Pension Crisis

The Golden State's Pension Reforms Get Spiked

California's public pensions have 99 problems and temporary upgrades in pay is one.


Calif. Flag
Grunge Textures

On Tuesday, a California Public Employee Retirement System (CalPERS) committee approved a proposal that would allow 99 types of supplemental pay benefits to count toward state and local government employees' pension benefits, nullifying, by administrative fiat, one of the key anti-spiking provisions in California's Public Employees Pension Reform Act of 2013 (PEPRA). 

Several of the 99 special pay categories are questionable in nature, but the biggest controversy was whether "temporary upgrade pay," for employees receiving temporary promotions, should be allowed to factor into pension calculations. Earlier this month, California Gov.Jerry Brown sent a letter to CalPERS Board of Administration President Rob Feckner, in which he stated his opposition to counting temporary upgrade pay as pensionable compensation for employees hired after Jan. 1, 2013.  

PEPRA was quite clear in what does and doesn't constitute pensionable compensation for employees hired in 2013 or later (PEPRA's pensionable compensation limits do not apply to employees hired before PEPRA went into effect in 2013). PEPRA states that pensions for new employees must be based on employees "normal monthly rate of pay or base pay," and the law specifically excludes one-time or ad hoc payments from being counted towards pensionable pay. However, the CalPERS committee determined during the August 19 hearing that temporary upgrade pay, along with 98 other different types of special pay items, will be counted as normal pay and will count toward pensions for all employees.

Gov. Brown wasn't the only one against factoring in temporary pay upgrades in pension calculations. Before the CalPERS committee ruling, Elk Grove City Manager Laura Gill told the Sacramento Bee that including temporary upgrade pay "really does invite spiking" and that it may erode savings from pension changes Elk Grove has enacted the past couple of years. Temporary pay increases lead to pension spiking when in the final years of their careers, public employees find a temporary assignment and earn a higher salary for six months to a year or even longer, boosting their pensionable salary. As Gill notes, if such practices become the norm for new employees, "it would put us backward from all the work we've done to have a sustainable and sound pension system."

CalPERS did not provide a cost estimate for how much employers' pension costs might rise due to the inclusion of the 99 special pay categories to newer employees' pensionable income, but the costs of special pay items do add up. As the San Diego County Taxpayers Association noted in a 2013 study, if a 60-year-old pads his or her salary with $7,850 in special benefits in the final year of employment and lives to be 80, the specialty benefits result in an extra $118,000 in pension benefits over the retiree's lifetime. It's easy to see cash-strapped cities and counties incentivizing well-paid employees' to retire, with late raises that will boost their pensions, for budget relief purposes. This practice isn't just limited to California; it has already been happening in other states as well.  

Several of the other 99 special pay items are antiquated, vague, and seemingly unnecessary, too. As CalPERS board member Steve Cooney pointed out during the August hearing, the list hasn't been revised since 1993. The list calls for special bonus compensation for librarians with "routine circulation or reference desk duties." It doesn't make sense in the Internet age to provide special compensation for librarians when libraries are becoming obsolete. The list also calls for premiums for questionable and seemingly random skills, such as auditorium preparation, which CalPERS explains is for employees who are "routinely and consistently assigned to prepare auditoriums." There is also a parking citation premium for employees who "are routinely and consistently assigned to read parking meters and cite drivers who have violated parking laws" as well as a marksmanship and physical fitness premium for officers who pass certain tests.

Good marksmanship, being physically fit, and being able to read parking meters should not be considered "special skills." They are skills that every police and traffic enforcement official should have anyway and should not require additional pensionable compensation.

PEPRA was a weak effort by the California legislature at passing pension reform. While it left a lot to be desired it did have a few good, cost saving provisions in it like the special benefit pay anti-spiking provision. The CalPERS board ruling eliminating this anti-spiking provision will further reduce the effectiveness of PEPRA as a law that can make California's pension system sustainable.   

NEXT: Shikha Dalmia on Millennials and The Libertarian Moment

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Pardon me while I go dig my shocked face out of the laundry.

    1. Don’t be shocked, move your retirement savings out of the jurisdiction of the US. There are several institutions in several countries that will open offshore accounts (offshore bank accounts and offshore brokerage accounts) entirely through the mail, even for Americans. The below recommended institutions are financially solid and in countries exercising sound monetary practices. All are non FATCA participants, and none have a single US location, placing them entirely out of US jurisdiction. See for yourself:

      1. Oh money laundering bot, there isn’t any place on earth outside of the jurisdiction of the U.S.

        1. I have thought about this, and I think one could try the Hong Kong branch of an Iranian bank.

          Taiwan for the longest time didn’t deal with the US, because they aren’t a “real” country, but my last visit they handed me a sheaf of US tax forms to fill in if I anted to change my address (within Taiwan!)

          The desk was covered with example of US government forms with Chinese explaining how to fill them in…disgusting.

          Luckily, Taiwan privacy laws means I can not change my address and they won’t make me sign the disclosure agreement, so they won’t tell the US about the account…which now only has $300 in it anyways.

          1. Not true, there are many non FACTA participants, besides, do you think Iran really wants to help the USA do anything??


  2. Why does CalPERS have its own pension committee anyway?

    The legislature already has one of its own.

    I guess the Senate is really working for CalPERS anyway.

    They should just go ahead and update the org. chart.

  3. I guess the Senate is really working for CalPERS anyway.

    You misspelled “taxpayers of California”.

    1. You misspelled “armed robbery victims”.

      1. you misspelled “suckers”

  4. As long as the state is still alive and wriggling, the parasites will continue to feed off of it. You can warn them all you want that the host is dying but that just makes them greedier to get that last pound of flesh before some other parasite gets it first. It’s the same reason we have a debt ceiling that doesn’t do a damn thing to keep the federal government from borrowing as much money as it pleases, just as if there were no debt ceiling at all.

  5. CA, as a one-party state, provides little reason for anyone other than Ds to vote, so we get well under 50% turn-out.
    Figure the unions will turn out a much higher figure from the parasites, and that means the people who ‘negotiate’ the union compensation packages are elected by the unions.
    The result is surprising to people like our lefty trolls.

    1. Like all monopolies, the D monopoly will eventually split over trivial differences. How soon, or whether it will merely be a difference in degree, is for the future to tell us.

      1. Sure. It could fracture into a group of small factions that want to take your property, wealth and freedom in all manner of novel ways.

        Nothing like a fractious group of thugs fighting over your stuff.

        1. They’ll all take timeouts to kick the victim in the gut to make sure he doesn’t get up, though.

  6. Who besides a state employee knew just how lucrative state employment in California is? Lots of ridiculous perks that sane people would never have allowed. But then sanity doesn’t seem to be the norm for policy makers in any government.

    1. Its sad to see people you respect who are police suddenly get a back injury their last year in the job. And then climb around rocks and through caves in Yosemite a week later.

      Its not just “bad apples” scheming.

  7. And I’ve been linking this in the AM links, but…
    A guy has been running full-page newspaper ads for 6 Thursdays in a row, providing ample evidence on how the CA state books are cooked. It gets no coverage for some reason:

    1. In California no one can hear you scream.

      1. You can check out anytime you want….

        1. Man I HATE the Eagles.


      That same guy took out full page ads demanding that the government dredge out the river in front of his house. I wonder if he gets the irony.

      Rich white people like to bitch and, unfortunately for the rest of us 99% we must listen to their bitching a or the bitching of their paid-off lackies.

      1. My first job was working as a bus boy in south Florida and while I met some very fine people my takeaway from this experience was that there was way too many people with too much money that liked to complain. So, I expect that the reason why this isn’t getting the traction you think it should is because journalists and the public kind of see it that way. Sorry.

        Is your point that we should bring back Arnold schwartzenegger. If I recall correctly doing things like that caused California’s 2007 budget to be passed in 2008. I know, I know.. That’s a plus for miniarchists like you .

        1. american socialist|8.23.14 @ 10:47PM|#
          “My first job”

          Somebody hired a fucking parasite like you?!
          Wha’d you do? Lie to convince them you weren’t a slime bag?

      2. american socialist|8.23.14 @ 10:19PM|#
        “That same guy took out full page ads demanding that the government dredge out the river in front of his house. I wonder if he gets the irony.”

        Cit missing, but I wonder if slimy parasites understand the concept of false equivalence.

        1. You’re such a boring troll. Yawn.

          “Cit” (sic)

          Sure. No problem .…..sitesearch

          1. american socialist|8.24.14 @ 12:18AM|#
            “You’re such a boring troll. Yawn.”

            You’re such a slimy parasite. Yawn.
            Not very interesting; nothing there suggests you’re capable of rational thought. It is simply one more example of your stupidity; false equivalence.
            Did you have a point other than to prove your stupidity?

          2. Oh, and commie-kid, let’s make clear the extent of your stupidity:
            You, as a slimy parasite, presume that others who gripe about government waste are opposed to any government at all. Of course, as an ignorant asshole, that would be your presumption.
            Well, that’s not true. We who produce value and pay taxes would hope the government would do as it promises and not support slimy parasites like you and the other slimy parasites in the pub-sec unions.
            Is that clear?

            1. Hey sevo, I hope you are ok. Are the slimy parasites out on the street right now trying the help the city clean up? Who need them, I say.

      3. I don’t get the irony. I strongly oppose many government programs, but given that I have to pay into them, you better believe that I try to get every penny back that I can.

        You seem to be saying that if one is robbed at gunpoint and asks the robber for some of that money back, that is somehow “ironic”? How?

  8. PEPRA was quite clear in what does and doesn’t constitute pensionable compensation for employees hired in 2013

    1. ACA was quite clear that op Jan. 1 2013, the employer mandate….

      Federal record keeping laws are quite clear that emails should be kept…

      Rule of law is eroding. Bad news for the Republic.

  9. PEPRA was quite clear in what does and doesn’t constitute pensionable compensation for employees hired in 2013

  10. Now there is a dude that seems to know whats going on.

  11. Most telling of all is that CalPERS hasn’t calculated – or won’t say – how much pension costs are expected to rise due to the inclusion of the 99 special bonus categories. Isn’t that CalPERS’ job?

  12. my best friend’s step-mother makes $82 /hr on the computer . She has been fired for nine months but last month her pay was $13237 just working on the computer for a few hours. go to the website …

    ============ http://WWW.JOBSPUG.COM

  13. This is becoming tiresomely common:

    Law is passed.

    Administration officials decide to change the law on their own.

    This now explains why people move straight from reulators to regulated firms and lobbying firms.

    They actually have power to change laws!

Please to post comments

Comments are closed.