The Los Angeles City Council voted Friday to move ahead with a plan to give early retirement to 2,400 employees while postponing raises for thousands of others, hoping to balance the budget without laying off workers or closing City Hall two days a month.
The council unanimously forwarded the proposal to the Coalition of L.A. City Unions for a ratification vote by its 22,000 members, saying that it would free up much-needed money over the next two years.
"We can't afford not to do it," Councilwoman Janice Hahn said after a nearly four-hour, closed-door meeting.
Before the council even cast its vote, a representative of another union said his members probably would file a court challenge to the early retirement proposal.
The plan "that they're proposing is not legal," said Bob Aquino, executive director of the Engineers and Architects Assn., which represents roughly 7,800 city workers and is not part of the coalition.
Aquino accused the council of excluding some unions from its early retirement talks. And he warned that the council has not been provided with a legally required actuarial study that would spell out the long-term cost of the plan to the city's pension system, which is projected to consume an increasingly large share of the city budget over the next five years.
The proposed labor pact sent to the council Friday applies to civilian workers, including those who provide such services as trash pickup, park maintenance and library operations.
Aquino's warning echoed comments made two days ago by Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce. Toebben called on the mayor and the council to release the information showing the five-year impact of the early retirement plan.
"It is important that this information now be shared with the citizens of Los Angeles," he said.
Bob Schoonover, president of Service Employees International Union, Local 721, said that by averting layoffs for his members the agreement "makes us part of the engine for economic recovery rather than part of the problem."
Mayor Antonio Villaraigosa said in a statement after the vote that the union pact would save more than $500 million over the next two years by delaying raises and reducing the size of the workforce.
Villaraigosa insisted that workers would cover the "net cost" of the early retirements, sparing the pension system from a new burden.
Under the plan, workers hired before 1983 would see their pension contribution hiked to 6% from a range of 2% to 4%.
Other city employees would see their contributions increase from 6% of their pay to 6.75% in July 2011.
Council members said they would receive an updated actuarial study within two weeks, in time for a final, public vote on the labor pact.
Councilman Bernard C. Parks, who voted for the early retirement concept, said he was reserving final judgment until he sees the long-term cost of the union agreement. "The council has a vote later to decide whether [to] accept it or not," he said.
Early retirement also will require a vote from members of the city's primary pension fund, the Los Angeles City Employees' Retirement System.
Councilman Richard Alarcon said the plan would be less painful for the public than a furlough plan, which would force workers to take 26 unpaid days off in the coming year.
"We're doing our best to save city services," he said.
The proposed agreement with the Coalition of L.A. City Unions is designed to dramatically reduce the possibility of layoffs and avoid furloughs, which would force the city to close some offices every other Friday.
Under the proposal, the coalition's 22,000 members would not receive raises for two years. Once that period is over, however, those workers would receive six raises between July 2011 and January 2014 -- the equivalent of an 18.8% raise -- plus two extra cash payouts.
To reduce the city's payroll costs, the city would offer early retirement to workers who are up to five years away from being eligible for retirement.
To entice them to leave, the city would offer some workers cash payouts and enough years of service to qualify for retirement ahead of schedule.
City officials have been increasingly anxious about the rising costs of retirement benefits at its two pension systems -- one covering public safety workers, the other for civilian employees.
A May report from the city's top financial advisor warned that the city's required pension contribution -- money that would otherwise be used to pay for basic services -- could jump from approximately $660 million next year to more than $1.6 billion by 2013-14.