Assembly Panel Passes ‘Pension-Spiking’ Bill : Legislation: Committee approves a measure that would penalize public employees who inflate final-year salaries to get bigger pensions.

A bill to stop the kind of public employee “pension-spiking” recently uncovered in Bellflower and seven other Southern California cities has easily passed its first committee.

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 last Wednesday.

A state controller’s audit made public in December said that 15 retired Bellflower city employees have been collecting inflated pensions because the city overreported wages for more than a decade. The overpayments total about $2,500 a month.

Auditors said that the city’s contributions to the state retirement system on behalf of employees were improperly listed as salary contributions. The city also permitted some retiring employees during their final year with the city to convert unused sick leave and vacation time into salary to boost their retirement benefits.

Bellflower officials said both practices were halted last summer after field auditors told them they were improper. In reponse to a retirement system request, the city is reviewing the payroll records of all 15 retirees.

In a letter to Elder, Bellflower City Administrator Jack Simpson said the city supports legislation “that will require professional controls and appropriate audits . . . for proper administration” of the retirement system.

At the same time, Simpson said, the city’s policy allowing employees to convert unused sick leave and vacation time to salary was not a case of “fat cats pigging out,” a reference to Controller Gray Davis’ criticism in December of former officials who “pig out” on inflated pensions. Bellflower officials viewed the conversion of sick leave and vacation time as an alternative to other high-cost benefits for longtime city employees, Simpson said. The policy was “deemed to be appropriate and deserving” when implemented, he said.

Among those testifying on behalf of Elder’s measure Wednesday was Robert C. Sangster, a Huntington Beach deputy city attorney, who said his 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--one of the cities audited--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 Davis.

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 Davis’ bid for the 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 officials said during Wednesday’s hearing that no civil or criminal penalty exists for pension-spiking.

Davis said 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.”

Times staff writer Gerald Faris contributed to this report.