Pension Changes to Cost County $265 Million : Government: Study calculates fiscal impact of increases quietly approved for top officials.

Controversial pension rules quietly approved by Los Angeles County officials last year have created a $265-million liability for taxpayers, according to a county study released Tuesday.

The pension changes--adopted without consideration of the financial impact--would raise the retirement benefits of county supervisors and senior county executives by 19% or more. That would boost the pensions for some officials to more than $125,000 a year.

Independent actuaries hired by the county now estimate that it will cost taxpayers at least $18 million next year to pay for the pension increases. And that amount will climb by millions of dollars each year for the next 30 years, according to County Pension Administrator Charles Conrad.

The report “identified a real, permanent and substantial increase” in the cost of providing pension benefits to the county’s 84,000 employees, Conrad said.

The county Retirement Board is to consider the report today and forward its recommendation to Chief Administrative Officer Richard B. Dixon and the Board of Supervisors.

“I would assume that Dixon will include it in the budget and that the supervisors will approve it,” said Conrad. “It will cost (the county) an additional $18 million a year, but we have no choice. The liability has been created.”

The expense comes as the financially troubled county gears up for possible spending cuts in county services such as health care for the poor.

The increase is significant even though the county retirement fund currently holds more than $13 billion, said Bob Herman, chairman of the county Retirement Board. “It’s a 30-year mortgage on our retirement system,” said Herman. “This is a real setback.”

Herman said that even though he is not comfortable with paying off the liability over three decades, it may be the only way the county can afford it without cutting back services.

“We could say, ‘This is a bill: $265 million,’ ” said Herman. “But how many sheriff’s (deputies) would have to be laid off and how many hospitals would have to close?”

County budget officials could not immediately comment on the impact of the increase on the $12-billion county budget. “I don’t know what it means yet,” said Lea Ann Mitchum, an aide to Dixon. The new budget is scheduled to be announced by Dixon’s office May 19.

On Tuesday, the supervisors approved a motion by Supervisor Gloria Molina asking that Conrad report next week on the actuarial study and “its fiscal impacts for the county.”

Molina, who was not on the board when the rules were adopted, said the actuarial study has taught the supervisors an expensive lesson: “From now on, before we make decisions, we should know the fiscal impact.”

Supervisors Mike Antonovich, Ed Edelman, and Kenneth Hahn could not be reached. Supervisor Deane Dana said he had not read the report and could not comment.

Dixon, who had recommended the pension changes, could not be reached for comment.

The Times reported in February that county officials adopted the pension increases with little public debate and no study of the impact on the county’s finances.

The rules provided that certain fringe benefits such as car and medical insurance allowances be counted with salaries when retirement pay is calculated.

Though some changes eventually will benefit most county employees, the largest gains in retirement income will accrue to members of the Board of Supervisors and top county managers. Dixon, a county employee for 33 years, will receive an annual pension of at least $127,236--about a $25,000 increase. Most supervisors will get a pension increase of at least several thousand dollars a year.

The Times found that few other counties have such programs and none have similar rules.

Dixon said earlier that he did not believe it was necessary to calculate the long-range impact on pension costs when making changes in salaries and fringe benefits. But administrators in several other counties said they routinely calculate the impacts of such changes.

Dixon also said he was forced to make the pension changes because of an obscure state law. The author of that legislation, Assemblyman Trice Harvey (R-Bakersfield), said the county gave a “reverse interpretation” to his bill.

Legislation has been introduced to get the county to rescind the new pension rules. “What L.A. County is doing, we call (pension) spiking,” the bill’s co-author, Sen. Cecil N. Green (D-Norwalk) said Tuesday. The bill, approved by the Assembly, would repeal the state law that county officials say prompted them to approve the pension changes.

County attorneys have contended that the changes are irreversible because it is illegal to take away pension benefits already granted. However, they say, the supervisors could limit the rights of future employees.

Green, chairman of the Senate Committee on Public Employment and Retirement, said state attorneys believe that the supervisors could legally rescind the changes. “They can do it if they so choose,” he said.

Assemblyman Dave Elder (D-San Pedro) has drafted separate legislation that would require the county to have public hearings and conduct actuarial studies before adopting new pension rules.

“It’s another case of high-level bureaucrats bailing out and leaving the taxpayer holding the bag,” said Elder.