California Controller: Teachers retirement system lacks proper oversight

California Controller John Chiang’s office today, following an in-depth review of the California State Teachers’ Retirement System (CalSTRS), concluded the agency doesn’t do enough to prevent pension spiking.

Pensions are typically calculated based on an employee’s final compensation (salary, bonuses and anything else thrown in). So some agencies have been known to very generously spike that final compensation in order to make the annual pension that much more rosy.

The Controller’s Office took a look at five California school districts, none of which were in the Coachella Valley.

The agency found that ”two of the five (districts), or 40 percent, lacked documentation to justify pay increases granted to their employees immediately prior to retirement, such as board or executive approval or written performance evaluations.”

Among those spikes were 20 percent and 26 percent raises at the San Francisco Unified School District.

The review noted that “CalSTRS uses a system that electronically identifies instances in which an employee’s monthly pay increase exceeds a certain percentage, or in which an employee’s ‘special compensation’ exceeds a specific dollar amount in one year.”

“However, the review found that during the period evaluated, CalSTRS did not review, verify or follow up on pay increases that were flagged by the system. The Controller urges CalSTRS to review all of the cases that were flagged by the system, require the agencies to provide adequate documentation supporting those increases and better determine if the pay increase thresholds are appropriate to detect pension spiking.”

Chiang in a news release announcing the report’s findings said “Starting with more rigorous auditing and better use of existing technology, CalSTRS must fortify its ability and resolve to crack down on those seeking unjust enrichment at the expense of their fellow educators and taxpayers,”

“These recommendations aimed at strengthening CalSTRS’ anti-spiking efforts will complement the recently-enacted pension reform package and shut down this form of public theft.”

The Controller’s Office said it plans to perform a similar audit of the California Public Employees’ Retirement System (CalPERS), which oversees the pension of most county, city and other public agency emloyees.

The Desert Sun’s iSun team on Aug. 19 published an investigation into the pensions of Riverside County, which as a $1.1 billion pension gap and pays nearly $200 million annually toward its employees’ pensions.

You can check out the investigation as well as a user-friendly database of all county employees’ pensions and final compensation here.

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About James Meier

I'm James Meier, a 15-year journalism veteran, who's spent the past nearly seven years at The Desert Sun and MyDesert.com in Palm Springs, Calif. I grew up in Orange County, spent many years reporting and editing there, and am enjoying working in the desert. I'm now the Senior Editor of Business, Data and Education. Reach me at James.Meier@thedesertsun.com or on Twitter @tdsJamesMeier