Pension Spiking in Huntington to Cost $13 Million : Finance: The city will have to pay most--but not all--of the shortfall caused by legal but highly controversial practice. The state will pick up the rest.

Pension spiking by some city employees is costing taxpayers a total of $13 million, city officials said Friday.

That amount includes about $3 million in unfunded pensions for 39 city employees who have already retired and $10 million more for 153 employees who have said they plan to retire with spiked pensions.

Spiking is the term given to pensions artificially inflated by adding such things as unused vacation days and car allowances, as if they were part of a final year’s salary. (The amount of the final year’s salary determines the pension.) Normal pensions are financed through periodic contributions to a pension fund. But when pensions are inflated through spiking, the increased amount has not been financed.

The practice has been legal but highly controversial. A new state law, effective July 1, will clamp down on most aspects of spiking.

In the meantime, Huntington Beach city officials are struggling to find ways to pay for spiking that already has been allowed.

At a special City Council subcommittee meeting Friday morning, specific fiscal details of spiking were released, but not the names of those who stand to benefit from artificially inflated pensions.

City Atty. Gail C. Hutton has said that no names of pension-spiking employees can be publicly disclosed because it would violate their right to privacy.

Although names were deleted, city officials on Friday released documents that showed the individual cost of 39 retired city employees who spiked their pensions. One retired city employee escalated his or her pension by $10,343 a year through spiking, the documents disclosed. The documents also showed that the average unfunded cost for a spiked pension for a retired safety employee, such as a police officer or firefighter, was $104,939. For an employee in other departments, the average spiked pension cost was $45,093.

Huntington Beach will have to pay most--but not all--of the $13-million shortfall caused by city employees’ pension spiking. The state will pick up the rest.

Councilman David Sullivan, chairman of a City Council subcommittee that is investigating spiking, on Friday repeatedly denounced the practice. He said past city councils probably allowed pension spiking simply because they were never adequately briefed on its fiscal consequences.

“Spiking is morally wrong because it is an unfunded liability,” Sullivan said. “The money it will cost the city to pay for spiked pensions could have been used for such things as hiring more police officers.”

Deputy City Administrator Robert Franz told the council subcommittee that the state’s Public Employees’ Retirement System (PERS) several months ago increased its rates to help compensate for spiking by Huntington Beach and other cities. Huntington Beach thus only owes about $750,000 of the unfunded $3 million for 39 already retired employees, Franz said.

Franz also estimated that Huntington Beach will only have to pay about half of the total $10 million in unfunded spiked pensions for 153 city employees still scheduled to retire. Franz said a variety of factors, such as employees’ quitting Huntington Beach and going to work for other governmental agencies, could reduce the city’s cost.

Sullivan, however, responded that no matter which way the unfunded pensions are paid for, the money ultimately comes from taxpayers in the state. He said that predictions that Huntington Beach may only have to pay half of the unfunded cost are “of very little comfort to me.”