Controller: No CalPERS controls on pension spiking

by John Seiler | September 13, 2014 1:57 am

Pension reform shredded, Cagle, Wolverton, Aug. 25, 2014With the state facing $500 billion in unfunded pension liabilities, you might think the state’s pension funds would do everything they could to make sure the liabilities would not go even higher. To quote the late John Belushi, But nooooooooooooooooooooooooooooooooo.

Controller John Chiang just issued a report that found[1]:

“CalPERS’ current efforts for reviews of reporting entities include, in part, procedures for
detecting pension spiking. The available resources limit its annual reviews to only 45, or
1.5% of the more than 3,000 reporting entities. At this current rate, pension spiking could go
undetected for an extended period of time, as each reporting entity would be reviewed, at the
earliest, every 66 years.”

A 1.5 percent review rate means just 15 percent every 10 years.

Pension spiking means maneuvers by employees to rig the system, legally, to sharply increase their compensation in their last year of employment; it’s that last year on which pension numbers are calculated.

The spiking could cost state taxpayers $800 million over the next 20 years.

The report recommended:

“Continue to use a risk-based analysis and other evidence-based criteria to identify which reporting entities to review. To aid in its annual workplan, CalPERS should include the “high-pay compensation in excess of $245,000” attribute in its annual risk assessment. This attribute can be given a larger weighting in the risk analysis to satisfy the CalPERS Board’s concerns. This analysis should be used to determine the number of entities that should be reviewed each year as well as the resources needed to properly provide program oversight.”

That’s not enough. Some more effective reforms would include:

1. Limit the top pay for any state or local employee to $100,000 per year.

2. Limit pensions to $50,000 a year.

3. Apply the pension limit to both current employees and those already retired.

  1. issued a report that found:

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