A key CalPERS committee on Tuesday approved counting nearly 100 types of government-salary supplements toward employees’ pension benefits, including extra money workers earn for temporarily filling higher-paying jobs.
Although Gov. Jerry Brown objects to including such “temporary upgrade pay” in employees’ retirement calculations and city leaders worry the regulations will encourage pension spiking, the fund’s Pension and Health Benefits Committee put down a request by one of the governor’s appointees on the board to remove the controversial temp-pay category from the staff-proposed list. After rejecting the motion by a 6-2 vote, the committee approved all 99 items on the list by the same margin.
The proposed regulation, which defines language in a 2013 law that bases pensions on “the normal monthly rate of pay or base pay,” goes to the full CalPERS board for a final vote on Wednesday and is expected to pass. The proposed regulation does not affect employees who were members of a CalPERS pension fund before 2013.
Before the votes, Department of Finance budget analyst Eric Stern reiterated Brown’s objection to factoring in temporary payments, saying that they are the kind of ad hoc pay increases that the pension-reform law intends to eliminate from pension calculations.
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“They should not be included for long-term purposes,” Stern said to the committee.
While Brown objected counting just one of the 99 supplemental payments for pension purposes, Chris McKenzie, executive director of the California League of Cities, said the board should delay adopting the broader regulations and consider drastically thinning the list. Otherwise, he said, struggling local government budgets will be squeezed more than they already have been by higher pension bills mandated by CalPERS over the next six years.
“Hundreds of California cities are still in financial distress,” McKenzie told the committee. “There's a lot at stake with this decision.”
Union representatives countered that management can bargain benefits and compensation, including whether to give supplemental pay or include the extra sum in pension calculations.
“This is 100 percent under (management’s) control,” said Terry Brennand, a lobbyist for Service Employees International Union California.
Before the votes, board member J.J. Jelincic drew a low murmur of approval by some in the CalPERS auditorium audience when he chastised local government employers for pressuring the board to disqualify temporary upgrade pay and other supplemental wages from pension formulas.
“This board is not your mother,” Jelincic said, noting that supplemental wages are created and controlled by employers for any number of reasons. “We’re not going to make you eat your vegetables. If you can’t deal with your problem, I’m not going to be the bad guy.”
Board member Richard Gillihan, who made the failed temporary-pay motion as Brown’s director of the Department of Human Resources, countered: “With all due respect to Mr. Jelincic, this is not about eating vegetables. It's about proper application of the law.”