California Widens Audit of Pension Abuse, Controller Says

California Controller John Chiang has expanded his audit of the California State Teachers’ Retirement System’s efforts to curb so-called pension spiking, a spokesman said.

The review to determine whether educators improperly received late-career raises to boost their pensions has widened from the second-largest pension itself, known as Calstrs, to also include five school districts, said Jacob Roper, a spokesman for the controller.

“It’s not actually a delay, it’s an extension of the audit period,” Roper said by telephone. “The additional time was needed because we drastically expanded the scope of the audit.” He didn’t identify the school districts.

Public-worker pensions are driving up employee costs nationwide in states and cities that lost tax revenue in the longest recession since the 1930s. Calstrs had assets to cover just 69 percent of liabilities in fiscal 2011, compared with an average of 75 percent for all states in 2010, according to Bloomberg Rankings.

Chiang, a Democrat who sits on the Calstrs board, announced the inquiry in November and said he expected it to take about two months.

Pension spiking refers to the practice of public employees artificially inflating future retirement payments through unjustified late-career raises and overtime, unused vacation and special compensation. Spiking and so-called double dipping, the practice of retirees collecting pensions while working a second job, have fueled criticism of the costs of government pensions.

Brown Proposals

In October, Governor Jerry Brown proposed several measures to contain retirement costs for the most-populous state, including two specifically aimed at pension spiking. One of Brown’s proposed steps would require that pensions be based on the final three years of pay rather than the last one, and another would require that pensions be based only on regular pay, not special compensation.

Lawmakers haven’t acted on the 74-year-old Democrat’s proposals. Leaders of the state Assembly and Senate, both Democrats, have said they plan to bring pension-related legislation to a vote by the end of the current session Aug. 31.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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