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Richard Riordan: LA headed for disaster without pension reform (updated)

Former Los Angeles Mayor Richard Riordan and business community leaders on Wednesday called for an overhaul of the city’s pension system that would include changes for current employees. 

Speaking before the Executive Employee Relations Committee, Riordan told Mayor Antonio Villaraigosa and several city council members that basic services — such as the police department and sidewalk repair — could be decimated without significant reductions in what the city pays toward employees’ retirement. He and leaders from the Los Angeles Area Chamber of Commerce want to see charter amendments on the ballot to change the city’s pension system.

The proposal would affect the pensions of current employees by capping their salaries, which determine retirement benefits.

Including current employees in pension reform would almost certainly be challenged in court. Voters in San Jose and San Diego recently approved pension reform for their employees. Immediately after the election, the City of San Jose asked a federal court for a prompt ruling on legal issues that may arise as a result of the vote. 

Pension costs for the City of Los Angeles are expected to increase by $442.6 million between 2012 and 2016, according to Riordan, who cited data from the City Administrative Officer.

“Our message today is not about blame," Riordan said. "It is about all of us working together to find a solution to a pension system that, if unchanged, will spell disaster for the city of Los Angeles. The time to act is now. If not now, when? If not us, who?” 

The group’s proposal calls for:

  • Allowing voters, and not the mayor or Los Angeles City Council, to approve changes to employees’ benefits
  • Capping workers’ salaries and the maximum contribution made to pensions
  • Creating a new pension category for new employees

Prior to 1972, voters were tasked with overseeing civilian pensions.

The Riordan proposal deviates from one backed by the mayor, which would:

  • Increase the retirement age for new civilian employees to 67
  • Cap pension benefits at 75 percent of final compensation
  • Reduce cost of living adjustments
  • Eliminate health benefits for retirees’ dependents 

Villaraigosa has previously said he will pursue a ballot measure if the city council does not approve his pension plan. In response to the Riordan plan, the mayor said, "We must act now to protect current employees' pension security and city services. I applaud the business community's decision to join other stakeholders in this important debate."

The plan prompted a sharp response from the president of SEIU Local 721. 

"Here you have a proposal being floated by one of the richest people in the city of Los Angeles and the Chamber of Commerce that would essentially gut retirement plans for middle-class city workers. It is an unfair and unwarranted attack. What Richard Riordan and the Chamber are proposing is not pension reform, it is pension evisceration," said Bob Schoonover.

Councilman Paul Krekorian, chair of the Budget and Finance Committee, declined to comment.

This post has been updated.

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