L.A.’s pension path
The City Council on Tuesday will consider a sharp rollback in pensions for newly hired employees, offering them lower benefits with less financial help from the city. Unlike the reforms recently adopted in San Diego, San Jose and the state Legislature, the proposal the council is mulling wouldn’t touch current employees’ benefits. So in a way, it’s solving a future problem, not the one the city faces right now. Nevertheless, if the city’s pension benefits aren’t sustainable, it doesn’t make sense to offer them to the next generation of employees.
The city has struggled with budget deficits on and off for decades, but the persistent shortfalls in recent years have been exacerbated by growing pension costs. According to City Administrative Officer Miguel Santana, the city’s bill for civilian worker pensions is projected to increase 45% over the coming five years. That’s the equivalent of more than 2,000 city workers’ salaries, or 440 miles of street repavings. Over the same period, the unfunded liability of those workers’ pension fund — the gap between the contributions received and the amount ultimately owed to retirees — is expected to grow by almost 50%, to $6 billion.
The coalition of unions that represents civilian workers — those who aren’t sworn officers of the police or fire departments or employees of the Department of Water and Power — argues that concessions made in recent years, such as increasing employees’ pension contributions and deferring raises, have solved the problem. And if more needs to be done, the unions say, the changes must be negotiated, not imposed. But the budget numbers tell a different story, and the unions’ claim to have veto power over the benefits offered to people who don’t yet work for the city strains credulity.
The proposal advanced by Santana, Mayor Antonio Villaraigosa and Council President Herb J. Wesson Jr. is tough on new employees, raising the age for retiring with full benefits, reducing the size of the pensions earned, capping cost-of-living adjustments and narrowing retiree health coverage. Those provisions may go too far, and if they drive off employees or applicants, the council may have to adjust them later. The plan would require workers to cover some of the shortfall if the fund doesn’t generate sufficient earnings to finance benefits, and that’s a principle worth preserving.
There aren’t many ways for the council to rein in pension costs without reneging on promises made to existing city workers. It has already frozen salaries, eliminated jobs and sent workers on unpaid leave, all of which it may have to do again. And, as it has negotiated with police and firefighters, it can offer less costly benefits to new hires. The continued increase in pension liabilities for civilian workers is ample proof that the city needs to stop making the problem worse.
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