HIDDEN INCOME,
PADDED PENSIONS
School officials may
face IRS, state penalties
By GREGORY J. VOLPE,
from the Home News Tribune Online, March 21, 2006
TRENTON — School
administrators targeted in a recent report by the State Commission of
Investigation may face civil tax and pension charges for overreporting their
earnings to the state pension division and underreporting their pay to state and
federal tax collectors, an SCI official said yesterday.
Testifying before the Assembly Budget Committee, SCI Deputy Director Charlotte
Gaal said the Internal Revenue Service and state divisions of taxation and
pensions were looking into the commission's work before it released a report
last week documenting questionable ways top school administrators boosted their
pay and padded pensions.
"They're very interested in it," Gaal said of the IRS.
Gaal told lawmakers it is likely administrators violated tax and pension laws,
but no criminal statute. An IRS spokesman neither confirmed nor denied an
investigation.
"I think there's illegality here. There's a fair amount of it," Gaal said.
"I think there's illegality of it in the tax area. I think there's
illegality in the inclusion of pension money that should not be included."
The report is rife with examples of administrators who didn't report bonuses or
buybacks of unused sick time or improperly deferred payments for tax reasons.
On the other hand, the report documents several administrators who included
similar earnings in reports to the Division of Pensions.
"It's so endemic and it's so systemic that I don't believe it's accidental,"
Gaal said.
Barry J. Galasso, executive director of the New Jersey Association of School
Administrators, wouldn't comment on the potential outcome with tax agencies.
"I have no idea what they would do, I don't want to speculate," Galasso said.
SCI officials said addressing their findings would require legislative changes
to bring more disclosure and oversight.
"You're dealing here with a culture," said SCI Executive Director Alan A.
Rockoff. "A culture that was not developed in the last decade. It's
been building in the state for generations."
The report recommended several changes including capping the amount of unused
sick time that can be cashed in, having the Department of Education approve
superintendent contracts and stronger monitoring of pension-eligible income.
Legislators from both parties pledged to bring those changes, though SCI
officials said their legislative recommendations have been largely ignored.
"Shame on us, then," Assemblyman William Payne, D-Essex, said after asking SCI
officials why previous recommendations were never enacted.
The report has also been forwarded to the state Attorney General and the U.S.
Attorney, and to tax, pension and education authorities.
On the Web: To read the SCI's full report:
www.state.nj.us/sci/newindex.shtm
Gregory J. Volpe:
gvolpe@gannett.com
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