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Teacher retirement system fails to curb spiking, controller finds

September 5, 2012 | 11:23 am

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California’s teacher retirement system does not adequately audit proposed pension benefits to prevent spiking and has missed opportunities to reduce possible abuses, the state controller found in a review released Wednesday.

The California State Teachers’ Retirement System (CalSTRS) has also failed to adequately use electronic databases designed to identify cases where large increases in compensation in the last year on the job unreasonably spike pension benefits for retirees, according to state Controller John Chiang.

"Starting with more rigorous auditing and better use of existing technology, CalSTRS must fortify its ability and resolve to crack down on those seeking unjust enrichment at the expense of their fellow educators and taxpayers," Chiang said in a statement.

The review found that there are 1,900 school districts and public agencies that are part of CalSTRS, but the pension agency averages only 40 audits a year.

One executive for the San Francisco Unified School District received a 26% pay increase six months prior to retirement, and another executive saw a 20% boost in income a year before drawing a pension, Chiang said. In both cases, the district was unable to provide any documentation supporting those raises, he said.

His office also found documentation lacking to support raises provided to officials in the San Diego Unified School District. CalSTRS CEO Jack Ehnes said the agency has taken steps to reduce abuses, including the creation of a toll-free line for whistleblowers.

“CalSTRS takes pension spiking very seriously and places a high priority on improving processes to reduce the likelihood of pension abuse attempts,'' Ehnes said in a statement. ``CalSTRS agrees with the Controller’s recommendations and will take additional actions to further strengthen its controls. In fact, many of the recommendations in the report have been initiated within the last year.”

Chiang's office is conducting a similar review of the California Public Employees' Retirement System, he noted. The Legislature last week sent Gov. Jerry Brown a bill aimed at preventing the spiking of pensions by basing retirement benefits on the average salary for an employee's three best years.

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Photo: State Controller John Chiang, shown during an event last year, issued a report Wednesday that found the state teacher's retirement system is not doing enough to prevent pension spiking. Credit: Jonathan Alcorn / Bloomberg.

 

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