L.A. pension panel delays decision that could add to city’s budget shortfall
A Los Angeles city pension board on Tuesday postponed a decision on whether to cut its investment assumptions — and put new stress on the budget that pays for police, firefighters and other basic services.
The Los Angeles City Employees’ Retirement System board had been advised to move its assumed rate of return, the yearly expected earnings for its investment portfolio, from 7.5% to 7.25%. The decrease is expected to shift $38 million in retirement costs to the city budget in mid-2018.
Board president Jaime Lee said she wanted to hear from the agency’s newly hired investment consultant before casting a vote. And board member Nilza Serrano said she wasn’t ready to make such a “significant” decision without reading more on the proposal.
“It’s just such a large amount of information to wrap my head around,” said Serrano, an appointee of Mayor Eric Garcetti.
Lee, another Garcetti appointee, predicted a decision would be made within two months.
Retirement agencies across the state have been reducing their assumed rates of return, concluding they would not succeed in meeting their prior earnings targets. Pension boards that represent L.A.’s retired police officers, firefighters and Department of Water and Power employees already have lowered their assumed rates of return to 7.25%.
The retirement system for civilian workers, known as LACERS, oversees benefits for more than 41,000 current and retired employees. Last year, the agency reported an average yearly rate of return on its investment portfolio of 5.9% over 10 years, 6.5% over 15 years and 7.3% over 20 years.
LACERS’ actuarial consultant recently recommended that the pension board lower its rate of return to 7% — a step that would add $93 million in retirement costs to the city budget.
However, the board also was offered an alternative strategy: move the investment assumption to 7.25% and revisit the issue next year, when it has fresh information on its investment mix and the expected lifespan of the city workforce.
Elizabeth Greenwood, a board member who represents current city employees, urged the board to wait at least six months before acting. But board member Michael Wilkinson said he worried about putting off a vote.
“I’m concerned about delaying this decision. And I’m really concerned about underfunding the [pension] plan,” said Wilkinson, who represents retired city workers. “That’s what this whole thing is about.”
Twitter: @DavidZahniser
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