Pension Spiking: Bleeds the Taxpayers. Nobody Likes It. But It Just Won’t Die!

The CalPERS Board’s actions to undercut pension spiking by adding temporary pay or increased pay for specific jobs into the pension calculation was mocked by a number of writers over the weekend with the temporary pay provision criticized by Governor Jerry Brown. 

Hard not to be cynical of the reasons employees will get higher wages that will count in juicing their pensions. In the private sector, clerical employees don’t get extra cash for typing and taking dictation. Isn’t that what they are supposed to do? Librarians get extra payments if they routinely help library patrons find books and resources. Huh? 

At every turn pension reform runs into a roadblock while the pension debt grows and government services are put in jeopardy of cutbacks. 

When voters in San Diego and San Jose voted to reduce pension obligations, the unions ran to the courts and administrative agencies to collapse the reforms. Recently, in Los Angeles the Employee Relations Board threw out a reform that included requiring new employees to work until 65 before retirement. 

Meanwhile, cities are facing reduced services as the pension obligation takes up more and more of the budget. In 2003 pensions made up 3-percent of the L.A. city budget. A decade later pensions ate up 18-percent. Pensions are considered an integral part of the bankruptcy proceedings in a number of California cities. 

So when even moderate efforts of reform championed by a powerful governor are ignored and turned back by a board dominated by union interests, there appears little hope for reform. 

As the pension obligation grows the fiscal hole caused by pension requirements will fall in the lap of taxpayers. Jack Dean, who publishes the widely circulated Pension Tsunami, a compilation of pension news stories from around the country, thinks the Proposition 30 tax increases were helped at the ballot because voters assumed the legislature had implemented some pension reform – the one championed by Governor Brown. Now some of that reform has been set aside. Dean wrote in an email, “Prop 30 has allowed more tax dollars to be pumped into public pensions (such as CalSTRS) to shore them up – just as we had predicted.” 

So does that indicate more taxes are on the horizon to deal with budget gaps caused by pension growth? Probably so. Advocates for tax increases will never use the argument that such tax increases will be used for pension payments but as the pension obligations become larger new tax dollars will be used to backfill general fund dollars that will fund the retirement commitments.

Pension spiking was supposed to be the easy reform. Nearly all who look at pensions agree that manipulating salaries to increase pensions is a way to cheat the taxpayers. But even this easy reform is hard. 

Twenty-two years ago, I was involved in a lawsuit to stem pension spiking in Los Angeles County. The circumstances were similar to what just happened on the state level – a county official adding extras that would spike the final pension calculations.

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The Los Angeles Times editorial page was in our corner and at a press conference a Times reporter covering the event assured us that the report on the press conference was scheduled for the front page of the next day’s paper. 

Didn’t happen. 

A short time after the press conference the Simi Valley jury acquitted the police officers in the Rodney King incident and the 1992 Los Angeles riots began. The pension issue was wiped off the front page and out of the minds of the voters. Our lawsuit was eventually rejected by the court. 

Despite years of legal and legislative efforts and press reporting and public shaming, pension spiking seems to find a way to survive. And to that, the taxpayers should say, “nuts!”

(Joel Fox is the editor of Fox and Hounds … where this column first appeared … and is president of the Small Business Action Committee.) –cw

CityWatch

Vol 12 Issue 69

Pub: Aug 26, 2014