COLUMN ONE : L.A. County's $100,000 Salary Club : Despite a severe fiscal crisis, many top officials and their aides have cracked the six-figure barrier. The pay and benefit system has helped fuel budget woes.

TIMES STAFF WRITERS

As Los Angeles County's economy plunged into its deepest recession since the Great Depression and county government careened toward its worst fiscal crisis ever, the salaries of department heads and top officials soared.

At $212,259 a year, Sheriff Sherman Block now earns more than President Clinton and may be the highest-paid elected official in the nation.

Assessor Kenneth Hahn's $167,025 salary is greater than that of the U.S. secretary of the treasury.

And at $153,948, Fire Chief P. Michael Freeman earns more than the chairman of the Joint Chiefs of Staff.

A Times examination of salaries paid by the nation's biggest county government found that many top officials and even their second-tier assistants are routinely paid more than high-ranking officials of the federal, state and local governments. They earn more than members of Congress, Cabinet secretaries, governors and big-city mayors.

The county's salary structure has been a significant source of its fiscal distress and promises to be for years, officials acknowledge.

By August of this year, 1,225 of the county's 85,000 workers earned more than $100,000 a year in base salary. A total of 2,232 county workers earned more than $90,000, according to payroll data obtained by The Times.

Pay and fringe benefits, richest at the upper echelon of the county's work force, were driven to unprecedented levels by the policies of the then-chief administrative officer in the early 1990s.

At the same time, hundreds of thousands of residents lost their jobs, particularly in aerospace and defense. Real estate values nose-dived and the county's property tax roll shrank.

Local governments, including the city of Los Angeles, froze salaries and stopped hiring. State employees took pay cuts.

But the county kept granting raises and extending benefits. The biggest increases were at the top, but even many rank-and-file workers received raises since 1989 of 13% to more than 30%.

County officials created this system of pay and benefits. They conceived it, approved it and maintained it.

"The county is the largest, most diverse and most complex local government in the nation," said Board of Supervisors Chairman Mike Antonovich in a written statement. "Most county managers are paid less than what they would be paid in the private sector."

In fact, the county's own salary surveys for top jobs are based on what other major California counties and the state government pay for roughly comparable posts.

To be sure, generous pay for public officials is not confined to Los Angeles County.

While Orange County was digging out from the worst municipal bankruptcy in history, for example, top officials--and some not so high on the ladder--continued to draw six-figure salaries. At least 200 county employees earned more than $100,000 in the 1994-95 fiscal year, with some Sheriff's Department officials and county psychiatrists collecting $30,000 each in overtime and "on-call" pay alone.

The county's top-paid employee for the year, Sheriff Brad Gates, received $164,839 in salary and benefits, followed closely by Dist. Atty. Michael R. Capizzi, who made $161,593.

But state lawmakers have singled out Los Angeles County's salaries and benefits for scrutiny as the fiscal crisis has worsened, and the Board of Supervisors blamed Sacramento and Washington for the county's woes.

When they appealed to Sacramento for help, then-Assembly Speaker Willie Brown denounced county officials as "scalawags."

Salary increases for nonunion employees in Los Angeles County are the result of a performance-based pay plan whose chief architect was then-Chief Administrative Officer Richard Dixon.

They slowed or stopped for most county employees after Dixon resigned under pressure in 1992. But Dixon's legacy lives on as pay and benefits help fuel the county's ongoing budget crisis.

Almost three-quarters of the employees who earn more than $90,000 are doctors, lawyers or judges in the health care and justice systems. An additional 350 are department heads, their deputies, administrators and law enforcement officials.

The statistics do not include overtime and bonuses that will push many employees into the $100,000 club, and pump up the total compensation of others already earning six figures. The data also does not include rich fringe-benefits packages and perks such as car allowances.

A 1993 county study showed that one of every 89 county employees earned at least $100,000 a year. By comparison, one of 224 Los Angeles city employees earned six figures and one of 1,130 state workers. Only some University of California campuses and the Metropolitan Water District had a higher ratio.

The Legacy of Dixon

Major changes were in store in 1987 when supervisors appointed Treasurer-Tax Collector Dixon as CAO and gave him unprecedented power to run the day-to-day operations.

With blessings from the board, then dominated by conservatives, Dixon promised to run the county like a business, turning its employees into a smaller, better-paid and better-trained work force.

The promise of a better-paid work force was the only one that came to pass.

The centerpiece of this business-oriented approach was the performance-based pay plan--borrowed from the corporate world, where businesses provide bonuses and raises to top managers who innovate, cut costs and otherwise do good work.

By 1992, 1,400 top officials--including department heads and general managers--had been removed from the Civil Service system and placed into Dixon's performance-pay scheme.

In return for losing Civil Service protection and overtime pay, the highest-ranking bureaucrats were given annual raises of up to 11%, cash bonuses that weren't calculated into their salaries and, finally, the opportunity to receive a lucrative package of fringe benefits.

For top bureaucrats, one of Dixon's most popular changes was the cafeteria-style benefits system called Megaflex, in which officials could choose a customized package of health, life insurance and other benefits at a value of up to 19% of their base salaries.

Dixon's plan, approved by the board, allowed the highest-ranking employees to take their 19% in cash instead of benefits if they so desired--and some have.

Although the benefits are not part of managers' base salaries, they are included for the purpose of calculating retirement benefits.

For example, Sheriff Block's pension would be computed by adding his 19% Megaflex benefits to his $212,259 salary. Because the 71-year-old sheriff has worked for the county for more than 40 years, he is eligible to receive 100% of his total compensation, including both salary and benefits. This would amount to more than $250,000-a-year in pension payments.

But he is not retiring. "I feel I owe a responsibility to the county to keep working as long as I can," Block said. "I'm worth what they're paying me, but if the voters decide I'm not, I'll ride into the sunset and cry all the way to the bank."

The county's unique pension plan was widely denounced as a gimmick to enrich top officials. The county grand jury called it "the height of fiscal irresponsibility" and Gov. Pete Wilson condemned it as an "abuse" and signed legislation designed to prevent other counties from doing the same.

"Dixon was a big hero with the department heads," said one high-ranking local official, who asked not to be identified. "He gave them an extra 19% in cash in the middle of a terrible recession. It made no sense. It was completely illogical."

Dixon defends his actions. "My belief, and I will go to my grave with it," he said, is that state law required the county to include the fringe-benefit amounts in pension calculations. "I would go that way again."

But his approach lost favor as one disclosure after another focused attention on his own free-spending approach.

In 1992, Dixon was forced to resign after he had completed an extensive $6-million remodeling of his office. Ironically, this proved more damaging to him than his fiscal policies, which cost the county more than $300 million in inflated pension benefits alone.

By virtue of his own policies, Dixon left with an annual pension of at least $127,236. (He would not comment on the exact amount.)

Though he is gone, he left behind the seeds of trouble.

In July, state Legislative Analyst Elizabeth Hill confirmed that the county's budget crisis was "massive," and brought on in part by employee pay increases.

"In many county departments, employee salaries have increased faster than inflation since 1988-89," Hill said. "These salary increases have contributed to cost pressures."

She said nearly half the county's job categories received salary increases ranging from 20.4% to 34% between 1989 and 1995. During that time, the Los Angeles area's consumer price index rose about 20%.

Hill concluded that despite the obvious need to reduce salary costs, "We found no evidence that the county has considered these options."

In a rebuttal to Hill's report, current CAO Sally Reed said the average raise provided since July 1989 was 19.5% and lagged the rate of inflation. She acknowledged some workers' increases did exceed inflation.

A tough fiscal manager, Reed was brought in from Santa Clara County to control spending. She said 91% of the county work force has gone without a raise since the 1993-94 fiscal year.

Reed said she and other local officials were amazed at what was happening in Los Angeles County in tough times. "It was a remarkable and inappropriate way to deal with compensation issues," she remarked.

The county's top administrator, who earns $180,133 a year, criticized Dixon, saying it was the responsibility of the chief administrative officer to advise the supervisors of "both the fiscal and to some degree the ethical issues" involved in their decisions.

"In a local government's case most of the budget is salary. That is the one control feature that you have a handle on," said Keith Comrie, Los Angeles' city administrative officer. "In our case, we are so revenue-sensitive, it was either that--hold the line on the number of employees and pay increases--or raise taxes."

A 68% Raise Since 1989

Of all the wage increases, none was more stunning than Sheriff Block's.

"I don't feel any need to apologize," he said in an interview.

He said his $212,259 salary, which increased 68% since 1989, is justified because of the size, scope and complexity of the job.

Block earns 43% more than U.S. Atty. Gen. Janet Reno, whose annual salary is $148,400. And he earns more than double the $102,000 salary of state Atty. Gen. Dan Lungren.

The sharp rise in Block's salary began in 1986, four years after he took office. He received a 20.5% salary hike to $114,400, documents show. In 1989, on Dixon's recommendation, the supervisors unanimously set the sheriff's salary after the next election at $157,641. At the same time, Dixon pressed for--and the board agreed with--a change in the county code that built in an automatic 5% annual increase for the sheriff.

Ironically, Dixon's rationale for the increase was that the sheriff's pay was in danger of lagging behind some of his top managers because Dixon's pay-for-performance system had rewarded second-tier managers so well.

Dixon also told the supervisors that it was necessary to set the sheriff's pay above that of then-LAPD Chief Daryl F. Gates because Block's responsibilities are greater. The Sheriff's Department not only polices a vast unincorporated area and many smaller cities, but it runs the nation's largest jail system and provides security for one of the biggest court systems.

But the department is not the nation's biggest law enforcement agency. With approximately 8,000 sworn officers, it is the fourth-largest--trailing New York, Chicago and Los Angeles.

Top salaries in these other jurisdictions are much lower. The Chicago police superintendent earns $115,812; New York City's police commissioner, $133,000, and LAPD Chief Willie L. Williams, $163,198.

The salary escalation has extended far into Block's department.

During the period in which it has closed two jails, is unable to open its newest high-security facility, and released prisoners early to relieve overcrowding, the Sheriff's Department has nearly doubled the number of employees with more than $100,000 in base salary. In June 1991, there were 35; now there are almost 70, from the top down to the rank of captain.

Dixon's pay system did not always work as intended. From 1992 to 1994, Health Services Director Robert C. Gates' performance was rated at less than "fully meets expectations"--the level necessary to receive a merit raise. Although the system calls for docking the pay of perceived nonperformers, Gates did not receive a cut.

Finally, this spring, when the health department's staggering budget deficit swelled to the point that it threatened the county's solvency, the supervisors pressured Gates to resign.

Under the system, such dismissals should have been routine.

But after Gates collapsed during intense questioning from Supervisor Gloria Molina, the supervisors--trying to boost his pension benefits because they feared a lawsuit--changed his performance evaluations and gave Gates a $25,000-a-year raise to $177,678 when he left Nov. 1.

Movement Toward Reform

A slow movement toward reform began with the election of Molina in 1991. She challenged Dixon, forced his salary and pension plans into the open and eventually led the move to oust him.

Stung by scandal, the board revamped Dixon's 1990 pension plan, establishing a two-tier system in which new employees are no longer eligible to include their fringe benefits in pension calculations. But the vast majority of the county's employees remain eligible.

Transportation allowances were also scaled back.

After granting a so-called professional development allowance to judges, the board backed away from similar cash payments to other officials.

And concerned by the skyrocketing salaries for the sheriff and assessor, voters in November 1994 approved a charter amendment that gives the supervisors the power to adjust the salaries of the sheriff, the assessor and the district attorney downward when those offices are vacated.

This week, the supervisors unceremoniously voted to end the performance-based pay system July 1, in favor of a new evaluating process for managers that is not directly linked to raises.

Despite the reforms, the salary structure remains a simmering issue.

"If you look at the size of Los Angeles County and the responsibility we place on our managers, I don't think our salaries are out of line to attract the type of talent we need for this organization," said personnel chief Mike Henry.

Supervisor Yvonne Brathwaite Burke, who has been critical of the pay structure since she was elected in 1992, disagrees.

"We have so many people in departments who make over $100,000, that's where our problem is," she said. It is the second-tier managers, not department heads, attorneys or doctors, that have caused the salary crisis, Burke said.

An example of the county's deep-seated problems occurred after Dixon left. His top assistant, Mary Jung, was forced to leave the post when Reed was appointed.

Reed selected Treasurer-Tax Collector Sandra Davis for the No. 2 job.

Jung ultimately was transferred to the Department of Health Services and took her salary with her. When Reed went to the board seeking a $35,000 increase for Davis, to nearly match Jung's salary, Molina and Burke expressed displeasure, but a majority agreed.

""We're not out of the woods," Yaroslavsky said, "but we're not going deeper into the woods."

Times staff writers Julie Marquis in Orange County and Josh Meyer and Times research librarian Julia Franco contributed to this story.

For the Record Los Angeles Times Thursday January 18, 1996 Home Edition Part A Page 3 Metro Desk 2 inches; 43 words Type of Material: Correction County government--The Times on Dec. 22 reported that Mary Jung was "forced to leave" her post as Los Angeles County's assistant chief administrative officer. In fact, Jung left voluntarily when incoming Chief Administrative Officer Sally Reed decided she wanted to select someone else for that position.
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