Schwarzenegger considers bills to prevent Bell-type pay, pension excesses

Gov. Arnold Schwarzenegger is mulling a raft of bills touted as the remedy to the kinds of pay and pension excesses discovered in the city of Bell, but there is disagreement among experts over how effective they might be in preventing future abuses.

If the governor signs the measures into law, the discord could turn into a legal battle, with some of the rules being decided by the courts, according to city representatives and legal experts.

The League of California Cities has urged Schwarzenegger to veto one of the bills, which would limit cushy employment contracts for local government managers, arguing that it would not achieve its goal of holding officials accountable for excessive pay and benefits. It is too broad to be effective, the group maintains; it would apply to some 6,000 cities, school districts and special districts and many more government workers than top managers.

Others say that measure and four additional bills approved last monthby the Legislature that address issues raised by the Bell controversy represent a justified effort to stop misuse of taxpayer money by city councils and administrators.

The other proposals would rein in excessive retirement benefits, such as the $600,000 annual pension that former Bell City Manager Robert Rizzo could get, by capping the salary that could be used for calculating pensions and by preventing “pension spiking” — padding salaries to boost retirement pay. Rizzo’s pay, before he resigned, was nearly $800,000.

“To the extent there might be future bad behavior, this would clamp down on that, and so it is a positive step,” said Jessica Levinson, director of political reform for the Center for Governmental Studies in Los Angeles.

Sen. Bob Huff (R-Diamond Bar) was among those who voted against a pension cap, which he said was rushed through as “hothouse legislation” in reaction to the scandal and before various investigations are complete.

“When you do that, you only get part of the solution, and then you have to go back and do it right later,” he said, calling the cap a “piecemeal” solution.

The bill’s sponsor, Assemblyman Alberto Torrico (D-Newark), defended it as “a direct response to the scandal in Bell.”

The League of California Cities is neutral on the proposal. But Daniel Carrigg, the group’s legislative director, noted that it applies only to future managers and that there is already an Internal Revenue Service rule limiting compensation payouts to $245,000 a year. Supporters of the measure said the IRS limit doesn’t apply to Rizzo and another former Bell manager, because they were already in the retirement plan when the federal law was adopted in 1996.

Fred Smoller, director of the master’s of public administration program at Brandman University in Irvine, said salary “is only half of what happened in Bell....You have to get to the pension issue, which is what really ramped up the compensation.”

The League of California Cities, which advocates for the 480 cities in California, has denounced what happened in the small working-class city in southeast Los Angeles County, where members of the part-time City Council were being paid nearly $100,000 a year.

That organization and others have argued that the solution is to require that the salary of city officials be publicly disclosed, something the Legislature chose not to do. One disclosure proposal, which included legislative salaries, was rejected. An unrelated dispute at the end of the session prevented final approval of a different proposal covering only local officials’ salaries.

Lawmakers did, however, vote to outlaw “evergreen contracts.” They proposed that cities, counties and local districts be barred from giving managers employment contracts that include automatic pay increases above the cost-of-living rate and automatically renew their contract without council action. Rizzo and his top deputy had contracts that called for 12% raises each July.

Under the Legislature’s proposal, performance reviews would be required before high-level officials could be granted raises above the increase in the cost of living. The reviews would have to be made public.

Such regulations would be helpful in setting a new “good practices standard” for cities throughout California, said Siegrun Fox Freyss, director of the public administration program at Cal State L.A.

“Unethical people will still find ways to enrich themselves,” Freyss said, “but at least this lets new administrators know what is appropriate.”

Carrigg said the measure could have unintended consequences, however. Instead of offering a top manager a contract with stepped pay raises of 8% a year over a number of years, city councils might feel an incentive to negotiate much higher initial pay.

And the League of California Cities argues that the bill would violate the state Constitution, which allows charter cities to control what they pay their managers. That issue could end up in court, according to Levinson, an adjunct professor at Loyola Law School.

The governor is also facing pressure to veto two bills aimed at blocking the practice of pension spiking. Rizzo’s salary was boosted 47% in one year, making him eligible for a much higher pension.

Pension reform has been debated for years in Sacramento, and the two measures were introduced months before the Bell scandal broke. But their sponsors say they would help prevent the kinds of excesses seen in Bell.

The bills would bar the use of pay raises for a single individual to be counted toward pensions unless others get similar raises, and would allow pension boards to deny pension payments they believe are intentionally spiked.

The California State Assn. of Counties is urging a veto, questioning the effectiveness of the provisions meant to stop the spiking of pensions.

Paul McIntosh, the group’s executive director, said one targets individual workers, such as city managers, who are not part of a large employee class, and does not address spiking that may occur because of pay provided in union contracts.

As a result, McIntosh said, “Unfortunately, counties believe that the bill falls short of a complete end to spiking.”

Sen. Louis Correa (D- Santa Ana), a sponsor of the other bill, said arguments that any one proposal doesn’t solve the whole problem do not justify a veto.

“What happened in Bell was outrageous”’ Correa said. “This is one of many remedies.”