers). Specifically, employees who are enrolled in Deferred Retirement Option Plans (DROP) were “grandfathered” under the 2009 law, so it doesn’t apply to them.

This year, Act 40 was enacted to further close the double-dipping loophole by more carefully defining what constitutes “termination” of employment.

What’s the rationale for allowing double dipping? 

The general rationale is that, with retiring employees who may boast decades of specialized experience in a position, there is value in retaining that expertise, and that the state would not save a significant amount of money in hiring a new person to fill the job.

Let’s take the case of Joe Arkansas, who serves as deputy director of the Office of Squandering Taxpayer Dollars, where he’s paid $110,000 per year. Joe just retired, and Jane Newbie took his place at $85,000 per year. Now you’re paying Joe a retirement pension, and then you’re paying Jane to fill the post. I

However, if Joe were to wait 30 days and then get hired back to his old job at the starting salary of $85,000. So you’re still paying him the pension he would be receiving while retired, and you’re paying him the salary you would have been paying the replacement anyway, plus he brings all these years of experience and expertise to the table. So the argument there is that it doesn’t necessarily cost more money.

One problem with that line of thinking is that, since the pension system is depends in part upon the current workforce to fund the system for retirees, Joe Arkansas is now a double-drain on the system. He’s getting a pension, but he doesn’t pay in to the pension system since he’s now “retired.” Confusing, right?

Also, as Rep. Kerr points out in this interview, hiring retirees keeps new blood, fresh ideas and innovative thinking from rising through the ranks. Kerr’s point is that, if younger employees see paths to leadership blocked by “retirees” who never leave, you’re less likely to see change and innovation in state government. It’s also an uncompetitive hiring practice, since Joe’s job was probably held for him while he took his 30 day retirement. Kerr says that, from this perspective, double-dipping is a sterling example of the “old boy” system of politics and government, in which the system exists to serve insiders rather than the taxpayers.

What do the double-dippers themselves have to say? Here’s a sample: In 2010, Little Rock’s KARK interviewed a Lonoke County double-dipper who blamed her situation on bad advice from state retirement officials.

Why is this making a comeback now?

Two weeks ago, we learned that Artee Williams, Gov. Beebe’s director of workforce services, was joining the ignoble ranks of double-dippers. His salary before retirement was over $136,000 per year.

This story from the Arkansas News Bureau’s Rob Moritz gives good background on double-dipping, as well as on how Williams’ short-term retirement and subsequent return sparked Kerr’s request for more action.

This August 2011 piece from the Arkansas Democrat-Gazette’s Mike Wickline also provides an excellent briefing, but a subscription is required.

Just how many of these double-dippers are there, and how much are they costing us?

There’s the rub! We’re not entirely sure, Kerr says, and one of the purposes of his interim study request is to better assess what the numbers are to determine future actions that can be taken to rein in double-dipping. The August 2011 Wickline piece in the ADG, referenced above, says the total number at the time that article was written is “more than 500.” (This 2010 report from Legislative Audit gives some insight into some of the higher level retirees who are double-dipping [opens as PDF], but is not comprehensive.)

This is terrible. Surely this is a problem that’s confined to Arkansas, and other states don’t allow such a horrendous and boneheaded practice. 

No, it’s actually a rather widespread phenomenon. A Bloomberg News story from earlier in the year offers a good perspective on double-dipping in other states, along with a look at how states are struggling to clamp down on the practice.

This article from Governing.com provides an excellent overview of double-dipping and possible solutions, including the suggestion to raise the retirement age for public pension eligibility to match that for Social Security, which the author says “would eliminate most of the double-dipping.”