SAN FRANCISCO (KPIX 5) — California’s schools may be cash strapped, but many school administrators are still retiring on easy street.
That’s because pension reform can’t stop many from gaming the system.
It’s networking time for some public school administrators, many of whom will one day enjoy some of the most generous retirement benefits in the state.
But when it comes to the practice of boosting pay at the end of a career to get a fatter pension, a practice known as pension spiking, it’s not something they seem eager to talk about.
Scott Thompson says he knows why. A former analyst for CalSTRS, the California State Teacher Retirement system, Thompson says he routinely caught school administrators gaming it.
“You are looking for a dramatic increase in the salary, near the end of their career,” he said.
Teachers can’t spike, because most belong to unions with collective bargaining agreements.
But administrators can.
That’s because unlike private sector employees whose social security benefits are based on a salary average, pensions for school executives in California who have worked more than 25 years are based on their single highest year.
“When people are paying in at this rate then they jump up here, it’s a dramatically underfunded pension,” said Thompson.
Thompson says he first became aware of the problem when the case of John Bayless crossed his desk in 2008.
He noticed the former superintendent of the Cabrillo Unified School District in Half Moon Bay received a $110,000 raise in his last year.
“When I first saw it I thought well someone clearly typed an extra zero,” said Thompson.
But it was no typo.
Bayless’ compensation jumped from $157,000 to $267,000 in his final year. The “spike” bumped what would have been a $7,000 dollar per month pension up to $13,000 per month.
Scott says he flagged the case and many others.
But no one at CalSTRS seemed to care.
Instead, the agency fired him in 2011 for adjusting a pension without authorization. Thompson believes it was retaliation for blowing the whistle.
“It’s public funds, the public has a right to know,” he said.
Soon after Thompson lost his job, lawmakers in Sacramento took up the cause and eventually passed a landmark pension reform bill that became a new law.
“It’s a question of fairness to the taxpayer,” said Santa Clara Supervisor Joe Simitian, who pushed for pension reform to prevent spiking when he was state senator.
“I thought it would be a relatively easy and straightforward issue to tackle, it turned out to be anything but,” Simitian said.
Simitian says the new law is an improvement: Padding salaries with car and cellphone allowances for instance is no longer allowed. And new employees’ pensions will now be based on an average of their highest three years pay.
The new law also caps pensions for new employees and cuts back on special bonuses for things like car and cell phone allowances.
But it’s not retroactive.
So for the next few decades school executives will still be able to spike their pensions based on their single highest salary year.
“Every time you artificially inflate that last year salary you take on a pension obligation for what could be decades to come,” said Simitian.
And it all adds up. CalSTRS’ pension obligations are underfunded by $72.7 billion dollars.
We wanted to find out if spiking is still going on but CalSTRS refused to release information, claiming in response to our public records request that it “doesn’t maintain payroll information for members,” something Thompson says is simply not true.
“Having worked inside the pension fund for six years I knew exactly which data there was, and it is primarily the salary data,” he said.
He provided us with a spreadsheet from December 2013 that CalSTRS sent to the California Foundation for Fiscal Responsibility that does show salary data. We found dozens of spikes were still happening even after pension reform, including one as high as 91 percent.
“The final year really does lend itself to abuse,” said Simitian.
Thompson is awaiting permission from a state appellate court to pursue a lawsuit for wrongful termination.
Soon after Thompson left CalSTRS, the agency reduced the inflated pension of Cabrillo Unified School District’s former superintendent. He now gets $11,300 per month, instead of $13,000 per month.
The State Controller blasted CalSTRS in 2012 for lack of proper oversight on pension spiking. Since then the agency has hired more auditors and says it performed 51 audits in 2016, up from 40 in 2012.