California's Attorney General Expresses Shock Over CalPERS' Blind Eye on Runaway Salaries for Top City Officials

(August 9, 2010) — According to a report obtained by the Los Angeles Times, California’s $204.4 billion state pension fund was aware of inflated pay to a Bell, Calif., city administrator and other top city officials but did not take action. Now, they are in the process of reviewing the pension benefits of system participants who earn more than $400,000 a year.

“We are taking immediate action to investigate whether salaries of top public officials are being reported correctly and in accordance with the laws and rules that govern our system,” said CalPERS Chief Executive Officer Anne Stausboll in a statement. “We are committed to increased transparency and will take all steps necessary to protect our members, employers and stakeholders.”

According to the LA Times, California’s attorney general says he is shocked that nobody at the fund alerted law enforcement, and even board members at CalPERS are at a loss for words as to why the scheme wasn’t proactive about handling out-of-control salaries. In 2006, during a routine audit, the state pension fund learned that Bell City Manager Robert Rizzo had received a nearly 50% salary increase the previous year. The pay hike put his salary at $442,000, when CalPERS is supposed to stop pay spikes that can unduly enlarge retiree pensions. Rizzo’s salary eventually ballooned to nearly $800,000.

In addition to the fund’s review of high public official salaries, CalPERS stated it is:

• Joining the California Attorney General to investigate the facts surrounding the salaries and other compensation of City of Bell officials;
• Conducting a second CalPERS review of Bell;
• Placing on hold the retirement accounts of the individuals under investigation in the City of Bell and committing not to approve any pensions until satisfied the pensions are appropriate under the law; and
• Working with members of the Legislature and the League of California Cities on potential legislation to address issues of transparency in local governments.

“We followed all the existing pension rules related to Bell four years ago, but it is clear that we need to work toward strengthening our regulations and possibly state law,” stated Stausboll.