State Board Upholds Cut in Former City Manager’s Pension

A $29,000 severance package was used improperly to inflate pension benefits for former City Manager William O. Talley Jr., but he can keep $45,000 he has already been paid, state officials said Thursday.

Talley’s salary increased from $97,390 to $159,109 shortly before he resigned in September, 1987, after the Anaheim City Council put him on notice that he was about to be fired. Talley’s outgoing salary helped boost his monthly pension to nearly $8,000, according to state records.

The state Public Employees’ Retirement System concluded in November, 1992, that a $29,371 lump-sum payment at the time of his resignation was wrongly used to calculate his retirement benefit, and reduced Talley’s monthly pension to just over $6,000, Assistant General Counsel Kayla J. Gillan said.

Talley challenged that decision, but the PERS Board of Administration on Wednesday approved the finding of an administrative law judge who endorsed the pension reduction. The judge, however, said Talley does not have to return the $45,920 he has already been paid.

“Basically, the allowance was reduced two years ago but the question was whether or not that reduction was appropriate, and the judge found that it was,” Gillan said.

Critics call it “spiking”: Government employees artificially increase their pensions by converting perquisites and benefits, such as unused vacation days, into an increased final-year salary that is later used to compute pension benefits.

Talley and his retirement payments were cited prominently in a December, 1991, audit by state Controller Gray Davis, who blasted former government officials who “pig out” at the public’s expense.

But Santa Monica attorney Stephen H. Silver said Thursday it is wrong to characterize his client’s retirement package as “spiking.” He stressed that city officials at the time approved the deal, and he questioned the independence of the state board’s decision.

“Considering that the party that makes the decision is the same party that is prosecuting the action, I’m not surprised they wouldn’t decide in our favor,” said Silver, who said his client may appeal. “What Mr. Talley did was not unlawful. Everything he did was aboveboard.”

PERS approved Talley’s retirement package at the time, Silver said, “which is why (the judge) didn’t allow PERS to recover any back pay. They knew about this for years and didn’t do anything about this.”