Sue Hall-Martin retired from teaching and started drawing her retirement more than a year ago, but this fall, she was right back at school in Spearfish working for a paycheck.

She is one of a growing number of South Dakota public sector employees who do what critics call "double dipping." The number has grown by 75 percent in the past six years, and that has some worried, including former state Sen. Clarence Kooistra.

"Taxpayers should be concerned," said Kooistra, who fought to curtail the practice, which is legal, when he was in the Legislature.

The South Dakota State Retirement System is reviewing its members' use of policies that let them do what employers call "retire and rehire" - drawing a pension and a paycheck at the same time. Some go back to the exact same job after a very short "retirement."

The practice was controversial in the 1990s when there were no strict rules that an employee must actually retire before beginning to receive retirement benefits while keeping the same job. Concern mounted, after the stock market drops in 2001, over whether the practice was draining money from the retirement system. New laws put in place in 2004 aimed to eliminate costs of "double-dipping" to the retirement system and to reduce the number of people who take advantage of the opportunity, and the study, due in December, will evaluate whether that is working.

System director Rob Wylie said an initial review of the practice shows it seems to be close to cost-neutral, the way it was designed.

But the number of state retirees who are back at work hasn't dropped; it has risen - from nearly 400 in 2002 to about 700 today, which is about 3.5 percent of thesystem's retirees. Wylie expects it to keep climbing as the wave of baby boomers reaches retirement age.

Spearfish third-grade teacher Hall-Martin taught for 35 years before retiring in May 2007, thinking she had worked enough and that it would be rewarding to spend more time with her family as her son entered his senior year of high school.

But it wasn't long before her former principal called with a job offer: part-time work coordinating the district's efforts to have its schools accredited. Hall-Martin, now 57, accepted the job and began this fall, having been retired for one year.

Hall-Martin could even be considered a "triple-dipper." In addition to her new salary and her retirement benefits, she also is on her second of three years of early retirement incentive payments from her school district, each roughly a year's salary of her former teaching job. She said she has never heard anyone criticize or question her situation.

She is a baby boomer at the convergence of competing policies, one that encourages workers to retire early, another encouraging a return to work.

Her district and employers nationwide adopted early retirement policies in the mid-1980s, a time of high unemployment when all the boomers were of working age and when women had come into the work force in unprecedented numbers, all reasons to encourage older workers to leave.

But today, with boomers starting to retire and fewer skilled workers coming up behind them, employers are doing everything they can to hold on to older workers, even hiring retirees whom they just encouraged to retire under old policies.

"If you're doing any succession planning at all, you're thinking, 'Which retirees can we rehire?'" said Cathy Druckrey, human resources manager for the city of Rapid City.

Druckrey represents municipalities on the board of the state retirement system. She supports the practice, saying it is hard to find qualified applicants for some positions.

Most who "retire-rehire" work in school districts, followed by state government and then cities and counties. Slightly more than two-thirds go back to work at the same employer from which they retired.

Both Wylie and retirement board president Elmer Brinkman of Watertown said they are comfortable with the way the practice is working.

System officials in a 2005 position statement acknowledged the criticisms - that some people are philosophically opposed to the idea of someone working for a paycheck and drawing a retirement benefit at the same time, and that the practice isn't uniformly available to all members, because one employer might choose to rehire retirees and another might not.

But Wylie said it isn't up to the retirement system to regulate where or for how long its members work.

"We hear it at different times: 'Why doesn't SDRS outlaw that?' We're trying to make sure we're not pushing employers to an employment process that is forced by us. They need to make those local decisions on the local level."

Former lawmaker Kooistra of Garretson agrees it is a local issue and said taxpayers should bring it up with their local government boards. He said taxpayers shouldn't have to fund, at 6 percent or 8 percent of a worker's salary, a second pension fund.

But others dispute his reasoning, saying a school district or fire department would have to hire someone to fill the job anyway and would have to contribute to that new person's retirement.

"The contribution that's going to be made on behalf of the taxpayer is going to be made at the same percentage, whether it's a rehire or a new hire," Druckrey said.

She said it can be hard as an employer to find someone qualified for a certain job, and doesn't want to "penalize" retirees.

Although people such as Kooistra see it as unfair or unethical that a public worker can have two income streams, others argue that it is unfair to limit public sector retirees from a benefit others could have. For example, a teacher could retire from teaching, start collecting retirement and go to work for Wal-Mart or any other private business. Or a person who had always worked in the private sector could, at a certain age, roll over her 401(k) into an IRA, start collecting distributions but still work for a paycheck at the same job or another job.

Some states have crafted policies that limit the practice, such as by establishing a waiting period before a retiree can go back to work. But they often find that people figure out a way to do it, anyway.

In Michigan and Texas, retirees do an end run around the rules by getting hired through third parties as contract workers, hurting the retirement system because they draw benefits while their employers avoid paying into the system.

In New York, school districts can apply for a waiver to rules restricting the practice, claiming they can't find anyone else to fill the job.

Wylie and Brinkman aren't so much concerned with public sentiment over the practice as they are with whether it works without damaging the retirement system's financial stability and without providing an incentive to members to make poor economic decisions, such as retiring too soon.

"The board's biggest concern is that a provision like retire-rehire not be something that would, in a sense, represent an extra cost to the system," Brinkman said, "or maybe to state it another way, an economic advantage to those who do it and an economic disadvantage to those who don't."

To that end, one of the changes the Legislature made in 2004 was to suspend the annual cost-of-living increase for "rehirees" while they worked the second job. The goal was to make the practice cost-neutral to the system. The study will tell if it worked.

Whether coming back to work or retiring for good is an advantage depends on a person's salary, how long they stay retired, how much they pay for health insurance before Medicare kicks in, and how long they live.

Brinkman said one of his goals for the retirement system is to help retirees understand the variables before they make a decision.

Another change made in 2004 was to mandate that "rehirees" begin a new, second retirement account, rather than adding on to the existing account. "You still get an extra little pension pop, but you're not getting the benefit of adding on to your pension years," state Sen. Jerry Apa said.

Apa declined to describe where he thinks the difference lies between people who abuse the system and people who go back to work because they're needed.

"I do know this, that there are many people that do retire and rehire, and they're assured that when they're retired, they'll be rehired," he said.

On the other hand, he said he recognized that legal restrictions on retirees' decisions could create unforeseen results.

Sometimes, the decision is made for emotional and family reasons beyond cash calculations.

Ken Krenz worked for 29 years as a custodian for the Rapid City schools and retired from Valley View Elementary School in 2005. The school threw him a party, toilet-papered his office and gave him an engraved Black Hills gold watch. The job, his friends there and the children made him feel like he was somebody.

After the retirement, he said, "I went home for two weeks and sat and thought, 'Man, you're nothing anymore, just old.' I was depressed."

He started substituting as a custodian when the district needed him and learned that the district had a hard time filling custodian jobs because candidates couldn't pass the background check. Two years into his retirement, a former supervisor called to ask him to consider a job at Western Dakota Technical Institute, which is run under the Rapid City school system.

Krenz disagrees with the criticism that it is wrong for a retiree to go back to the same job while receiving retirement. He has three children and three grandchildren that he helps support, which takes quite a bit of money, he said.

"I see their point in a way, but then I think, you earned it," he said. "I'd feel guilty if I was taking someone's job."

But the district might not have hired him if there were qualified people waiting for his spot. Krenz figures he does a good job for a 65-year-old.

"I don't think I've got the speed I used to have, but I've got the knowledge, so I think it balances out."

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Contact Barbara Soderlin at 394-8417 or barbara.soderlin@rapidcityjournal.com