Salary 'spiking' drains public pension funds, analysis finds
Twenty California counties, including Ventura, Kern, Los Angeles, Orange and San Diego, allow some workers to make more in retirement than they did while working. The coffers are underfunded by millions of dollars.
By Catherine Saillant, Maloy Moore and Doug Smith, Los Angeles Times
Approaching retirement, Ventura County Chief Executive Marty Robinson was earning $228,000 a year.
To boost her pension, which would be based on her final salary, Robinson cashed out nearly $34,000 in unused vacation pay, an $11,000 bonus for having earned a graduate degree and more than $24,000 in extra pension benefits the county owed her.
By the time she walked out the door last year, her pension was calculated at $272,000 a year — for life.
Robinson, 62, is among a group of public employees who have increased their retirement paychecks by adding such things as vacation time, educational incentives, car allowances and bonuses to their final salaries.
Such "salary spiking" was banned in 1993 by CalPERS, the state's largest public employee retirement system, to help control spiraling costs. But 20 of California's 58 counties — including Los Angeles, Ventura, Orange and San Diego — do not participate in CalPERS and their employees may legally continue to spike their salaries.
The scope of the practice is unclear because counties have resisted releasing complete pension data, citing the difficulty and cost of assembling the information.
But an analysis by The Times of partial data from Ventura and Kern counties — two small windows into the problem — shows that spiking is affecting pension systems already staggered by massive obligations.
In Ventura County, where the pension system is underfunded by $761 million, 84% of the retirees receiving more than $100,000 a year are receiving more than they did on the job. In Kern County, 77% of retirees with pensions greater than $100,000 a year are getting more now than they did before.
Ventura County officials have defended the practice, arguing that some pension boosts were meant to make up for pay freezes during lean years. It would be unfair to take them away now, Robinson said during a board hearing last year.
And the vast majority of county employees, officials pointed out, retire with modest pensions: an average non-management worker with 30 years of service gets $32,580 a year.
But Jim McDermott, a board member for the Ventura County Taxpayer's Assn., said the burden from spiking was too large to ignore.
"This is becoming an increasing drain on taxpayers … which will have to lead to cuts in service or additional taxes," he said. "Managers have their entire careers to refine spiking. And there is not a nook or cranny that they don't manipulate."
For those who plan ahead, there are numerous ways to spike salaries in the last year of work. In fact, there are 60 categories of payments that Ventura County employees can convert to cash.
Former Sheriff Bob Brooks, for instance, added a $30,500 "longevity" bonus (for working more than 30 years), which boosted his pension to $272,000 a year, almost 20% higher than his base salary.
Former Undersheriff Craig Husband added nearly $92,600 in unused vacation time, resulting in a $257,997-a-year pension, nearly 30% above his working pay. Many county retirees also are entitled to annual cost-of-living adjustments.
Brooks, Robinson and Husband did not return calls seeking comment.
County firefighters and sheriff's deputies can boost their pensions by layering premium pay and end-of-career cash-outs on top of salary. Fire Capt. T.N. Roberts, for instance, padded his final year's pay by nearly $130,000, resulting in a pension 84% higher than his base compensation. He gets $159,598 a year in retirement pay.
A pension is typically a percentage of an employee's highest annual pay — usually, but not always, the final year's pay. A firefighter who worked 25 years, for instance, could get 75% of his or her final salary in many counties.
Government jobs historically have been a tough sell because of the modest salaries they often provide; one incentive for prospective workers was the generous pension that came with being a cop or a county planner.
And when counties and cities couldn't afford to hand out raises, elected officials routinely offered enhanced retirement benefits. Pension payouts did not burden retirement systems in years past as they do today, and the deals seemed to make financial sense: Government agencies could hold the budgetary line and workers in turn would get richer paydays when they retired. It effectively kicked the problem down the road.
But in bad economic times, pension systems can take a beating. Higher benefits and lower market returns put a squeeze on county treasuries.
Orange County last year went all the way to the state Supreme Court in an effort to roll back benefits sweetened through salary spiking and other incentives, only to learn what other agencies already had: Once given, benefits can't be taken away from current employees or retirees.
Gov. Jerry Brown now is proposing to stop spiking by basing pensions on a three-year average of final pay to discourage "games and gimmicks … that artificially increase compensation." Brown is also proposing to base pensions on normal salary only, without all the add-ons lumped in.
McDermott, of the Ventura County Taxpayers Assn., repeatedly has asked county supervisors to eliminate vacation cash-outs, calling it the most abused form of spiking.
A Times analysis of Ventura County data showed that a third of the final salaries for its highest-paid retirees was the result of spiking. About 25% of that final salary boost came from vacation cash-outs; about 20% from accrued overtime and about 12% from the cashing out of healthcare credits.
Supervisors agreed to eliminate the vacation sell-back policy for new managers but declined to do the same for current employees.
Ventura County Supervisor Steve Bennett said that he supports pension reform but that change should come through either statewide legislation or union cooperation. "It took 30-plus years and lots of layering of things back when people weren't paying enough attention to get to this point," he said. "It's not going to be something you can just flip the switch."
The Times has asked for pension data from the 18 other counties that allow spiking, but most have resisted or said it would be too costly and laborious. Some have asked to be paid for extracting the data — $63,000 in the case of Sacramento County.
The data from Kern and Ventura counties also does not provide a complete picture. Ventura County turned over detailed information on 148 officials who earned more than $100,000 a year in retirement, only a fraction of its 5,500 retirees. Kern County provided information for all of its retirees but left out pensions paid to the beneficiaries of deceased retirees and withheld the full amount of pensions that are split between ex-spouses.
Several counties, including Los Angeles, Orange, San Bernardino and Santa Barbara, have agreed to provide the data, but the release of the information is dependent on ongoing negotiations over cost and handling.
Limited data provided by the Los Angeles County Employees Retirement Assn. showed that at least 4,000 retirees are receiving pension checks that exceed their final compensation. But the data lack additional details to determine whether the workers spiked their salaries or whether the bump is the result of cost-of-living increases or a combination of the two.
Database: Biggest Ventura County pensions
Database: Kern County pensions
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