So What About LA’s Pension Time Bomb?

LA WATCHDOG - We have been overwhelmed by the disingenuous rhetoric from our manipulative Elected Elite who occupy Sacramento about how the recently drafted “pension reform” legislation will solve the State’s pension problems.

But this late night, last minute legislation does very little to solve the State’s pension problems which consist of escalating annual contributions and an unfunded pension liability that has been estimated to be between $250 billion and $500 billion, or about $18,000 to $36,000 for every household.

Rather, this con job is just another crude attempt to convince California voters to approve Proposition 30, Governor Brown’s $8 billion tax increase that will essentially fund these massive pension obligations.

Of course, this is contrary to the Brown’s bogus claim that these new funds are “for the kids” and their education.

But lost in all this clamor is the status of Mayor Villaraigosa’s Eight Point Civilian Pension Reform Plan that he introduced in April as part of his “balanced” budget that was hardly balanced.

As of June 30, 2011, the Los Angeles City Employee Retirement System (“LACERS”) was only 69% funded and had an unfunded pension liability of $4.7 billion. Pension contributions are also expected to increase by 45% over the next four years, from $342 million to almost $500 million.

But this feeble attempt at pension reform that would only impact newly hired civilian employees has not seen the light of day as the super secret Executive Employee Relations Committee (consisting of Villaraigosa, Wesson, Reyes, Koretz, and even Paul Krekorian, Chair of the Budget and Finance Committee) (the “EERC”) has kept this proposed legislation bottled up because of the vehement opposition of the campaign funding leadership of the City’s public labor unions.

But people are beginning to rattle the cages of the financially irresponsible occupiers of City Hall.

Mayor Riordan and a “brigade” of civic leaders pressed the EERC to control pension costs by freezing salaries and increasing the pension contributions by current workers.

He and other civic leaders also threatened to put pension reform on the ballot.

Of course, the City’s union leadership went ballistic, saying that the Riordan plan was “pension evisceration” and that the unions had already made considerably sacrifices.

Yet, left unsaid was the fact the average salary for City workers during the profligate Villaraigosa will have increased by at least 35%, significantly higher than the wage of the average Angeleno who is just thankful to have a job, with or without medical benefits.

David Zahniser of The Los Angeles Times also contributed to the ground swell by highlighting that the City’s contribution to the $4.8 billion underfunded Fire and Police Pension Plans (“FPP”) is projected to escalate by 56% over the next four years, from $506 million to almost $800 million.

But that is just part of the story as total pension contributions to both LACERS and FPP over the same four year period will increase by over 50%, from $850 million to almost $1.3 billion, representing almost 26% of General Fund revenue.

And if you toss in benefits, pension and benefit expense will total almost $2 billion, representing 40% of General Fund revenue.

And then LA Times columnist Steve Lopez jumped into the fray, wondering why anybody in their right mind would want to be Mayor of Los Angeles, a City careening towards insolvency.

But the most interesting aspect of Lopez’ column was the failure of the three City Hall insiders who want to be our next mayor to come up with any concrete solutions to the City’s pension mess.

Only outsider Kevin James had specific ideas, outlining seven solutions and three more to be considered.

Unfortunately, pensions are only part of the City’s problem.

There is also the not so minor issue of the $10 billion (or more) that is needed to repair and maintain our failing infrastructure that has experienced rapid deterioration ever since Villaraigosa was elected Mayor in 2005.

That is evident just by driving on our lunar cratered streets, the second worst in the nation after San Jose, or walking on our frost heaved sidewalks or through our neglected, overgrown parks.

$20 billion of unfunded pension liabilities and deferred maintenance, a continuing Structural Deficit where the increase in personnel expense will exceed the growth in General Fund revenues by $300 million a year, a projected four year cumulative budget deficit of over $1.1 billion, and a spineless Mayor and City Council that are unwilling to go to the bathroom without permission from the campaign funding union leadership is why we need a ballot measure that will require the City to “Live Within Its Means.”

This common sense amendment would require the City to develop and adhere to a Five Year Financial Plan, approve two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next ten years, provide adequate funding for the repair and maintenance of our streets, parks, sidewalks, and the rest of our infrastructure, and the elimination of the City’s unfunded $10 billion pension liability. The City would also be mandated to fully fund any future spending programs or tax cuts.

Of course, such an amendment would have the support of a vast majority of the voters, just like in the left leaning city of San Jose where, despite strenuous public union opposition, 70% of the voters approved comprehensive pension reform that will require current employees to significantly increase their pension contributions.

Finally, the failure of City Hall to even consider Villaraigosa’s lame Civilian Pension Reform Plan in the face of vigorous opposition by the campaign funding public union leadership is another excellent reason to vote YES on Proposition 32 (better known as “Paycheck Protection” or “Stop Special Interest Money Now”) that will help reform the financing of our City’s elections.

(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- He can be reached at: –cw

Vol 10 Issue 73
Pub: Sept 11, 2012