The Pay Behind The Curtain

Hoping to quell growing outcry spawned by the Bell salary and pension scandal, cities across the state raced last week to pull back the curtain on employee compensation for an increasingly agitated public.

Yet as well-intentioned as the gesture may be, the complexities of public employee pay and benefits make it difficult to get an accurate picture of how much city workers are actually receiving, according to government reform advocates.

For instance, the city of Pasadena’s salary schedule, which was on the city’s Web site long before the volcanic outrage over the situation in Bell, lists only 174 positions as having potential to earn more than $100,000. But in reality, a total 550 city employees — 24 percent of the entire municipal workforce — took home more than $100,000 last year, factoring in overtime and other benefits, according to payroll data the Pasadena Weekly obtained from the city. And that’s after employee unions representing the workers conceded millions of dollars worth of scheduled pay raises last year to help close a budget hole.

But the Bell scandal highlighted not only how much taxpayers are paying now for city services in the worst of cases, but also what it will cost them in the future when those employees retire. Similar concerns will soon wash over the Crown City, as a growing number of high-paid public employees move closer to retirement, and as city leaders grapple with ways to pay off $100 million worth of pension bonds that could begin eating up roughly 10 percent of the city’s $220 million General Fund by 2017, according to even the most optimistic assumptions provided to the city.

Such problems seem almost endemic to the 88 city governments in Los Angeles County, according to Barry Allen, a Glendale resident who five years ago formed a nonprofit to analyze employee compensation in local governments.

“It’s a systematic transference of wealth from the taxpayers to special-interest people,” said Allen, a former private detective. “It’s very unfortunate that a lot of the public doesn’t see it, doesn’t know about it.”


The $100,000-plus club

Ask someone on the street and they’ll probably tell you Pasadena is a fairly well-run city. Then again, that same person might say you get what you pay for.

With 550 of the city’s 2,290 employees earning more than $100,000, Pasadena has a high percentage of employees earning more than six figures, without including health benefits or pension contributions. But even with such a seemingly high percentage of workers earning 50 percent more than the area’s $66,000 median income — half make more, half make less — Pasadena surprisingly is not on the top end of public pay.

The San Francisco Chronicle reported 33 percent of San Francisco city government workers earn more than $100,000. The same is true in Glendale, which has a budget and population about 25 percent larger than Pasadena’s and where 33 percent of employees — 603 of 1,776 — earn more than $100,000.

Conversely, the Los Angeles Times reported 14 percent of the city of Los Angeles’ municipal workforce earns more than $100,000, while only 13 percent of employees in San Diego earn more than that.

Pasadena Mayor Bill Bogaard wasn’t aware that one in four full-time city employees earned more than six figures, and that the salary schedule neglects that information.

“I don’t know what level of disclosure the city was attempting to meet,” he said, adding that the scandal in Bell may spark a fresh look at standards for disclosing employee compensation, which in Pasadena’s case has been left to city administrators. “Almost certainly the outcome will be to disclose more information to satisfy a very legitimate public interest.”

Whether the public gets an accurate view of employee pay depends on those disclosure standards, but the city’s performance for its residents in the past 10 years can serve as a real-time ledger to judge whether tax dollars were well-spent, Bogaard said.

“I think the way in which the city has been financially administered in the first eight years of the decade, the good times, and the last two years, the difficult times, provides citizens with a reasonable basis for understanding the cost of government,” he said.

A charter city like Bell, Pasadena has more wiggle room to raise municipal salaries, which are controlled by state legislation. But Pasadena Finance Director Andrew Green said he doesn’t believe salaries here are excessive, and are essentially based on how much city leaders are willing to pay to attract the talent they desire. “It’s kind of what the cities are willing to pay,” said Green, who earns $192,059.

Generous amounts of overtime for members of the police and fire department are a major factor in the number of employees earning more than six figures. Of the 550 six-figure earners, a total of 147 work in the 400-person Police Department and 144 are among the 185-employee Fire Department, where irregular schedules mandate overtime.

The city’s online salary schedules do not include overtime pay, vacation payouts and bonuses that in many cases can add tens of thousands of dollars to a city worker’s paycheck. For example, a Pasadena firefighter on a 56-hour weekly schedule can collect up to $74,000 in overtime pay to gross $167,894 in one year, while a police officer here can rack up $40,678 in overtime to take home $123,025, according to police and fire payroll documents obtained by the Weekly. But a police officer’s maximum pay tops out at $80,377, if calculated by the salary schedule alone.


Pension tension

As the Bell scandal helped illustrate, employee pay is only half of the challenge taxpayers and local leaders will face as city employees retire and collect pensions.

“That is the $64 billion question in California: what to do about the pension obligation?” said Councilman Steve Madison, who along with his colleagues will soon begin wrestling with ways to pay an $81 million bill for the Fire and Police Retirement System (FPRS) in 2015. “Everybody in government is looking at that right now.”

Pasadena maintains FPRS for fire and police employees who were hired prior to 1977, and CalPERS, the California Public Employees’ Retirement System, administers plans for current public safety and all other city employees.

Behind on payments into FPRS, the city in 1999 sold $100 million worth of bonds to catch up on funding retirement for the system’s roughly 300 members. That’s in addition to special legislation that takes nearly $20 million of redevelopment money from Lake Avenue and puts it toward FPRS. But that legislation sunsets in 2014, and a year later $81 million will be due on the bonds. Making matters worse is that FPRS investments in the stock market lost $38 million between 2008 and 2009.

For the other funds, Pasadena’s unfunded pension liability — what the city would have to come up with if all its eligible workers were to retire now — grew by $19 million to $113 million in 2008, the latest year for which data is available, according to Green. Combined, the CalPERS funds are 88 percent funded.

Forty-six retired city employees draw in excess of $100,000 a year in CalPERS pension payments, adding up to a $5.7 million annual tab, according to the California Foundation for Fiscal Responsibility’s database, which relies on data obtained from the CalPERS system in May 2010. These retirees are among more than 9,000 former state and local government workers earning more than $100,000 from CalPERS, according to CFFR.

Given the vagaries of the stock market and the chance that employees may change jobs and spread the cost of their pensions to other cities, it’s difficult to predict increases in the city’s $36 million in costs for the CalPERS funds, to which employees contribute $5 million. But costs appear set to increase about $4 million for 2011-12, Green said. “Going further than that, I couldn’t venture to guess,” he said.

Among the options the council will consider is refinancing the $81 million payment, which a city consultant said would take about $23 million a year from the general fund starting in 2017, assuming a seven-year refinancing.


Upside down

Pension reform advocates say retirement for the public sector is inverted based on the length of time private employees work and how much they receive in retirement.

Nearly 90 percent of CalPERS pensioners receive about $36,000 a year, but the average employee works only about 19 years — half of a career — and can likely expect to collect retirement benefits for 25 years. Compare that to the financially troubled Social Security system, which participants pay into for about 40 years and collect for about 20 years. “Compared to Social Security, it is a complete flip-flop,” said Marcia Fritz, a certified public accountant and president of the Citrus Heights-based California Foundation for Fiscal Responsibility.

Madison said he favors a two-tier system that would shift new hires to a retirement plan that requires them to work longer and pay more toward pensions. In the meantime, pay cuts for city employees negotiated in the last year should help hold down the city’s pension costs for employees on the verge of retirement, Madison said. Then again, investments and city revenue could perk up, he said. “I think the real answer is going to come with an improving economy, which will sort of lift all the boats,” he said.


To view city payroll data, click here

Payroll Records for city of Pasadena employees who earned more than $100,000
between June 22, 2009, through June 20, 2010. Figures include pay for
regular wages, overtime, and premiums for employees who receive bilingual
pay, education pay, paramedic pay and shift pay used to calculate overtime
or vacation payouts. The names of police personnel who work undercover have
been redacted.