Public Employee ‘Pension-Spiking’ Bill Passes 1st Test

A bill to stop the kind of public employee “pension-spiking” recently uncovered in Torrance, Manhattan Beach and six other Southern California cities easily passed its first committee Wednesday.

The measure, sponsored by Assemblyman Dave Elder (D-San Pedro), would allow the state Public Employees’ Retirement System to recover excess retirement payments and impose an additional 25% penalty against any local official found to have improperly inflated his final year’s salary for pension purposes.

Elder’s bill would also allow the $63-billion pension system to forward findings of such abuses to local grand juries and prosecutors, as well as extend the statute of limitations for criminal charges brought from those investigations from three years to 10 years.

“The 10-year statute of limitations is one for political corruption, and I think this is political corruption on a grand scale,” Elder said of the pension-spiking problem. The Assembly Public Employees, Retirement and Social Security Committee, which Elder chairs, unanimously approved the measure.

A state controller’s audit made public in December criticized pension practices in Torrance and Manhattan Beach.

The audit took aim at the sizable salary increases that the Torrance City Council granted to two longtime officials shortly before their retirement. The raises increased their retirement benefits.

Former City Atty. Stanley Remelmeyer was given a 34% salary increase in 1987, one year before he stepped down. And former Police Chief Donald E. Nash was granted a 15% raise when he announced in February, 1991, that he expected to retire in one year. The raise boosted Nash’s base pay to $109,379, increasing his annual pension by nearly $11,000. Nash stepped down in June, 1991, citing health problems.

The audit also questioned a decision allowing former Manhattan Beach City Manager David J. Thompson to retire on a pension of $139,000 a year, or $50,000 more than he earned on the job. City officials later slashed Thompson’s pension by $60,000.

Among those testifying on behalf of Elder’s measure Wednesday was Robert C. Sangster, a Huntington Beach deputy city attorney, who said the city supports the bill because it would clear up ambiguities in state law about what kind of expenses can be lumped into pension calculations.

Sangster said it was a matter of interpretation when Huntington Beach included payments for unused vacation days and car allowances when calculating retirement payments for 16 former officials.

Sangster maintained that the city and the retirees were unfairly “tarred” in a December audit and subsequent press conference by Controller Gray Davis naming former officials who “pig out” on inflated pensions.

And he said the decision by Davis to publicly disclose individual names of the Huntington Beach retirees who were audited was designed to “grab attention” for his bid for U.S. Senate.

“I think the only conclusion you can come to is that the controller is trying to use the audit process for publicity for his Senate race,” Sangster said after the hearing.

Those named in the controller’s audit have not been charged with any crime, and PERS officials said during Wednesday’s hearing that no civil or criminal penalty exists for pension-spiking.

Davis said Wednesday that the findings of pension abuse by his auditors were “unimpeachable,” and not just a difference of interpretation.

“My auditors are longtime civil servants who work independent of who the current controller might be,” Davis said. “If Mr. Sangster doesn’t like them, that’s tough.”

He also suggested that comments by Sangster during and after Wednesday’s hearing were aimed at blunting criticism of Huntington Beach.

“What’s happening is that the officials in Huntington Beach are embarrassed, and they should be,” he said. “Inflated pensions are ripping off hard-working taxpayers and devaluing the honest effort of public employees.”

Times staff writer Deborah Schoch contributed to this report