By working just two and a half more years, retired Vallejo City Manager Joseph Tanner boosted his starting annual pension from $131,500 to $216,000. He wants more, claiming he's entitled to yearly retirement pay of $307,000.
An administrative law judge, the board of the California Public Employees' Retirement System and a Sacramento County judge all rejected his outlandish pension-spiking attempt. Now he is now taking his six-year dispute to the state Court of Appeal.
At issue is whether CalPERS must pay benefits on a contract Tanner and the Vallejo City Council concocted to boost his pension or whether the retirement system has the legal right and responsibility to set boundaries. So far the rulings have come down on the side of sanity.
Ironically, Tanner was a critic of pension excesses. He went to Vallejo as it was teetering on bankruptcy, which it eventually filed. And he worked hard to rewrite generous labor contracts that had pushed the city toward insolvency.
Yet his personal spiking gambit was breathtaking. The case exemplifies how some top public officials try to manipulate their compensation to grossly inflate their retirement pay.
To be sure, neither side has clean hands. CalPERS administrators first denied Tanner a portion of his pension to which he was entitled, but they ultimately relented, resulting in the $216,000 starting pension.
But Tanner's quest for another $90,000 a year, plus inflation adjustments, for the rest of his life is unreasonable. Tanner was nearly 62 when he retired in 2009. Funding just that additional benefit would require immediately pouring an unanticipated $1.1 million to $1.5 million into CalPERS investments.
While the case hinges on Tanner's employment contract with Vallejo, most of the financial burden would be borne by five other cities that previously employed him.
Public pensions are calculated based on a worker's top salary, usually in the final year of employment. But the pension costs are then apportioned to all of the employers for whom that person worked.
Thus, in Tanner's case, Pleasant Hill, where Tanner was city manager for 14 ½ years, would be socked with nearly half the pension cost from an excessive late-career contract over which it had no input. Pension systems like CalPERS are the only backstop against such abuses.
Tanner's spiking saga, recounted in court documents, began in November 2006, when he was working as city manager of Pacifica, earning $170,000 a year. He was 59 and entitled to a pension of about $131,500 annually.
When Vallejo tried to court him, he was explicit: He would go to work for them only if they gave him a contract with at least $300,000 of annual income that could be counted toward his pension calculation.
His first contract with Vallejo called for $216,000 in base salary, plus a list of add-on items that would soon be converted to salary, bringing his compensation to $306,000. But when CalPERS advised that the amount of those add-ons would not count toward his pension, he insisted the contract be fixed.
The result: His contract was amended. The add-ons were eliminated and his base salary was simply increased to $306,000, plus management incentive pay and other items that brought the total to about $349,000. If CalPERS used that number, his pension would have started at $307,000 a year.
CalPERS says it was an obvious subterfuge. The amended contract was never put before the City Council at any public meeting. And there was never a truthful public explanation for it.
At the time, according to a Vallejo survey, no other nearby city was paying its city manager a base salary of more than $200,000.
Tanner says all the compensation in the amended contract should count toward his pension calculation. CalPERS, he argues to the state Court of Appeal, "cannot step in between the contracting parties."
In other words, if Tanner and Vallejo collude to spike his pension, CalPERS must honor the deal. That's ridiculous, especially because Vallejo wouldn't bear most of the cost; Tanner's prior employers would.
CalPERS serves as the pension cop, ensuring everyone plays by the same rules. The court must reaffirm that.