The spiking of McClain's pension - in their own words

DEL MAR UNION SCHOOL DISTRICT
NOTICE OF SPECIAL BOARD MEETING
BY THE BOARD OF TRUSTEES

February 24, 2010
3:00 pm
 

Del Mar Hills Academy
14085 Mango Drive
Del Mar, CA 92014

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Full Agenda

Excerpted from the agenda:

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February 24, 2010

To:	Board Members
From:	Comischell Rodriguez, President, Board of Trustees
Through:	Dr. Sharon McClain, Superintendent
Subject:	Agenda Item 10: Board Discussion/Approval, Contract between Sharon L. McClain, Ed.D and the DMUSD Board of Trustees

It has come to the Board's attention that district staff have been unable to implement a provision in Superintendent McClain's contract reported revised on June 17, 2009. The Board firmly believes that all District employees should receive prompt payment of all benefits.

To determine what the issues are, and what Board action may be necessary, the Board has placed a discussion of Superintendent McClain's current contract on the agenda. By law, any discussion about the contract must occur in open session. Through this discussion the Board hopes to clear up any issues related to implementing all provisions of the contract.

FISCAL IMPACT:

Cost - Dena Whittington will be available to calculate the fiscal impact based on revisions to the original contract. Program or Department - Unrestricted General Fund Is this a Restricted Program? No Was this expenditure anticipated in the adopted budget? Yes, budget for superintendent's total compensation based on original contract. Will this Program or Department be over budget after this expenditure? No, if changes are within total compensation oforiginal contract.

RECOMMENDED:

The Superintendent recommends the Board discuss and take any necessary action.

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Below is audio from the February 24 public meeting. This is the full unedited audio from the DMUSD website in its entirety, the player resides on this site but the audio is being streamed from DMUSD's site. Alternately you can download the audio from the DMUSD site and listen to it in the player of your choice.

(3:32:42) Full unedited board meeting audio from dmusd.org

This is the exact wording of the contract amendment requested by Sharon McClain, as read by Katherine White at the Board meeting.

(01:21) Contract amendment read by Katherine White

This is Katherine White reading the letter Sharon McClain wrote to request the contract amendment.

(00:56) Request language

These are Dena Whittington's comments from the meeting where she discusses sending the amendment to CalSTRS and CalSTRS' response.

(01:34) Dena Whittington's comments

This is a compilation of Sharon McClain's comments during the discussion of her contract amendment.

(05:16)Sharon McClain's comments

This is a compilation of Board member comments regarding the reasons that they hadn't yet implemented the changes to Sharon McClain's contract.

(05:13) Board members explaining the delay in implementing the contract amendment

This is the public comment portion of the contract discussion segment.

(01:47) Public comment

This is an edited clip of the entire portion of the meeting where McClain's contract was discussed, edited only to remove long pauses, any other deletions, if any, are unintentional.

(31:42) Board meeting contract amendment discussion

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More information:

• Sharon McClain's employment contract with DMUSD
• Special Board Meeting • June 17, 2009
• Special Board Meeting Feb 24 2010
• Del Mar school district power play in progress
• McClain asks Board to make promised changes to contract

A Spike in DMUSD's Heart

The California State Teachers’ Retirement System (CalSTRS), the second-largest public pension fund in the nation, lost 25 percent of its value in 2009, and is carrying close to 50 billion dollars in unfunded liabilities.

CalSTRS members, which include both administrators and certificated district employees, receive pensions paid according to a “defined benefit”, which means that a member’s pension is determined according to their creditable salary and years of service and does not depend on the amount paid into the plan.

Typically, CalSTRS members contribute 8% of their salary to STRS, the district contributes 8.25%, and the state of CA kicks in another 2.1%. In this current time of financial crisis and rampant unemployment, one of California’s major issues is paying the pension obligations for teachers and other public employees who are no longer working. The defined benefit structure of CalSTRS makes it particularly susceptible to abuse by members who collect benefits far in excess of their contributions.

Enter Sharon McClain, former superintendent of the Del Mar Union School District. In addition to her salary, McClain’s employment contract with the DMUSD included annual benefits of: 6 weeks of vacation and 24 days sick leave, and a $4,800 automobile allowance. In addition there was $16,000 to be used “to offset her employee contribution to the State Teacher Retirement System or to fund a tax sheltered annuity, or some combination of thereof”.

However well-intentioned that $16,000 retirement benefit was, it has already cost the district far in excess of $16,000 in legal fees and it’s not over yet. Instead of using the $16,000 to offset her 8% contribution to STRS, Sharon McClain did the math and determined that if that money could somehow be classified as salary, it would raise the basis on which STRS calculates her retirement benefit and guarantee her higher retirement payments for the rest of her life.

To show the effect of such a reclassification of income, below is a very rough calculation of how creditable income for McClain might be calculated by STRS. The last two rows of the table show McClain’s income with and without the additional $16,000 added.

	2009-2010	2010-2011	2011-2012
Salary (184 days)	$178,000	$183,000	$188,000
Vacation (6 weeks)	$29.022	$29,837	$30,652
Sick leave (24 days)	$23,218	$23,870	$24,522
Auto allowance	$4,800	$4,800	$4,800
Creditable income*	$182,400	$187,400	$238,370 (incl. vacation)
Creditable income + $16,000 retirement	$198,400	$203,400	$254,70

^*The creditable income was calculated with the following assumptions: Salary + auto allowance + 45 vacation days accrued and paid at end of contract, 30 vacation days from final year and 15 from previous year.

Using the creditable income figures above, a rough calculation of Sharon McClain’s possible retirement benefit was made using the benefits calculator on the STRS website.

	Current Contract	Amended Contract	Gain
Monthly Benefit*	$12,719	$13,689	$970
Annual Benefit*	$152,623	$164,268	$10,645

^* STRS benefits calculated using birthdate Feb 1945, retirement date Jul 2012, creditable service 30 years, unused sick leave 60 days, no service credit or incentive.

From the above figures, it is easy to understand what Sharon McClain’s motivations were for requesting this change, she stated at the February 24 board meeting that the change was worth $200,000 to her, a substantial financial incentive.

If the district were to redirect McClain’s retirement contribution to her salary, she would owe 8% of that amount to STRS, the DMUSD would be responsible for another 8.25%. If she were to be eligible for a performance bonus, her increased salary would increase the basis on which the bonus was calculated.

The exact changes requested by Sharon McClain to paragraph 8E of her contract were:

During the term of this contract or any renewal or extension thereof, the Board shall provide the Superintendent an annual fixed additional salary retirement contributions in the amount of Sixteen Thousand Dollars ($16,000) at no additional cost to the district. At her discretion, the Superintendent may elect to use the retirement contribution payment to offset her employee contribution to the State Teacher Retirement System or to fund a tax sheltered annuity, or some combination of thereof.

In a letter to the board, she gives the following reasons for the change:

I’m asking permission to change this section for three reasons:

• First, I believe the board’s intention was to meet my need to boost my retirement income which is based on the highest year’s salary.
• Secondly, Ricardo Soto, Annette and I agreed that the contribution was to be given annually, and was not specified in the contract.
• Third, having the option to add this amount to my compensation during my first year of employment will make a difference in my STRS calculation for retirement.

Most importantly, it would help me avoid the problem of STRS personnel determining that my salary was spiked.

I will pay the 8% cost of STRS, $1,200 each year so there will be no cost to the district.

This request will not affect my total compensation, there is no additional cost to the district, nor will it affect the annual salary or any increases made to it through the step system in the future. Any increases given will not be calculated on a larger base. The salary schedule outlined in the contract will remain the same unless negotiated differently.

McClain asked that the increase count as salary, but with differences. This salary would require her to pay the district’s portion of STRS, and this salary would not be a basis for any percentage salary increases. She did not address whether or not unused sick and vacation days would be paid at the higher rate.

So, was Sharon McClain trying to spike her pension? Pension spiking is defined as the intentional inflation of final compensation with the primary purpose of increasing the retirement benefit. McClain’s request seems to fit this definition to a T.

CalSTRS specifically prohibits pension spiking. The problem with such practices is that since salary spikes take place shortly before retirement, the inflated benefit that spiking produces is unfunded, which has an adverse impact on both the funding and credibility of public retirement systems.

By Sharon McClain’s own account, for the cost of an additional $1,200 per year ($3,600 total), she gains an additional $200,000 in retirement benefits, a very respectable and unrealistic rate of return on her investment.

Fortunately, this sort of salary manipulation is available only to an elite few members of CalSTRS, district administration. Classroom teachers are subject to collective bargaining agreements and do not have the power to manipulate their employment contracts individually.

Concerned over such abuses, CalSTRS regulations now specifically disallow:

• Compensation paid for the principal purpose of enhancing a member’s retirement benefit, as determined by CalSTRS
• Compensation paid for a limited period of time
• Compensation for service in excess of 1.000 years of service in a school year
• Compensation with restrictions on how the employee spends the compensation, or where they are required to document how it was spent

CalSTRS controls the practice of pension spiking by auditing school districts, combined with the provision of law that permits the Board to determine whether particular compensation is being paid for the principal purpose of enhancing the pension benefits. A presumption by CalSTRS that spiking has occurred can only be reversed upon receipt of sufficient evidence to the contrary. By auditing school districts, CalSTRS is able to identify circumstances in which the employer reported compensation that appears to CalSTRS to be spiking.

Last June 17, at a special closed meeting, the Board of Trustees unanimously voted to approve Sharon McClain’s request to modify her contract, a decision that is almost impossible to comprehend given that her request sounds like a textbook definition of pension spiking. Had the board just denied her request back in June, we could have nipped this particular piece of drama in the bud and saved the district tens of thousands of dollars.

Upon receipt of McClain’s proposed amendment, Dena Whittington, assistant superintendent of Business Services, sent it to her STRS contact at SDCOE, who in turn passed it on to STRS in Sacramento. Unsurprisingly, STRS responded that any increases in Ms. McClain’s salary resulting from the transfer of funds as written in the contract amendment could not be used for purposes of calculating her retirement income.

Although the Board of Trustees had voted to approve the contract change, they hadn’t signed the amendment and were unsure of how to proceed after the STRS determination. And then the legal wrangling began.

Sharon McClain’s attorney Mr. Gronemeier wrote nine letters to the board on November 19, December 11, 13, 14, 15, 17, 19, 21, and February 3, in an attempt to force them to honor the contract amendment they’d agreed to in June. The board retained their own attorney Mr. Shinoff, and asked McClain for an amendment with different wording that would satisfy STRS. In the February 24 meeting, McClain asserted over and over that she’d “given [the board] the remedy”, but from their discussion it does not appear that “the remedy” included an actual written amendment that could be sent back to STRS for approval.

McClain maintained over and over in the February 24 meeting that this amendment would cost the district nothing, but her proposal as written, even if approved by STRS, would at minimum have cost the district additional pay for sick and vacation days.

But those costs pale in comparison to the legal fees, not to mention the time that both she and the Board of Trustees have expended on this matter, reading and responding to letters in an endlessly circular argument that could only have been resolved by submitting a new amendment to STRS.

If McClain and the Board had managed to come up with an amendment that would be acceptable to STRS, where do any of them think that $200,000 comes from? It is exactly such abuses that have led to the current financial state of CalSTRS. Are we taxpayers and unemployed parents and teachers who share the CalSTRS pension pool so insignificant that our contributions to McClain’s pension don’t count? Why didn’t the board take a stand for their constituents back in June?

It’s inexplicable, and in the long run, it's us, the parents, the constituents, the taxpayers who are left holding the bag for the ongoing posturing and grandstanding by both Sharon McClain and our elected Board of Trustees, who should have just said no.

…All in all, it’s just one more brick in the wall…

- A DMUSD parent (Torrey Hills)

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More information:

• June 17 Special Board Meeting Minutes
• Del Mar School District Power Play in Progress
• Audit finds 2 pensions were hiked
• Judge agrees with auditors

EDUCATION MATTERS: An interview with the attorney

Source: Del Mar Times

By Marsha Sutton

A brief interview this week with the attorney for the Del Mar Union School District's Board of Education offered up tiny nuggets of information about what led up to the March 31 firing of former DMUSD Superintendent Sharon McClain. Provided here is the transcript from that conversation, edited for greater brevity.

Board members who voted her out would, we can assume, like nothing more than to share every detail of their reasoning but are restrained, according to their lawyer, by the law which prohibits them from disclosing any personnel matter. McClain has them at a disadvantage, as she can speak as she likes, knowing there can be no response from the other side.

In the conversation related here, an interesting point is that the board's attorney, Dan Shinoff of the law firm Stutz Artiano Shinoff & Holtz, said all personnel information would be revealed if McClain chooses to file suit. So either all the sordid details eventually get disclosed through costly court proceedings, or McClain refrains from suing and the district saves money but the community remains in the dark.

One issue that clearly troubled the lawyer is that McClain had asked for an open session on March 31, which is her right, and he came prepared to present the board's case. But then she changed her mind before the start of the meeting, perhaps not realizing that an open session meant a public airing of the charges against her, not just the vote.

In a follow-up e-mail on this issue, Shinoff wrote, "She chose not to address the charges in open session. ... Sharon wanted the public comment, not a defense of the charges. Completely contrary to her request."

Another point: One clear-thinker posted in a blog that the anger against the firing of McClain may have to do more with displeasure with the school board than any love for the former superintendent. It's important to separate the two.

Many observers, myself included, have expressed profound disappointment over the way this board has functioned since 2006. Yet the possibility exists that McClain did indeed breach her contract and there may have been legitimate grounds for releasing her, even if some of us have been dissatisfied with the board's long-term performance.

Just because people may believe school board members have not served the district well does not necessarily mean they made a mistake in this instance. Anger against the board over past performance should be separated from an action that might actually be in the best interests of the district. To acknowledge that trustees may have acted appropriately in this case does not mean we accept that they walk on water. If doesn't even mean we have to like them.

Finally, energy spent demanding the resignations of board members in the spring of an election year, when a new group of three will surely be elected come November, seems pointless. Yes, stay vigilant, but would it not be better to focus on who will replace them rather than continuing to vocalize displeasure?I think we can safely assume that this message of dissatisfaction has already come through loud and clear.

Q: What led up to the firing?

Shinoff: They did an evaluation with their concerns and she did a response and they weren't happy with the response. Then she retained an attorney, and then the big issue as you know from open session became, at least for her, the $16,000 issue, which there is no paperwork to support a change in her contract.

Q: You are talking about the STRS [California's State Teachers' Retirement System] contribution?

Yes, the STRS contribution. But she didn't want that as STRS contribution. She wanted that as salary. But there was nothing that indicated that there was action taken to increase her salary. In fact quite to the contrary, the action appeared to support some sort of contribution to a 403(b) or a 457 retirement plan. So that became a huge stumbling block.

Q: Didn't the board initially agreed to it?

The board did agree to a contribution to her retirement plan, but apparently that's not what she wanted. She wanted an increase in salary. So she went in September ... to see if she could do that, and STRS said no. But that wasn't what the board had in mind in any event. So that became a big problem, and she retained an attorney, and everything became predicated upon the board capitulating to this demand for a salary increase which had never been agreed to. And it further exacerbated a difficult relationship.

Q: Is there more to it than that issue?

It isn't all of it. The problem is it's all in her personnel file which is private.

The thing that really is bothersome to me is she demanded a public hearing so that the charges could be heard against her. So I show up there [at the March 31 meeting when she was released] and I told her that what we had in mind was 20 minutes for me and 20 minutes for her to present her view of the charges. And then she acted as though she was completely caught by surprise. But she's the one that asked for open session.

What the Brown Act says is that if there are complaints or charges to be heard against an individual, they can be heard in closed session or in open session at the option of the employee. She chose not to have those heard in open session despite the fact that she asked for an open session.

I think quite frankly the community was misled by her because she wanted to have an open session, but she didn't want to have an open session to discuss the charges. In fact, I heard she said, "I have no idea what they're talking about." Well, that's just not true.

Q: The board has been meeting in closed session for about six months over this, yes?

Well, yeah. There were evaluations, there were opportunities for her to respond. Then she had a lawyer, and there were all kinds of threats made regarding litigation. But for her to tell the community that she didn't have a clue what the charges were, well if that's the case, why did she ask for an open session?It's really disingenuous as far as I'm concerned.

Q: Which item or items in her contract did she breach?

The material breaches of her contract include not complying with the law or with not doing your job in a manner that's consistent with your obligations as superintendent. It's like any other employer-employee relationship. She's the CEO and the board of directors has the right to hold that person accountable.

Q: Do you expect her to file suit?

Everybody else says she will. I'm not so sure that she will. [People] talk about how she'll recover attorneys' fees. Well, there's no attorneys' fees provision in it. So she needs to make this big financial investment, that's number one. Number two, she'll go into the retirement system, and that is going to be an offset against any damages that she can claim because you can't get a double recovery.

Q: Was her releasing your invoices [last December] a violation of the law?

Yes. How could she who had retained a lawyer go through attorney-client communications and decide what she was going to release?She couldn't do that. She's not a lawyer. Do I think she had a different agenda?Yeah, I do.

Q: Is there a laundry list of issues, not just one or two?

Oh yes.

Q: Was the board within its rights?

Absolutely. It's interesting that all of these people know about her performance. They know nothing about her performance, one way or another. They elect these people to hold people accountable - teachers and staff and principals and superintendents. But apparently they believe they have better information.

Q: Did the board act recklessly?

Not at all. I think the board did their job.

Q: Can you be more specific on the ways she may have violated her contract?

No, I can't. If she chooses to go public with her lawsuit, then it's all on the table.

Q: If she decides to sue?

Then everything is wide open.

Q: When were you hired?

In the summer, in July.

Q: Were you hired with the directive to fire her?

No, I was never given a directive to fire her. They were frustrated in terms of superintendent-board relations, they were concerned about how things were going, and they wanted to get legal counsel on it.

Q: You would have advised them if they didn't have grounds to fire her?

Absolutely.

Q: Did all five board members appear to understand that she violated her contract?Were they all behind this?

That's getting into how they think and how they deliberate and what they said in closed session, and I really can't say that.

Q: Were you surprised that one person abstained and one person voted against?

I'm never surprised when it comes to voting because I think that it's really easy to take a position that you feel comfortable with at one time and then facing an angry crowd is a difficult thing to do. So whether you vote in favor or against, it's a very, very difficult thing to do. And quite frankly, I think it scares away good people from getting involved in public service. That crowd was very angry. It's always easier to do things without an angry crowd, that's for sure. I think that everybody did their level best.

Q: Does a 3-1-1 vote strengthen McClain's case in a way a 5-0 would not have?[via e-mail]

Not at all. The number is irrelevant in a court of law. Although that is different than the court of public opinion.

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After speaking with the attorney, I requested the exact wording of the motion to fire McClain, took another look at her contract and called board president Comischell Rodriguez for further explanation on the STRS issue.

The March 31 motion specifically reads as follows: "To terminate the Superintendent pursuant to section 11C for material breach of her contract. By so moving, payment of Dr. McClain's salary and benefits will cease immediately." Trustees Annette Easton, Doug Perkins and Katherine White voted in favor, Comischell Rodriguez opposed and Steven McDowell abstained. There was no roll-call vote.

Section 11 of McClain's contract, titled "Termination," provides for three ways the contract can cease: 11-A is by the superintendent's choice, 11-B is without cause, and 11-C is with cause.

Section 11-C reads in part as follows: "With Cause. The board may elect to terminate the superintendent's employment upon thirty (30) days written notice to the superintendent, except as specifically provided herein, for cause defined as serious misconduct ..."

The contract specifies seven definitions of "serious misconduct," including conviction of a crime, acts of moral turpitude, willful malfeasance or gross negligence, fraud or embezzlement or theft, failure or refusal to perform her duties or obligations, refusal to obey governmental laws and regulations, and unsatisfactory performance after being given a reasonable time to rectify deficiencies.

McClain's salary for 2008-2009 was $168,000, and for 2009-2010 was $178,000. This does not include benefits: 30 paid vacation days annually, health and insurance benefits, 24 days annually of sick leave, an auto allowance of $400 monthly, the $16,000 STRS retirement fund contribution, and a housing allowance of $1,500 per month for the first six months of the agreement for relocation to San Diego County. These benefits are standard for many school district superintendents.

The contract took effect Sept. 17, 2008, and was to run through June 30, 2012.

The STRS clause, item 8-E in the contract, reads in part as follows: "... the board shall provide the superintendent retirement contributions in the amount of sixteen thousand dollars ($16,000). At her discretion, the superintendent may elect to use the retirement contribution payment to offset her employee contribution to the State Teacher Retirement System or to fund a tax-sheltered annuity, or some combination thereof. ..."

The STRS issue, which was eventually discussed in open session at a recent board meeting, was a bone of contention between McClain and the board since last summer.

"I know that she had requested that her STRS contribution be changed at no cost to the district," Rodriguez said.

McClain had asked the district to pay the $16,000 directly to her and she would then contribute to STRS. This would not cost the district any more money but would allow her to receive a higher pension.

This, McClain claimed months ago, was agreed to by the board last summer, although there appears to be nothing official in writing.

"It was a year ago when the board agreed in open session, unanimously agreed, to allow her to modify the way her retirement was paid at no cost to the district," Rodriguez said.

The board, however, stipulated that STRS would have to agree to the arrangement first.

Rodriguez said McClain was given direction "to check it out with STRS and with the lawyer and provide a way to make it happen."

When I asked Rodriguez if STRS rejected the plan, she said, "I believe so, yes."

But Rodriguez said the contract was written before she was elected to the board and that she was "uncomfortable discussing what was promised to her and what was not promised."

She said the issue "has become part of any kind of potential litigation we would have with her." So even though it was discussed in open session, she was reluctant to comment further.

When asked why she voted against releasing McClain, even though it appeared outwardly until the March 31 meeting that all five trustees were aligned on this issue, Rodriguez would not comment.

"I've been advised not to make comment on that question by our attorney," she said. "I stand behind my vote, but I'm not going to comment on it."

Neither would she comment on whether she believed McClain had breached her contract.

She asked the community to support the interim superintendent, Jim Peabody, during this time of transition and said everyone is supporting him as he takes the helm.

"It really is my sincere hope that we can move forward as a district," Rodriguez said. "I think that we will be in good hands with Jim in this interim period. That's the message I would like to send."

The message on the Web site of the Del Mar California Teachers' Association echoes Rodriguez's comments.

"Each member of this board takes his or her responsibility very seriously," the DMCTA message reads. "It is our desire that we ensure a smooth transition for a new superintendent. We truly believe that threats of retribution and litigation do very little to unify our community. The board has had to make a very difficult decision. Each board member agonized over making the decision, but it has been made, and now we are moving forward as a united board that is committed to providing a rigorous, inspiring and nurturing educational program for all our students."

More information:

• McClain's Employment Contract
• California State Teacher's Retirement System
• Del Mar school district power play in progress
• Audit finds 2 pensions were hiked
• Public pension plan targets ‘spiking,’ double-dipping

Del Mar school district power play in progress

Source: Union Tribune
Chris Reed
Monday, March 15, 2010

I've been forwarded materials in recent weeks that suggest that Del Mar Union School District Superintendent Sharon McClain is pressuring her school board members to go along with a huge spike in her pension by reclassifying the $16k she gets annually for retirement contributions as pay.

The California State Teachers Retirement System frowns on this sort of late-career shenanigans and has apparently told the district its decision to provide the spike last June was not OK -- but McClain keeps pushing the board to pursue the matter.

My e-mails to board President Comischell Rodriguez have yielded bland or misleading responses. Is she going to go along with McClain's wish that the district push to get CalSTRS to change its mind? Or will she try to defy CalSTRS and deem McClain's pension to be much higher?

Will she OK using school district-paid attorneys to try to get CalSTRS to change its mind?

Keep in mind that McClain's pension is already going to be well north of six figures. And CalSTRS is woefully underfunded with about $40 billion less in its portfolio then what it is obligated to pay out. This looks like an ugly, inappropriate, costly power play to me.

So what will Rodriguez and the rest of the board do?

We'll see.

But remember what happened in San Ysidro. This is from the April 27, 2006, U-T:

Judge rejects higher pensions for 2 former school officials

SAN YSIDRO -- The $15,000 raises two San Ysidro school administrators got just weeks before their retirement in 2002 do not qualify them for higher publicly funded pensions, an administrative law judge has ruled.

The judge agreed with retirement system auditors who found that the San Ysidro school board gave the raises to boost the pensions of former assistant superintendents Christine Aranda and Alice De La Torre. That is an illegal practice known as spiking.

Aranda and De La Torre requested a hearing, which was in September, to challenge the audit by the California State Teachers' Retirement System. ...

In 2004, CalSTRS put a stop to the higher retirement payments and put Aranda and De La Torre on installment plans to repay the surplus pension money they had received. Neither they nor the San Ysidro School District face additional sanctions. ...

CalSTRS did not dispute the legality of the raises. It found only that those raises should not be used in calculating retirement benefits. ...

The case began in June 2002. It was then that the board increased the salaries of Aranda and De La Torre from $104,494 to $120,000 a year, retroactive to the previous July. ...

The current San Ysidro board spent $72,000 in legal fees on the case before dropping its opposition to the CalSTRS findings. Aranda and De La Torre then hired their own attorney to represent them in a hearing in September.

If McClain wants to pursue this with CalSTRS, she shoud do it on her own dime.

As for Del Mar school board members, it's time they grew spines.

More information:

• California State Teachers' Retirement System

Public pension plan targets ‘spiking,’ double-dipping

Source: Capitol Weekly

With the state’s finances in a shambles, an issue that is drawing increasing scrutiny is the abuse of public pension systems, including double-dipping and pension "spiking."

A plan by the Assembly’s ranking member on pension and retirement issues would bar boosting a favored worker’s pay solely in order to inflate retirement benefits – an action known as "bumping" or "spiking" -- and place local public pension systems under tighter state control.

It would apply to all public pension systems in the state, including the California Public Employees’ Retirement System, the State Teachers Retirement System and the pension systems in 20 counties that were setup by a 1937 public retirement law. The latter, which have their own boards and administration, include Los Angeles, Orange, Sacramento, Alameda, Mendocino, San Diego, Ventura and others. The full list of the county retirement systems is available here.

It would limit a worker’s final compensation to the average increase of other employees in the same or related work group, a move intended to limit spiking. To limit double-dipping, it would require retirees to wait at least six months before working for any other public entity. Currently, there are cases in which a public employee will retiree on a Friday and come back to work Monday as a contract employee or retired annuitant while collecting retirement benefits.

The legislation, AB 1987, is authored by Assemblyman Ed Hernandez, D-West Covina, and is partly in response to media reports of six-figure pensions for public workers. One pension reform group, at CaliforniaPensionReform.com, lists more than 9,000 retired government employees with pensions of $100,000 or greater. The group includes a former city manager with a half-million-dollar annual pension. At least two ballot initiatives also have been proposed to curb pension benefits.

The legislation by Hernandez, the chair of the Assembly Committee on Public Employment, Retirement and Social Security, also would set up an auditing system to catch violations. In part, it is patterned after a 1993 Senate bill, SB 53 sponsored by CalPERS, that curbed pension spiking. The Hernandez bill takes the rules in the earlier bill and applies them to all public pensions systems, including local systems in cities, one expert said.

In a written statement, Hernandez said "teachers, nurses, firefighters, and police officers deserve an adequate and secure retirement that is not threatened by a few unscrupulous individuals trying to fatten their own benefits."

Under his bill, retirement boards would block intentionally spiked or manipulated pension payments and require that the employer and employee prove that the increase was justified. The bill would also prevent against accrued vacation, severance or settlement pay from counting towards an individual’s retirement benefits.

More information:

• Text of AB 1987

Judge agrees with auditors

Source: Union Tribune

No higher pensions for ex-school officials

By Chris Moran
STAFF WRITER
April 27, 2006

SAN YSIDRO – The $15,000 raises two San Ysidro school administrators got just weeks before their retirement in 2002 do not qualify them for higher publicly funded pensions, an administrative law judge has ruled.

The judge agreed with retirement system auditors who found that the San Ysidro school board gave the raises to boost the pensions of former assistant superintendents Christine Aranda and Alice De La Torre. That is an illegal practice known as spiking.

Aranda and De La Torre requested a hearing, which was in September, to challenge the audit by the California State Teachers' Retirement System. The judge issued a decision this month, and the ruling must go to the CalSTRS board for approval. That probably will happen in June, an agency spokeswoman said.

In 2004, CalSTRS put a stop to the higher retirement payments and put Aranda and De La Torre on installment plans to repay the surplus pension money they had received. Neither they nor the San Ysidro School District face additional sanctions.

CalSTRS did not dispute the legality of the raises. It found only that those raises should not be used in calculating retirement benefits.

De La Torre and Aranda both said they had not yet decided whether to continue contesting the issue.

The case began in June 2002. It was then that the board increased the salaries of Aranda and De La Torre from $104,494 to $120,000 a year, retroactive to the previous July.

The San Ysidro district gave CalSTRS two reasons for the raises: to recognize Aranda and De La Torre's increased workload under an inexperienced superintendent and to persuade them not to retire.

The incentive didn't work. De La Torre retired three weeks after the raise and Aranda retired six weeks after the board's action. Their replacements were given $106,000 salaries.

The board fired Superintendent Jose Torres the same day it gave the raises to Aranda and De La Torre.

The state teachers' retirement fund accrues through contributions from employees, school districts, the state general fund and investment earnings.

Each retiree's age, years of employment and highest salary figures into the retirement benefits. CalSTRS calculated that the last-minute raises added $1,189 to De La Torre's monthly pension check and $869 to Aranda's, an increase that was estimated to add up to nearly $300,000 combined over their lifetimes.

In her proposed decision, Administrative Law Judge Vallera Johnson recapped that Aranda and De La Torre took on extra work, such as teacher union negotiations, a task generally handled by the superintendent.

The current San Ysidro board spent $72,000 in legal fees on the case before dropping its opposition to the CalSTRS findings. Aranda and De La Torre then hired their own attorney to represent them in a hearing in September.

Both are still active in South County, Aranda as a trustee on the board of Southwestern College and De La Torre with several volunteer organizations.

Audit finds 2 pensions were hiked

School administrators given illegal boost, challenge says

Source: San Diego Union Tribune>
By Chris Moran
STAFF WRITER

August 13, 2005

SAN YSIDRO – The San Ysidro school board illegally jacked up the publicly funded pensions of two administrators by more than $10,000 a year each as they retired in 2002, auditors have found.

The California State Teachers' Retirement System is challenging the pension increases to former associate superintendents Christine Aranda and Alice De La Torre. Within weeks of their retirements, the San Ysidro board gave retroactive raises that boosted their annual pay by more than $15,000 each.

Aranda's retirement benefits increased by $869 a month as a result of the raise she got six weeks before retiring as San Ysidro's associate superintendent of educational services, according to a CalSTRS document calling for a reversal of the pension increase. Aranda is now board president of Southwestern College.

De La Torre's monthly pension check went up by $1,189 because of the raise she got three weeks before she retired as associate superintendent of human resources, according to the same CalSTRS document.

CalSTRS does not object to the salary raises themselves but claims the school board granted the raises for the purpose of inflating De La Torre's and Aranda's pensions. That practice, which CalSTRS calls "spiking," is prohibited by state law.

CalSTRS found that retirements so soon after the raises and the board's replacement of Aranda and De La Torre with assistant superintendents at lower salaries were proof that the board was spiking their pensions.

Aranda had no comment on the case. De La Torre could not be reached for comment.

CalSTRS is a retirement fund for teachers of kindergarten through community college. It's funded by contributions from public school teachers and administrators, their school district employers, state general fund money and interest earnings.

Retirees' benefits are based in part on the highest salaries they earned. CalSTRS estimates that if the last-minute raises are figured in, Aranda and De La Torre would, between them, receive nearly $300,000 more in pension payments over their lifetimes than they would if the raises were excluded from the calculations.

The current San Ysidro board, after having spent $72,000 in legal fees on the case, has voted not to contest CalSTRS in next month's hearing before an administrative law judge to decide whether Aranda and De La Torre get to keep the increased pension benefits. Aranda and De La Torre have hired an attorney.

Last year, CalSTRS put the retired administrators on an installment plan to repay the extra pension benefits they had already received, said Wendy Tucker, the attorney who represented San Ysidro until the district pulled out of the case.

The case arises from a particularly turbulent era in the 5,100-student district with an annual budget of $39 million.

An account from documents obtained by The San Diego Union-Tribune through a public records request show that in early 2002 Aranda and De La Torre felt they were working in a hostile work environment.

Dr. Jose Torres had been hired as superintendent in November 2001 and barred Aranda and De La Torre from attending some meetings and "went so far as to publicly humiliate and demean them," according to the district's response to the CalSTRS audit findings.

Because of Torres' inexperience, his "disruptive" impact on employees and his conflict with the board, Aranda and De La Torre carried a heavier load than they had under his predecessor, the 13-page response states. The duties included labor negotiations with teachers who came close to striking in February 2002.

On June 8, 2002, the board fired Torres. At that same meeting, by a vote of 3-1 with one abstention, it changed the titles of Aranda and De La Torre from assistant superintendent to associate superintendent and each got an annual raise of $15,506, retroactive to July 1, 2001.

The raises were approved in part as an incentive to keep Aranda and De La Torre working for the district.

It didn't work. Aranda retired six weeks later, including a three-week stint as interim superintendent. De La Torre retired three weeks after she received her retroactive raise. They both retired at annual salaries of $120,000.

CalSTRS would not release information on the retirees' total retirement compensation, only the amount at stake. But retirees with decades of experience often receive pensions nearly as great as their highest salaries.

Trustees Jean Romero and Yolanda Hernandez, the only trustees still on the five-member San Ysidro board from three years ago, both said that the district's attorney said the raises were legal and that they were not granted to boost retirement pay.

Romero was the only trustee to vote against the raises, "because it didn't feel right," she said. Romero said the board shouldn't have been doling out hefty pay raises in a crisis atmosphere. Rather, she said, raises should have been tied to achievement, as in the case of Grace Kojima, who retired as superintendent in 2001 and came back to serve as interim superintendent for several months in 2002.

Hernandez said she not only believes Aranda and De La Torre deserved the raises but also that they should keep the pension increases even though the district has withdrawn from the case.

"They're very valuable and they helped the district a lot, especially in those difficult times," Hernandez said.

A spokeswoman for CalSTRS would not comment on why San Ysidro was audited. She said audits are regularly scheduled but can also occur as a result of tips or because of red flags, such as dramatic salary changes.