Pay Scandals Encourage CA Bill to Tackle Inflated Pensions

(September 1, 2010) — The Legislature has passed a bill to limit “pension spiking” in the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS).

A bill to limit methods that have been used to inflate the pensions of public employees has come as a result of controversies in pay in the Los Angeles city of Bell, a city of 37,000 where inflated salaries for city officials has led to uproar. A 2007 study by Pacific Research Institute, San Francisco-based non-profit, revealed that pension spiking costs California taxpayers about $100 million each year.

According to the Senate Bill 1425, which now requires the Governor’s approval, an individual’s pension would be based on a set of criteria preventing employees from padding final salaries with one time bonuses, end-of-career promotions and accrued vacation time, as noted in a release on the web site of State Senator Joe Simitian (D-Palo Alto), who authored the Legislation.

Additionally, the bill, introduced on February 19, focuses on the issue of revolving door double-dippers employees, who retire with substantial pensions and then resume full-time employment at a later date.

“Pension spiking does a disservice to the public, who ultimately foots the bill; and it does a disservice to other public employees who rely on the resources and solvency of the system for a secure retirement,” said Senator Simitian in a statement. “Most of the folks I talk to don’t begrudge employees a reasonable pension to provide some security in their later years. But they are understandably angry when they hear of these off-the-charts payouts – even as our state and our residents are struggling to make ends meet.”

Republican California Governor Arnold Schwarzenegger has said he would not sign a budget agreement until the Legislature takes steps to reduce pension benefits. To erase a $19 billion state budget deficit, the governor has proposed a reduction in public worker pensions to 1999 levels, refusing to sign any budget that doesn’t contain the cuts.