With Los Angeles facing a $320-million budget shortfall next year, Mayor Antonio Villaraigosa backed on Monday what he termed a "landmark proposal" to reform "out of control" pension costs and retiree health benefits for newly hired city police officers and firefighters.
"The days of unsustainable pensions are over," Villaraigosa declared at a City Hall press conference, accompanied by City Controller Wendy Greuel and Miguel Santana, the city administrative officer. "The era of free healthcare is over."
The mayor called the plan an essential step to ensuring the long-term fiscal health of a city that has suffered a bruising series of layoffs and service cuts in the wake of the nation's protracted economic downturn.
However, the plan omits more contentious reforms, such as increasing the minimum retirement age and shrinking the maximum pension payout for cops and firefighters from its current 90% of salary.
"You have to applaud the mayor for starting, but this simply doesn't go far enough," said George Kieffer, an attorney who is one of a group of prominent citizens calling for immediate and broader pension reform.
Samuel Garrison, vice president of public policy for the Los Angeles Area Chamber of Commerce, said the plan "falls well short of reforming the city's out-of-control pension system."
The changes would apply only to those hired after next July 1. Legal and contractual restraints, along with political considerations, make it difficult to target the benefits of existing retirees and current workers.
The mayor said he was confident his proposal would win support from the City Council and public safety employee unions as well as from voters, who, by his timetable, would be asked to vote on the plan next March 8. To make the ballot, the council must decide by Nov. 3 to send the plan to the voters.
The proposal comes as recession-ravaged cities, counties and states nationwide are grappling with the dilemma of sharply rising pension obligations and healthcare costs for public sector employees.
Within five years, pension-related costs are expected to consume one-third of L.A.'s general fund budget, which pays for such basic services as public safety, parks and libraries.
According to a city report, the new plan would save the city $173 million for every 1,000 new cops and firefighters hired.
The mayor's plan was developed in collaboration with labor representatives and it sparked no immediate outcry of resistance from that politically potent bloc.
"We're going to be supportive of this," said Pat McOsker, president of United Firefighters of Los Angeles City.
Eric Rose, a spokesman for the Los Angeles Police Protective League, said the league would not take a position until the council considers the pension proposal in a meeting scheduled for Friday.
City officials in the meantime are weighing broad pension reform ideas for civilian employees on the city's 30,000-plus payroll.
"Now that the mayor has come to the table with a proposal for sworn personnel, both sides of the pension equation can be addressed," Council President Eric Garcetti said in a statement.
Under the mayor's proposal, public safety employees who earn $100,000 annually and retire after 20 years would be eligible for a pension equaling 40% of their salaries, or $40,000. That would be $10,000 a year less than under the current formula, which grants pensions of 50% of pay after 20 years.
As in the existing plan, the mayor's proposal would hike pension payouts gradually until reaching a maximum benefit level of 90% of an employee's salary after 33 years of service. However, the new plan would stagger increases to save cash and provide an enticement for personnel to remain.
The city is also demanding that newly hired police officers and firelighters contribute 2% of their income to pay for post-employment healthcare benefits. That would be on top of their usual 9% pension contribution.
The plan would also eliminate "pension spiking," said Santana, by calculating retirement based on workers' average salaries during their highest-paid two years, not based a 12 month period, as is currently the case.
Times staff writer David Zahniser contributed to this report.