CalSTRS wants (no) change in anti-spiking bill

Two amendments pushed by the CalSTRS board would remove most current teachers from coverage by a bill aimed at curbing spiking, the manipulation of final pay or service credits to boost pensions.

A pay cap would be changed to apply mainly to highly paid administrators, not teachers, and to cover new hires, not current employees. A limit on the types of pay used to calculate a pension also would be changed to apply only to new hires.

The California State Teachers Retirement System board, dominated by teacher representatives, acknowledged that protecting teachers is part of the goal of the changes said to be needed to avoid administrative problems and legal challenges.

“Given the climate, the context and the speed at which this issue in particular is moving, I think it would be in the board’s best interest to take a position that would have the least harmful effect on our members,” said Harry Keiley, the board vice chairman.

The CalSTRS board, on split votes, approved the push for the amendments early last month two days after the anti-spiking bill, SB 27 by state Sen. Joe Simitian, D-Palo Alto, was approved by the Senate 39-to-0.

“I think the cap can be structured so that it would never be as detrimental as what’s being proposed,” said Dana Dillon, the board chairwoman.

A similar Simitian bill last year moved through the Legislature with broad bipartisan support but was vetoed by former Gov. Arnold Schwarzenegger. He liked the bill, but said it was tied to a troubled anti-spiking bill for county pension systems.

The latest round of anti-spiking legislation was sparked by a Contra Costa Times report of spiking in a county system. Two fire chiefs, ages 50 and 51, retired with pensions far above their pay — in one case, final pay $221,000 and pension $284,000.

One chief was rehired as a consultant. A curb on “double-dipping” in the Simitian bill, a 180-day delay, is opposed by local government groups, who say keeping retirees on the job is needed for training replacements and for jobs requiring scarce skills.

This year a new and potentially improved anti-spiking bill for the 20 county retirement systems operating under a 1937 act, AB 340, is not linked to the Simitian bill covering CalSTRS and CalPERS.

Since the CalSTRS board decided to push for changes in Simitian’s bill, spiking at CalSTRS has moved into the spotlight in two reports this month in the Sacramento Bee.

A whistle-blower, Scott Thompson, was was fired by CalSTRS executives who claimed he reduced a pension without authorization and refused to restore it. A retired CalSTRS specialist told the Bee Thompson is a “hero” because spiking was “common knowledge” and nothing was done.

A Bee analysis found that nearly half of the 225 Sacramento area retirees drawing six-figure CalSTRS pensions received at least a 10 percent pay raise in one of their final three years. Some of the raises were 20 percent or even 40 percent.

CalSTRS is different from most California public employee retirement systems in several important ways.

The CalSTRS board lacks the power to set annual contribution rates that must be paid by employers, needing legislation instead. Teacher unions can bargain for pay but not for pensions, which also are set by legislation.

Teachers do not receive Social Security. A decade ago CalSTRS became a “hybrid,” adding to the pension a 401(k)-style investment plan guaranteed to earn at least the 30-year Treasury bond rate, more in a good year.

A view that the retirement plan for teachers was inadequate, until a series of improvements around the time the 401(k)-style supplement was added, may have led to a tolerance at CalSTRS for what some might regard as spiking

The giant California Public Employees Retirement System sponsored its own anti-spiking bill, SB 53 in 1993, and has a compensation review unit that checks for spiking, which has not been among the well-publicized issues at CalPERS in recent years.

CalSTRS, on the other hand, had a verification unit that was disbanded as automated databases were installed, beginning in fiscal 1988-89. Now in an era when public pensions feel under attack, spiking is getting another look.

The CalSTRS board was told last week that a new compensation review unit is being developed. The unit will require additional staff and will probably look at about 5,000 cases a year.

The CalSTRS staff has given the board three reports on spiking prevention this year, beginning in February. Anyone wondering if spiking has been institutionalized at CalSTRS could look at evidence in the reports:

–After 25 years of service, the period of pay used to calculate a pension is switched from a three-year average to a single year.

–Unused sick leave is counted as part of the years of service.

–Automated checks that replaced the verification unit are generous, not triggered until pay creases are 15 percent and special pay exceeds $15,000.

–Only 141 audits were conducted during a three-year period, recovering more than $3 million in overpaid benefits.

–Pay found to be intended to boost pensions is not disallowed for all retirement credit, but instead goes into the 401(k)-style investment plan.

–Pay for auto allowances, performance bonuses and cash in lieu of health benefits can be counted for pensions.

–Pay for overtime and summer school, once not credited for retirement, now goes into the 401(k)-style investment plan.

In the amendments to the anti-spiking bill, the CalSTRS board would replace a cap on pay increases used to calculate pensions, 25 percent over five years, with a cap on the total pay, about $147,000, a salary rarely reached by teachers.

CalSTRS staff said the five-year average would be difficult to administer and require about 12 additional staff. The estimated cost for “one-time technology and training” is about $5.1 million.

The CalSTRS board wants the pay cap to apply only to new hires to keep promises to current workers and for legal reasons. The board’s lawyer thinks that imposing the pay cap on the pensions of current workers would violate their vested rights.

The lawyer said the law is less clear about whether the types of pay used to calculate pensions are a vested right. But the second change sought by the CalSTRS board would apply the bill’s limits on types of “pensionable” pay to new hires only.

State Treasurer Bill Lockyer’s representative on the CalSTRS board, Grant Boyken, voted against both proposed amendments. Board member Carolyn Widener voted against the proposal to limit the redefining of pensionable pay to new hires.

Widener said the proposal risks making the board “look like we are protecting 500,000 people no matter what’s going into their compensation right now. This is also the court of public opinion.”

At an Assembly committee hearing on the anti-spiking bill this month, a CalSTRS lobbyist diplomatically said the board’s position is “support if amended.” A lobbyist for the California Teachers Association said the powerful union supports the CalSTRS proposal and is “opposed unless amended.”

The author of the bill, Simitian, told the committee others are “just as determined that we not use” the pay cap. As issues are raised, he said he tries to respond if it’s a “real issue” and not just a reluctance to change the way things are done.

“When I worked on renewable energy,” Simitian told the committee chairman, “I thought there was no area that could be more complex as a policy area — until I got into public employee pensions.”

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Posted 19 Jul 11

19 Responses to “CalSTRS wants (no) change in anti-spiking bill”

  1. Tough Love Says:

    You need only read the first 2 paragraphs to CLEARLY see that CalSTRS Board is going WAY beyond it’s proper roll to correctly administer Plan provisions and act as a fiduciary in the investment and protection of Plan assets.

    CalSTRS Board’s roll is NOT to ADVOCATE for teachers. If anything, it has a greater responsibility to California taxpayers.

    Taxpayers …… listen up: DEMAND change.

    This Board must be changed to include no more than ONE teacher/labor representative.

  2. Dr. Mark H. Shapiro Says:

    No mention from about the stellar investment results from both CalSTRS and CalPERS this past fiscal year. Can we conclude that Calpensions is in the pocket of the anti-pension crowd?

  3. Keen Observer Says:

    Teachers don’t receive six-figure pensions. Superintendents do, along with administrators (usually with at least 35 years of service). With 30 years of service at age 60, salary would need to be about $139,000 to generate a $100,000 pension. That’s more than school principals make.

    The conversion of sick pay is a bargain for taxpayers. If I have half a year’s worth of sick days at retirement at 60, that will bring me about $800 a year in additional pension. If I decided to use my sick days before retiring, half a year would bring me almost $40,000 in salary (which would take 50 years in retirement to match at $800 per year), and my district would have to pay about half that to substitute teachers to cover my classes. And my students would lose out because of discontinuity. Moreover, if I used this as a strategy to lengthen my career by a year, my additional pension would be $1,600 per year – twice the $800.

  4. Keen Observer Says:

    As for the Defined Benefit Supplement, which you refer to as a “401-k,” you should be aware that employees pay into this but not employers (at least since the 2% was discontinued). If I teach summer school or an extra class, 8% of my pay goes into my DBS account. There is no employer match.

  5. Thomas Wickstrom Says:

    The KochWhores who set up these Right Wing Shill websites don’t care about the truth Keen. They have an agenda and do not give a dam about anything else other than getting richer.

  6. Tough Love Says:

    Dear Keen Observer, You’re wrong. Just like the UNIVERSAL practice in the Private Sector, sick days are for when you are SICK. There should be ZERO payout (of any type) for unused sick days. And, if you take a sick day when you are not sick, you should be fired.

    The entitlement mentality coming from Civil Servants such as yourself is astonishing.

  7. Keen Observer Says:

    Tough Love (Troll), I don’t take sick days, even when I probably should. That’s why I have a lot of them.

  8. Rex The Wonder Dog! Says:

    No mention from about the stellar investment results from both CalSTRS and CalPERS this past fiscal year.
    No mention from CalTRDS about the disasterious investment results from 2008 when they lost 36% of the fund and bankrupted it. No mention from CalTRDS the fund is still under a 50% funded level today.

    No mention that CalSTRS is essentially bankrupt and will be 100% depleteted of funds within 30 years and is asking the legislator for a TAXPAYER BAILOUT.

    No mention fo the pension spiking that alllows GED educated gov employees to reitre at age 50 with a $10 million dollar pension either.

    Yes, it seem many things have been left out Dr Phil!

  9. Rex The Wonder Dog! Says:

    Tough Love (Troll), I don’t take sick days, even when I probably should. That’s why I have a lot of them.

    Yeah right dork, and I bet you and your GED are worth every penny of the $200K per year you’re comped too!

    Hehehheehe….you should be in stand up-at least then you would be forced to earn your pay.

  10. Rex The Wonder Dog! Says:

    As for the Defined Benefit Supplement, which you refer to as a “401-k,” you should be aware that employees pay into this but not employers (at least since the 2% was discontinued).
    My god are you dumber than a bag of rocks.

    A 401K can be MACTHED by ANY AMOUNT. As a teacher your DC costs you 8%, costs the district 8% and costs the state 2%, that is a 10 point (125%) match to your 8%.

    We could switch the bankrupted CalSTSRS from a DC to a DB system and use the exact same contibution amounts.

    And you are a teacher!!! No wonder we have a 50% drop out rate in this state-you would be fired if you worked in the real world and taught lies liek that

  11. Rex The Wonder Dog! Says:

    The conversion of sick pay is a bargain for taxpayers. If I have half a year’s worth of sick days at retirement at 60, that will bring me about $800 a year in additional pension.
    Sick pay is for SICK PAY fool, not a benefit spiking tool.

    Another dork gov leech with “entitlement mentality” telling the real world how to spike his pension, and thinks this is legit. Unreal.

  12. Rex The Wonder Dog! Says:

    BTW Keen Fool you have a PART TIME, 37 week work year job, and are only required to work 36 hours per week-a part time job comping $108K per year (the state average – $68Ksalary/$40K benefits), or about $80 an hour.

    In the real world you only get 2 weeks of vacation and usually only 4-6 sick leave days.

  13. Reilleyfam Says:

    Too bad for TF & RTWD, all they can do is cry and whine and hide behind blogs & NOTHING they say or do will result in actual results in the real world.

    Now bend over and pay – and you’ll keep paying.

  14. Tough Love Says:

    Reilleyfam, I’d love to be the fly on the wall (when your pension fails) and you’re repeating over-and-over again …

    “but we were promised”
    “but we were promised”
    “but we were promised”
    “but we were promised”

    When (not if) the money runs out, it’s “game over”.

  15. Reilleyfam Says:

    Hey TL & Rex – how do like being an ineffectua crybaby? You cant make any tangible results in the real world so you whine and cry and rant like the pantywastes you are.

    And the end of the day, you’ll just keep paying, so do everyone a favor and just shut up & bend over.

  16. Reilleyfam Says:

    TF – I inherited enough money to never work again – I only work for the govt for the free healthcare & even if I lost that I’d have enough to pay my own if needed. NOTHING you can do to me will ever have any tangible affect on my life. However, YOU will keep paying & paying & paying.

  17. Tough Love Says:

    Reilleyfam, I’m happy for you that you have such financial stability ………. but reading you’re comments …………. and particularly the rather snide “YOU will keep paying & paying & paying” ……….. you’ll always be a schmuck.

  18. jskdn Says:

    This would be an irrelevant issue if pensions were calculated in a way that reflected the how pension funds are earned, the time-value of pension contributions. And when pension aren’t so calculated, that is aligning benefits with earning structures, it then represents and transfer of wealth from other pension fund members and/or those burdened by making up shortfalls in pension funding.

    Final salary or even a 3-year average of the last years of employment has little to do with the accumulation of assets due to pension contributions paid on behalf of the retiree. A dollar contributed during the first year of 30 years of employment has had 30 years of time-value-of-money growth. A dollar contributed during the last year represents almost zero additional earning.

  19. Keen Observer Says:

    Tough Love and Rex,

    I’m sorry that your education failed you, that you never learned to engage in respectful discourse.

    Rex, you rant about my GED, but every teacher has at least a four-year degree and many have advanced degrees. My own degree is from one of the top five universities in the nation, which accepted 8% of applicants last year. Where did you go to college?

    Rex, you also say that I’m “dumber than a bag of rocks” before going on to say: “A 401K can be MACTHED by ANY AMOUNT. As a teacher your DC costs you 8%, costs the district 8% and costs the state 2%, that is a 10 point (125%) match to your 8%.”

    Aside from the misspelling of “matched,” you confuse DB and DC. You accurately describe the defined benefit pension plan, but you call it a defined contribution plan. Bad Rex. Worse, you inadvertently shifted the topic from the Defined Contribution Plan, what CalSTRS calls the Defined Benefit Supplement, which is what was being discussed. Goes off topic, confuses terms, can’t spell or doesn’t proofread – no wonder you weren’t admitted to my university.

    Obviously, a DC plan can be matched by the employer or not matched at all. I’m not aware of 401(k) plans that mandate that employees contribute 8% – or that can only be annuitized but not rolled over into an IRA.

    As for my work week, you aren’t honest enough to resist the temptation to distort. Contractually, I am required to be on campus about 37 1/2 hours a week, but when would I grade papers. plan lessons, make photocopies, clean my classroom, meet with parents and colleagues. Add about four hours a day for all of that. If I didn’t do that work, my students would turn out like you hyenas.

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