Amid cost cutting, L.A. city pensions continue to soar
Collecting nearly $318,000 a year, the former head of Los Angeles’ Department of Water and Power tops a list of 841 city pension recipients paid six-figure benefits, according to newly obtained records.
And, like many of the retirees, former DWP General Manager Ronald Deaton will be paid more beginning this summer -- boosting his annual retirement pay to more than $327,000 -- because of annual cost-of-living increases, records and interviews show.
New DWP pension data provide a fuller picture of the city’s largest retirement packages at a time when City Hall is cutting services, the public is being hit with recession-driven tax increases to cover government budget shortfalls and rising public pension costs are under close scrutiny.
The Times previously reported that nearly 600 pensioners received $100,000 a year from the city’s police, fire and general government retirement plans. The new data from the city’s utility adds close to 250 names to the list, which includes retirees or, in some cases, beneficiaries.
Former DWP Assistant General Manager Frank Salas ranks second on the list, receiving about $290,000 a year.
Councilman Bernard C. Parks, a former Los Angeles police chief and head of the city’s budget committee, is third.
The Times reported in May that Parks, 65, who has publicly warned about soaring payroll and pension costs, received $265,000 a year in retirement payments on top of his $178,789 council salary.
With a cost-of-living adjustment that took effect this month, Parks’ pension has grown to $273,000 annually, roughly 10% more than his final pay as police chief, records show.
In addition, Parks, who is serving a second four-year council term, is participating in a civilian pension plan as a councilman, officials confirmed. That could add tens of thousands of dollars per year to his total city retirement income.
Parks’ eligibility for a second pension -- and the amount -- would depend on how long he serves, his final salary and his age when he collects it, officials said.
Parks did not respond to an interview request.
City employee groups stress that six-figure retirees like Parks and Deaton are a small fraction of pensioners. Most collect far less, typically about $40,000 for civilian retirees and close to $50,000 for former police officers, firefighters and DWP workers. Also, officials note that career city employees don’t normally receive Social Security payments, which also are adjusted yearly to offset increases in the cost of living.
“For the most part, the high pensions go to people who are not in the unions. They are basically senior management folks,” said Barbara Maynard, spokeswoman for a coalition of city unions. “The vast majority of those we represent are frankly rank-and-file, hardworking people with modest pensions.”
Still, the recession, the erosion of private-sector retirement benefits, and state and local budget cuts have given critics fresh ammunition to attack what they contend are overly generous government pensions.
“We should never, ever design a pension formula that provides more for a person when they retire than when they are working. It defies any common sense,” said Marcia Fritz, vice president of the California Foundation for Fiscal Responsibility, a nonprofit pension reform group headed by former GOP Assemblyman Keith Richman.
“But that’s what we’re finding” in some school systems and public safety agencies, Fritz said.
The group has publicized more than 5,000 names of state and local government pension recipients across the state collecting more than $100,000. Fritz said high-end public pensioners are worthy of attention. They include “people who were advising, in closed-door labor negotiations . . . negotiating benefits,” she said. “These are the ones that made this whole thing happen.”
Deaton was a well-regarded executive who served in key city positions, including chief legislative analyst, over more than 40 years. He said his benefits flow from a bargain he struck in the 1960s, when he walked into the DWP as a young junior administrative assistant. His pension takes into account his long service, career advancement and final salary (about $345,000), he noted.
“It was a deal made at the beginning of my career, not the end of my career,” he said.
“Because you happen to get up to the top, I don’t think you should be paid any differently.”
A looming jump in city pension costs, attributed largely to sharp declines in pension investment values, has prompted a major review of retirement plans at City Hall. One recent projection warned that the share of the city general fund receipts required by two large pension funds would jump from 15% this year to 33% in 2013-14.
That would amount to an increase of nearly $1 billion, making pension contributions the fastest-growing area of city spending, said Asst. City Administrative Officer Tom A. Coultas, an employee relations specialist.
“It’s perfectly clear from our standpoint, design changes need to be made,” he said. “The question is how much of a correction is necessary” to ensure that pension programs can be sustained.
Recent market gains and accounting changes have eased the financial blow somewhat. And a plan to cut 2,400 city jobs also could help control costs. Still, recommendations for pension changes, expected to be sent to the mayor and City Council in September, will probably include some combination of reduced benefits and adjusted contribution rates for many new city employees, Coultas said.
There are legal and practical limitations to the changes that could be made. Court rulings generally protect benefits provided to retirees and promised to current employees, officials say. Altering pension plans involves negotiations with unions and, in some cases, voter approval.
Ironically, Parks, one of City Hall’s more fiscally conservative voices, has been among those warning about rising pensions.
During the recent budget battle, Parks said that soaring payroll and pension costs have brought the city to a “breaking point.” Without swift and significant structural changes to city finances, he wrote on his website, the city could risk insolvency.
Maynard, the union spokeswoman, said labor groups would work with city leaders to craft a solution. “Clearly, there is a problem.”
The larger issue, she argued, is how vulnerable retirement accounts have become for many Americans, particularly in the private sector.
“We need to lift all workers up to make sure they have a modest, secure pension. Not take away from those who do.”