February 22, 2011
CONTACT: Chris Cate
619-234-6423 or firstname.lastname@example.org
Gayle Lynn Falkenthal, APR
619-997-2495 or email@example.com
Accounting Sleight of Hand Results in Increased Pension Costs to Taxpayers
Legal loophole allows public employees to boost pension paychecks
(San Diego) – A little known provision in pension payment accounting allows public employees in San Diego County and throughout California to boost their pension checks upon retirement, increasing the cost paid by taxpayers when this method is being employed. Typically an employee pays their OWN share of pension costs. But the San Diego County Taxpayers Association has discovered an accounting sleight of hand is beginning to be implemented in cities across San Diego County.
For years, cities and government agencies have offered to subsidize an employee’s required pension contribution as an additional benefit of employment. After demands for reform, public employees are now agreeing to pay for the cost of their contribution. Indeed an employee will be paying a portion of their pension contribution. On paper though, the employee is paying all or a portion of the city's share of the pension cost rather than the employee's own share; and the city is continuing to pay the entire employee’s share. On the surface, this nonsensical-approach would not seem significant, but this tactic allows employees to continue to earn almost 100% of their annual salary for the rest of their life.
The California Public Employees Retirement System (CalPERS) allows a City to report their payment of an employee’s pension contribution as additional compensation when calculating the final pension payment. That means, a city’s payment of nine percent of the employee’s pension is added on to their final salary, leading to a “bump” in the employee’s annual pension payment. While cities across the county are touting pension reform, they are continuing to allow pensions be calculated on this higher amount, effectively raising the lifetime retirement payout to the employee paid for by taxpayers.
City of Oceanside firefighters and police officers recently approved new labor contracts that enable this pension contribution arrangement. All of the new labor contracts for the City of Chula Vista now include this pension contribution arrangement as well.
“The bill for this deceptive practice will come due long after those responsible are out of office,” said April Boling, SDCTA board member and former chairperson of the City of San Diego’s Pension Reform Committee. “It is incredibly irresponsible to put this additional burden on future taxpayers when pension costs are already spinning up out of control. The result will be more hard choices and more drastic cuts in services to citizens.”
“The San Diego County Taxpayers Association is concerned that the temptation to play these accounting games may become a trend among other jurisdictions within the CalPERS system,” said Boling. “The Association calls on the Cities of Chula Vista and Oceanside to manage their employee pension programs in a straightforward way and end this sneaky practice immediately. We applaud the City and County of San Diego and the other cities in San Diego County participating in the CalPERS program who have not allowed themselves to be drawn into this sort of chicanery.”
The San Diego County Taxpayers Association is a non-profit, non-partisan organization, dedicated to promoting accountable, cost-effective and efficient government and opposing unnecessary new taxes and fees. Founded in 1945, SDCTA has spent the past 66 years saving the region’s taxpayers millions of dollars, as well as generating information to help educate the public.