A fire chief in Contra Costa County who retired last year at age 51 with a final year’s salary of $221,000 ended up with an annual pension of $284,000. Another Contra Costa fire chief who earned $185,000 his final year on the job, wound up with an annual pension of $241,000.
As cash strapped state and local governments struggle to pay increased retirement costs, pension spiking has become a focus of public anger.
Public employee pensions in California are based on a retiring employee’s age, years of service and compensation – usually the employee’s final year’s pay. Pension spiking occurs most often when compensation is inflated during the worker’s last year on the job. It occurs regularly – not just in Contra Costa County.
Loopholes in state law make pension spiking easy and legal. Efforts to curtail the practice have gone nowhere in a California Legislature dominated by lawmakers whose campaigns are bankrolled by union members who benefit from spiking.
So at the same time cash-strapped state and local governments cut vital services, lay off some workers and furlough others, they also have increased payouts to their retirement funds. Most recent retirement contribution hikes have gone to backfill the billions of dollars government pension funds lost in last year’s stock market crash. But spiking makes the problem worse.
Two bills, one in the state Senate and one in the Assembly, have been introduced to address spiking. For the most part, they seek to bar unusually high pay raises in the last year of a person’s career that fuel higher lifetime pensions. While that will help, it’s not enough.
The bills, as currently drafted, do not strictly ban the inclusion of unused administrative leave, education incentives, uniform allowances, shift differentials and other types of special payments commonly used to inflate final compensation.
A more straightforward way to stop pension spiking would be to define final compensation strictly as base pay and nothing more.
Sen. Joe Simitian, D-Palo Alto, author of the one of the spiking bills, says he’s seeking to craft a measure that has a chance of getting through legislative committees and to the governor’s desk. He sees his bill as “a good start, a step in the right direction.” It is that, but frankly given the state’s dire fiscal situation, the Legislature’s inability to do more to address an obvious abuse is appalling.
Lawmakers are weighing truly draconian budget cuts. The governor is seeking to eliminate services that help to keep sick elderly and disabled people in their homes. College students face steep fee hikes. Class sizes are growing and transit service has been slashed. Given that and more, to allow top government officials to retire as young as age 50 with pensions fully 30 percent fatter than the salary they earned while they worked is just flat wrong.