Sunday, June 11, 2006

Lucrative Loophole for State Employee Pensions – Screw the Taxpayers

See article in Saturday, June 10, 2006 Sacramento Bee Watchdog report: Lucrative loophole for pensions by John Hill

Quirk in state law lets some earn more from retiring than working.

Imagine collecting a bigger check in retirement than you did while working.
That's more than a fantasy for some former members of the State Police, who went on to become California Highway Patrol officers when the two agencies merged in 1995.

A quirk in state retirement law entitles them to pensions greater than the 90 percent cap for state public safety workers. And an unknown number of other state workers may be sidestepping the limit by earning retirement credit under more than one pension formula.

So far, 14 former State Police officers have exceeded the 90 percent limit, including one who is getting 10 percent more in retirement than on the job, according to the California Public Employees' Retirement System.

That's wrong, said state Sen. Roy Ashburn, R-Bakersfield.

"People should not be compensated for no work at a rate higher than they receive when they are performing work," he said.

Ashburn is the author of Senate Bill 1443, which would close the loophole and apply the 90 percent pension limit to all state public safety workers, even if they change jobs.

State officials say they don't know how many other workers might be in the same situation as the former State Police officers.

Theoretically, any worker who went from a public safety job to another with a different retirement formula could add together the two caps.

That would mean a pension as high as 180 percent of salary. As a practical matter, workers would never reach that level, since it would require at least 60 years on the job. But pensions above 100 percent of pay are well within the realm of possibility.

"People find these loopholes, and they drive through them," Ashburn said.

In fact, Ashburn's legislation was motivated by another case of pensions going higher than pay.

The Bee reported in April that some supervisors in the Department of Forestry and Fire Protection were in line to receive pensions reaching as much as 115 percent of their pay because of a similar quirk in retirement law.

That loophole occurred because the administration of Gov. Arnold Schwarzenegger had not granted supervisors a richer retirement formula given to rank-and-file firefighters under an agreement five years ago. Because most of the supervisors had logged time in the ranks earlier in their careers, their pensions were based on two separate sections of retirement law, making them eligible for more than the 90 percent cap.

Schwarzenegger reversed course, closing the loophole by granting firefighting supervisors the same retirement formula as the rank and file. CalPERS is adjusting monthly allowances to recover overpayments, spokeswoman Pat Macht said.

Starting in 1935, the state created special retirement formulas for public safety jobs, such as CHP officers. The original purpose was to encourage workers whose jobs required them to be young and fit to retire early.

Those special pensions generally came with a cap, to take away the incentive to stay on the job after hitting the ceiling. By contrast, the standard state pension that covers most workers doesn't include a limit -- a moot point, since most employees would have to put in 50 years on the job to qualify for pensions rivaling their pay.

But over the years, the Legislature undermined the purpose of the cap by repeatedly raising it. The limit is now 90 percent for the CHP, prison guards, firefighters and some others, and 80 percent for other prison workers such as nurses and cooks.

Even as the limit went higher, loopholes opened up that allowed some workers to avoid it altogether.

The quirk involving the State Police came about in July 1995, when the department was merged into the CHP.

State Police were given the option of performing some additional training to qualify as CHP officers, along with the CHP retirement plan, CalPERS spokeswoman Macht said.

In all, 259 people transferred to the CHP and therefore qualified for pensions under two separate sections of retirement law. So far, 108 have retired, Macht said, including the 14 who qualified for more than 90 percent of pay.

CalPERS could not say how many of the remaining 151 are still with the CHP and would be in line for the higher pensions.

Ashburn's bill, which is before the Senate committee that deals with retirement issues, would prevent any state public safety worker from going higher than the 90 percent cap. It would apply to those who retire after the law goes into effect, not those who are already collecting pensions.

Ashburn said the current cap should be enough for any retiree, far beyond what most people can expect in the private sector.

"Ninety percent is a very generous retirement for people who are able to leave state service at a relatively young age," he said. "In many cases, those workers become otherwise employed."

• Read The Bee's ongoing coverage of the state pension system. The original investigation documents how top-tier California Highway Patrol officers aggressively pursue injury claims, often near the end of 30-year careers, that hike their retirement income. Some go on to demanding second careers while collecting their state disability pensions. Inside the CHP it's known as "Chief's Disease."

About the writer:
The Bee's John Hill can be reached at (916) 326-5543 or


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