CalPERS knew about Bell administrators’ large raises

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

The memo, which pension staff sent board members Tuesday, shows that the California Public Employees’ Retirement System was asked in 2006 to grant an exemption to its rules 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 an audit and informed Bell officials that an exemption could be needed.

When officials of the pension system learned that several of the city’s administrators were getting similar pay hikes, they decided that an exemption was not needed.

“At the time, the city represented that the city manager was part of the top management group 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 granted the former city administrator, Robert Rizzo, and two other top officials; it ordered a freeze on their pension benefits pending completion of an investigation by California Atty. Gen. Jerry Brown. The three Bell managers have resigned but have not applied to receive retirement benefits from CalPERS.

CalPERS spokesman Brad Pacheco said such large pay hikes can be permissible under his agency’s 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 statues 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 that Bell officials may have violated other rules and regulations and that CalPERS is assisting law enforcement in its investigation.

Meanwhile, the memo states that CalPERS has expanded an 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 said.

Also Tuesday, state Controller John Chiang announced he would require all California cities to clearly and publicly report salary information for elected officials and employees. The information would be posted on his office’s website beginning in November, he said.

The controller’s action came as a Times analysis raised questions about financial data filed with the state by the city of Bell. Bell officials had reported that the city’s cost for legislative activities, which includes City Council salaries, fell sharply after 2005. But an investigation by the paper recently found instead that council salaries began rising around that time to nearly $100,000 a year for jobs that amounted to part-time work.

“The absence of transparency is a breeding ground for waste, fraud and abuse of taxpayer dollars,” said Chiang, who is running for reelection. “A single website with accessible information will make sure that excessive pay is no longer able to escape public scrutiny and accountability.”

Tuesday’s developments followed Times reports that Bell spent $1.6 million annually on just three city employees, about half of it going to Rizzo’s nearly $800,000 salary. After Rizzo resigned, council members slashed their salaries amid intense, national public criticism and an uprising by Bell residents who stormed City Hall meetings.

Council members’ sizable pay checks included compensation for their service on multiple city panels, some of which met at the same time or for as little a minute.

Chiang’s office is auditing Bell at the request of an interim city administrator. Eight state auditors were at City Hall on Tuesday reviewing records. In addition to the attorney general’s inquiry, the Los Angeles County district attorney’s office has opened an investigation of Bell’s salaries, elections and other matters.

Initial reaction to Chiang’s salary disclosure plan was positive. “I think it’s an excellent step,” said Chris McKenzie, executive director of the League of California Cities. Clear reporting guidelines would be needed to ensure salary information is as complete and comparable as possible, he said. The cities’ group also wants salaries of state agency executives and workers made easily accessible to the public.

Atascadero City Manager Wade McKinney, president of a group of 177 city managers in the state, said meeting the controller’s new demands for data should be easy. “I think this is information we all have, so I don’t think it should be that difficult to add” to existing financial reports, he said.

Local governments must transmit annual summaries of their revenues and expenditures to the controller. Agencies face fines of up to $5,000 for failing to file the reports.

The information is used in reports to the Legislature. Payroll figures are included in total amounts spent on government functions, such as police, but not itemized.

The new rules, which Chiang said would be finalized and issued in the coming weeks, will require public disclosure of compensation figures for each category of local official, including council members and city managers. Individuals will not be named, but even pay for blue-collar jobs will be reported.

“We have to make sure people aren’t moving categories or hiding what they are being paid,” Chiang said in an interview. “We want to put it in a format people understand.”

Los Angeles city salaries, also listed by position, will be posted online as early as next week, L.A. Controller Wendy Greuel said this week.

Under the current system, Bell reported gradually increasing outlays for the legislative branch of City Hall until 2004-05, when expenses peaked at about $195,000, records show. But over the next three years, reported expenses in the same category dropped rapidly, to just $34,483 in 2007-08, the most recent final figures available.

The Times has reported that after a 2005 special election, which allowed Bell to effectively exempt City Council members from a state pay cap, council members’ salaries climbed more than 50%, from about $62,000 to nearly $97,000.

It was not immediately clear how those larger salaries were accounted for in the city’s financial reports to the state. Bell officials did not respond to requests for comment.

Chiang said the apparent disparity is “obviously a question that needs an answer.”

evan.halper@latimes.com

marc.lifsher@latimes.com

rich.connell@latimes.com