Calpers's Play for Pay
Jerry Brown wanted to stop 'pension spiking.' So much for that.
Updated Aug. 26, 2014 3:12 p.m. ET
When one door closes, government unions crack open a window. So it was last week when the labor-controlled board of the California Public Employees' Retirement System (Calpers) approved counting 99 categories of supplemental pay toward workers' pension calculations.
One objective of the de minimis reforms Gov. Jerry Brown signed in 2012 was to curb egregious abuses such as "pension spiking." Defined-benefit pensions in California are calculated as a percentage of the average of workers' highest compensation over three years multiplied by the numbers of years worked. Many employees have goosed their pensions by loading up on overtime and cashing out vacation and other add-ons during their final working years. In one famous example, a fire chief in Northern California who made $186,000 retired after 26 years with an annual pension of more than $230,000.
Mr. Brown's reforms ostensibly closed these loopholes by defining "pensionable compensation" as "base pay" for "services rendered on a full-time basis during normal working hours." The law explicitly bars overtime as well as unused vacation and sick leave.
Calpers has now tried to end run the law by including 99 other salary boosters such as "incentive pay" for "local safety members, school security officers and California Highway Patrol officers who meet an established physical fitness criterion."
Public-safety officers can earn up to $1,600 annually for taking annual physicals. Employees earn "longevity pay" for merely sticking around for more than five years, which comes on top of "step" increases and annual raises. Workers can also boost their salaries by up to 10% if they are "required to obtain a specified degree" such as a bachelor's and for "maintaining a license required by government or regulatory agencies to perform their duties."
Some governments even award extra pay to firefighters "who are routinely and consistently assigned to administrative work" and to prison guards who are given the onerous job of "responding to questions from the public." Police are paid premiums for handing out parking tickets and patrolling streets. Librarians can earn more if they have to "provide direction or resources to library patrons." If only journalists could earn bonuses for writing.
Calpers did graciously exclude from its list pay boosts for public-safety officers who wear their uniforms and the monthly allowance they receive for keeping their clothes clean. But it's inevitable that government unions will soon find ways to exploit these 99 other pay bumps to pad their pensions. For instance, they could negotiate greater "longevity pay" or larger "physical fitness" premiums for workers over age 50.
Gov. Brown has chastised Calpers for undermining the reforms and asked his staff to "determine what actions can be taken to protect the integrity of the Public Employees' Pension Reform Act." The truth is that government unions and Calpers will always find ways to manipulate defined-benefit plans that are run by their political allies. The only way to protect taxpayers is with 401(k)-style plans that are individual property that can't be politically exploited.