Clamor grows to rein in California pension benefits
Gilbert Robles retired as a state parole agent at age 53, able to collect a $101,195 annual pension — 94% of his final salary. Last year, six months after he retired, the Arcadia resident accepted a political appointment with the same agency that pays an additional six figures.
Scott Hallabrin took retirement as the top attorney for the state’s ethics agency on June 29, 2009. The next day, he went back to the same post, as he prepared to watch his pension checks roll in on top of a salary.
Los Angeles school administrator Norman Isaacs got a 35% raise in 2006, the year before he filed for his public pension. The increase sharply boosted his retirement benefits.
Robles, Hallabrin and Isaacs acted within their rights under California’s pension rules, which the Legislature’s independent budget analyst recently described as “among the most generous in the country.” That generosity comes with a price: The main pension system for public employees is expected to cost taxpayers $2.3 billion this year and has long-term obligations that it is $85 billion short of being able to fund.
Gov. Jerry Brown came to office promising to reduce the state’s burgeoning pension costs, partly by limiting the kinds of practices that inflated the three employees’ retirement incomes. Saying the system is not financially sustainable, the governor has laid out a 12-point plan to change it. He would raise the retirement age, require many employees to contribute more toward their benefits and stop allowing workers to buy retirement credit for years they don’t work, among other changes.
But key parts of the plan would apply only to people hired in the future — after the overhaul passed the Legislature and became law. Tens of thousands of current public employees would still be able to take advantage of the rules that benefited Robles, Hallabrin and Isaacs.
“The governor’s plan doesn’t go far enough,” said Dan Pellissier, president of California Pension Reform, a group led by former state officials that is proposing a ballot measure to rein in pensions further.
Eliminating one of the three practices, the kind of salary “spiking” that swelled Isaacs’ retirement pay, could be difficult. Courts have ruled that the California Constitution prevents the state from changing the terms under which employees were hired. One of the terms is that retirement benefits are based on a worker’s highest-paid year of service.
Attorneys advising Pellissier’s group say the courts left room for changes in case of a financial emergency such as the pension crisis. But Evan Westrup, a spokesman for Brown, said, “We went as far as we thought we could with current employee pensions within existing legal boundaries.”
Similar legal constraints do not apply to the other two income-boosting methods. Hallabrin, 61, used a “revolving door” that allows a government employee to retire one day and go back to work the next day for the same agency, drawing a paycheck and a pension. Brown’s plan would not prevent that.
Hallabrin was making $136,500 a year as general counsel for the state Fair Political Practices Commission, California’s ethics watchdog, in June 2009 when he filed retirement papers. His pension payments were to be $78,648 a year. The day after he retired, he returned as the agency’s general counsel. As a “retired annuitant,” he may work only 120 days a year, but that pays him $63,000 annually on top of his pension.
Hallabrin said annuitants give the state the benefit of knowledgeable workers at lower cost.
But the governor, in crafting his plan, weighed such benefits to the state against the need to prevent abuses, according to Westrup. “We believe a reasonable balance must be struck in limiting post-retirement employment,” he said.
Another loophole Brown’s proposals would not close allows his appointees to state commissions to receive full-time pay for those posts while they collect government pensions, as Robles does. He retired in December 2010. Brown subsequently appointed him to the Board of Parole Hearings. There, he draws a full-time salary of $111,845 in addition to his annual retirement benefit of $101,195.
In announcing his proposals, the governor said he would begin asking potential appointees whether they intended to collect pensions while serving in paid posts — information he would consider in making the appointments.
Not good enough, said Marcia Fritz, president of California Foundation for Fiscal Responsibility. The exemption for political appointees should be eliminated, she said. “If he doesn’t do that,” she said, “I would be disappointed.”
Brown’s plan does address pension “spiking.” He would require all new public workers to have their payouts based on their highest average compensation over a three-year period, rather than on one best year, which is allowed for many current employees.
The one-year rule “encourages games and gimmicks,” Brown said.
But current workers could still use their best year’s salary, as Isaacs did. A longtime employee of the Los Angeles Unified School District, Isaacs received a 23% raise when he transferred from a principal’s job in 2005 to create and lead a charter school in Van Nuys.
In 2006, he got a 35% boost — to $185,000. That helped push his annual pension from the California State Teachers’ Retirement System, which he began collecting in 2007, to $215,194. Isaacs is 67 and again heading an LAUSD school while he receives those benefits.
Attorneys for Pellissier’s group say they believe the state can legally change benefits for current workers if it can argue it’s necessary to prevent abuses or is needed because the pension system is in financial crisis.
“If you are in dire financial straits, if its preventing you from providing basic government services, if you have tried reasonable alternatives — all of which is true here — then you can alter” the terms, said Chapman University law professor John Eastman.
Pellissier said the governor should extend the three-year rule to all public workers, as his group’s potential ballot measure would.
“If spiking is bad for everyone,” he said, “why are we excluding current employees?”
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