Posted on 05/14/2007 3:33:29 PM PDT by DogByte6RER
The Teachers' Lesson: How To Scam Social Security
by David Hogberg, Ph.D.
How would you like to work for just one day and earn thousands of dollars for it afterwards? Perhaps that sounds like an infomercial on cable TV at three in the morning. Or maybe it sounds like another FOX TV “reality show.” In fact, it is the experience of more than a few Texas schoolteachers.
In 2002, the Dallas Morning News reported that the Coleman Independent School District advertised on its website a “Temporary Employment Program” that “may include custodial work, cafeteria work, clerical work, classroom aide.”1 Most important, the website stated, “if employed by Coleman ISD in a temporary role your compensation for the work will have deductions for the Teacher Retirement System and for Social Security.” What Coleman was advertising was a well-known (among Texas teachers) legal loophole that enabled teachers to get more spousal benefits out of Social Security.
Decades ago, a public employee whose spouse was employed in a job covered by Social Security would have three sources of retirement income. The employee would have a public pension, the spouse would have a Social Security benefit, and, because the employee was married to a Social Security beneficiary, the employee would be eligible for a full Social Security spousal benefit. In 1977 Congress ended this practice by passing the Government Pension Offset (GPO). Under GPO, a public employee’s spousal Social Security benefit was reduced by $2 for every $3 he received in his public pension.2
Public school teachers in Texas eventually found a loophole in GPO. They could still receive their public pension and full Social Security spousal benefits if, during their last day of public employment, they were in a job covered by both Social Security and a public pension program. School district jobs such as janitor and cafeteria worker fit the bill nicely. A system was developed to exploit this loophole, which worked out well for both teacher and school district alike. Teachers would be hired for one day to mop some floors or do similar work, which made them eligible to receive much larger retirement benefits courtesy of the U.S. taxpayer. The school districts would charge the teachers “fees” for the privilege of holding these one day jobs, fees that would add up to millions of dollars for the districts.3
Congress eventually got wind of this scam, and had the Government Accountability Office investigate. The GAO issued a report in 2003 noting the use of loophole was growing, with officials of one Texas school district reporting “that use of the exemption grew from one worker in 1996 to 1,050 in 2002.”4 In 2004, Congress closed the loophole with legislation requiring public employees be employed for five years in a job covered by Social Security in order to be eligible for full spousal benefits. However, the GAO report concluded that exploiting the loophole was legal and that the teachers would get away with it:
…the law provides an exemption from the GPO if an individual’s last day of state/local government employment is in a position that is covered by both Social Security and their state/local pension system. In these cases, the GPO will not apply, and Social Security spousal benefits will not be reduced.5
Enter Joe Fried, a CPA who runs a Texas-based nonprofit, the Public Program Testing Organization, which studies the effectiveness of government programs. Fried has written a book on Social Security that contains a chapter on this scandal.6 “The book was the first time I’d looked into it,” said Fried. “I returned to it after the book, and the more I looked into it, the more it became a kind of crusade.”7 However, Fried was unable to get the Social Security Administration to take any action. Using the Texas Public Records Act, he launched his own investigation. He compiled a bevy of evidence that he turned over to the Inspector General of the Social Security Administration. That was enough for the Inspector General to launch his own investigation in October 2005.
In late January of this year the Inspector General released his report on the scandal. It was damning. The report estimates “that 19,212 individuals will receive $110 million in spousal benefits annually to which they may not be entitled. Over their lifetime, they will potentially receive about $2.2 billion in spousal benefits.”8 The report examines seven Texas school districts, finding that the “school districts collected approximately $7.4 million in fees from their one-day workers, while only paying them about $900,000.”9
The report further noted that five of the districts had agreements with the Social Security Administration that precluded them from providing Social Security to part time workers. The Inspector General was not impressed with the districts’ claim that the one-day jobs were full-time jobs: “Although school district officials stated they hired the one-day workers for full-time positions, we found there was no intent or expectation by either party that the employment would last longer than one day.”10
Unfortunately, the overall reaction to this scandal has been a collective yawn. Other than a few press stories, the media has largely ignored it. No one in Congress is calling for an investigation. And the Social Security Administration seems determined to ignore its own Inspector General and sweep the matter under the rug. The Waco Tribune-Herald reports that Social Security Administration spokesman Mark Hinkle, in an interview with the paper, “stressed the agency doesn’t anticipate finding problems.”11, 12
According to the Tribune-Herald, the Social Security Administration will only review whether the school districts had valid participation agreements with Social Security. The agency will not investigate if those agreements were misused or if individual teachers are receiving benefits to which they are not entitled. “We’re not even getting down to that level,” Hinkle said. “We’re just looking at (the agreement) on file and seeing that everything is in order.”13
Fried sees it differently. “Can you imagine if this was a private company?” he asks. “In the Tyco scandal, CEO Dennis Kozlowski stole $600 million from private investors, and the media and prosecutors were all over it. This is over $2 billion bilked from the taxpayers and no one seems to care.”14
Fried also notes that a new Social Security Commissioner, Michael J. Astrue, was just approved by Congress. Says Fried, “Whether Astrue takes this scandal seriously is the first true test of his leadership.” Indeed, it is.
David Hogberg, Ph.D. is senior policy analyst at The National Center for Public Policy Research in Washington, D.C. Comments may be sent to dhogberg@nationalcenter.org.
It shouldn't be surprising that unionized public school teachers are exploiting a loophole in an already corrupted system.
A good analogy would be that of rival drug gangs or mafia families who rip each other off from their ill gotten gains...
Sad ping for later reading.
I have a question for you. We have a teacher [here in non-union Texas] who has worked 20 years in the public sector. She very recently got her alternative certification. Since she’s paid into SS for all of those years, shouldn’t she be able to draw on it when she retires?
“Social Security is nothing more than a ponzi/pyramid scheme that is legal because the government runs it. “
So is the stock market; your broker, by virtue of his federal and local licenses, is an agent of the state, compelled to report your activity (and the income it generates) for the purposes of taxation. By the time he gets around to calling you with a “hot tip” rest assured his firm and his top-dollar clients have already made their money; now it’s his turn. You just have to be lucky enough to be one of the suckers who jumps on the gravy train (and subsequently leaves it, too) early enough to cash in.
Truly, a stockbroker is little more than a bookie in a better suit, only he will only break your legs in a metaphorical and legal sense when you don’t pony up.
And as for loopholes, they are purposely written into laws in order to be exploited. It’s what the intended class of future ‘exploiters’ lobbied for, and paid for, after all.
Seems to me the only “clean” retirement plan, free of government interference, regulation, scam-artists and all the rest is to bury cash in your mattress.
Of course, that’s almost guarenteed to leave you eating pet food in your old age, so, there ya go. Free markets, my backside.
Hi Red,
Thought you might like to hear of another Social Security rip-off.
Cheers.
Of course, I have an option to participate in the stock market, and can stop playing in it any time I want. If only that was true of Social Security...
Well put.
bump for later reading on social security scam
You may know this already, but did you know that our Congresscritters do not use Social Security? They are all members of the old style system where the members pay into a federal fund, instead of social security. My husband has been with the Supreme Court as a programmer since 1980 and he is under the old system. As a result, he is ineligible for social security because of this. He is one of the very few left. The system he is in is far superior to what current employees have and it is the same system that Congress uses. He was given the option to switch to FERS (the current system that does use SS) but turned it down. So while the rest of us may be hoping that social security doesn't run out, at least our Congressmen and women will be a-okay.
Mind thse words, because they might be considered prophetic by future generations:
At some point, in the very near future, the American people will be asked to make a choice of which government scam they like better, and therefore, wish to keep; Social Security or Medicare, and at least one of these abominations will disappear if only because the tax base can no longer support both simultaneously at current rates of funding.
With one gone, the other will be firmly set on the road to final collapse because the government can’t order toilet paper, let alone save money on people’s behalf or provide them with Band-Aids and eyedrops, at an affordable price. The very inertia and stupidity of government will finally destroy the other abomination.
Just be ready to ride out the impending disaster as best you can. Prepare now, because you won’t have the chance to later on.
ping
It would seem that the Congress would do better if they spent more time on fixing all the monies stolen by legal loop holes and reparied such things as illegal immigration and failing school systems and social security, etc. rather than trying to make things worse for the overloaded taxpayers of America.
Politicians in Washington D.C. and elseware need to return to Christian ethics in order that our nation not be destroyed from within and the future of American children be secured.
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