Advertisement

L.A.'s new fiscal reality

One of Richard Riordan’s major goals as mayor was to enlarge the Los Angeles Police Department. Much of the city’s future and quality of life depended on putting more officers on patrol to protect a growing city and to change the LAPD’s tragic and costly tradition of confrontation. But recruiting was hard. After state law boosted pension benefits for Highway Patrol officers and other state workers in 1999, cities up and down California decided to do the same for their public safety workers, offering “3% at 50" — retirement at age 50 with 3% (rather than the former 2%) of the final year’s salary for every year worked, plus an annual cost of living increase, for life. Longer service could earn a retiree up to 90% of the last year’s pay annually.

In June 2001, Los Angeles voters adopted Measure A to give such a pension increase to the city’s police officers and firefighters. The stock market had tanked the previous year, but recovery had begun and reputable economists continued to argue that the Internet-based economy represented a “new normal” of infinitely foreseeable double-digit investment growth, or at least the 8% that most pension agencies were counting on.

Economists now argue whether our “new normal” will actually yield growth rates of 7.5% or 5% or lower, but the city’s current budget situation should make something clear: The new normal now includes pension obligations to police and fire retirees that will reach 19% of the city’s budget in five years, up from 8.7% this year. Meeting that obligation would require continuing cuts and layoffs. And that’s just the public safety portion, not counting other city workers.

Another undisputed aspect of the new normal is that medical costs for retirees have risen an average of 10% a year for each of the last 10 years. The city has traditionally paid those costs, although it is under no charter obligation to do so. The new normal also includes retirees living longer, with medical costs that rise with age.

Advertisement

As Mayor Antonio Villaraigosa noted this week, Los Angeles can no longer afford to pay retiree medical care without any employee contribution. He has proposed a modest — in our view, a too-modest — 2% annual contribution. It’s OK as a minimum, but the city can’t afford it to be carved in stone as the maximum contribution.

Nothing can or should undermine the city’s obligation to current public safety retirees and employees. But the City Council must now ask voters to offer a more rational, although attractive, retirement benefit to new police and fire recruits at pre-2001 levels. The council has until Nov. 3 to put a measure on the March city ballot.

It will not be enough to protect the city’s budget, but if the city continues to hire at a steady pace to replace retiring police officers and firefighters, the proportion of employees working toward the more rational benefit will increase. It’s step one in addressing the city’s pension crisis.


Advertisement