News Story

Whistleblowers Allege Police Pension Spiking Scheme

Ann Arbor officers may add millions to taxpayer burdens

According to two retired city of Ann Arbor employees, some police officers nearing retirement engaged in a pension spiking scheme that involves writing more traffic tickets than usual. The scheme could add hundreds of thousands of dollars in lifetime pension benefits for these individuals, and millions in additional taxpayer burdens.

Writing more traffic tickets generates extra overtime pay because officers are required to spend time in court when tickets are challenged by drivers. Pay boosted by extra overtime in an officer’s final three years increases, or spikes, the annual pension payouts by artificially boosting the final compensation figure used in pension formulas.

According to the former employees, as patrol officers near retirement they try to get on the midnight shift, if they were not already working that late shift. They then write more tickets than they customarily would, knowing that many drivers will fight the charges by taking them to court.

Historically, court appearances by officers are a big trigger of overtime.

One officer collected an average of $22,688 in overtime his last three years with the department. Another who retired in 2015 averaged $22,097 during his last three years on the job. Both worked the midnight shift.

For an officer who had been employed for 25 years, $22,000 in annual overtime in the final years would add $15,125 a year to the individual’s annual pension benefit payments. Many employees of the Ann Arbor police department have retired in their late 40s or early 50s, meaning inflated pensions could be paid for decades.

To place these figures in context, the average annual overtime of all 72 employees who retired from the Ann Arbor police department from 2009 to 2015 was $7,743, according to the city’s response to a Freedom of Information Act request. These 72 employees included detectives, a former police chief and others who were not patrol officers.

The process highlights a problem with government pension systems that use “final average compensation” as a factor in calculating pension payouts, instead of the final base pay of an employee. Years of service and the highest average salary in the final years on the job are the primary factors that determine an individual’s monthly pension payouts.

“Pension rules are supposed to provide stable and plannable incomes to workers that retire,” said James Hohman, the assistant director of fiscal policy at the Mackinac Center for Public Policy. “Unfortunately, rules about final compensation have been gamed in order to spike the value of a pension. It’s no surprise that people want to get more income in retirement, but pension rules should not encourage bad behavior.”

Determining whether any particular officers were writing tickets to spike their future pensions is very difficult. Overtime is a routine part of compensation for police officers. In Ann Arbor, they can make thousands in overtime working football Saturdays.

Ann Arbor Mayor Chris Taylor didn’t specifically address the pension spiking allegation, but did comment in an email on overtime in the police department.

“Overtime procedures are outlined in the collective bargaining agreements,” Taylor said. “These procedures determine how overtime is equalized and offered. If voluntary overtime is available, it is open to all eligible employees, regardless of service time. In a City the size of Ann Arbor, there is often additional police coverage required for special events, such as UM football games, special events (Art Fair, festivals, etc.) and other events requiring higher levels of security.”

Michigan Capitol Confidential received the overtime paid to officers that retired since 2009 in a Freedom of Information Act request.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.