In a major policy reversal that critics say will cost the city and taxpayers millions of dollars, Los Angeles Mayor Eric Garcetti has abandoned his long-stated goal of getting the city’s public employee unions to pay a portion of their healthcare costs.
Under contracts signed this year that were supported by the mayor, many of City Hall’s largest unions will continue to contribute nothing toward their healthcare premiums. Garcetti also backed agreements with several smaller unions, allowing those employees who had been contributing 10% of their premiums to stop paying in January.
The decision is an about-face from what Garcetti told voters while first running for mayor. He had vowed to push city employees to contribute 10% toward the cost of their healthcare.
“You get elected talking tough,” said Christopher Thornberg, founder of consulting firm Beacon Economics. “Then you get into office and roll over.”
Critics say Garcetti is ignoring warnings about City Hall’s shaky finances, as budget analysts warn of looming deficits. It also reflects how his public relationship with labor unions has shifted from adversarial to friendly since he first ran for mayor.
Garcetti said union leaders persuaded him that requiring contributions would hurt the poorest city employees. He said he instead chose other strategies for cutting costs, such as persuading unions to give up pay raises in certain years.
“I’m agnostic about where you save money,” he said. “Whether it’s in healthcare or in less of a raise, a dollar is a dollar is a dollar.”
Budget analysts said last month that the city faces annual deficits of $200 million to $400 million because of new labor deals that leave the city on the hook for raises and healthcare costs for police, fire and civilian workers.
L.A.'s practice of paying 100% of the cost of the healthcare premiums for most of its 50,000 city employees — though workers chip in toward co-pays and prescription fees — “is not typical,” according to a 2017 city controller audit. The review cited a national study that showed the overwhelming majority of large government employers require employees to chip in.
According to a Times analysis, the city is projected to spend at least $740 million on healthcare for all of its employees this year — a 34% increase over spending in 2013, when Garcetti first took office. The city also is paying more for healthcare in part because of the thousands of employees have been hired in recent years.
Garcetti had said on the campaign trail that year that he’d stand up to public employee unions and rein in rising costs at City Hall.
At the time, Los Angeles was still recovering from a recession that had led to employee furloughs and cuts to basic city services, including sidewalk repairs, tree trimming and street paving. Like other cities across the country, the downturn drained tax revenue. Healthcare, salaries and pension costs for public employees were consuming a concerning share of the city budget.
Today, though, L.A.'s economy is humming along and most of the city’s workers still pay nothing toward their healthcare costs.
Garcetti said the city has had success negotiating prices with healthcare companies. This year, he said, there is no rise in civilian healthcare premiums for the city, for example. Overall, that cost has risen 22% since Garcetti first became mayor, his office said.
John J. Pitney Jr., a professor of government at Claremont McKenna College, said there’s less pressure on politicians to get labor concessions because the economy has been strong and polls show the public views unions more favorably. At the same time, the national Democratic Party is focused on lowering healthcare costs for individuals.
“In good times, politicians can be more generous,” Pitney said.
After the 2009 recession plunged L.A. City Hall into financial crisis, then-Mayor Antonio Villaraigosa convinced the group representing engineers and architects to pay 5% toward their healthcare premiums, or about $65 a month. Villaraigosa said at the time it was the first time a union had made such a concession.
The following year in 2011, then-Councilman Garcetti stood next to Villaraigosa at City Hall to announce that city workers had agreed to pay toward their retirement healthcare costs.
The city’s largest labor groups declined to endorse Garcetti in the mayor’s race two years later, but he used that to his advantage, saying he’d be independent from labor and telling voters he had already won healthcare concessions from workers.
City workers “have to have some skin in the game, because when healthcare costs triple, they don’t feel it,” Garcetti during at a 2013 debate at Loyola Marymount University.
After winning, Garcetti began paying 10% toward his own healthcare premium as part of a labor deal with City Hall’s executives. Several smaller employee groups also began pitching in 5% to 10% toward their healthcare premiums under contracts inked during Garcetti’s first term.
But the mayor encountered resistance from the Department of Water and Power’s largest union, which refused the concession in its 2013 and 2017 contracts. However, Garcetti and other negotiators convinced the union to forgo raises in its 2013 agreement, which saved the city $385 million, budget analysts said.
The Coalition of L.A. City Unions, the largest civilian employment group representing 20,000 workers, also balked. Its leaders refused to pay the 10% healthcare premium as part of a2015 contract, though they did agree to defer raises.
Their contract that passed this year also doesn’t require a healthcare contribution.
The coalition “would absolutely never agree” to it, said City Councilman Paul Koretz, who serves alongside the mayor on a panel that negotiates with unions. Koretz said he was never fully on board with the healthcare concession plan, saying it was hatched during the recession.
Without the backing of the Coalition of L.A. City Unions, city leaders abandoned their goal. Several labor unions that had been contributing to healthcare premiums, including the management labor group of which Garcetti is a member and the union representing engineers and architects, will stop next year.
Members of the Engineers and Architects Assn. also will get a one-time cash payout from the city. Michael Davies, the union’s interim executive director, said it was for “past sacrifices,” including payments members made toward healthcare.
SEIU Local 721 President Bob Schoonover cast the city’s one-time push for healthcare contributions within the broader context of shrinking benefits for middle-class workers across many industries. He called it a “race-to-the-bottom mentality.”
It’s unclear how much money the city could have saved if employees contributed to their healthcare costs, but a 2013 report predicted as much as $50 million annually in savings.
Budget analysts have warned that the city will face deficits in the next four years. City departments were ordered to find ways to reduce costs.
Garcetti said those concerns weren’t unusual. He said budget officials always “warn people that the sky is falling” in order to push departments to save money.
But Pitney sees risks for Garcetti if a recession squeezes City Hall’s budget.
“There is a chance that this could come back and hurt him,” Pitney said.