As you may have read in recent news stories, former Mayor Richard Riordan has taken the first steps toward eliminating the current pension system for all future City employees and replacing it with 401(k) plans. However, this proposal will not only impact the pay and benefits of current employees, who have already given years of service to the City, but it will be detrimental to Los Angeles taxpayers.
Under the Charter Amendment proposal, which needs signatures from more than 254,000 registered voters by Dec. 7 to qualify for the May 21, 2013 election, Riordan’s proposal would close the current pension systems and have all future employees adopt 401(k) plans. Please tell your friends and family that if they value the work of police officers, firefighters and other City workers, they should not sign this petition.
The Riordan scheme has the catchy ballot title, “Bankruptcy Avoidance and Pension Protection Act,” when in reality the cost of closing the three pensions plans is projected to cost taxpayers nearly an additional billion dollars in the next decade alone. His poorly thought-out plan does not save the City money, despite his witty sound bites, but instead may lead the City to bankruptcy.
The plan Riordan is proposing immediately becomes more costly to the City. The reasons are twofold: (1) the pension system will have a shorter investment horizon and a lower return rate; and (2) the time to pay the unfunded liability is reduced. In short, it ends up costing taxpayers billions more.
In the past year, nine states considered switching their new employees to 401(K) plans. Every single state that considered it did a thorough independent study and then rejected the switch for one reason: because it does not save taxpayers money and in fact would cost taxpayers billions more!
City Administrative Officer Miguel Santana has examined a possible shift to a 401(k) style system, but found it would cost the City even more than the current system. The study found that the City would still be liable for the benefits to be paid to workers covered by the existing system without the benefit of new contributions from the new City workers.
It is disappointing that the Charter backers may likely bankrupt the City by pushing a plan that is more costly than the current pension systems. Thoughtful analysis and real solutions are needed to solve public employee pension issues – not Wall Street double-talk and Charter changes that are poorly thought out, more expensive and legally dubious.
The Riordan plan is reckless in light of all the publicly available reports from many different states that such a drastic change will cost taxpayers billions.
Richard Riordan is factually wrong about all the pension plans and has no independent analysis to back up his numbers. The Riordan scheme will bankrupt the City. We urge all residents not to sign the petition that would put this poorly thought out plan on the ballot.
