Pensions

Governments sent CalPERS more than $8 billion last year, an amount that has quadrupled in the last 10 years. (Thomas Fuchs / For The Times)

By Melody Petersen and Marc Lifsher
October 23, 2014

Directing traffic is part of a police officer’s job, and in the city of Fountain Valley, keeping cars moving comes with a $145 monthly bonus — and a bigger pension.

Fountain Valley officers can also pump up their pensions by working with police dogs or mentoring schoolchildren. Those who stay in shape get as much as $195 more each month.

All these perks boost officers’ salaries and add thousands of dollars to taxpayer-funded pensions for years to come.

The California Public Employees’ Retirement System made these higher pensions possible. The nation’s biggest public pension fund voted in August to adopt a list of 99 bonuses, ensuring that newly hired California public workers would receive the same pension sweeteners as veteran employees.

The long-term cost of pensions calculated with bonuses is billions of dollars more than with base pay only. But the exact price tag remains a mystery. The labor-dominated CalPERS board voted without estimating the potential tab.

The vote raised alarms on Wall Street, where analysts have warned about the skyrocketing costs. With $300 billion in investments, CalPERS estimates it still needs an additional $100 billion from taxpayers to deliver on its promised pensions to 1.7 million public workers and retirees. That amount would be enough to operate the 23-campus California State University system for 16 years.

Gov. Jerry Brown, who pushed through a 2012 law to stop workers from using questionable perks to unjustly inflate their retirement pay, wants the action reversed. He vowed to take a personal role in the fight and has asked two state agencies to scrutinize whether the 99 pension sweeteners are legal and appropriate.

All new state employees, as well as those at most cities, counties and other local agencies across California, will now benefit from the list.

Among the beneficiaries are librarians who help the public find books, secretaries who take dictation, groundskeepers who repair sprinklers and school workers who supervise recess.

“Ninety-nine, are you kidding me?” said Dave Elder, former chair of the Assembly’s public employees committee. “It’s almost impossible to police.”

CalPERS repeatedly told The Times it didn’t know how much the bonuses were adding to the cost of worker pensions even though cities submit detailed pay and bonus information that is used to calculate retirement pay.

Even a small bump in salary can cause a public agency’s pension costs to soar. An increase of $7,850 to a $100,000 salary can amount to an additional $118,000 in retirement if the employee lived to 80, according to an analysis by the San Diego Taxpayers Assn., a watchdog group that scrutinizes city finances.

Fitch, a Wall Street rating firm that weighs in on the financial health of governments, warned that the pension fund’s vote would burden cash-strapped cities.

“Cities and taxpayers will undeniably face higher costs,” said Fitch analyst Stephen Walsh. “Pensions are taking a bigger share of the pie, leaving less money for core services.”

Governments sent CalPERS more than $8 billion last year, an amount that has quadrupled in the last 10 years.

And the cost will continue to rise. Long Beach expects its payments to CalPERS to increase 87%, or $35 million, in the next six years. Finding that money will be “very painful,” its staff recently told the City Council.

Sacramento had been expecting pension costs to rise by millions of dollars when CalPERS asked cities to start paying even more because retirees are living longer. Leyne Milstein, the city’s finance director, estimated the newest jump adds up to an additional $12 million annually — the equivalent of 34 police officers, 30 firefighters and 38 other employees.

At The Times’ request, CalPERS analyzed salary and bonus costs for Fountain Valley — one of hundreds of cities and public agencies that award pension-boosting bonuses to workers.

To read entire story, click here.