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April 7, 2013
Editorial: CalSTRS starts to get tougher on spiking

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(April 7 -- By the Editorial Board)

In January, auditors with the California State Teachers' Retirement System found that incentive payments were improperly boosting pensions for 54 Yuba City school district employees by more than $500,000. In February, another CalSTRS audit, this time of the Cajon Valley Union School District in San Diego, found incorrect payroll data resulted in overpayments of more than $1 million to 77 employees.

In both cases CalSTRS is working to recoup the overpayments by reducing monthly payouts to retirees by as much as 5 percent. When money cannot be recovered from retirees, the retirement system is seeking refunds from school districts.

The two audits are examples of CalSTRS' recent attempts to step up its anti-spiking efforts. Last year a review by State Controller John Chiang exposed serious weaknesses in the retirement system's programs designed to detect spiked pensions, when final compensation calculations are improperly boosted to raise retirement benefits.

The controller found that warnings generated by an automated system designed to flag suspiciously excessive end-of-career salary hikes were routinely ignored. School district audits, the other major anti-spiking tool, were too infrequent.

Things have changed. The retirement system has increased its internal audit staff by 66 percent. More focus is being placed on large districts with high numbers of highly paid retirees who received hefty pay hikes in the last three years of employment and were able to cash out high levels of sick leave.

In addition, CalSTRS has launched a compensation review unit that is reviewing all pension payouts of $100,000 or more annually. In the first 182 pensions examined, 128, were found to have no issues. But 62 required further review and so far, 14 of those have resulted in pension reductions.

The $161 billion retirement fund faces a staggering $73 billion in unfunded liability.

Before state taxpayers, local school districts, and teachers themselves are asked to pay more to rescue the pension fund, CalSTRS officials must prove they are doing all they can to prevent the fund being drained illegally by spikers. That's beginning to happen.

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