SACRAMENTO, Calif. – A state pension fund committee on Tuesday approved retirement calculations for new government hires despite concerns about so-called “pension spiking” raised by Gov. Jerry Brown and local governments.
The committee of the California Public Employees’ Retirement System board voted 6-2 in favour of adding nearly 100 types of supplemental pay that can be used for calculating pension benefits for public employees hired after Jan. 1, 2013. The full board is expected to vote Wednesday.
One item the committee supported Tuesday drew criticism from the governor. Counting extra pay given during short-term promotions goes against the intent of the Brown’s 2012 pension reform law and should be excluded, said Eric Stern of Brown’s Department of Finance.
Chris McKenzie, executive director of the League of California Cities, also urged the board to review pay differentials because the calculations that are being adopted will affect local governments and the state for decades to come.
“This list has grown, perhaps organically, but I think excessively,” McKenzie said. “It’s now got about 100 items over the last few decades, and it’s probably time that your staff and you dig into it and look at it carefully.”
The committee’s vote in favour of pension enhancers was expected given the composition of CalPERS’ board, which is stacked with public employees or retirees who benefit from the pension system they oversee.
If approved by the full pension board, the list of supplemental payments that could be used for retirement calculations includes law enforcement officers who get certified as a marksperson, paramedics who obtain training for medical techniques, fire inspectors who are assigned to investigate causes of fires and garbage collectors who routinely collect trash.
McKenzie said the list includes special pay for audio visual and notary services, skills that are outdated and should be examined.
The list of duties eligible for added compensation already applies to employees hired before Jan. 1, 2013.
The 2012 pension reform law, AB340, was a bipartisan effort intended to save taxpayers billions of dollars by capping benefits, increasing retirement age, stopping pension spiking and requiring state employees to pay at least half their pension costs.
The law prevents using unused vacation, leave and other paid time off toward pension calculations. It also prevents “any one-time or ad hoc payments” to employees from being used for the calculations.
The state Department of Finance earlier this year estimated that California has nearly $218 billion in unfunded pension and retiree health care liabilities for CalPERS and the retirement systems for teachers, judges and University of California employees.
The Brown administration is worried that by counting the higher pay given for short-term promotions, employees could manipulate the system toward the end of their careers by taking “acting” or other temporary promotions to boost their final pension calculations.
Board member JJ Jelincic, who represents CalPERS members, supported the calculations, saying workers who earn the extra pay are entitled to be compensated.
“If you ask people to do the work, you’re going to pay them, and part of their compensation is their pension,” Jelincic said.
School employees’ representative Rob Feckner agreed.
“The employee didn’t choose to upgrade the pay, the employer did,” Feckner said.
Christy Bouma, a lobbyist for the California Professional Firefighters union, said there already are clear limitations to prevent pension abuse.
“These allegations that this is somehow going to be used as an opportunity to spike a pension, I will remind you … this is a 100 per cent management-controlled situation,” Bouma said.
Board members George Diehr, who represents state employees, and Richard Gillihan, of the California Department of Human Resources, voted against adding the supplemental payments to retirement calculations.