Troopers’ pension ‘spiking’ targeted

Nebraska_State_Patrol

LINCOLN — State lawmakers are seeking to stop what they describe as state troopers “spiking” their pension benefits by cashing in excessive amounts of comp time in their final year of service.

While an official with the state troopers union disputed that deliberate spiking is occurring, a recent analysis of pension benefits from 2004 to 2015 found that retirees over that period had boosted their salaries, on average, by 16.7 percent in their final year. That translated into an average increase of $178 per month in pension benefits.

One trooper who retired in 2009 and had a 6 percent final-year pay raise increased their last-year salary by about 44 percent by cashing in nearly $23,000 in unused vacation, sick leave and comp time. That spiked the trooper’s last-year salary to $77,877, which boosted the trooper’s pension by $440 a month.

Overall, the increased pension benefits are projected to add nearly $13 million in additional taxpayer expenses over 30 years for the state’s defined benefit pension program for Nebraska State Patrol personnel. The net assets of the State Patrol pension plan as of June 30, 2015, were $363.9 million.

“That obviously is unacceptable,” said State Sen. Heath Mello of Omaha, a member of the Legislature’s Retirement Systems Committee.

A committee proposal, Legislative Bill 467, would increase pension contributions and reduce benefits for new hires to firm up the plan financially. The measure also seeks to eliminate steep increases in final-year wages used to compute pension benefits by ending the use of comp time in computing compensation. It would also compute the final salary as the average of a trooper’s final five years instead of the final three.

Seward Sen. Mark Kolterman, the chairman of the committee, said that LB 467 makes reforms similar to those that have already been adopted by the state’s other defined benefit pension programs, which cover teachers and judges.

Those changes were made to close shortfalls in pension funding, but also to end spiking, which is often defined as artificially increasing the career-ending wages used to compute pension benefits by working excessive overtime, thus increasing benefits. Excessive spiking creates a large and unexpected burden on pension funds, which are jointly financed by employees and employers.

Spiking is a practice that’s familiar in Omaha, where police and firefighters were found to be padding their final-year salary by working extra overtime and then cashing that in, spiking the final pay used to calculate their pensions, and thus increasing their retirement checks.

In Omaha, spiking helped contribute to a $600 million shortfall in the city’s fire and police pension plan. Spiking in Omaha ended in 2013. That pension fund is 50 percent funded, an actuary found last year. That’s up from a 2008 low of 39 percent.

By contrast, the state trooper pension problem is estimated at about $423,000 in extra benefits a year, though Mello and Kolterman said that if changes aren’t made now, the financial problem would grow.

A representative of the State Troopers Association of Nebraska rejected the idea that spiking is occurring, and said a bill is not necessary at this time.

Kurt Frazey, a state trooper who is the association’s legislative liaison, said that a shortage of state troopers is driving a need to work overtime. Because troopers are required to cash out their comp time in their final year, their wages will naturally be higher in that final year of work, he said.

“We take offense to the fact that the Retirement Committee insinuates that we are spiking, when we are abiding by the administrative codes set by the state,” he said. “The idea that officers are intentionally gouging the system, I don’t think that’s occurring.”

At a recent hearing on LB 467, Frazey blamed the increased pension benefits on supervisors at the patrol who allow troopers to accumulate excessive comp time. The association’s labor contract limits the amount of comp time that can be carried over to 120 hours for regular comp time and 240 hours for holiday comp, which translates into nine weeks of pay.

Supervisors know what those caps are, Frazey said, and if they’re allowing them to be exceeded, it’s unacceptable.

He suggested that the pension problem be resolved administratively, with tighter oversight, and that the Legislature wait to take action.

Mello said there’s plenty of blame to go around, but there’s no other way to describe what’s going on other than spiking.

An attorney for the Nebraska Public Employees Retirement Board, which oversees state pension plans, also used the term “spiking” to describe what is happening with the State Patrol pension fund.

The attorney, Orron Hill, said the spiking, which increased troopers’ pension benefits by an average of $2,136 a year, has caused an unfunded liability for taxpayers.

In July 2015 the state had to contribute an extra $2.7 million, he said, and other additional contributions are expected unless changes are made.

There is little dispute that the State Patrol is short of personnel. The authorized strength for sworn officers is 483, which is 42 fewer officers than 12 years ago. Frazey said that a recent report suggested that the patrol needs nearly 90 more officers, or 570 total, by 2017.

He said that LB 467 would eliminate one of the few advantages the patrol has over other Nebraska police departments: better retirement benefits.

“The reduction in benefits (in LB 467) will greatly reduce our ability to recruit and retain quality personnel,” Frazey told the Retirement Committee.

Committee members questioned whether new hires are that focused on retirement benefits that are decades away.

While LB 467 promises to eliminate spiking by new employees, it has no impact on current troopers who are nearing retirement. However, Mello and Kolterman both said they hoped the attention the bill has brought to the issue will make the patrol more vigilant.

When asked to respond to Frazey’s allegation that supervision of overtime was lax, State Patrol spokeswoman Deb Collins said that supervisors are monitoring troopers to ensure that they don’t exceed leave balances spelled out in the union contract.

According to figures compiled by the Public Employees Retirement Board, the spiking was highest in 2004 and 2005, when troopers were still allowed to include unused vacation and sick leave in computing their salary for pension purposes. A court ruling ended that practice in 2012, but the last-year salary increases have continued due to cashing out of comp time for holidays and other days.

Mello, who heads the Legislature’s budget-writing Appropriations Committee, said he heard rumors of it last year, which prompted him to request an analysis of retirement salaries of the patrol.

“We didn’t realize it was as big of an issue until we got the data back,” he said, adding that he hopes the attention to the issue will lead to better monitoring.

A lawsuit is pending that the State Troopers Association filed in 2011, claiming that the state was charging troopers excessively high pension contributions.

Mello and Kolterman both said the state can’t wait for resolution of the lawsuit to make changes to the troopers’ pension plan, because if it did, the state’s liability for the pension fund could grow beyond the projected $12.7 million over 30 years.

Troopers, who are not covered by Social Security, currently contribute 16 percent of their salaries to their pensions. That compares with 9.78 percent for teachers and 10 percent for judges, which, when Social Security contributions are figured in, puts contributions into both plans higher than 17 percent.

Frazey said it’s unfair to compare troopers with teachers and judges, who he said don’t normally work weekends and holidays, are not required to provide 24/7 coverage, and don’t face the same dangers.

On Friday, he pointed out that seven law enforcement officers had been killed in the past 48 hours across the nation.

“I don’t think the teachers union or judges union can say that,” Frazey said.

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