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Investor's Business Daily


Pay Reform Can't Neglect Double Dippers In Charge

June 08, 2011

By Steven Malanga

Over the past decade a handful of top government administrators and supervisors in San Jose, Calif., have left to take similar jobs in other cities, including two of the city’s police chiefs and a fire chief.

What’s provoked local outrage, however, are press reports that these officials first retired and began collecting six-figure pensions, then went to work elsewhere at full salaries that boosted their total annual compensation to as high as $373,000 in one case, thanks to loopholes in California law that allow public administrators to retire early at virtually full salary and go right back to work in government.

The rich pay that former top San Jose supervisors are now hauling down is symptomatic of a growing national problem. Even as the face-off over pay and benefits between government unions representing rank-and-file workers and politicians like Wisconsin Gov. Scott Walker continues, taxpayers are discovering that government supervisors and administrators have also been hauling in big paychecks, earning fat pensions and obtaining hefty severance packages, often by exploiting loopholes in the law.

Controlling the growth of public-sector pay and benefits will require that cities and states successfully rein in the salaries and perks of those who supervise our public-sector workforce, too. But reform won’t come easily, if the battles over public-sector executive compensation taking place around the country are any indication.

In New Jersey, for instance, two successive governors have tried to contain the growth of pay and benefits of the state’s more than 600 schools’ superintendents and their administrative staffs, to little avail so far. In Jersey, more than 300 schools administrators earn salaries greater than Gov. Chris Christie’s annual pay of $175,000.

The effort to control their pay dates back to 2006 when, in the wake of revelations that a retiring superintendent of a low-income school district, Keansburg, received a $740,000 severance package, the State Commission of Investigation launched a statewide inquiry which found a “range of questionable and excessive practices” in superintendent pay that “collectively cost unsuspecting New Jersey taxpayers millions of dollars.”

The report said the local school boards it examined were underreporting the actual amounts they were paying to superintendents by about $70,000 a year and employing dubious compensation techniques — like not fully accounting for all pay on federal W-2 forms — that probably violated tax laws.

Today, Gov. Christie has put in place salary caps on schools administrators based on district enrollment. Still, the battle continues as several school districts have tried to find loopholes in the Christie caps, prompting the pugnacious governor to decry the “greed” and “arrogance” of some superintendents in a state where Trenton sends nearly $8 billion a year to local schools.

Cozy relationships between elected officials and the administrators they employ are costing taxpayers dearly elsewhere, too, as Miami-Dade County residents recently discovered.

In March, voters outraged at a hefty 12% property tax increase engineered by Miami-Dade Mayor Carlos Alvarez recalled the mayor in a landslide vote against him. Within days of Alvarez’ defeat, his close ally and the architect of many of the mayor’s controversial policies, county manager George Burgess, resigned with what later was revealed as a half-million severance package including $160,000 in unused vacation and sick time.

The revelations in Miami-Dade follow the well-publicized scandal in tiny Bell, Calif., where city manager Robert Rizzo, who had administered government in the municipality for 17 years, earned $1.5 million annually through automatic pay increases he engineered while city council members and the mayor looked on and did nothing. While the scandal provoked a series of California state reforms, including a ban on routine pay raises that exceed the rate of inflation, in Miami-Dade the outcry over the pay packages has prompted local reformers to push for a cap on administrator pensions and a smaller county bureaucracy.

Increasingly, top-level administrators take home lavish pensions that kick in at such early ages that these workers head right back into the workforce. In California, public safety workers can retire at 50 years of age with pensions totaling up to 90% of their final salaries. The system creates a perverse incentive to do that and then get another job.

As the former police chief of Oxnard, Calif., explained to the Ventura County Star newspaper after he retired then went back to work as an assistant county sheriff, he was “too young” at age 57 to sit around the house after leaving his Oxnard job. Now he collects a combined annual pension and salary of $396,955, according to the newspaper.

Double-dippers are a multistate phenomenon. In Rhode Island, the former superintendent of state police retired after 26 years on the force and now collects a pension of $104,101 while also getting paid $150,000 a year as the public safety director for the city of Providence, according to the Providence Journal.

Lawmakers also benefit from double-dipping. In New Jersey, those who have earned enough time to qualify for a state pension can retire while still serving in the state legislature and collect a pension and legislative salary simultaneously, as at least four lawmakers are currently doing, according to the Newark Star-Ledger.

Although such practices are mostly a state and local concern, Congress and federal regulators ought to look more closely at pay practices that potentially violate federal law, such as underreporting the true size of compensation packages. And taxpayers should demand states and cities eliminate some of the loopholes that officials have crafted to elevate retirement benefits above federal limits.

For instance, the tax code restricts payments that an individual can receive out of a pension system to $195,000 a year — and less if you retire before age 62. Still, hundreds of former supervisors and administrators in states are now earning more than federal pension limits, thanks to loopholes created by local governments in the form of special funds set up to pay supplemental benefits to workers above limit. But the extra benefits are more costly for taxpayers because these excess benefit funds don’t enjoy the same tax advantages as traditional pensions.

Some governments are even paying additional benefits straight out of their current, cash-strapped budgets. In San Francisco, the top pensioner, former Police Chief Heather Fong, is receiving $195,000 annually from the city’s retirement fund and another $69,247 in benefits directly from the police department’s budget, according to the San Francisco Chronicle.

It’s unseemly to watch as our own state and municipal officials do their best to craft loopholes to compensation laws. Taxpayers cannot have confidence that local governments will bring soaring pay and benefit costs under control if those who are responsible for overseeing and administering government workforces are exploiting the system for their own gain.

Original Source:



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