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CA pension failed to stop 'spiking': audit

September 5, 2012 12:00:00 AM PDT
A new audit by the state controller found the California State Teachers' Retirement System, known as CalSTRS, failed to curb a controversial, taxpayer-subsidized practice called "pension spiking." That's when workers get a huge boost in pay just before retirement so that the salary used to calculate pension checks for the rest of their lives includes the late-career raise. The controller likens it to "public theft."

"Ultimately, it increases the amount that's paid out over the course of a person's retirement, but may not be reflective of how much they actually earned during their career," said spokesman Jacob Roper of the California State Controller's Office.

The 2009-2011 review concluded just under half of the school districts audited lacked the documentation to justify the pay increases. In one outrageous instance, an executive at San Francisco Unified School District got a 26 percent raise six months before retiring.

Ironically, CalSTRS has electronic methods that can detect large raises, but it doesn't follow up to question the excessive pay bumps.

"It's ridiculous to me," said Laurie Aust, a mother of four children in public schools. "My sixth grader got a big list of materials he needed this year, more materials for us to buy than coming from the school."

"It's sad that they can go live with themselves when they know they're taking away from children," she added.

The country's second biggest pension fund says it has already made some changes to prevent pension-spiking.

In a statement, the CEO said that in instances of abuse: "CalSTRS responds by reducing benefits to the appropriate level and collecting overpayments."

Just last week, the Legislature approved pension reforms that eventually reduce the taxpayers' burden.

"Nobody in the public sector can base their pension on a six-month raise or a one-year raise. It has to be the final three-year average," said California Sen. Darrell Steinberg (D-Sacramento).

State Controller John Chiang will now focus on CalPERS, the nation's largest public pension fund, to see if spiking abuses go on there.