The State Worker

The State Worker: CalPERS has hands full monitoring public agency hiring

Jon Ortiz
Jon Ortiz

Ten years. Enough time for a U.S. Treasury note to mature or a kid to start fifth grade.

And, as The Sacramento Bee reported last weekend, that’s also how long a Southern California public power executive worked full time and drew his government pension before CalPERS discovered the illegal arrangement. Why did it go on for so long?

Officials with the tiny Southern California Public Power Authority said they believed way back in 2000 that contracting with the retiree, Bill Carnahan, was a legitimate way to bring his income closer to what the job market demanded, they said.

CalPERS auditors disagreed when they ran across the deal in 2010. Carnahan, they said, was really an authority employee.

That meant his full-time job – paying up to $271,000 per year in salary and extras – broke state law that limits government retirees to working six months per year for public agencies in the same pension system.

Between wrongly paid retirement benefits and unpaid pension contributions for the government job he had held out of CalPERS’ view for more than a decade, Carnahan and his employer owed a combined $1.2 million.

“I wish, given the way it turned out, that (CalPERS) would have done it sooner,” a morose Carnahan said in a recent interview. “The bill wouldn’t have been so big.”

It also wouldn’t have been so big if the power authority had never made the agreement or had stopped re-upping Carnahan’s annual contracts. Those decisions aren’t CalPERS’ fault.

Still, the story highlights the task the nation’s largest public pension fund faces keeping tabs on the 3,300 employers it both serves and occasionally slaps.

CalPERS has budgeted for 30 positions for its public agency review team, which looks at the books of employers, based on risk factors that include agency size and high pay levels.

But turnover in the review unit has been relatively high, with six employees leaving in the last year, fund spokeswoman Rosanna Westmoreland said. Some positions are difficult to fill. Although CalPERS has hired nine employees in the last year, five review team positions remain empty.

The unit acts on tips and conducts reviews, such as the one that unearthed the Carnahan case. In the last two fiscal years, it has issued 90 public agency reviews and has about 80 in the works right now.

Put another way, CalPERS has a little less than one position in its review unit per 100 public employers in the system. If it issued 60 reviews and audits per year, it would still take a half-century to look at all the books.

Given the scope of CalPERS’ universe, “it would be impossible to do a complete audit of every employer,” said Sanjay Varshney, dean of Sacramento State’s business school.

Fair enough.

But you have to wonder how many other Carnahan-type cases are out there and how much quicker they’d be found if CalPERS had more muscle.