Mike Wiley
Mike Wiley

The Public Eye

How Sacramento’s transit chief landed a pension that exceeds federal limits

By Tony Bizjak

tbizjak@sacbee.com

July 03, 2016 06:00 AM

For four decades, Mike Wiley has clocked in at Sacramento Regional Transit headquarters in midtown, working up the ranks to the top job and earning recognition for dedication to an agency he says he has been honored to serve.

For that, he is being richly compensated. Some say too richly.

Wiley, who steps aside as RT general manager next month, is eligible to collect a $278,000 annual pension. That’s $48,000 above his current $230,000 salary. It’s also higher than the $210,000 federal pension maximum.

How can an employee earn more sitting at home than going to work? And more than Internal Revenue Service limits?

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The answer lies in a little-publicized pension supplement RT has made available in recent years to a few top officials. The local bus and light-rail district’s program mirrors a pension supplement program the California Public Employees’ Retirement System also gives to a small percentage of retirees.

In both cases, the agencies allow highly paid public employees with decades of service to draw on pensions that make use of supplemental payments to exceed dollar limits imposed by the federal IRS code.

The pension supplements are legal, they say. The state Legislature, nonetheless, closed the CalPERS program to new employees during recent efforts to limit public pensions, although the state still allows qualifying workers hired before 2013 to participate. RT has its own pension system, separate from CalPERS.

Currently, the federal IRS code limits payouts for public and private employees to $210,000 a year from funded pension programs. To provide Wiley with a higher pension – based on RT’s accrual system – the Regional Transit board agreed in a 2008 contract to give him supplemental checks in retirement from the agency’s annual operating budget, which is the pot of money that pays for bus and light-rail service. It is funded in part by rider fares.

Shortly after signing Wiley’s contract, RT slipped into financial duress from which it has yet to recover. The agency has tapped reserve accounts in the last three years to balance its budget, leaving it with virtually no emergency funds this summer. RT raised rider fares 10 percent on Friday, making its buses some of the most expensive to ride in the country. It laid off 20 management and administrative employees last month.

Wiley told The Bee he does not plan to take the entire $278,000 available to him annually when he retires Aug. 1. Instead, he said he will choose an option that gives him about $220,000 annually so he can leave benefits for his wife if he dies before she does.

The retirement package, nonetheless, has drawn anger from union officials and some riders.

“The management elite of the public sector has used an excuse that they can make a ton more money working in the private sector, so you have to pay me more to stay,” said Bill Sokol, an attorney and labor studies lecturer at San Francisco State University. “Something has gone off track, in my opinion.”

Wiley is the second RT official to be given bonus retirement checks out of the agency’s operating account, according to RT documents. Former chief legal counsel Mark Gilbert briefly took advantage of a similar deal after his retirement in 2007, amounting to a few thousand dollars from the agency’s operations budget. Shortly after his retirement, because of a change in federal pension caps, he was able to keep the same payout but have it funded through RT’s pension fund rather than its operating budget.

The agency’s current chief attorney, Tim Spangler, has a similar provision in his contract, but told The Bee last week he will ask the board to take it out.

“This benefit will be removed from my contract,” Spangler said in an email. “The public has sent a clear message of concern about such benefits. Ultimately, I work for them. RT is on a mission, and issues that distract from the mission need to be avoided.”

The management elite of the public sector has used an excuse that they can make a ton more money working in the private sector, so you have to pay me more to stay. Something has gone off track, in my opinion.

Bill Sokol, attorney and labor studies lecturer, San Francisco State University

Jay Schenirer, a Sacramento city councilman who took over as chairman of RT’s board last year, called Wiley’s pension arrangement a remnant of a time when the agency was not watching its bottom line as closely. The contract for RT’s new general manager, Henry Li, does not include a pension supplement deal. Li’s starting salary is $214,000.

“I would not expect to see this clause in any future contract from RT,” Schenirer said. “We did not include it in Henry’s contract. We are trying to be responsible stewards of the public money.”

The California Public Employees’ Retirement System since 1995 has had a pension supplement program similar to RT’s, allowing some higher-paid, long-term employees in the system to get pensions beyond the federal IRS cap. As of last year, 684 retired public employees have received benefits above the federal maximums in place at the time of their retirement, according to a CalPERS financial report.

Under CalPERS rules, the cities, school districts and other agencies that employed the retirees must come up with the additional money, unfunded by the pension programs, to pay for the supplements. In that sense, the supplemental money is more like an ongoing salary paid to the retiree, rather than a formal pension.

The program is now closed to new employees in the CalPERS system, as part of the 2012 California Public Employees’ Pension Reform Act.

IRS spokeswoman Karen Connelly said her agency had no comment regarding pension supplement programs. “The IRS has not said anything about these plans in general. We enforce federal tax law as it is written,” Connelly said.

Michael Shires, a professor of public policy at Pepperdine University, said the supplement programs underscore issues that persist despite the 2012 reforms.

“The feeling that the public finds this excessive isn’t surprising,” Shires said. “There is a limit to how much quality of life the public should pay for for a public employee. That is a lot of money.”

I would not expect to see this clause in any future contract from RT. ... We are trying to be responsible stewards of the public money.

Jay Schenirer, Sacramento city councilman who took over as chairman of RT’s board last year

Some RT riders suggested the severance deal could cast a shadow over Measure B, a November ballot measure asking voters to raise the Sacramento County sales tax a half cent for transportation improvements, including transit.

“That (bonus) should be the first thing that goes away,” RT rider Russell Rawlings told the agency board last week. “The public faith is really going to be determined by the fiscal decisions that RT makes.”

In response to public complaints, Wiley agreed last week to retire early, on Aug. 1, rather than stay on as a special adviser until Dec. 31, to save the district an estimated $135,000 this year. He said he wanted to do his part to help RT work its way through its financial woes.

He briefly defended his severance package in comments to the board last week at his final meeting. “The features of the contract that some members of the public find a little bit distasteful have been in the contract since 2008,” he said, “and in fact were part of (other contracts) in the organization prior to me.”

Wiley then choked up, saying, “It’s been an absolute pleasure for me to have the opportunity to lead the organization. Thank you.”

RT had been talking about paying Wiley a contract fee of up to $50,000 for annuitant work. The board lowered that potential amount to $25,000 last week, although both Wiley and RT officials said he may not necessarily do any more paid work for RT.

Tony Bizjak: 916-321-1059, @TonyBizjak