As graduation rates were bottoming out at the City Colleges of Chicago in 2009, then-Chancellor Wayne Watson was cashing out.

Big time.

The Better Government Association previously reported Watson was paid more than $500,000 in unused sick and vacation time when he retired from the taxpayer-funded community-college system three years ago.

The BGA recently learned that Watson’s out-the-door compensation was richer than previously known, totaling as much as $800,000, according to public records and interviews.

On top of roughly $537,000 in sick- and vacation-day payouts, Watson also was given an exit bonus of $124,615, according to City Colleges records recently obtained under the Illinois Freedom of Information Act.

What’s more, City Colleges is providing him with free health care coverage for life – costing the system more than $22,000 to date in premiums and reimbursements – and a life insurance policy that he was allowed to cash out for $112,602, records show.

Watson, now president of Chicago State University, wouldn’t say whether he exercised the right to convert the policy to cash.

“This is a personal matter,” Chicago State spokeswoman Deborah Douglas said. “No comment.”

Watson would not answer other questions posed by the BGA.

But this much is known: the exit bonus was signed by the City Colleges’ then-board chairman, Jim Tyree, in July 2009, the month before Watson retired, records show.

Tyree died in March 2011. (At the time, he was a co-owner of the Chicago Sun-Times, and chairman and CEO of Mesirow Financial.)

None of the current City Colleges board members were with City Colleges at the time the bonus was agreed upon.

Terry Newman, a close friend of former Mayor Richard M. Daley, was the City Colleges’ board secretary at the time. Through a spokeswoman, Newman said “as he recalls there was no discussion about this or any negotiation about his payout . . . that would have been a discussion and negotiation between the chairman and chancellor.”

Regardless, compensation experts consulted by the BGA said such perks – an exit bonus and a life insurance payout – are relatively rare in the private sector, and are rarer still in the public realm.

“Normally it doesn’t happen that way,” said Paul Dorf, managing director of Compensation Resources, Inc., a New Jersey-based consulting firm.

Meanwhile, after the BGA inquired earlier this year about Watson’s sick- and vacation-time payday, Mayor Rahm Emanuel ordered a crackdown on the perk for non-union employees at city-related agencies.

Annual sick-day payouts at CSU were curtailed even earlier – but not before Watson took advantage of the allowance and cashed out $13,000 in unused sick time in 2011, school officials indicated.

Watson, who started at CSU in fall 2009, now receives an annual salary of $250,000 and gets to live rent-free in a university-owned home in the Beverly area of the Far Southwest Side.

He’s collecting an annual pension, from his days at City Colleges, of nearly $140,000.

Graduation rates within the City Colleges system – which serves more than 100,000 students at seven main campuses – fell from 13 percent in 1999, Watson’s first full year as chancellor, to 7 percent in 2009, when he left. (The rate reflects how many students obtained a two-year degree within three years, a City Colleges spokesman said.)

The average graduation rate when taking into account all community colleges in Illinois, including City Colleges, was nearly 20 percent in 2010, according to the Illinois Community College Board, the public agency that regulates those institutions.

Watson’s successor at City Colleges, Cheryl Hyman, has made boosting the graduation rate a priority, and has had modest success. In 2010 the rate was 8 percent, the spokesman said, noting that’s the preliminary figure for 2011 as well.