County Drops Plan for Pay Cuts, Urges Hold on Raises for Top Staff : Budget: Actions come after lengthy talks with union officials. Dixon reports ‘real progress.’

After two days of marathon negotiations with union representatives, Los Angeles County officials said Tuesday they will withdraw two controversial proposals to balance the county budget with sharp pay cuts for most employees.

Chief Administrative Officer Richard B. Dixon also recommended, in a written memorandum to the Board of Supervisors, that the county accede to a key union demand and suspend all pay raises to top administrators and non-union employees for two years.

Faced with an $833-million budget deficit, Dixon had recommended in July that the county consider a plan to require its 85,000 employees to work two days a month without pay. Union officials steadfastly opposed the plan. On Tuesday, county officials said it was no longer an option.

“We are backing off our suspension-of-pay program pending further recommendations from the unions,” said Mary Jung, Dixon’s top assistant. “We’re not seriously considering it now.”

After another recommendation by Dixon, supervisors also voted Tuesday to withdraw a proposed work furlough program that would have required many county workers to take an unspecified number of days off each year without pay.

In turn, it appears that union representatives will agree to the creation of an early retirement program for represented workers, Dixon said. The county’s top bureaucrat has said that without such concessions, massive layoffs will be inevitable.

Representatives of the Chief Administrative Office and union officials conducted lengthy negotiating sessions Friday and Monday. Friday’s session began at 1 p.m. and ended at 8 a.m. Saturday.

Dixon said he was withdrawing the work furlough proposal because “I believe we and the unions are making real progress” in the negotiations.

The county’s budget crisis intensified this month when the state adopted a budget that substantially reduces payments to local governments. County officials are considering a variety of cutbacks in the county’s vast social service network, including the closure of libraries, probation camps and health clinics.

The Board of Supervisors has postponed action on most program cuts until its meeting next Tuesday.

Just before Tuesday’s meeting, about 800 workers from a host of county unions held an emotional rally outside the board’s hearing room in the downtown Hall of Administration.

Workers chanted “Cut from the top,” a reference to a union plan that would balance the budget by cutting the pay of top executives and through saving other administrative costs.

“We have come together to demonstrate our vision for a just society,” Gilbert Cedillo, general manager of Service Employees International Union, Local 660, told the crowd. “We must put forward human need before county greed.”

Also on Tuesday, the Board of Supervisors voted to raise tax assessments in its Fire Protection District. The assessment, which is applied to 600,000 homes in 48 cities served by the county Fire Department, will increase by $22.56 to a total of $36.55 on single-family dwellings.

The board also approved reductions in the county’s contribution to the Los Angeles County Employees Retirement Assn. fund. The move will generate $45.1 million in savings this fiscal year.

In a memorandum to the board dated Sept. 12, Dixon proposed sweeping--but temporary--changes in the system of pay raises to top administrators. He proposed freezing for two years the county’s controversial Performance Based Pay Program--which has been sharply criticized by union officials as a tool to give large raises to favored management employees.

Dixon wrote to the board that the program could be eliminated for 79 classes of employees. Jung said that under Dixon’s proposal all mid- and lower-level managers would be eliminated from the program. Dixon also recommended that the board defer pay increases to all non-union employees for two years, with the increases to be paid later in a lump sum.

Earlier Tuesday, the board again balked at repealing controversial pension rules that have cost the cash-strapped county $265 million.

The action came after two private attorneys hired by the county supported a county counsel’s opinion that it would be illegal to strip current employees of the lucrative retirement benefits. Supervisors put off a final decision until October to allow more study about whether the county should deny the benefits to future employees.

The pension changes were criticized earlier this year by the county grand jury as “the height of fiscal irresponsibility.” Pensions for some employees jumped by 19% to more than $125,000 a year. The new rules were adopted without public vote of the supervisors or a study of their cost.

Times staff writer Richard Simon contributed to this story.