The state retirement system has slashed the benefits of scores of top-paid local government officials as part of a review of overly generous public pensions prompted by the Bell scandal.
Although the California Public Employees Retirement System has cut the benefits of individuals in the past, this review is its largest systematic effort to examine and possibly adjust high-end pensions.
For The Record
Los Angeles Times Saturday, August 13, 2011 Home Edition Main News Part A Page 4 News Desk 2 inches; 62 words Type of Material: Correction
High-end pensions: In the Aug. 9 Section A, an article about CalPERS reducing high-end pensions said that a doctor with the state Department of Social Services was denied a pension because he was not considered a public employee. He was actually an independent contractor for Santa Clara County, not the state. The article also misidentified CalPERS Vice President George Diehr as president.
So far, the state retirement board has reviewed 2,250 retirement payments and found that 329 needed to be reduced, mostly because employers incorrectly reported employees' pay. They include a former general manager at the Serrano Water District in Orange County whose pension was reduced because the salary it was based on -- $206,668 -- was too high. A retired Vallejo city manager's pension was reduced when his salary was adjusted from $305,842 to $216,000.
CalPERS has also dramatically cut the pensions of top officials in Bell after an audit determined that they were improperly inflated, according to records obtained by The Times under the California Public Records Act.
Former City Administrator Robert Rizzo is now set to receive $50,000 per year. Before, he had been poised to get $650,000 a year from CalPERS and more than $1 million annually overall when a second pension from the city was included. The pension of his assistant, Angela Spaccia, was slashed from a projected $250,000 to $43,000.
The aggressive review comes amid criticism of high pensions paid to some officials, even those accused of wrongdoing.
Vernon's former city administrator receives the highest pension of any public official in California, $500,000, even though he was convicted of public corruption.
"We're certainly being more vigilant around compensation issues," CalPERS spokesman Brad Pacheco said.
Rizzo, Spaccia and six other former Bell officials were charged last year in a wide-ranging public corruption case that alleged that they schemed to illegally increase their salaries and benefits. They paid themselves lavishly while illegally taxing residents, levying arbitrary fees on businesses and aggressively impounding cars.
CalPERS decided that the former council members, who each made nearly $100,000 a year, should also have their retirement payments reduced to between $1,000 and $2,000 a year. One longtime former councilman, George Cole, will receive about $4,000 a year and must now pay back a large, undisclosed sum to CalPERS, Pacheco said.
Attorneys for several Bell officials said they planned to appeal CalPERS' decision.
CalPERS is also auditing the hefty pensions of some top Vernon officials, including several attorneys who received generous public safety pensions similar to those of police officers and firefighters. It's unclear when that audit will be completed.
Since the Bell scandal broke a year ago, CalPERS has moved beyond routine audits and focused more on whether some of the highest pensions in the system are justified.
It embarked on a series of procedural changes and reviews to help accurately calculate pensions and detect offenders. It created a whistle-blower hotline for the public; conducted a sample review of 45 current and retired employees making more than $245,000 in salaries; and reviewed 2,250 retirement documents between September and February.
One major shift allows CalPERS to continually review employee accounts, rather than focusing on them when someone retires.
"Recent events on Wall Street, pension fraud in this state and even allegations of wrongdoing at CalPERS have taught us that managing risk and ensuring accountability across the enterprise are critical to our effectiveness today and tomorrow," said CalPERS President George Diehr at a recent pension fund board meeting.
In addition, CalPERS reviewed 15 officials who had earned or are earning more than $400,000 a year in salaries. In three cases, including Rizzo's, pensions were reduced or eliminated.
CalPERS found that one highly paid doctor with the state Department of Social Services did not qualify for a pension because he was not considered a public employee. Another person's pension was reduced because his "special compensation" -- a car and travel allowance or a sick leave buyout -- could falsely inflate his salary and thus increase his pension.
"Based on the level of concern regarding highly compensated officials in local cities and counties, we determined to focus on high reported compensation agencies for review," Pacheco said.
Some pension reform advocates said CalPERS' actions are a step in the right direction. "I believe Bell is just the tip of the iceberg," said Marcia Fritz, a pension reform advocate. "They may find the same irregularities elsewhere if [they] drill to the extent that they drilled down in Bell."
Fritz and others have long criticized the retirement system for not aggressively cracking down on overly generous pensions, saying there was little incentive for the retirement agency to act because employees' pensions are actually paid by their former employers.
Dave Elder, the former chairman of the Assembly Public Employees, Retirement and Social Security Committee, said he hoped that the Bell scandal would lead to more serious oversight of the entire system.
"It's the big pigs that get slaughtered first," Elder said. "That's what happened in Bell."