Worried about the prospects of a new round of budget cuts during his last two years in office, Los Angeles Mayor Antonio Villaraigosa has grown increasingly bold — some say too aggressive — in his attempts to influence panels that guide the city’s huge retirement funds.
Two weeks ago, Villaraigosa warned a seven-member board overseeing pensions for civilian employees that a new round of layoffs would “almost certainly” occur if the panel scales back income projections for its $11-billion portfolio.
The week before, the mayor’s lawyer called on the Fire and Police Pensions board to disregard a legal opinion on potentially costly health benefits owed to retired police officers and firefighters. And in recent months, Villaraigosa has removed two pension appointees who took positions or cast votes that he opposed.
The forceful approach is raising questions about how far a mayor should go in efforts to sway decisions by public pension boards, which under state law are supposed to remain free of political interference.
Retirement boards are charged with investing billions of dollars and safeguarding benefits for tens of thousands of city retirees. Villaraigosa appoints a narrow majority on the two boards, one for police and firefighters and another for other employees. Labor representatives hold a narrow minority of seats.
One dramatic example of political involvement has been playing out at the civilian City Employees’ Retirement System board. The panel is scheduled to vote Tuesday on a hotly debated plan to lower the long-term projection of its investment return from 8% to 7.75% annually. The change would increase the city’s payment to the fund by nearly $27 million next year.
Similar adjustments already have been made by other public pension agencies during the economic downturn. But Villaraigosa wants the decision delayed for one year to lessen the effect on the city budget.
“This request is completely reasonable … given our own financial situation,” he said Monday.
City Administrative Officer Miguel Santana, who advises the mayor, warned that the city would need to lay off at least 400 employees if the pension board refused to go along with the delay. If the board ignores the mayor’s request, it should at least spread the cost over five years, he said.
The issue first came before the board two weeks ago. Board President Roberta Conroy said she was driving to the meeting to cast a vote on the investment projections when she got a call from Matt Szabo, Villaraigosa’s deputy chief of staff.
Szabo had a meeting that morning with the mayor and four council members, Conroy said, and wanted to know where she stood.
“I indicated that it would be difficult” to ignore the agency’s actuarial firm, which concluded an 8% annual return was unrealistic. That firm warned the board that the figure may have to drop to 7.5% next year, she said.
Three days later, Villaraigosa’s lawyer told Conroy she was being replaced.
The mayor’s involvement disturbed some labor representatives on the pension boards, including Ruben Navarro, a firefighter who sits on the nine-member Fire and Police Pensions board. Navarro said his fiduciary duty is to ensure his agency delivers benefits to the next generation of police and firefighters, not to balance next year’s budget.
“You’ve got to plan not for tomorrow, not for the 21 months left in the mayor’s term, but for 30, 40, 50 years from now,” Navarro said.
Villaraigosa spokesman Peter Sanders said there is nothing inappropriate about the mayor expressing his views. And Santana argued that pension boards also have a fiduciary duty to current employees, including those in danger of being laid off.
The mayor would not discuss Conroy’s departure, saying only that he had accepted her resignation. Conroy said her firing came as a surprise and pointed out that commissioners are required to submit a resignation letter when they are appointed, so that they can be removed at any time.
Rick Rogers, another pension board member, said he believed the tug of war over the financial assumptions played a role in Conroy’s departure. He suggested that Villaraigosa was dropping hints to his other appointees. “The message is, you follow my direction or you’re off the board,” he said.
Conroy is not the only pension commissioner to be replaced this year. Villaraigosa appointee Adlai Wertman lost his seat on the Fire and Police Pensions board in June after he disregarded the mayor’s wishes on healthcare subsidies. Wertman voted to increase those benefits by 7% for retirees, after the mayor held a news conference opposing such a move.
The measure passed 5 to 4, with Wertman casting the deciding vote. Villaraigosa’s other four appointees on the board sided with the mayor. Wertman had no comment. But two of his colleagues said he was punished for defying Villaraigosa.