County May Stiffen Rules on Pensions : Finances: A panel urges reform that could save $30 million a year. But board majority has resisted changes.

After suffering two years of blistering criticism, the Los Angeles County Board of Supervisors today will consider proposals to scale back its controversial pension rules, which boosted the retirement pay for senior officials by as much as 20% at a cost to taxpayers of more than $400 million.

A citizens panel has recommended that the board initiate a top-to-bottom reform of the pension system that could slow the drain on the county’s coffers and improve Los Angeles’ relationship with state officials, who condemned the pension plan as wasteful and self serving.

The proposal by the Citizens Economy and Efficiency Commission would affect virtually all 80,000 county employees and save nearly $30 million a year.

Even a limited, alternative reform plan offered by the county chief administrative officer--to reduce benefits only for new employees--would save the cash-strapped county millions of dollars annually and send a message that the purse strings are being tightened at the county these days.

But thus far, only the two newcomers to the Board of Supervisors have endorsed major reforms.

Supervisor Gloria Molina, who fought to bring the issue up for a vote at today’s meeting, has fully embraced the wide-reaching reforms proposed by the commission, while Supervisor Yvonne Brathwaite Burke has spoken in more general terms about the need for an overhaul. The remaining supervisors, Ed Edelman, Mike Antonovich and Deane Dana, remain reluctant to change the rules.

Molina acknowledged that she is not certain a colleague will second her motion to adopt the commission proposal. But she is hopeful that, armed with the Economy and Efficiency Commission report and her own colorful 14-page pamphlet entitled “Pension Scam Simplified, the Taxpayer’s Guide to the Raid on the County Bankroll,” she can prevail. “The only thing lacking is political will,” said Molina.

Today’s debate promises to be personal and divisive, as it has been since the pension controversy first emerged.

The county’s decision four years ago to increase pensions of the highest-paid county employees and elected officials has been criticized in a string of investigations, studies, legislation and lawsuits by the Los Angeles County Grand Jury, the state Legislature, Gov. Pete Wilson, the state’s largest taxpayer organizations and even a citizens watchdog group whose members were handpicked by the Board of Supervisors.

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The grand jury called the pension rules “the height of fiscal irresponsibility” and urged the board to “set an example of responsible government” and rescind them.

The pension rules, revealed by The Times two years ago, were adopted without a public vote of the supervisors or any study of their financial impact. They dramatically increased pensions by counting the value of fringe benefits, such as health and life insurance, as compensation for the purposes of calculating retirement pay.

County officials interpreted a state law to mean that they were compelled to include the amounts in pension calculations. But the author of that law said the intent was just the opposite. And after learning how Los Angeles County had used the law, state legislators quickly repealed it in unanimous votes.

The county’s pension decision immediately created a deficit in the employees pension fund of about $267 million. The deficit has since grown to more than $400 million, after the rules were extended to include rank and file employees on a limited basis. The deficit has to be paid off by the county within 20 years.

Under the unusual pension rules, many senior executives and elected officials would earn more in retirement pay than they do on the job.

For instance, Public Works chief Tom Tidemanson, who is planning to retire in March, will earn $193,000 in annual pension pay--about $35,000 more than his current annual salary. Former Supervisor Kenneth Hahn, who retired last year, collects about $126,000 in annual pension benefits, $27,000 more than his $99,000 salary.

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Today, the board will be asked to change that for all future retirees.

The Citizens Economy and Efficiency Commission has recommended that the supervisors scale back the pension benefits for existing employees and eliminate the rules entirely for all future hires. There apparently is nothing that can be done about those who have already retired under the existing rules.

County Chief Administrative Officer Sally Reed, hired last year to replace Richard B. Dixon, who was held responsible for the pension changes, said the existing pension plan is one she would not have chosen.

Reed is recommending that the supervisors adopt just one of the Economy and Efficiency Commission recommendations as a first step and leave the bulk of the reforms for future consideration.

She is recommending that the county end such pension benefits for any new county employees, but leave them untouched for thousands of current workers. Reed said she believes the board is prepared to approve that measure.

But Molina, who was not on the board when the decision to change pension rules was made in 1990, said Reed’s recommendation falls short.

“That’s not good enough” said Molina in an interview. “We have to go for the big one” and adopt the full spectrum of the commission’s recommendations.

Molina is also calling for a policy stating that “any time the county changes its benefits package, the financial impacts on the retirement system must be quantified and approved by the Board of Supervisors.”

“This is a real opportunity,” said Molina. “The savings could be dramatic, perhaps as high as $27 million a year.” Molina calculates that the savings could fund 91 libraries for a year, or hire 373 law enforcement officials.

But so far, the Board of Supervisors has stood its ground through three separate votes on the issue and refused to reverse its policy. Based on the opinion of County Counsel DeWitt Clinton, the supervisors have argued that their hands are tied. They say that under the law, pension benefits cannot be withdrawn once they are granted.

Supervisor Edelman, who will retire in December, has generally been reluctant to amend the rules. Dana has indicated a willingness to end the program for new hires, according to an aide, but he is reluctant to take away benefits for existing employees. Antonovich said that given conflicting legal opinions, he does not want to make any changes until there is a court ruling to clarify the question.

Board Chairwoman Burke, who like Molina was not on the board when the original decision was made, spoke out sternly about the pension scandal when she was a candidate for supervisor. Last week, through a spokeswoman, Burke said she still believes “the pension system should be overhauled” for existing as well as new employees.

While it is unclear if she will have enough support on the board, Molina’s motion is endorsed by taxpayer advocacy groups, including the Howard Jarvis Taxpayer’s Assn.

“This is a glaring example of how the system is being abused,” said Joel Fox, president of the association. Fox’s group sued the county in an attempt to overturn the county rules, but lost in court. The verdict is being appealed.

“The taxpayers who are paying for this don’t have anything like it,” said Fox about the generous benefits.

Indeed, a study conducted by W.F. Corroon Corp., a consulting firm, for the Economy and Efficiency Commission found that there is little precedent for the county’s rules in either the public or the private sector.

“The county is unique among those surveyed,” the commission concluded. In fact, a few counties do have similar programs, but the benefits are negligible--a few hundred dollars annually--compared to the amounts offered in Los Angeles, which can be as much as $40,000 annually for some senior executives.

Representatives of the county’s rank and file workers are also on record opposing the pension rules, which they say are skewed heavily in favor of senior management but do little for the average worker. Dan Savage, a representative of Service Employees International Union Local 660, said the union would prefer to see the rules eliminated entirely.

Still, eliminating the benefits could be a thorny legal issue.

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The county counsel and outside legal advisers agree that the benefits do not have to be offered to new hires. They also agree that in general an employer cannot make radical changes in a pension plan once it has been offered, such as deleting life insurance from the pension calculations.

The legal advisers part ways, however, when it comes to scaling back those benefits to existing employees. For instance, the Economy and Efficiency Commission is recommending that the amount of fringe benefits be reduced or frozen.

The county counsel says that, depending on just how it is done, such a move could prompt a lawsuit from employees.

Supervisor Molina dismisses the county counsel’s opinion: “He’s very dedicated to his personal retirement. It’s called a conflict of interest.”

And, referring to the county counsel’s inch-thick report on the topic, Molina added, “You have to wonder when lawyers take that much time to explain something.”

County Counsel Clinton said he had no comment on Molina’s remarks, though in the past he has acknowledged that to some degree all county decision makers, including the supervisors, have a conflict when it comes to matters of pay and benefits.