Pension Crisis

California Embraces Pension-Spiking Bonanza

This completely undermines the governor's pension reform law. Will he let that happen?

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SACRAMENTO — After reading new state rules that detail 99 categories of "special pay" that can be used to spike a public employee's pension, I was tempted to ask my editor for "special deadline pay" for filing columns on time. Maybe that boost could also lead to a higher pension calculation. Then again, like most private-sector workers, I don't receive a pension. So never mind.

Pardon my facetiousness, but the decision by the California Public Employees' Retirement System (CalPERS) to engage this week in a pension-spiking extravaganza is infuriatingly brazen, even for Sacramento. It undermines the governor's pension-reform law, although Jerry Brown's objections to the CalPERS action seem lukewarm.

Under the current public pay system, clerical employees get extra cash for typing and taking dictation — activities that seem like basic parts of the job description. Likewise, police officers who attend physical-fitness programs get paid extra. Librarians get extra payments if they routinely help library patrons find books and resources.

Employees are given extra compensation for receiving and maintaining licenses that they are required to have to do their jobs. Likewise, groundskeepers get extra pay for working on sprinkler systems. A few of these categories make sense — e.g., employees who often are exposed to hazardous waste — but most are silly. For instance, employees get a boost for filling in for their bosses when they are away ("temporary upgrade pay").

Now it gets worse. The newly passed CalPERS rules apply to government employees hired after the state passed its pension-reform law in 2013. The rules will also allow these extra pay categories to inflate new employees' final "pensionable" pay — meaning that the extra dollars translate into permanently higher retirement pay. So much for reining in skyrocketing pension costs.

CalPERS claims that its action brings "needed clarity to the definition of what is pensionable compensation for new CalPERS members." Of course, passing regulations that denied the use of special pay for pension increases would have brought clarity, also.

This situation — finding creative ways to increase pay as a means to gin up the salary upon which one's pension is calculated — is the classic definition of "pension spiking." Brown had railed against the practice when he signed the Public Employees' Pension Reform Act. It was largely about combating rampant spiking abuses.

Some of Brown's foes argued that the union-friendly governor was only pushing that measure as a means to convince the public that the state is serious about reining in costs. At the time, polls showed voters skeptical about giving the Legislature more money (via the Proposition 30 tax increase) given its lack of discipline in tackling pensions and other debts. Ultimately, voters gave Brown what he wanted, and now Brown is watching as CalPERS and the unions undermine that modest reform.

"What unions have argued is that, yes, there were abuses in the past, but that's done … and we learned our lesson," said former San Diego City Councilman Carl DeMaio, a congressional candidate and pension-reform activist. "They haven't learned a darn thing. (This CalPERS action) deflates their entire narrative."

CalPERS' union-dominated board voted 7-5 last Wednesday to approve the regulations. The governor appeared to criticize the move: "Today CalPERS got it wrong. This vote undermines the pension reforms enacted just two years ago." But Sacramento Bee columnist Dan Walters pointed out that Brown objected to only one of the 99 pension-spiking gimmicks.

The governor's office told me it is considering all its options with regard to the CalPERS regulations. If so, there is a possible option to consider. All new regulations must go to the state Office of Administrative Law to make sure they conform to the requirements of the underlying legislation. The CalPERS rules fly in the face of the pension law, which was meant to calculate pensions on base pay.

The governor can file an objection. And he appoints the head of that law office. We'll soon get to see if he is serious about defending his own pension law. Sadly, the odds that Brown will quash the CalPERS pension-spiking bonanza probably are similar to the odds that newspapers start giving out deadline pay.

NEXT: Back to School Surveillance: "If you're not where you want to be at the expected time, campus police will show up."

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  1. Wow. Shocking. Cannot believe this is happening in Cali, of all places. Whoda thunk it? Amazing.

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  2. Seriously thought the headline said “Poison-spiking.” And I was all like “California is going full Jonestown! YAY!!!!!”

    1. Right, except instead of Kool-aid, we use lattes.

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    1. Spam, spam, spam spam…

  4. California has become just as sick and vile as New York.

    If you willingly live in California, you are a piece of human garbage.

    1. If you live in California and you are not a public employee, you are a terrorist. Or you should be anyway.

    2. I want to get out. I desperately want to get out. I desperately want to live someplace freer.

      We’re looking at Washington State as an alternative, but I hear that the Seattle metro area is pretty commie.

      1. Have you considered Somalia? No government whatsoever. Paradise!!

    3. Thanks, in the end, we’re all just garbage, anyway.

  5. Wow. It really has come full circle. The stuff they’re doing in Cali sounds a lot like what was written into the old railroad union agreements (which, I am told, I would give my left nut to have now).

    In the old days, a conductor had a payable claim for almost anything you can think of, including the act of putting your own water in the caboose. If you know anything about the history of the railroads, you know how that story ended: by the 1960’s and 70’s, every RR in the country was either bankrupt or on the verge of it, none of them had any money to maintain their trackage, and entire systems (most notably the Penn Central and the Rock Island) were abandoned.

    California is going the way of the Penn Central.

    1. That means they’re going to get bailed out.

      1. Penn Central wasn’t really bailed out, they were rolled into the new Conrail system. And though the government was all over the formulation of Conrail, it was the Staggers Act–and its massive deregulation and de-taxation–that saved the railroads.

        I’m telling you guys, if you want a huge historical example which clearly illustrates the superiority of free market economics to those of statism and central planning, study the history of the railroads.

      2. I doubt it. CALPERS is beyond bankrupt. It would require several hundred billion dollars in immediate cash just to make payouts on its promises. I doubt every American out there would be willing to pay $1,000 to ensure that California public employees receive a millionaire’s pension.

  6. I’m over these news articles of California topping it’s last unbelievablly brazen, doomed, misguided, and immoral act with something a few weeks or months later this is even more over the top. California cannot sustain half the things going on in that state, and I hope that – when the time comes for htem to be the first state to declare bankruptcy – the other states and fedgov tell them to shove it. (They won’t because people don’t have the cajones to hold others responsible for their action, but I hope I’m wrong.)

  7. CA in the hole for ~$250Bn in un-funded pension obligations already:
    http://www.liar-liar.com/
    Aug. 28 edition.

  8. They haven’t learned a darn thing

    I beg to differ. Unions have learned that the voters are gullible, have short memories, and are easily manipulated. (Actually, they already knew this. This is simply more confirmation.)

  9. The basic principle is to get all you can. Get as much of the taxpayers money as possible. They didn’t earn that money, the state employees earned it for them and are entitled to that pension!

  10. I got 99 categories of pay
    and productive work ain’t one

  11. We need another San Diego mayor to become governor. Go Kevin Faulconer!

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  13. But, but, but, I have a contract! This magical piece of paper says you owe me a millionaire’s pension, even if I bankrupt the system through poor management.

    Hope you like working the extra thirty hours a week that will require, while I lounge at my beachhouse! Now get working, slave.

  14. When a state and a few cities (e.g., Illinois and Chicago), literally run out of pension money, Congress will very quickly pass a statute expanding the remit of the PBGC to include state & local governments. the law will also stipulate that Federal statutes override state constitutions. State & local governments will have the option of going through Federal bankruptcy court. If the courts rule in their favour, the local authority can then “dump” its pension obligations on the PBGC. The local authority also has to turn over its pension assets to the PBGC, but this is no skin off the local authority’s nose. Local authorities will have to pay X$/year/employee to the PBGC. They can easily afford this, by underfunding their pension plans. The PBGC insures pensions up to 54K/year. This truncates all large pensions, and complete saves ordinary pensions. The unions will publicly yell, but privately accept this. The current spiking of pensions is silently intended to get retirees as close to the 54K ceiling as possible. The ceiling does not have to be 54K. The strategy I am speculating holds for any fixed ceiling holding for all employees.

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