Newport deal shows how pensions are rigged against taxpayers
A former Newport Beach deputy police chief’s parting pension deal may be worth hundreds of thousands of dollars over the course of his lifetime — and serves as just a small local example of how the state’s pension system continually puts the needs of public employees over California taxpayers.
Local government watchdogs brought to my attention the case of David McGill, who has been deputy police chief for the city for close to — but not quite — five years. He came to Newport Beach in 2012 after “retiring” from the Los Angeles Police Department.
According to Transparent California, McGill earned $204,000 in regular pay and a total compensation package of $341,000 at the Newport Beach job, while collecting a pension of nearly $75,000 from Los Angeles, which offers a less generous pension formula than Newport Beach.
That’s typical by modern California “public-safety” pension standards. But it gets more interesting. McGill was passed over for the Newport Beach police chief job last year and then accepted the position of police chief in the small, trendy town of Sedona, Arizona. He was sworn in Jan. 11, yet continues to receive a paycheck from Newport Beach.
City Manager Dave Kiff allowed him to use his vacation time to carry him through the first week of February, which gives him the magical five years with the city. That’s the time needed to be vested in the California Public Employees’ Retirement System and to receive a lifetime pension. Given McGill’s base salary average of $193,000 over his last three years and Newport’s pension formula, this would add up to a pension of around $29,000 a year.
Newport Beach is a charter city, and the city manager gets to make this call. On Wednesday, Kiff told me it was only fair, given McGill had enough vacation time — and did some part-time work for the department — to carry him past the deadline. Kiff said it’s rare for an employee to have taken a new job, but have enough vacation time to take him to vesting. “In Newport Beach, especially in Dave’s position, he has significantly paid toward his pension costs,” Kiff added.
In a follow-up conversation Thursday, Kiff added new information: Because of “reciprocity” between the two police agencies, it turns out McGill was eligible for full vesting even without using his vacation time, so the vacation carry-over makes little difference to local taxpayers. But it’s clear the city would have allowed him to do this, reciprocity or not.
Just to be clear, there are no allegations of wrongdoing. The situation simply is illustrative of our pension system.
Police unions sometimes claim that officers die a few years after retirement, but research from CalPERS debunks that myth. If a current male officer is 55, then CalPERS’ numbers suggest he is likely to live to be 81.4 years old. Women officers live longer. McGill is 53, so if he lives to 81, that means this one minor pension situation will cost the system a bundle.
In many California cities, the taxpayer picks up not only the employer’s cost for the officer — but the employee’s cost. Newport Beach admirably requires a decent contribution from its employees, although it has followed the model of other cities by boosting salaries to cover the extra contribution costs.
“If true this is unacceptable and precisely what our new City Council is working to fix,” Newport Beach Mayor Kevin Muldoon said regarding the situation.
The City Council now has a conservative majority, which is more likely to focus on such spending matters. But the problem is rooted in the state Capitol, where unions have long ruled the roost. Public-safety workers can retire in most jurisdictions with the “3 percent at 50” formula that provides 90 percent of their final years’ pay at age 50 after 30 years, plus “enhancements.”
Because they retire so young, police often take jobs in new departments and start piling up pensions. But as pension funding levels fall, localities must pay higher contribution rates and cut services or raise taxes. Meanwhile, a new study from the California Policy Center in Tustin finds average compensation for a California public employee is twice that for an average private-sector employee.
Kiff, in fact, strongly agrees that legislators need to pass far more of the pension system, even though he said he was trying to assure the fairest outcome for an individual. I understand how the Newport Beach situation is fair to the employee. But isn’t it time to consider what’s fair to taxpayers?
Image by Allen Graham – PDImages