State May Cut Pay of Some Hawthorne Retirees : Pensions: Auditors say final salary of 28 former city employees was improperly boosted by vacation, sick leave and holiday pay.

State pension officials have notified more than two dozen retired Hawthorne city employees that they may lose part of their pension income--and perhaps have to return some of it to the state.

The notification came nine months after state auditors claimed that Hawthorne, Manhattan Beach, Torrance and other cities were overstating the final year’s salary of certain city workers to boost their pension payments.

The Hawthorne workers plan to meet on Saturday to discuss possible legal action against the state and city.

In letters sent to the retirees last month, state Public Employees’ Retirement System officials said Hawthorne incorrectly reported the workers’ salaries for retirement purposes, effectively inflating their pensions.

As a result, state officials tentatively concluded that the workers’ pension incomes must be reduced, and in some cases the retirees could be required to give back some of the money.

The 28 retired workers were given until Wednesday to appeal the findings.

At issue is an interpretation of state guidelines regarding unused sick, vacation and holiday leave pay for the final year of service, and whether it could have been added to the workers’ final year’s salary that is used to calculate retirement benefits.

Hawthorne officials maintain that they followed state guidelines in calculating retirement pay.

“The problem is they keep changing their minds on what we can and cannot do,” said Douglas Gates, Hawthorne’s personnel director. Attempts to reach state officials for comment were unsuccessful. The pension reductions could go into effect as soon as Nov. 1, officials have said.

Steve Sturgeon, a former Hawthorne police officer, said that when he applied for retirement in 1990, city officials told him that his final year’s sick, vacation and holiday leave pay would be added to his last year of earnings to determine his pension. Sturgeon said he believed there was nothing improper about the arrangement.

But last month, pension officials notified him that his monthly check could be reduced by $500, and that he could owe the state $5,000 because of alleged overpayments.

“If I knew that I was only going to get this much, I wouldn’t have retired yet,” Sturgeon said. “I’m going to have to try and find a job.”

The decision by PERS came as a shock to Richard McCarroll, who said he followed his dream and moved to Sedona, Ariz., after retirement from the police force in May, 1991. He said he could owe as much as $10,000 in back payments and his monthly pension could be reduced by $450 a month.

With $63 billion in assets, PERS administers pensions for 1,200 cities and government agencies throughout California and is the nation’s third-largest pension fund.

However, an audit by the state controller’s office released last December suggested that the pension system is fraught with problems.

The audit of pension funds uncovered “significant deficiencies” in the practices of eight Southern California cities, including Hawthorne, Torrance and Manhattan Beach.

It was unclear Wednesday whether three former Torrance and Manhattan Beach officials, whose pensions were questioned in the audit, now also face reduced incomes.