Audit: Legal Pension Spiking Will Cost California Nearly $800 Million 20 Years

LOS ANGELES (AP) - Thousands of California public workers have sweetened their retirement checks with a now-outlawed accounting maneuver that will cost nearly $800 million over two decades, an audit disclosed Tuesday.

The report by Controller John Chiang came as California faces tens of billions of dollars in future pension payments for government retirees that the state doesn't have the money to pay.

The audit of the California Public Employees' Retirement System, covering July 2010 through June 2012, found that dozens of government agencies were authorized to engage in what it termed "legal pension spiking," a method of boosting a worker's pay for the final year on the job to fatten future pension checks.

The higher pay from the maneuver "will require an additional $796 million in public funds to compute the additional retirement benefits for those ... employees," the audit found.

The California Public Employees' Retirement System said the practice highlighted in the audit had been authorized under state law. However, it has been outlawed for new government workers.

Auditors found no evidence of illegal spiking but the report said the nation's largest pension system does little to detect it.

For example, the report said a local government that contracts with the pension system, known as CalPERS, would face an audit once every 66 years under current schedules, meaning there would be little opportunity to expose any problems.

More than 3,000 public agencies contract with CalPERS.

In a statement, Chiang said the pension system's "generally passive approach ... invites abuse." He said the system "must be more vigorous in protecting taxpayers from this form of public theft."

The pension system said it has increased its audit staff and the number of audits it has conducted.

The controller's review "recommended no material changes to the pension fund's efforts to audit agencies for pension spiking and acknowledged CalPERS had effective processes in place to recoup overpayments," the agency said.

California