The crown for “Prince of Public Pension-Spiking” would surely land on Bruce Malkenhorst’s head.

Despite pleading guilty to misappropriating public funds, the Huntington Beach resident was collecting $551,688 a year from the California Public Employees’ Retirement System in 2015. How? By crediting himself with separate salaries for serving as the city of Vernon’s administrator, finance director, redevelopment director, clerk, treasurer and head of municipal light and power operations — all at the same time! Once shaken by the proverbial collar, though, CalPERS slashed his pension down to $120,530. Malkenhorst sued to stop it. He lost.

An extreme example, perhaps, but pension spiking is a time-honored tradition that officials have tried to wrestle into submission and courts have ruled is verboten. Still, though, spiking — like beauty — may be in the eye of the beholder.

Santa Ana police union President Gerry Serrano. (Photo by Bill Alkofer, Orange County Register/SCNG)

Gerry Serrano is a Santa Ana police sergeant, on a paid leave of absence from policing duties to serve as president of the Santa Ana Police Officer’s Association. Serrano wants to retire. The burning question is: How much of his pay should count toward his final pension?

In the wake of CalPERS pressing this question, and the city defending him, Serrano filed a lawsuit accusing Santa Ana city officials of a host of sins, from sexual harassment to retaliation to violations of freedom of speech and labor laws. It’s a brazen attempt to silence them, attorneys for the city argue — all grounded in rage over that final pension calculation.

Serrano’s attorney says the lawsuit has absolutely nothing to do with the pension conflict, and it’s unfortunate that the city is linking the two. “They’re ignoring serious problems — raised by the Police Officers’ Association and other officers — as to what’s going on at the department, that they really need to address,” said Corey W. Glave.

In a letter to police union members in March, Serrano sought to explain the conflict. “I stand to lose almost half of my pension,” he wrote. “Who would ever work in this assignment knowing that you and your family would lose about 50% of your pension? This work assignment endures unimaginable stressors to the employee and the employee’s family so who would ever accept this work assignment under these conditions? The fact is that the city wants to break and weaken the SAPOA.”

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Understand that police officers don’t just get a salary (Serrano’s base salary was $133,032 in 2020).

They also get extra pay for lots of other things, like being bilingual, and being a detective, and being “routinely and consistently assigned to sensitive positions requiring trust and discretion” (confidential premium pay), and taking classes that “enhance their ability to do their job” (“educational incentive” pay), as well as for lots of other stuff.

Serrano’s “special pay,” on top of that base, was another $123,925. That bumped his total pay to $256,957 in 2020 (not counting benefits), according to CalPERS.

So clearly, a pension calculated on base salary alone would be starkly less than a pension calculated on base salary plus those extras (in Serrano’s case, 48% less, CalPERS says). For years, the city had reported those extras as pensionable pay — but in the end, CalPERS disagreed.

First off, most special pay is for police officers who, you know, police the city. Serrano hasn’t done that since 2016, working, instead, as head of the officers’ union, negotiating contracts and pay raises, handling health insurance, etc. (for considerably more than he earned in his policing role). Since he wasn’t working as a detective, the extra detective pay made no sense, CalPERS concluded. Ditto for the “confidential premium.” “He was not assigned to any position within the City … let alone any position requiring trust and discretion,” the CalPERS decision reads.

And then there’s the overtime issue. Overtime is not included in pension calculations  — imagine public workers taking gobs of overtime their last few years on the job, doubling take-home pay, and thus doubling pension forever — precisely to prevent spiking. Unfortunately for Serrano, the agreement between the union and the city specified that the union president’s “confidential premium” was intended to make up for the overtime hours he wouldn’t be earning because he wasn’t actually policing, according to documents.

He enlisted the help of the State Treasurer, Fiona Ma, who backed two (unsuccessful) proposals that would exempt Serrano from the pesky rules that prohibit CalPERS from including “special compensation” in his final pension calculations, the plucky Anaheim Investigator found.

In the end, Serrano’s education incentive pay (he has a bachelor’s degree) can count toward his final pension, but not confidential, detective and bilingual premiums, or holiday pay (he was not required to work holidays), or uniform pay (he was not required to wear a uniform), CalPERS decided. The final decision was adopted, over Serrano’s objections, by the CalPERS board on April 25.

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Bruce Malkenhorst

So what now? Serrano can appeal the conclusion through the courts, as Malkenhorst did, but no decision on that has been made yet, Glave said.

City officials declined comment, but the Police Department, which has retained a separate attorney for the chief (indicating, perhaps, that all is not in Technicolor over the rainbow), sent us there for perspective.

“The CalPERS final decision firmly prohibits pension spiking and clearly supports the position that the lawsuit filed by Gerry Serrano against Santa Ana, City Manager Kristine Ridge, City Attorney Sonia Carvalho, HR Manager Jason Motsick and the Chief of Police David Valentin is false and intended to distract police officers and the general public from the truth,” said Seymour B. Everett, III, partner with Everett Dorey LLP, by email.

“Regrettably, Serrano’s baseless and reckless lawsuit continues to drain valuable City resources that could likely be directed to further support the brave men and women who protect and serve the City.”

There is a lot of disturbing stuff in the lawsuit and countersuits, from allegations of intimidation and sexual harassment to dark warnings of workplace violence. Attorneys for the city and police chief have asked the judge to throw much of it out; hearings are slated for June.

City Hall (Courtesy City of Santa Ana)

As all this has been unfolding, Serrano has sought another city job so his pension could return to that expected $200,000-per-year range.

It’s messy. In a letter to the city council last year, City Manager Ridge charged that Serrano was making false accusations to get his way. “It is clear he intends to ‘burn this city to the ground’ if he doesn’t get what he wants,” she wrote.

Serrano, for his part, said city officials are “spreading misinformation” and outright lying to weaken the union. “I am being portrayed as greedy and guilty of pension spiking,” he wrote in his letter to union members, saying it’s an issue that hits other public union leaders across the state. “You can see why this is an important issue. Could your family withstand a decision that blows up your retirement and the future of your family to such a huge extent?”

It certainly must be jarring. But a lot of folks would swoon at a measly $120,000-a-year pension for life.

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