ERIP Saves money

The potential loss of the Early Retirement Incentive Program (ERIP) is especially disheartening to educators who are planning to apply for early retirement this spring. Because of the way the state budgeting process works, the money in the FY09 budget was spent on those teachers who took early retirement at the end of the 2007-2008 school year. Some officials, including Superintendent Luna believe cutting this program would save $4 million in the FY10 budget.

You may have heard the expression, “Never tear down a fence until you know why it was there in the first place.” Let’s take a minute to understand why we have an ERIP. The Legislature created this program in the mid ’90s with the goal of saving the state money by allowing experienced teachers to retire with a bonus payment and being replaced by a less experienced (and less expensive) teacher. Since the implementation of ERIP in FY96, the state has saved approximately $90 million in salary and benefit allocations for the teachers who have chosen to retire early. This savings is above the implementation cost of the program. That’s a huge savings to the state.

How did this savings occur? The average age of ERIP participants has been 58, while the average retirement age for Idaho teachers in general has been at least 60. If each group of retiring teachers had continued to work until they reached the age of 60, they would have continued to make the same or greater salary during those years, depending upon whether the Legislature increased the calculating base salary. Instead, they were replaced by newer teachers and Idaho saved thousands of dollars.

Although the savings haven’t been quite as high over the last few years, projections show that the state will continue to at least triple their investment in this program.

Rep. Fred Wood (R-Burley) raised an important consideration during the JFAC hearing yesterday. He noted that under Superintendent Luna’s proposal, the state will be asking school districts to absorb a $15 million reduction in the salary allocation formula, perhaps by not filling vacated positions. Funding ERIP might encourage more teachers to retire, thus making attrition the least painful way to absorb the $15 million loss.