Extra Pay To City Employees Is Increasing, New Report Says
March 28, 2013 2:03 p.m.
Chris Cate, Interim President & CEO, San Diego County Taxpayers Association
Related Story: Extra Pay To City Employees Is Increasing, New Report Says
CAVANAUGH: Learning Spanish, getting a degree or maintaining your uniform. All have been salary add-ons for municipal workers in San Diego County. A watchdog group is out with an analysis of how specialty pay can increase workers' salaries and in some cases be factored into retirement benefits. The state has revised the rules on taxable compensation, but the group suggests the changes are not enough. Chris Cate is President and CEO of the San Diego Taxpayers Association. Welcome back.
CATE: Thank you for having me.
CAVANAUGH: And we contacted the public employees union CALPERS to join us for the interview but they did not respond to our requests. Before we get to the numbers in this report, remind us how California public employees get specialty pay in the first place. Are these benefits negotiated with various cities?
CATE: Yes. And CALPERS sets out a broad range of pays that could be negotiated into the contracts for labor groups for cities that are enrolled in CALPERS, and during the negotiation process, the employee groups and the city bargain and determine which specialty pays will be given to employees, the amounts, things like that, and at the end of the day, those compensations are included within the regular base pay that are given to employees when calculating a payout.
CAVANAUGH: What kinds get calculated in San Diego County?
CATE: Things from uniform allowances to S.W.A.T. pay down to things for a true tree premium pay for employees who work on trees, or a sprinkler backflow pay which is given to employees who work on sprinkler heads. The range varies from city to city based on what type of services are provided.
CAVANAUGH: And your report finds that there are 33 different pay add ones basically for employees throughout the cities that you reported on.
CATE: Yes. So we looked at 16 cities in the county that enroll in CALPERS, and we had some difficulty in getting data from certain cities going back to certain dates. In our unless, we found that of the 16 cities, 33 different types of pays are offered to employees, be it safety or non-safety employees, and the total of that over a 12-year period from 2000 to 2011, over $90million.
CAVANAUGH: We spoke with a person who is the director of human resources for national city, Stacy Stevenson, and she told us what benefit cities derive from offering this add-on special pay.
NEW SPEAKER: When we create job qualifications in a public agency, we have to look at the knowledge, skills, and abilities that are required for that job, the highest level of duties performed by that job, and we have to set a salary schedule accordingly. In these cases we have some instances where we need individuals to perform a highly specialized skill or have a certain type of license and instead of paying everybody in that job classification as a rate of pay that would cover that, we carve out a specialty pay so only those individuals who are performing that specialized skill or have that specialized license get that pay. So it actually is in that way a cost control measure so that not everybody gets it. Only those that are performing that duty or have that specialized license.
CAVANAUGH: That again was Stacy Stevenson, director of human resources for national city. And Chris, after your analysis of specialty pay, I'd like your response to what Stacy said.
CATE: Sure. And one of the recommendations that we make is to annually look at what is required of the classifications. I would argue that our things that we are hiring employees to do as part of their job and then paying above and beyond that for having that skill, if we're hiring someone whose job it is to trim trees, we should be paying them accordingly for doing that job. We shouldn't be giving them an extra pay for that. Or if we have maintenance workers working on sprinklers, should we give them an additional premium above and beyond their regular pay? Go back and look at what the job classifications are and fit the base salary accordingly to the job classifications required for those employees. And we would see that, we can move these things into the regular salary that are given to employees. The one byproduct of having these different types of pays is that you can have employees who maintain these certifications, classifications, get these pays to boost their pension payouts. And that is part of the reasons we went back and have been advocating for pension reforms because we don't want these instances of pension spiking. And we looked back at the governor's pension proposal, they looked at having pension based on regular pay. We now have CALPERS coming out and saying that their definition of regular pay includes 85 different types of premium and special pays that can be added onto the regular salary of employees and still be used for the pension calculation.
CAVANAUGH: I want to break down some of the things you mentioned because you took a wide scope in that answer. And they all relate directly to the report that you've come out with. Are all specialty pays eligible to be added onto a worker's pensionable pay?
CATE: Through this analysis, yes. We looked at the legislation past, the CALPERS definition of what specialty pays are pensionable. Then we went back to the cities and said, okay, from this yes, what did you offer your employees, and how much of it cost taxpayers to provide those benefits? And that's when we came back and looked at and got the 33 different specialty pays.
CAVANAUGH: And as I understand it, there's an actual formula for figuring out how much of the specialty pay is actually going to be added into what is called pensionable pay?
CATE: Right. So you would take the regular salary that's pensionable, add on the specialty pays, and then the formula, the pension formula that the employees receive will be based on whatever that total compensation amount is. We have an analysis and the study that looks at, okay, this is what the regular salary, the pension calculation based on the regular salary this, is what it would be, and if you looked at it with additional specialty pay, this is what the pension payout would be. And it can vary over the lifetime of the retirement of an employee.
CAVANAUGH: Your report here analyzes how much specialty pay is costing residents in various cities around San Diego County. Which cities stand out in your report?
CATE: We took two different looks at that. Different cities offer different services. If you look at the total amount, the city of Chula Vista has paid over $20million in specialty pays for that 12-year period. But if you look at it on a per household basis and try to take out the size of the cities and the services that are provided, per household, national city has the highest amount per household at about $45 per household with imperial beach and Santee being on the bottom end of the scale, $1.55 per household.
CAVANAUGH: And explain why you didn't include the City of San Diego in this report?
CATE: We didn't include the City of San Diego nor the county of San Diego, they have their own pension systems that they fall under and they offer different types of pays and what not. CALPERS has the broad range of the types of pays, and it's uniformed through each of those cities.
CAVANAUGH: Overall how much has specialty pay increased during the last decade in the San Diego Cities that you studied?
CATE: If you look at the annual amount from 2000 to 2011, annual cost of specialty pays has increased by 60%. That's just the cash payout. What we're not able to do is look at how has that impacted pension costs. We couldn't go down to the granullar level of looking at each employee, how long they are in service, how much their salary was, and look at the impact on pension costs. But we do know that that 60% increase will have an effect in the future on pension costs.
CAVANAUGH: Now, the biggest increase in specialty pay is holiday pay; isn't that right?
CATE: Yes, holiday pay has increased as well as for some cities education pay. The city of Carlsbad increased recently the amount given to as education incentives for employees. Over the last four years, the city of Carlsbad and some cities have seen increases in specialty pay costs because of the city's higher benefits.
CAVANAUGH: I don't know if you know this, but is the increase in holiday pay linked in any way to the number of people in special services like police and fire, etc, as those payrolls shrinks or decrease? Do more people spend more of their holidays on the job, so to speak?
CATE: I think it has to do with the type was pays offered between cities. Some cities don't offer what pay other cities do. And holiday pay is pretty uniform through all the cities. They take up a larger portion of the total cost. If you look at the total, $49million is accounted through holiday pay.
CAVANAUGH: Your report suggests that public workers can use the specialty pays to spike their pensions. Can you explain for us how that might work?
CATE: During an employee's time with their individual city, they're able to attract these different types of classifications and specialty pays. If you have employees who were -- had their pension based off their high one year, you could have employees who obtain pays for that one high year they know they're going to be having their pension based off of, obtain different types of pays and premiums, and then saw that pension calculation based off that salary. One of the ways you can remove the ability to spike the pension is to have your pension calculation based off your pace pay alone or move to a 3-year average, so there are various methods to avoid pension spiking, and this is one that hasn't really been talked about in recent years. It's one of the reasons why when we look at prop B in San Diego, we move forward that because all these specialty pays were being offered to employees.
CAVANAUGH: You hear these stories about people getting an exaggerated amount of pension for the types of work they used to do in the public sector. But isn't that a rather small percentage of the people? Is this pension spiking a major problem?
CATE: Absolutely. And that's one of the reasons why the state moved forward on pension reform and requiring that pension calculation be off a high three year, why we believe the true intent of the legislation was to base an employee's pension on their base salary alone. Those are the reasons why they moved forward on reforms. There are nose instances in which pension spiking does consider, and it's a long-term cost well beyond when that employee retires.
CAVANAUGH: What is the position of the taxpayers association? Should any kind of specialty pays be included in pension pay?
CATE: On the short-term, cities should be reassessing annually what types of pays are required for the duties their employees perform. And also looking at posting the pays online so the public can understand what they are. We want to see the negotiations with the employee groups at the bargaining table, removing the special pays and having the calculations of the pension based on those things alone, not having these special pays calculated toward the employee pensions.
CAVANAUGH: When Stacy Stevenson was saying is that cities have a base salary for a category of worker, and then if that worker learns Spanish or gets a special skill that's going to help them in their position, that's why they add on that special pay for that one worker, and in essence sort of save them from boosting the salary reality for that entire classification of worker.
CATE: I understand. But the issue that we were running into was that a lot of these different pays are negotiated by the employee groups and the city. So when you're negotiating 85 different types of pay, it ends up being things that are paid for for just the performance of the job. If requiring you to be bilingual is part of that, you can make your salary schedule and range inclusive of that. Not everyone has to be paid the same amount. That classification requires them to be bilingual, then you'll pay them that amount within that, not having additional pays on top of what their salary is for doing the job that they're required to do.
CAVANAUGH: You mention that there have been reforms that have taken place from the state, basically trying to alignment any kind of pension spiking or anything like that. So why do this report now?
CATE: We've been working on this for about a year and a half now, well before the pension reform legislation was passed because it was a little-known fact that these things were being offered, but no one knew what the true cost of these pays were. What we're doing is educating the public on these things do exist. CALPERS is stating that they will continue to exist even though the reform legislation passed was an attempt to remove these things, and that taxpayers should be aware of these costs and asking their council members to negotiate out of the contracts for these employee groups these types of pays. And that pension reform is not done and we need to continue to move forward on this. Our website is SDCTA.org and I would be remiss to take a second, one of our analysts spent a year and a half working on this, and he did a great job.
CAVANAUGH: Thank you very much.
CATE: Thank you very much.