(August 20)  In a move seen as being in conflict with the Public Employees’ Pension Reform Act that was pushed through the California Legislature and signed into law in 2012, the board for the California Public Employees Retirement System this week voted to authorize 99 types of special payments as counting toward pension calculations for the state’s public employees.
Critics, including governor Jerry Brown and advocates of pension reform immediately assailed the move as one that will reinstitute “pension spiking” and thereby endanger the integrity of the pension fund itself or otherwise require that taxpayers subsidize even further public employee pensions that over the last several years have been viewed by a growing segment of the population as overly generous.
The vote authorizes retirees to cite a host of functions incidental to their employment as special categories that give them “temporary upgrade pay” which can then be used to enhance the formula used in calculating their pensions.
Brown and other pension reform advocates had called upon the California Public Employees Retirement System (CalPERS) Board to reject the proposal from CalPERS staff calling for certifying 99 types of special payments as counting toward pension calculations for employees enrolled in the CalPER System since January 1, 2013.
The Public Employees’ Pension Reform Act requires pension calculations for employees who became retirement system members on January 1, 2013 and later be based on “the normal monthly rate of pay or base pay” those employees received.  The act further disallowed “ad hoc” payments included in retirement benefit calculations.
These reforms followed lingering controversy over the escalating expense of debt servicing public employee pensions in recent years and projected increase in future years that threaten to eat up funds available for normal governmental operating expenses. Putting in place limitations that disallow employees from citing temporary pay increases as the basis for calculating their pension amounts was intended to prevent current and future pension spiking, although the  act’s provisions did not apply to employees in the system before the act took effect.
Some members of the board took to heart the opposition to the move expressed by the governor and others, such that approval of the certifications was divided. The board’s vote was 7-5 to allow the “temporary upgrade pay.”
Some, including the governor, suggested the vote was in outright defiance of the Public Employees’ Pension Reform Act, constituting an outright illegal act.
“CalPERS got it wrong,” Brown said in a prepared statement following the board’s vote. “This vote undermines the pension reforms enacted just two years ago. I’ve asked my staff to determine what actions can be taken to protect the integrity of the Public Employees’ Pension Reform Act.”
The pay enhancements authorized by the board apply to a host of actions, work, conditions, requirements or positions that appear to be routine descriptions of duties or classifications associated with typical job descriptions such as dictation, shorthand, typing, pesticide application, notary, accountant, circulation librarian, asphalt work, aircraft/helicopter pilot, reading specialist, fire safety certificate, certified public accountant, polygraph, refugee arrival, refuse collection sandblasting, sewer crew, working with the severely disabled, crime scene investigation, detective division, DUI traffic officer, fire inspector, flight time, fire prevention fugitive pursuit, gang detail, juvenile officer, lead/supervisor, library reference, police training, streetlight changing, professional licensing, tire technician, cement finisher, school yard supervision, and police administration.
A 1937 law prohibits public employee pension spiking but has never been consistently enforced.
A leading advocate of pension reform is San Jose Mayor Chuck Reed who has consistently argued that the ever increasing payments to CalPERS represent an unsustainable liability to both local and state government and that the most sensible place to start pension reform is adhering to restrictions, such as those contained in the Public Employees’ Pension Reform Act that prevent CalPERS from broadly, liberally and generously defining pension plan definitions to provide members with maximum payouts.
Reed said the vote in favor of the special payment enhancements and their applicability to pension calculations further demonstrates the degree to which the CalPERS board is dominated by public employee unions who are intent on “expanding benefits and resisting reforms. This undermines the pension reforms enacted two years ago. Counting temporary and special pay will only increase pension spiking in California and add to the skyrocketing costs for public employee pensions,”  Reed told the Sentinel.
Two of the board members voting in favor to the special pay enhancements said public employers can push for lower pension payouts through the bargaining process.