The bill, introduced by Assemblyman Mike Gatto (D-Silver Lake), would force cities to cover the cost of an employee's pension if it's tied to a pay raise of more than 15%.
Gatto said the legislation was inspired by the case of former Glendale Police Chief Randy Adams, whose salary more than doubled to $471,000 when he left Glendale last year for the same job in Bell. In doing so, the pension obligations for Glendale and Adams' other former employers — Ventura and Simi Valley — increased by tens of thousands of dollars each year.
That, in turn, prompted city officials to cry foul, arguing they shouldn't be on the hook for the bloated salaries at another city.
Under the current California Public Employees' Retirement System, Adams' estimated annual pension of $400,000 would be shared among the four cities where he worked – Ventura, Simi Valley, Glendale and Bell. But because of his longer stays at the first three stops, Bell is only responsible for 3% of his pension benefits, despite the fact that his pension more than doubled because of the single year he worked there.
Under Gatto's bill, cities like Bell would have to cover the additional retirement benefits spurred by the increase in wages that are 15% higher than the last position. The bill would take effect July 1, 2011.
Glendale City Manager Jim Starbird said the proposed legislation was a fair fix to a problem that now remains out of the hands of former employers.
"How can we be held responsible for the actions of agencies over which we have absolutely no control?" Starbird said. "The hiring city ought to have to consider the pension cost at the same time they consider hiring the person. If you want the person bad enough, you say 'OK' knowing full well you are carrying the other burdens."
A spokesman for CalPERS said it was premature to comment on the legislation. In addition to Gatto's bill, several other reform measures are being proposed in Sacramento, ranging from salary caps on charter city employees to income tax increases for those who receive municipal salaries that are deemed to be excessive.
"It's a fluid situation," said spokesman Edward Fong. "Things are changing just about every day with amendments and conversations with different parties about what's appropriate."
Starbird estimated that Adams' compensation in Bell could cost Glendale taxpayers $40,000 a year more than if he had retired at his Glendale salary of $215,000.
"I certainly realize there are times a city might want to hire an underappreciated manager from another city," Gatto said. "This bill doesn't prevent that. Cities are still free to hire whoever they want, they just have to sign on to be responsible for pensions."
The city of Ventura, where Adams was employed for 20 years, is on the hook for two-thirds of his increased retirement benefits costs.
"This legislation is a terrific antidote to a poison pill that none of the other cities want to swallow," Ventura City Manager Rick Cole said.
While the legislation would not take effect until next year, Cole said he was hopeful that the exorbitant benefits for top Bell officials can still be stopped. Probes by the California attorney general, the Los Angeles County district attorney's office and CalPERS have been launched to look at the legality of the pay raises.
"We still hope and believe that the inflated salaries that triggered this concern will actually be set aside," Cole said.
If the city still finds itself liable for two-thirds of Adams' pension after the smoke has cleared, Cole said his city would go to court to block the pension payouts.