San Diego public hospital administrator paid over $1 million per year

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A hospital administrator in San Diego County turned up on California State Controller John Chiang’s salary database in no. 2 position, just shy of Robert Rizzo – the former City of Bell administrator accused of looting the blue-collar suburb of Los Angeles.

Michael Covert, CEO of Palomar Pomerado Health, a two-hospital public district, was paid $1.15 million in 2009. The information was only disclosed this week after The San Diego Union-Tribune questioned the hospital why its information was not reported last month with other public health care districts. Hospital representatives claimed that it has technical difficulties uploading the salary data to state computers.

Covert declined to discuss his salary with the Union-Tribune, although a hospital official, Theldore Kleiter, said “We have to compete for talent with all of the for-profit and nonprofit health systems. If you want the top management, that’s what you have to pay.”

Others were not as convinced that the million-dollar salary was justified. “Is this really rocket science?” asked Kris Vosbergh of the Howard Jarvis Taxpayers Association. “We’re talking about paying an administrator more than we pay a doctor, who makes life and death decisions.”

“Essentially, this is a bureaucrat.”

The state salary database project was begun last year to provide the public with accurate information regarding salaries earned by public servants.

“What we found in the absence of transparency is a breeding ground for waste, fraud and abuse,” state spokesman Garin Casaleggio said of the data in general, not any particular person. “This provides the public with a snapshot of what public compensation includes and allows them to weigh the figures along with the public benefit.”

Public hospital employees dominate the top end of the salary database.  Eight of the top twenty public positions are held by hospital administrators and four of the top twenty are physicians.

Other highly paid officials listed in the database include Washington Hospital CEO (Freemont, CA) at $905,084; the Orange County chief counsel at $692,768; the Upper San Gabriel Valley water agency manager at $646,902 and the Downey (pop. 107,000) Police Chief at $623,664.

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San Diego County pays millions annually for unused sick days

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Jeff Dusek was one of San Diego County’s most prominent prosecutors, successfully handling some of the region’s highest profile murder cases. He was known as a hard worker, who spent a lot of weekends in the office. He rarely took a sick day off in his 34 years at the District Attorney’s Office – except for gall bladder surgery.

The accumulated sick pay turned into a cash payout in January when Dusek retired. The county cut him a check for $118,605.20 – the biggest sick pay cash-out in recent years.

It’s a practice virtually unheard of in private industry, but at the County of San Diego, top tier managers and some other employees have the option of cashing out 50 percent of their unused sick time or applying 100 percent of it to their service time. If an employee has banked a year of sick leave, for instance, that time can be added to years of service to boost his or her pension.

The Watchdog Institute, a nonprofit reporting center based at San Diego State University, analyzed four years of sick pay cash-outs, and found that since 2007, San Diego County has paid more than $2.5 million to 278 employees. Of the total, the county paid $686,238.93 in 2010 to 49 employees for an average payment of $14,005 a piece.

The county’s policy allows executives, some managers and unrepresented administrative employees to accumulate unlimited amounts of sick time. That amounts to about 4 percent of the workforce.

It is not unusual for government agencies to allow sick time to be translated to cash, but many have limitations. The city of San Diego, for example, does not distinguish between sick time and vacation time, but it caps the amount of unused time off most employees can accrue at 350, 600 or 700 hours, said Scott Chadwick, human resources director for the city.

Dusek, who has officially retired as chief deputy district attorney but is still working under a temporary program, said his payout was a pleasant surprise.

“I didn’t know what the policy was until the end,” he said Thursday. “I hardly ever used sick leave. I looked at it as an insurance program for catastrophic injury.”

Several employees who were covered by the cash-out policy defended it as an incentive program. They said that compensating employees for unused sick time discourages employees from using sick time when they shouldn’t.

“I think there’s something to be said for that,” said Darren Pudgil, spokesman for San Diego Mayor Jerry Sanders. “Otherwise, there might be people who take advantage of (sick leave).”

Pudgil worked for the county for almost 13 years before leaving his post as Supervisor Ron Roberts’ chief of staff in 2008 for a position in city hall. The county paid Pudgil $35,528.28 for unused sick time.

Countywide, 30 employees cashed out more than $20,000 for unused sick time. The average payment to all 278 employees over the four years was $9,119; the median was $6,000.

Full-time county employees are allowed 13 sick days a year. When they are cashed out, sick days are calculated according to the employee’s latest salary.

The high-level employees leaving the Auditor and Controller’s office from 2007 through 2010 received some of the highest average payouts of any department at about $27,000 per person.

The Department of Health and Human Services paid $363,105 to 63 employees in the past four years for an average payout of $5,763. It was the highest total amount paid out to the largest number of employees.

County Supervisor Dianne Jacob said she supports the policy because it helps the county attract the best workers.

“Allowing top managers – those with the highest level of responsibility – fair compensation for half of the sick time they don’t use is a reasonable, cost-effective way for the County to stay competitive as an employer,” she said in a statement.

Board of Supervisors Chairman Bill Horn declined to comment.

County Chief Administrative Officer Walt Ekard said the the sick pay policy is treated as one part of the wage and benefit package offered by the county to attract and retain quality personnel. To his knowledge, he said, the benefit had not been raised in cost-cutting discussions.

Jennifer Loftus, the national director for Astron Solutions, a New York-based human resources consulting firm, said the county’s policy of allowing employees to accrue unlimited sick time and then cash it out is “extremely rare” in the private sector.

Typically, there are caps, she said. One level limits the amount of sick leave per year, the second limits the total amount of sick time an employee can accrue.

Sick time is generally allotted by an employer to bridge the gap between when an employee experiences a less serious illness and the need to go on short-term or long-term disability, Loftus said.

Paying employees for unused sick time could also have practical ramifications, Loftus said. “You have to consider strongly the culture of the organization and will that encourage people to come in when they otherwise should stay home,” she said.

Matt Weatherly, president of Public Sector Personnel Consultants, a compensation consulting group based in Tempe, Ariz., said it’s not unusual for governments to reward healthy employees by letting them cash in their sick time. In his experience, the ones that do give employees 25 to 50 cents on the dollar for unused sick days, he said.

But, Weatherly said he thinks more employers will establish tiered systems that limit the amount of sick leave their employees can bank.

“Everything that I’ve read would suggest that employers are revisiting this notion,” he said.

Eric Banks, president of the Service Employees Local 221, which represents about 10,000 county employees, said he disagrees with the idea that certain high level employees can get cash for unused sick days.

Banks said a down economy has increased the need for services in the county, and that many county employees are being asked to do more with less.

“If we’re looking at cutbacks across the board, everyone should share in those cutbacks,” he said. “The actual cashing out for money is a problem because that’s money they could be using to provide services.”

Carlos Armour, another high ranking prosecutor in the DA’s office, retired in 2008 to become a Superior Court Judge. He was surprised to get a $93,597.61 check for unused sick time.

When he realized he was getting the money, “I thought, at least all those days that I came in to work when I maybe could have taken the time off, paid off in some manner.” He said he rolled some of it into his retirement account.

He thinks the policy is beneficial because it provides an incentive for employees to avoid using sick time unnecessarily.

“If you can accumulate and get some compensation at the end when you retire,” he said, “it encourages people to be on the job and not be tempted to maybe try to use their sick leave every year.”

Watchdog Institute, by By Kevin Crowe and Kelly Thornton

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San Diego judge allows transfer of pension overcharging case to L.A. despite city’s objection

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A lawsuit filed by the San Diego city attorney against its pension system will be transferred to another venue, according to a ruling by San Diego Superior Court Judge Joan Lewis.

The transfer was sought by the San Diego City Employees Retirement System and local labor unions because they felt that the recent damaging stories in the local press about alleged abuses in the pension system would prevent them from getting a fair trial.

The city tried to stop the transfer saying the request was not made timely, and only for the purpose of delaying the trial. The case was originally scheduled to begin on April 29 in San Diego.

City Attorney Jan Goldsmith brought the lawsuit last May, based on an interpretation of the city charter requiring that workers and the city contribute “substantially equal” amounts into the employees pension plan.

The lawsuit claims that the city has been overcharged by tens of millions of dollars each year by pension system officials.

“In light of the constant media attention that San Diego’s pension funding has received, we believe it is prudent to change venues to ensure a fair trial and we’re very pleased that Judge Lewis agreed with our position,” pension official Mark Hovey said.

Goldsmith told the San Diego Union-Tribune that “The labor unions and their supporters see this case as such a threat that they pulled out all the stops to delay, confuse and bury it — anything to avoid a decision on the merits.”

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San Diego firefighter gets $424,000 in lawsuit after being punished by city for calling out pension abuses

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Paul Vandeveld though he was doing the right thing in 2006 when he agreed to provide information to then-City Attorney Michael Aguirre about the commonplace practice in the department called “pension spiking.” The practice involves promoting department employees to higher paid positions immediately before they retire, in order to get substantially higher pension benefits from the city’s pension plan.

Paul Vendeveld was held back from promotions after he agreed to provide information to the city attorney about pension plan abuses.

Shortly thereafter, Vandeveld, 44, tried to help a fire captain that was being harassed by fellow firefighters, because many in the department thought he had leaked information to the press about a battalion chief who had been arrested for drunken driving.

The firefighter sent out an email defending the battalion chief using a phony email address containing the name of a prominent union leader, so that it would be read by recipients. A few hours later, feeling remorseful, he sent an email saying that it was he who had sent out the earlier email.

A subsequent investigation found that he was guilty of conduct unbecoming of a firefighter, and was briefly suspended. Afterwards, he was repeatedly passed over for promotions to captain, even though every job review ranked his job performance as “satisfactory” or “outstanding”, and he was “next in line” for promotion.

Vandeveld’s attorney said that the fire department used the benign email as an excuse to punish him for cooperating with the city attorney in the pension spiking investigation.

“This firefighter was cooperative with and supportive of the efforts of the City Attorney’s Office to eradicate wrongdoing in the pension system,” Aguirre said. “He was trying to help to do the right thing. He was ill-advised, though, to use someone else’s name … and that was wrong.

The 12 member jury reached a unanimous decision that he should be paid the difference between what he received as a fire engineer, and what he would have received as a caption. The jury also awarded him $60,000 in punitive damages and lost wages from the time of his suspension.

The San Diego Union-Tribune

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Revenge of the Feds: San Diego’s federal employees out-earn private workers by over 30 percent

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A year ago, the annual report showing local pay trends and published by the President’s Pay Agent, a Washington, DC agency led by government officials, showed that federal workers in the San Diego area made 54 percent less in wages than their private counterparts.

Since President Obama’s announcement last month that the pay of federal workers would be frozen, the San Diego Union-Tribune has been gathering data to determine if federal workers are, in fact, paid substantially less than in the private sector.

The data used was from two government agencies- the Bureau of Labor Statistics and the U.S. Census Bureau. Instead of being paid less, data showed that in nearly every industry, including construction, manufacturing, financial professional and business services, federal workers were far more highly compensated than private sector employees. The only industry that didn’t follow the trend was in the information sector.

According to the data, federal employees earned $55,300 compared to private employees’ annual salary of $42,100, according to the Census Bureau’s 2009 American Community survey. The same local data showed that federal wages rose by 14 percent between 2005 and 2009, compared to an anemic 4 percent increase for private workers.

The data didn’t include U.S. military employees, but included civilians working in the military sector.

Chris Edwards, director of tax policy at the libertarian Cato Institute in Washington said that the President’s pay report is a “black box” with no published methodology.

Larry Mishel, a labor expert and president of the liberal Economic Policy Institute in Washington had a different take on the data. He claimed that the Pay Agent information relies on a complex model that compares public jobs to private ones and factors in so-called “job knowledge.”

The Union-Tribune contacted Office of Personnel Management several times in the last two weeks by phone and email for an explanation of how the Pay Agent report comes up with its figures showing federal employees earning so much less than private employees. Both the phone calls and emails were not returned.

The Pay Agent report is prepared annually to help the government understand pay trends and gaps in disparity between federal and private workers in local markets throughout the country, so the government can provide locality pay adjustments to its employees.

The U.S. federal government has about 46,000 employees in San Diego County.

San Diego Union-Tribune

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Former San Diego union boss gets $700,000 settlement that IRS, judge and city lawyers say unnecessary

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The San Diego city retirement board has awarded former labor leader Judie Italiano a $700,000 settlement, despite legal rulings that she wasn’t entitled to anything.

Italiano sued the city and the pension fund for $1.8 million, after an IRS determination found her pension payments were improper and violated tax laws. Italiano sought to have her 22 years as head of the Municipal Employees Union count towards city pension benefits in addition to the nine years she worked for the city as a typist.

Former San Diego employee's union leader, Judie Italiano, was handed a $700,000 gift from the pension board so she would drop her lawsuit.

The IRS ruled that the pension system could not pay the additional benefits because they were barred under rules that grant tax advantages to employers and employees that sponsor or are part of pension funds.

U.S. Superior Court Judge Joel Pressman agreed, saying any payment was “clearly not legally necessary.” In a ruling last month, Pressman said that the city never approved the arrangement giving Italiano credit for years as the union leader, and was only obligated to pay her for the years she worked as a city employee.

Despite the IRS and Superior Court rulings, the pension board negotiated the settlement with the union, agreeing to the $700,000 settlement. Italiano won’t receive the full amount, since she was already overpaid by the pension system by $250,000. The balance will be used to purchase an annuity that will pay her income for the rest of her life.

The settlement was referred back to Judge Pressman, who approved it, saying he had no choice in the matter once the parties agreed. “This court does not see this as a good faith settlement,” he wrote in a tentative ruling. “It is a settlement crafted to give judicial cover to an agreement based on prior illegal acts. This court is not inclined to grant that cover. If the parties choose, the settlement can go forward but without this court’s good faith determination.”

The city’s attorney general’s office also said the deal was not negotiated in good faith, and it didn’t make any sense to settle based on the court’s ruling.

The head of the San Diego City Employee’s Retirement System, Mark Sullivan, defended the settlement saying the court ruling only cleared the city from liability, and Italiano would still be able to continue to sue the pension fund for additional benefits. He said the settlement was about the amount that the fund might pay to defend itself in the matter.

The city’s pension fund currently has a deficit of over $2 billion, accumulated over the last 10 years from investment losses and insufficient contributions from workers and the city. Some critics say that the only way to prevent the obligation from forcing the city to cut services to the bone is for the city to declare bankruptcy, enabling officials to reset union contracts.

San Diego Union-Tribune

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San Diego mulling over response to illegal move by pension officials

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Originally billed as too good to be true, it may not be true after all. In 2003 when San Diego pension officials encouraged city workers to participate in a special program to purchase additional years of service that they didn’t actually work, they knew that they were pulling a fast one on the city.

Now an appeals court has ruled that the special program promoted by the pension board was illegal, and that as many as 2,200 current and retired employees may be required to take big cuts in their expected pensions, or fork over up to $50,000 to keep their current pension payments.

The special program, first enacted by then-mayor Susan Golding in 1997, allowed workers to participate in a so-called “purchase of service credit” program. City employees could make a lump sum payment determined by actuaries, in order to add extra years to their actual years worked, so they could retire early, or retire with more years of service, entitling them to a higher pension payment.

The general idea of the program was that the employee would pay an amount equal to the present value of the future incremental benefits, so that taxpayers would not be on the hook for such amounts. The problem occurred immediately and over a number of years because workers weren’t changed enough for the extra benefits. In 2003 when the discrepancy was discovered, the amount undercharged to city employees was nearly $13 million.

In order to fix the problem, the pension board voted on Aug. 15, 2003 to substantially hike rates to properly charge for the purchased benefits. Under the revised program, an employee could purchase an additional year of service for 27 percent of their annual salary, up from 15 percent. Public safety employees would be required to pay 37 percent of their annual salary to purchase an additional year of service, up from 26 percent.

Instead of implementing the well-publicized increases immediately, the board delayed the rate increases to Nov. 1, encouraging workers to take advantage of the cheap buy-in rate. Once the word got out, workers bought into the program at a furious rate. During the short 10-week window, more city employees bought into the program than the entire previous six years combined. The average credit purchase was about $65,500, when the fully-funded amount should have been $103,200.

Former city attorney Michael Aguirre sued the pension board in November 2007 over the illegal credit purchases. Anyone retiring after that date is subject to the appellate court decision.

The amount calculated as the undercharge to employees was determined to be about $100 million. The appellate court ruling found that the pension board was responsible for matter and ordered it to fix the mistake by adjusting pension benefits, without charging the city for the deficiency.

The city council has until the end of January to decide how it will handle the problem and whether it will exempt some or all of the employees from additional payments, and instead charge taxpayers. If the city does nothing, employees will see their benefits adjusted or have the option of paying additional monies to keep their existing pensions.

Retirees and union leaders have already told the city that they intend to sue if workers are forced to make up the deficiency in their original credit purchase, or if payments are adjusted.

San Diego Union-Tribune

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