LA councilmembers consider pension reform

A view of City Hall in downtown Los Angeles, Calif.
A view of City Hall in downtown Los Angeles, Calif.
Omar Omar/Flickr CC

Amid skyrocketing pension costs, several Los Angeles City Council members Friday called for pension reforms that would affect future hires.

"City Hall must fundamentally reform the way it does business, and reforming the pension system is a key component to that,'' City Council President Eric Garcetti said. "The status quo is unacceptable.''

City Administrative Officer Miguel Santana said there is an urgent need to reform the city's pension system.

"As of [Friday], we're projecting a $320 million deficit starting July 1, and half of that deficit is created because of the increased pension costs,'' Santana told City News Service.

The city has three pension systems: the Los Angeles City Employment Retirement System (LACERS); a separate one for police officers and firefighters; and another for workers at the Department of Water and Power.

On Friday, Garcetti filed a motion directing the city's lawyers and budget analysts to draft an ordinance within 10 days that includes LACERS pension changes for future hires.

The motion should include a provision to raise the retirement age from the current 55 to at least 60, Garcetti said.

Garcetti also proposed requiring employees to make a minimum 2 percent contribution toward their retiree health benefits. Currently, employees pay nothing.

In the the motion -- which was seconded by council members Bill Rosendahl, Greig Smith, Bernard Parks, Janice Hahn, Tom LaBonge and Dennis Zine -- Garcetti also sought to bar practices known as double dipping and pension spiking.

According to Santana, double-dipping happens when, for example, a police officer retires, begins collecting a pension, then is rehired as a background investigator for the Personnel Department. Under current rules, that employee could be entitled to receive a second pension, this time from LACERS.

Pension spiking occurs when employees receive a promotion -- and with it, a significant raise -- just before they retire, Santana said.

Garcetti recommended doing away with the current practice of basing final compensation on an employee's average salary over his or her last year at work. Instead, he proposed basing the pension on the employee's average salary over the last three years.

Pension benefits are tied to the consumer price index, and Garcetti proposed lowering the CPI cap to 2 percent from the current 3 percent.

Garcetti also asked the city's lawyers and budget analysts to report on the pros and cons of setting a "pension cap'' and changing the contribution plan for "higher-earning employees.''

Currently, most civilian city employees pay 6 percent toward their pension, a rate which will go up to 7 percent in July.

Santana estimated that unless pension reforms are undertaken, pension costs would account for 33 percent of the city's budget within the next five years. The city is already dealing with health care costs that have risen by 10 percent in each of the last 10 years, he said.

According to Santana, the city is required to negotiate with unions on pension reforms for existing employees enrolled in LACERS, but an ordinance is sufficient to implement changes for future hires.

Barbara Maynard of the Coalition of Los Angeles City Unions, disputed that, saying, "Any changes to the city's pension plan, as well as to the compensation of city employees, must be a part of comprehensive negotiations
and cannot be legislated by the council.''

Garcetti said pension reforms for police officers and firefighters must be approved by voters through a ballot measure, while those for DWP workers must be enacted by the DWP board.