Gilroy
– Gilroy’s top two police officials have nearly doubled their
$100,000-plus salaries after quietly retiring this winter, then
returning as hourly employees.
Gilroy – Gilroy’s top two police officials have nearly doubled their $100,000-plus salaries after quietly retiring this winter, then returning as hourly employees.
In a deal brokered by city administrator Jay Baksa without city council’s knowledge, police chief Gregg Giusiana retired Dec. 1, and assistant chief Lanny Brown retired in January. Both now collect more than $100,000 in state pensions, and, if they work the full year, more than $100,000 each in wages. If both chiefs work a full year, Giusiana will earn $277,772, and Brown will earn $247,426, but Brown says he’ll leave the job in July.
While similar schemes have been deemed illegal by the California Public Employees’ Retirement System, CalPERS officials say Gilroy’s plan is perfectly legal. In fact, it will save the city roughly $116,000 this year in benefits and pension contributions, Baksa said.
“It’s a win-win situation,” he said. The retirements were “my administrative responsibility,” Baksa said, adding that there was no need to present them to council.
“Jay’s doing his job,” Mayor Al Pinheiro said. “I don’t know what the big hoopla is.”
City council members learned of the deal last week, via e-mail from Baksa. But the e-mails were sent only after the Dispatch questioned Baksa, upon receiving an anonymous tip outlining the deals. Councilman Craig Gartman said it should have been revealed earlier.
“We should be kept abreast of these kind of situations,” Gartman said. “Jay reports to the council … I believe in not surprising the boss,” he said.
“It’s not a bad deal, [but] it looks secretive,” said former councilman Bob Dillon. “And that’s always ugly, when it’s the people’s money.”
Police officers were likewise kept in the dark, and didn’t learn of the deal until Thursday night, after Giusiana was interviewed by the Dispatch. Rumors that the chief might retire have long circled the department, but the news startled officers.
“It took us completely by surprise,” said Cpl. Jim Callahan, vice president of the Gilroy Police Officers Association. Callahan declined to comment further.
Human resources director LeeAnn McPhillips refused to release copies of Giusiana and Brown’s contracts, and referred the Dispatch to the city attorney, who did not return calls. Under California law, all employment contracts are public information.
The arrangement is legal, according to CalPERS representatives, because both Giusiana and Brown are older than 50, the city’s “normal retirement age” for police. Planning to retire, then return, “is only an issue if the individual is not of normal retirement age,” as set by the city, CalPERS spokesperson Edd Fong said.
But state experts say the scheme violates the spirit of the law, if not the letter. CalPERS allows local governments to contract with retirees on a temporary basis as “retired annuitants,” to pinch-hit for short-staffed departments or to provide unique skills. Planning to retire-and-return, however, is another story.
“If you want to keep working, you should stay employed,” said Karon Green, chief consultant for the state assembly’s Public Employees Retirement and Social Security Committee. “If you retire, then later go back to work, that’s appropriate … within the restrictions. But you shouldn’t predetermine that you’ll come back full time and work.”
Double-dipping, or doing
a favor?
In Sacramento, a similar scheme erupted into controversy and prevented popular fire chief Joe Cherry from returning to the department as interim chief. CalPERS deemed the deal illegal because Cherry, unlike Giusiana and Brown, was younger than the city’s “normal” retirement age when he retired, and tried to sign back on as a retired annuitant. Tax activists slammed the plan as “double-dipping.”
But “double-dipping” isn’t rare among public employees, and in most cases, isn’t shunned. Plush retirement plans give public employees, particularly police and firefighters, few reasons to stick around in their golden years. Once they’ve left, many adopt second careers, piling a second salary onto their retirement benefits. If they trade one CalPERS job for another, they’re limited to working half-time, 960 hours per fiscal year. But if a retiree’s new job is on a different retirement plan, they face fewer or no restrictions on the hours they can work, or the money they can earn.
For instance, Gilroy Fire Chief Dale Foster retired in 2005 from the San Jose Fire Department, where he collected benefits from the Public Safety Retirement Plan, then snapped up the top job in Gilroy the same year. Between his San Jose pension and his Gilroy salary, he takes home more than $290,000 a year, based on figures supplied by the city of San Jose. When he retires from Gilroy, he’ll collect a CalPERS pension as well. And interim school superintendent Darrel Taylor has made a post-retirement career as an interim leader, serving six districts across California since he retired in 1998.
“We see it somewhat commonly in upper ranks of management – city managers, police chiefs, et cetera,” said CalPERS spokesperson Fong. The agency doesn’t track the number of retired annuitants statewide, he said, but “we conduct periodic random audits of public agencies, to make sure they’re complying with the law.”
Abuse is rare, he added, and often inadvertent.
For many employers, retired annuitants are “a good, experienced temporary workforce that doesn’t want to work full-time anymore,” Green said.
“It works out beautifully,” said Baksa, citing Taylor as an example. “He’s using his experience to help other districts.”
Cities such as Gilroy offer cushy retirement plans to lure applicants from the higher-paying private sector, Baksa said. But the blowback comes when seasoned employees hit 50 or 55 – and split. Across the state, “chiefs’ jobs are constantly open,” Giusiana said. “People only stay chief for a few years.”
And though cities and employees make good on the deal, the money “doesn’t just fall out of the sky,” said Professor Daniel Mitchell, who studies public policy and management at the University of California, Los Angeles.
“Somebody has to pay for the health insurance, and when the city gets rid of it, the state picks it up,” Mitchell explained. “It also transfers expenses from the payroll to the pension system.” Among University of California professors, many opted to retire, then return, during the state budget crisis in the early 1990s, Mitchell said, saving money for the university system.
“The difference is that our pension system has been overfunded, where CalPERS is underfunded,” he said. “There isn’t lots of money for these sorts of deals.”
New building doesn’t need new chiefs
Gilroy’s CalPERS fund is “in pretty good shape,” Baksa said. Besides, he said, Brown and Giusiana have earned their pensions. The only difference is, they’re sticking around to lend the city a hand, and to ease officers’ transition into their new headquarters this spring. The colossal 103,000-square-foot building will finally open this March, more than a year behind schedule. Moving will disrupt routines, and Baksa would rather not toss two new chiefs into the mix.
“The wild card is the [new] police station,” he said. “I didn’t want to lose our top two guys during such a transition.”
Giusiana said he will work 14 months for 12 months’ salary, to avoid violating his CalPERS work restriction. As a retired annuitant, he’s only allowed to work half-time, a total of 960 hours per fiscal year. But since Giusiana retired this winter, he side-stepped the restriction, and can work full time from January to December, splitting the hours between fiscal year 2006-2007 and fiscal year 2007-2008.
Baksa said the city won’t advertise Giusiana’s job until April, at the earliest. Asked why, he said, “We don’t have to yet.” But if the department doesn’t find a chief by next February, said Baksa, the city will go to “Plan B,” and ask CalPERS to extend Giusiana’s employment. CalPERS allows local governments to petition for a one-time extension for retired annuitants, for another 960 hours of work. In the past, Baksa has estimated it could take nine months to a year to find a new chief.
As for Brown, he plans to leave in July, and may not need a replacement. Since the city commissioned a department-wide staffing study, Brown has speculated that the assistant-chief job may no longer exist, once he clears out.
Baksa balked at even calling the chiefs “retired,” and dismissed suggestions that the pensions would dampen their work ethic. Since retiring, both are hourly employees.
“If I stopped working,” Giusiana said, “they’d throw me out the door.”
But as long as Giusiana and Brown are at work, the mayor said, he’s satisfied. The pension is irrelevant.
“He’s still doing his job,” said Pinheiro. “I don’t know what the big deal is.”
