Los Angeles Mayor Antonio Villaraigosa said he'll ask voters in the second-largest U.S. city by population to decide whether new police and firefighters should get lower pension benefits than existing employees.
The city faces at least five years of budget deficits, including a $492 million gap for the fiscal year that begins July 1, City Administrative Officer Miguel Santana said in an interview. Its cost to pay pensions will nearly triple in the coming year to $801 million from $277 million in 2000, according to a report from Santana's office.
"We can't sustain the pensions or the medical benefits at the rate we are currently," the mayor said in an interview. "I've said let's work together to make our pay structure, benefits and pensions more sustainable and put ourselves back on the path to a sound financial footing."
Villaraigosa, 57, a Democrat in his second term, said he's looking to increase pension contributions and decrease benefits for both civilian and uniformed city employees. While changes for civilians can be done by ordinance, those for police officers and firemen have to be put on the ballot. A vote on pension changes for uniformed employees may come in November, but will most likely be in March, Villaraigosa said.
The mayor on April 20 unveiled a budget for fiscal 2010- 2011 that proposed eliminating 3,500 jobs from the city's workforce of 35,864 and cutting services, including closing libraries two days a week and reducing pothole repairs and tree trimming. Even with those cuts, Los Angeles would post deficits for the next several years, including a $472 million gap in 2015, according to Santana.
Pension Costs
Los Angeles last month had its bond ratings lowered by Moody's Investors Service and Fitch Ratings, and was placed on a list of credits at risk of a downgrade by Standard & Poor's, because of its budget-balancing problems. S&P today removed the city from CreditWatch because it expects finances to improve with a $73 million payment from its utility.
Politicians from New Jersey to California have been seeking to trim public-worker salaries and benefits to help close budget deficits that emerged as tax revenue fell and expenses rose amid the longest U.S. economic slump since the Great Depression.
In New Jersey, Governor Chris Christie signed bills aimed at reducing employee costs and paring down a $46 billion deficit in the state pension system. The measures exclude part-time workers from the $67.3 billion pension system, require teachers for the first time to pay for health insurance, and cap payouts of unused sick time at retirement.
Different Pensions
Los Angeles police and firefighters last got an increase in their pension benefits in 2002, Assistant City Administrative Officer Tom Coultas said in a telephone interview. Officers and firefighters can retire with annual pension payments equal to 90 percent of their last salary, up from 70 percent under the previous plan.
If voters approved the pension changes, newly hired police and firefighters may see increases in the percent of their salaries they pay into the plan and decreases in the percentage of the pay they receive in retirement, Coultas said.
"We're working through a series of proposals," he said.
Pat McOsker, president of United Fire Fighters of Los Angeles City, which represents 3,600 city workers, said the mayor hadn't approached him yet with a plan for changes.
"Our pension system is 96 percent funded, even after the worst stock market crash in 80 years," McOsker said in an e- mail. "You shouldn't ask two firefighters hired at different times to take the same risk at an emergency and then provide different pensions to their survivors should something tragic happen."
