California Embraces Pension-Spiking Bonanza

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


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.