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About one in eight state and county employees engages in what is called "spiking" of overtime work during the final three years on the job to boost retirement income. The pension benefits from that chicanery can be enormous, but public disclosure of individual cases is prohibited. Also, a new investigation shows that 1,470 local government retirees receive $70,000-plus in pensions annually, but there is virtually no public information on what departments they worked in or what jobs they did to earn such lucrative retirements on the public dime. At the very least, such details should be disclosed so potential abuse can be tracked and, if needed, brought to a halt.
Government auditors and Wesley K. Machida, administrator of the state Employees Retirement System, have given recent overviews of how the system has been abused via "spiking."
And in an investigative report Monday, the Star-Advertiser’s Rob Perez revealed how nearly five dozen county and state retirees are bringing home pensions of more than $100,000 annually, far above what most active public employees are making on the job. At least 20 new retirees in 2008 and 2009 drew pensions that exceeded their base pay, according to the system. The questions that need answering is whether, or how much, these retirees spiked their overtime during their final years of employment; and in what areas they worked and at what salaries, to determine if there are patterns of pay abuse among certain agencies.
An examination of the state retirement system from 2008 to 2010 found that 670 of the 5,000 members who began retirement during those years had engaged in spiking overtime hours in their final years of employment. That added nearly $40 million to the retirement system’s unfunded liability needed to pay for promised benefits, according to Machida.
How does a county or state employee average a $50,000 salary over 25 years or so, rising to an average of slightly more than a $56,000 base salary in the last three years, retire with a pension more than double that amount? All he has to do is put in enough overtime and other non-base pay to reach a total of $200,000 each of those three years, and the pension could reach $120,000, Machida told legislators.
At Gov. Neil Abercrombie’s nudging, the state Senate is grappling with a method of dealing with the problem without angering the state’s public employee unions. The latest version would stretch the base-pay period affecting pensions from the current final three years to the last 10 years, affecting only employees beginning work for the state or county this year. Sadly, though, that would leave taxpayers on the hook to pay spiked benefits until around 2040.
House leadership has avoided dealing with the problem even that directly. Instead, the House Labor and Public Employment Committee has advanced a bill that would require "the state and counties to pay greater contributions rates on their employees’ non-base compensation than on base compensation." The notion is that a supervisor would be more reluctant to approve employer income — i.e. taxpayer dollars — for overtime at higher rates. That would be a good laugh if legislators were not proposing it as a real alternative to blockage of spiking overtime.
Hawaii legislators should dare to look to New York’s Democratic Gov. Andrew Cuomo for a serious way to deal with the problem: Raise the retirement age for new state workers and offer a 401(k)-type alternative to government pensions.
Hawaii’s legislators should join the Abercrombie administration in dealing with a problem that is sure to grow if measures are not taken. The best way to determine the most effective route to success is to shine the public light on how county and state employees are getting the most — more than taxpayers can afford — out of the pension system.