Public Pensions and Salary Spiking: A Cautionary Tale of Data Inaccuracy Leading to Erroneous Results

Analyses of public policy issues often rely on administrative data collected by state and local governments. The reliability of such analyses is contingent on the quality of the data and it is tempting for researchers to take the accuracy of administrative data for granted. In this paper we show how this can lead to spurious research findings. Specifically, we use two sets of administrative data on teacher compensation to study the issue of salary spiking (where end-of-career spikes in compensation are used to boost pension benefits) in Washington State. We illustrate how discrepancies in the reporting of pensionable compensation can lead one to strikingly different conclusions about the prevalence and financial implications of salary-spiking behavior. Our findings point to the importance of understanding how data collection processes and administrative uses of the data may (fail to) incentivize accuracy in reporting.