CALL IT THE contract that keeps on giving.

For 21/2 years of service as county administrator of Contra Costa, John Cullen will receive $92,000 more in his pension each year for the rest of his life.

In 2006, the Contra Costa County Board of Supervisors promoted Cullen, then director of county social services, to the top administrative job. It was well-known that he was a short-timer. When his contract expired in 2008, he started collecting a $240,000 yearly pension, almost equal to his final base salary. Had he worked those final years in his old job instead, his pension would have been about $148,200 a year.

Most of the 62 percent increase in his largely taxpayer-funded pension is directly attributable to the salary and benefits in the contract county supervisors approved when they made him county administrator. Cullen was 58 when he retired. If he lives another 25 years, the pension bump-up alone will be worth roughly $2.3 million, plus inflation adjustments.

Supervisors didn't consider that when they approved Cullen's contract. "We didn't think about the pension implications," said Supervisor John Gioia of Richmond. "At the time, our overriding concern was appointing the most-qualified person to be county administrator at a very difficult time. And I think John (Cullen) filled that role."


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The good news for Contra Costans is that Merced County, where Cullen started his career, will pay a majority of the tab. While Contra Costa can breathe a sigh of relief, next time the tables might be turned and local taxpayers could be stuck paying for most of the excesses of a distant public agency.

Cullen's short tenure as Contra Costa County administrator was certainly challenging. By all accounts, he was a very hardworking leader. County finances were entering an era of free-fall that required difficult cutback decisions. Cullen also worked hard to staunch the fiscal bleeding from Contra Costa's $2.6 billion liability for county worker's retiree health care costs.

For his work, Cullen was rewarded handsomely — although the full extent of the payoff wasn't at all clear at the time to those who didn't know the ins and outs of county pension rules.

Public employee pensions are typically based on a formula that factors in a worker's final 12 months salary, years of service and age at retirement. In Cullen's case, his annual pension was roughly 70.7 cents for every dollar of salary he received in his final 12 months.

The key for Cullen was that county rules and the terms of his 2006 contract allowed him to significantly increase what counted toward that salary:

  • Salary increase: Cullen received a hefty pay raise for taking on the job of county administrator. That's certainly understandable. Just before he retired, his annual base compensation and longevity pay totaled about $245,000.

  • Vacation sell back: His contract essentially doubled his vacation time, bumping it up to seven weeks a year. That allowed him to sell back twice as much vacation time. County rules restrict vacation sell back to once each calendar year, but they don't specify when in the calendar year. By carefully timing the sale of his vacation, he was able to do so twice in his final 12 months of employment. The sell backs resulted in $22,120 of additional income, which counted as salary for his pension calculation.

  • Vacation and holiday cash out at termination: The contract doubling of Cullen's vacation time also doubled the amount for which he could be compensated when he left. County rules allow a payout of up to one year's unused vacation upon termination. In Cullen's case, that was $33,510. He also received $2,513 for unused holiday time.

  • Deferred compensation: Cullen's contract called for the county to make a $20,000 annual contribution to his deferred compensation plan, another form of retirement savings. Normally, that would not have counted toward his final salary used to calculate his pension. But during the final year, as permitted by his contract, Cullen made his own contribution to the retirement plan and collected the $20,000 from the county as direct income. As a result, he was able to count that $20,000 toward his final salary.

  • Auto allowance and life insurance: In the contract, Cullen also was given an $7,200 annual auto allowance — a benefit available to most other county department heads — and a $4,620 life insurance allowance, both of which counted in his final salary.

  • Retirement notification bonus: As I've reported previously, Cullen, while county administrator, was the mastermind behind a program that offered managers a 2 percent salary boost in their final year if they gave a year's notice of their retirement. That money counted toward the managers' final-year salary. Cullen was a leading beneficiary of the program, adding $4,786 to his final salary.

    Adding it all up gave Cullen about $340,000 in final-year compensation that he could use for calculating his pension. Consequently, at 70.7 cents on the dollar, his pension started at about $240,000 a year.

    Had he worked his final 21/2 years in his old job, his salary and benefits would have been very different. I estimate he would have been able to claim a final 12 months' compensation of about $209,600. His pension, consequently, would have been about $148,200 a year.

    Interestingly, even though it was Contra Costa supervisors who gave Cullen the sweetheart contract, and it was Contra Costa pension spiking rules that allowed him to boost his retirement pay, Merced County pays a majority of the cost.

    That's because Cullen worked 21 of his nearly 35 years in Merced, so that county was responsible for roughly that proportion of his pension. The counties are part of a statewide reciprocity agreement that's designed to allow public employees to move freely among government employers without hurting their retirement payout.

    Under the reciprocity, it doesn't matter that Cullen's Contra Costa salary and benefits on which his pension is based are much larger than what he earned in Merced County. It doesn't matter that, for example, Contra Costa has much more generous rules for selling unused vacation pay.

    Some counties are starting to question whether they need to accept final compensation numbers from other public retirement systems that are based on pension spiking rules they don't agree with. The retirement system for Fresno County recently won a Superior Court ruling that it didn't have to pay a former employee's pension based on more generous rules in San Luis Obispo County, her final employer.

    Pension systems in other counties, including Merced, are reviewing the ruling. But unless Merced County challenges Cullen's final-year compensation, he will be living very comfortably for the rest of his life, due in large part to that final contract approved by Contra Costa supervisors.

    Borenstein is a staff columnist and editorial writer. Contact him at 925-943-8248 or dborenstein@bayareanewsgroup.com.