Pension fund knew about high Bell salaries but didn’t stop them, memo shows

Officials at California’s state pension fund became aware four years ago of the exorbitant pay raises being given to administrators in the city of Bell and did nothing to stop them, according to an internal memo obtained by The Times.

The memo, which pension staff sent to board members today, shows that the California Public Employees’ Retirement System granted an exemption to its rules in 2006 so the Bell city manager could get a 47% pay hike and still receive a full pension on his salary.

The pension system learned of the salary hike during the course of an audit and informed Bell officials that the exemption would be needed.

“At the time, the city represented that the city manager was part of the top management groups or class, and all of the employees in this group or class received similarly large increases,” said the memo, written by Lori McGartland, head of the pensions fund’s employer services division. “Based upon those representations, CalPERS granted a one-time approval of the city manager’s 2005 increase.”

Just last week, CalPERS officials expressed surprise at the hefty increases for the then-city manager and two other top officials and ordered a freeze on their pension benefits pending completion of an investigation by California Atty. Gen. Jerry Brown.

The three have resigned but not applied to receive retirement benefits from CalPERS.

CalPERS spokesman Brad Pacheco said such large pay hikes can be permissible under CalPERS rules as long as they are spread out among a group of employees, as was the case in Bell, as opposed to enriching a single official.

“Our job is to enforce the statutes that govern the retirement law,” he said in a statement. “Pay and compensation is the decision of city and county elected officials.”

But Pacheco said Bell officials may have violated other rules and regulations, and CalPERS is assisting law enforcement in their investigations.

The memo states that CalPERS has expanded its internal probe beyond the city of Bell. “Staff is currently researching the pay of all CalPERS members paid in excess of $400,000 for appropriateness,” the memo states.