The Maricopa County Community College District illegally put 26 nonemployees on its payroll, and a majority of them in the state retirement system, the Arizona Auditor General's Office announced in a report Tuesday morning.
That action created taxpayer-funded pension accounts for the individuals and resulted in the district loaning more than $3 million to outside nonprofit organizations. The loans violate the state Constitution, "which prohibits the gift or loan of public monies to corporations," the report said.
The district denies that the arrangements were illegal or inappropriate, said Tom Gariepy, a spokesman for the Maricopa colleges. Rather, the nonprofit employees were also district employees, he said, hired to undertake specific jobs.
"We entered into the relationships with these employees and these organizations in good faith," Gariepy said. "In hindsight, the auditors disagree with what we did. Those are actions which, looking at it years later, reasonable people could disagree over whether those employees should have been characterized that way."
In June, the Tribune reported that the district had enrolled multiple East Valley lobbyists for business and educational organizations in the state retirement system. The Arizona State Retirement System froze those pension accounts shortly thereafter and the auditor's office launched its probe.
Among those impacted, retirement system records showed that Roc Arnett, president of the East Valley Partnership, was eligible to receive more than $10,000 annually from the state's pension plan through such an arrangement with the district. The district at the time contended that the partnership and the community college district had similar policy goals.
Arnett was a legitimate district employee, his attorney Brian Campbell said Tuesday.
Documents filed with the retirement board list Arnett as "president and CEO" at the college district.
On Feb. 11, Arnett filed a notice of claim with the state, precursor to a lawsuit, arguing that Arizona owes him $274,000 in pension benefits.
"The bottom line is, if the state wants to discontinue this program, they can do so," Campbell said. "But they can't do it in such a way that leaves people hung out to dry who have worked for years."
Rufus Glasper, the district chancellor, had decided to end the arrangements at least a year ago. However, auditor's found that some nonprofit employees remain within MCCCD's payroll system.
Gariepy confirmed that one individual, who does data collection for the Arizona Community College Association, remains on the Maricopa district's payroll.
Arizona State Retirement System officials and state lawmakers criticized the arrangements after the Tribune exposed them.