California controller urges better auditing in teacher pension system

SACRAMENTO — California’s teacher retirement system does not take adequate measures to prevent pension “spiking,” missing opportunities to reduce such abuses by insufficiently auditing benefits, the state controller said Wednesday.

Auditors in Controller John Chiang’s office spotted raises of up to 26% for retiring executives in the San Francisco and San Diego school districts without enough documentation to justify the end-of-career boosts.

Part of the problem, Chiang said, is that the California State Teachers’ Retirement System — the largest in the nation — hasn’t taken full advantage of electronic warning systems designed to identify problems.

“Starting with more rigorous auditing and better use of existing technology,” Chiang said in a statement, CalSTRS must “resolve to crack down on those seeking unjust enrichment at the expense of their fellow educators and taxpayers.”

The review was released a few days after the Legislature sent Gov. Jerry Brown a proposal to curb spiking by basing retirement benefits on the average salary in an employee’s three best years rather than on their final pay.

CalSTRS serves educators in 1,900 school districts, but Chiang said the pension agency averages only 40 audits a year. Of the audits CalSTRS did, 40% returned findings of pension spiking, the controller’s report said.

CalSTRS chief executive Jack Ehnes said the agency, which has 856,000 members and $152 billion in assets, has taken steps to reduce abuses, including the creation of a toll-free line for whistle-blowers and the establishment of a special unit to review all pension benefits exceeding $100,000 a year.

“CalSTRS takes pension spiking very seriously and places a high priority on improving processes to reduce the likelihood of pension abuse attempts,” Ehnes said in a statement, adding that his agency agrees with Chiang’s recommendations.

Since December, the new special unit has identified 270 suspected instances of spiking, investigated 175 cases and confirmed 28 instances of “inappropriate benefit enhancement,” the executive said in a report on his agency’s efforts.

Those in the latter category included Frederick Wentworth, retired superintendent of the San Joaquin County Office of Education, whose monthly pension was reduced after the CalSTRS review from $24,311 to $19,577. Sandra Shackleford, retired associate superintendent of the Ventura County Office of Education, had her monthly check cut back from $17,237 to $15,951, the agency said.

Most rank-and-file teachers cannot engage in pension spiking because their pay is increased gradually under union contracts, said Mike Myslinski, a spokesman for the California Teachers Assn. All the examples cited by the controller involved school managers and administrators.

In San Francisco and San Diego, Chiang’s auditors found cases in which pay increases lacked proper approval, written performance evaluations or other supporting documentation.

Among them was a 26% raise for San Francisco schools executive director Pamela Mills, whose final year’s salary was $124,459, up from the $98,636 she received the year before. Another San Francisco executive had a 20% boost in income a year before drawing a pension.

patrick.mcgreevy@latimes.com