LA’s Pension War Goes Nuclear
Riordan’s Fair Share Pension Reform plan will also force the candidates for Mayor, Controller, City Attorney, and City Council to pick sides as the union leadership will demand absolute loyalty in return for their campaign contributions.
Based on press reports, Riordan’s plan would “move newly hired workers into 401 (k) style plans and freeze retirement benefits for existing workers,” saving the City “hundreds of millions of dollars every year by 2017 and upwards of a billion dollars by 2020.”
This compares to the meager $15 million savings in 2017 under Mayor Villaraigosa’s lame “Retirement Security Plan,” representing about 1% of the General Fund’s 2017 projected pension contribution of $1.3 billion.
There is no doubt that the City has a major league pension problem.
The City’s two pension plans, the Los Angeles City Employees Retirement System and the Fire and Police Pension Plans, have an unfunded pension liability of $9.5 billion, representing a funding level of only 73%.
However, if this liability were determined based on a more realistic investment rate assumption, the unfunded pension liability would be at least $13 billion, a funding level of only 66%.
Pension contributions are also devouring the General Fund, suffocating numerous programs and services, catapulting from $350 million (9.6% of the General Fund) in 2005 to a projected $1.3 billion (26% of the General Fund) in 2017.
If the truth be known, the annual pension contributions would be even higher if the City had not relied on an overly optimistic investment rate assumption and resorted to numerous under the radar gimmicks such as extending the ‘smoothing” period and lowering various inflation assumptions.
Unlike the Mayor’s plan which applies to only new civilian employees, the Riordan’s Fair Share Pension Reform plan will impact all new and current City workers, including the police and fire fighters, and those employees covered by the Department of Water and Power’s pension plan that is underfunded by almost $2 billion (80% funded).
Needless to say, the leadership of the City’s major unions (including, among others, SEIU 721, the Police Protective League, the United Firefighters, and IBEW) will go nuclear, trashing Riordan, asserting that there is no problem with the pension plans, launching numerous legal challenges, and claiming that this measure is a violation of collective bargaining, a crude attempt to bust public sector unions, and an attack on the middle class.
The leadership will also mobilize its resources to thwart the collection of the 250,000 signatures needed to place this charter amendment on the ballot, which would include, among other tactics, “picketing” signature gatherers in public locations.
The union leadership may even pressure their captives on the City Council to place an alternative plan on the ballot.
If The Fair Share Pension Reform Act of 2013 makes it to the May ballot, it will become an issue of national importance, as the voters in the nation’s second largest city, a Democratic stronghold in the very Blue State of California, battle the public sector labor unions in order to save their City from insolvency.
Just imagine the money that this ballot measure will attract, not only from our local public sector labor unions, but from partisans on both sides of the issue throughout the country.
Underlying this plan for serious pension reform is the very real concern that our City will become insolvent within the next five years.
Our City’s finances are so desperate that senior elected officials have secretly discussed the sale of our Department of Water and Power, the Port of Los Angeles, and/or Los Angeles International Airport.
To earn a seat at the table, our public sector unions must develop a detailed plan that addresses how the City will “Live Within its Means.” This would include a Five Year Financial Plan, balanced budgets based on recurring revenues and Generally Accepted Accounting Principles, and, over the next ten years, programs to eliminate the $10 billion unfunded pension liability and to repair our lunar cratered streets, our cracked sidewalks, and the rest of our crumbling infrastructure.
As for Riordan’s pension reform plan, there are two questions.
The first is whether our wannabe mayors, Perry, James, Greuel, and Garcetti, support or oppose The Fair Share Pension Reform Act of 2013. A straight up Yes or No! Weasel words are not acceptable.
The second is: “How do we sign Riordan’s pension reform petition that will prevent our City from going broke?”
Jack Humphreville is the LA Watchdog writer for CityWatch, President of the DWP Advocacy Committee, Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and Publisher of the Recycler