Warren Katchmar's top annual salary was $102,896; his starting pension was $104,020. Similarly, Bhupinder Dhaliwal traded up from a $135,433 salary to yearly retirement pay of $143,462.

How did these Central Contra Costa Sanitary District employees collect more in retirement than working? They leveraged generous district leave accrual policies and retirement system rules that enabled workers to spike pensions as much as 40 percent.

The rules were never legal. But public employee retirement systems in Contra Costa, Alameda and Merced counties had ignored past court decisions, prompting state lawmakers in 2012 to pass a law reaffirming the earlier rulings.

Public Employee Salary Database

Contra Costa Superior Court Judge David Flinn recently upheld the new law, ending most of the spiking for future retirees. Labor unions in the three counties, who claim the law violates past promises, have appealed.

Public employee pensions are based on years on the job and top salary, which is generally recurring income workers receive annually. But employees in the three counties have been allowed to also include one-time cash payments for unused leave to fatten their pensions year after year in retirement.

The sanitary district excesses were among the worst and highlight what's at stake as the state Court of Appeal considers the case. At the district, those one-time payments were the equivalent of up to 19 or nearly 21 weeks of pay, depending on when an employee started working. Here's how it was done:


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  • Vacation (up to six or seven weeks). Retiring workers receive cash at termination for unused vacation. In Contra Costa, the retirement system allowed employees to count payments for up to a year's vacation in their pension calculations. This practice was halted by the new law.

  • Vacation cash-out (up to four weeks). Sanitary district workers can sell back unused vacation once each calendar year. Counting this as income in pension calculations continues under the new state law.

  • "Straddling" (up to four weeks). The income used in a pension calculation can come from any 12-month period. Thus, the period can straddle two calendar years. So employees can sell back vacation twice in those 12 months. The Contra Costa pension board recently ruled that a second sale cannot be counted as income for pension calculations, but Judge Flinn carved out an exception that allows sanitary district workers to still count two weeks.

  • Sick leave (up to 2.4 to 3 weeks). At termination, retiring employees receive compensation for unused sick leave. The new state law prohibits counting that as income for pension calculations.

  • Holiday compensation pay (up to 2.6 weeks). This applies to sanitary district treatment plant operators. When holidays fall on days they would have off anyway, they receive extra leave time, which they can bank. At termination, those unused days were converted to cash.

    Even under its generous past policies, the pension board had apparently allowed workers to count too much of this pay. The new state law now prohibits counting any of it for pension calculations. The practice was also ended by a new labor agreement between the district and workers.

    The total 21 weeks' compensation that could be used in pension calculations would boost retirement pay about 40 percent. The new law, as interpreted by Judge Flinn, reduces that to six weeks. The difference is what's at stake in the appellate court case.

    Blame this mess partially on past trustees of the Contra Costa County Employees' Retirement Association, which knowingly allowed illegal pension spiking for years. With a recent new board majority, the pension system has begun shifting away from past abusive practices.

    Past sanitary district directors also deserve blame for agreeing to overly generous leave provisions. That enabled employees to build up large banks of time that they could use to inflate pensions.

    Four new board members elected since 2006 have started to ratchet back. Moreover, the sanitary district is the only local agency to join the state Attorney General's Office defense of the new law.

    There's a lot riding on the case. The changes were long overdue, but their survival still depends on the Court of Appeal.

    Daniel Borenstein is a staff columnist and editorial writer. Reach him at 925-943-8248 or dborenstein@bayareanewsgroup.com. Follow him at Twitter.com/BorensteinDan.