Villaraigosa Proposes Mild Pension Reform for New Police and Firefighter Hires


Facing a crushing pension obligation problem, Mayor Villaraigosa tries to save the city's future by suggesting a mild reform of pension outlays for future police and firefighter hires.

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The Daily News on the nature of the problem:

last budget year, the city contributed about $650 million to its two pension systems. That figure is expected to double to $1.3 billion in four years and probably increase even further after that. Pension costs alone are expected to take up one-third of the city's general fund within two years.

And on Villaraigosa's proposed solution, which if approved by the City Council could end up on a ballot for L.A. voter approval in March:

the mayor's plan calls for new hires to pay 2 percent of salary for health care, up from nothing now. It would also reduce the pension for those who retire after just 20 years to 40 percent of their salary rather than the current 50 percent....

City Administrative Officer Miguel Santana said the mayor's proposal is expected to save about $120 million in the first 10 years. That is just a fraction - about 20 percent - of the city's looming pensions bill.

The pension reform proposal isn't enough, some argue:

The Civic Alliance supported many of the specific proposals, although it said it wanted to see a higher retirement age and benefits calculated on the last three years of pay to avoid pension spiking in the final year of an employee's career....

Also, financial consultant Alex Rubalcava, who has been working with former Mayor Richard Riordan on the issue, said the city was ignoring an approach where workers would have a defined contribution pension system, similar to 401(k) plans.

And for city workers outside police and firefighters, pension changes that voters won't have to approve might be on the horizon:

Last Friday, Council President Eric Garcetti introduced a reform proposal for the civilian pension fund, which can be changed by ordinance and without going before voters.

The proposal includes raising the retirement age to 60, requiring a three-year averaging of salaries to determine pensions and prohibiting drawing a pension and salary at the same time.

Firefighters are already on board with Villaraigosa's plan; the police union is waiting until it gets to City Council to say anything.

The L.A. Times has more on the specifics of the mayor's pension plan:

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.

Past City of Angles blogging on the pension crisis statewide.

(Photo: David McNew/Getty Images)

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