Incentives for Voluntary Termination of Employment

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LB 512 went into effect on September 1, 2017. Among other things, it sets up duties for school districts that offer Golf Subsides voluntary termination incentives to certificated employees, and phases out the ability of the board to exclude the expense of such programs from the levy limit.

The Statutes

Neb. Rev. Stat. § 79-8,142 establishes the duties of the district when creating an incentive for voluntary termination for teachers, and when paying voluntary termination incentives.  The main take-aways are:

  1. $35,000 maximum on incentives.
  2. Time limit on payment: five years from the certificated teacher’s voluntary termination, or before the certificated teacher becomes eligible for Medicare; whichever is earlier.
  3. The district must demonstrate to the satisfaction of the State Board of Education that the payment of the incentive will result in net savings in salary and benefit costs over a five-year period.
  4. Any voluntary termination incentives cannot be included in any collective-bargaining agreement.
  5. All voluntary termination incentives paid out must be reported on the annual financial report to NDE.

Neb. Rev. Stat. § 77-3442 is the home of the property tax levy, the maximum levy limit, and the exceptions to that limit.  Prior to LB 512, the statute excluded payments made as an incentive for voluntary termination from the levy limit.  LB 512 has removed this exclusion.  Districts are required to pay for incentives for voluntary termination within their levy limit.  Districts that hit their limit and need to raise additional funds to make incentive for voluntary termination payments can do so outside the levy limit if the incentive is contained in a collective bargaining agreement that was in place prior to September 1, 2017.  The district can only partially pay for the incentives this way, and that exclusion decreases annually in a stair-step fashion to phase out the exclusion by 2020. 

If a district is at the maximum levy limit, the district can pay up to 75% of the incentives it committed to in a collective bargaining agreement prior to September 1, 2017 with funds excluded from the levy limit.  The levy exclusion to pay pre-existing incentives drops to 50% in 2018-19, 25% in 2019-2020, and is phased out at the start of the 2020-2021 school year. 

How this Affects Schools

If your district currently offers an incentive for voluntary termination, and pays for it within the levy limit, you shouldn’t have a change in how you pay for the incentives.  However, you are no longer able to include those incentives in a collective bargaining agreement, and all incentives for voluntary termination for teachers going forward are subject to the constraints of Neb. Rev. Stat. § 79-8,142.

If your district is currently paying off voluntary termination incentives that were agreed to prior to September 1, 2017 you may be able to partially pay for those incentives with funds excluded from your levy limit.  This will depend on your current levy amount and whether or not the incentives were included in your collective bargaining agreement. 

The new statutes have added a fairly complex layer to how early retirement incentive programs are funded.  Any voluntary termination incentives currently on the books will need to be reworked to meet the new statutory requirements, and any existing payment commitments will need to be funded appropriately.  If you have any questions about these obligations, or any other issue, you should contact your district’s attorney or call Karen, Steve, Bobby, or Tim.