UPDATE: The LACERS pension board delayed a vote today on the city’s
planned early retirement program as union leaders stepped up their
campaign to derail a controversial proposal for making the city pay off
the program’s cost 10 years sooner than expected, the TImes reports. LACERS will convene a three-member panel to discuss the
payment timeline for the early retirement initiative.
Publicly and privately, the mayor was saying not so long ago that the sweetened early retirement deal city unions wanted was unaffordable.
For once, he was right. Too bad, he lacked the courage of his convictions.
Even as the pay-to-play corruption of public policy reaches new heights, City Hall has stepped up its reliance on a play now, pay later philosophy of fiscal mismanagement.
For years, City Hall has carried forward a structural deficit — it was committed to spending more money each year than it actually was expecting to take in — so it begged, borrowed and stole a couple of hundred million dollars to cover its overspending. For most of two years now since the economy started to slide, it has stepped up its borrowing against the future while displaying its lack of political will in its inability to make substantive cuts and focus on basic services.
Facing a $530 million deficit going into this fiscal year — and now a $200 million additional hit thanks to the gross dysfunction of the state government — LA’s elected leadership has chosen to juggle the books, reward 2,400 or so senior city workers with a lucrative buyout/pension deal and mortgage the city’s future for years to come in a way that escalates the level of risk from high to catastrophic.
Even in the bureaucratic language of Sally Choi, head of LACERS, the underfunded pension fund that covers most city workers, the strategy of “smoothing” repayment of the cost of the early retirement package is not “fiscally prudent.”
The difference is enormous.
In accepting the deal, city unions agreed to increase their members’ contributions for pensions and lifetime health benefits from 6 to 6.75 percent of their salaries, still far below Social Security/Medicare.
But an actuarial study only coming out now — long after the mayor and City Council cut this deal — shows their contributions need to be between 8.86 and 10.7 percent to repay the pension fund within five years.
The unions, backed by the mayor, are as adamantly opposed to early repayment as they are for early retirement.
“The mayor continues to believe that an early retirement package is
better than layoffs,” mayoral spokesman Matt Szabo said told David Zahniser in the Times. “The question now is, how much will
it cost and how much will we save?”
Having flip-flopped to please the unions, it’s a little late for the mayor to be asking those questions.
Even some Council members are getting squeamish. Jan Perry is alarmed, Bernard Parks is having “grave difficulty” finalizing the deal and Dennis Zine says, “This is not good news for the unions.
This is not good news for those who thought they had a deal for early
Not to worry.
The plan is already in the works to spare the city coming up with $1 billion next year and even more in the years ahead to keep the pension funds solvent as the cost to taxpayers rises to well above 40 cents for every dollar of payroll. Just as they proposed “smoothing” the costs of repaying the cost of the early retirement package, they are moving to “smooth” over a long period of time the cost of keeping the pension funds solvent.
In other words, they are hoping and praying that by burdening the city’s future with heavy debts they can put off doomsday and an economic miracle will somehow save the day.
The trouble is it won’t work and they know it.
The current budget is so fragile that the Council is re-budgeting on a weekly basis, preparing this week to steal money from the parks and libraries.
They are on the road to ruin. If there is any lesson to be learned from the nation’s current economic crisis, it’s that borrowing against the future at a level far beyond your means will lead to dire consequences.
It’s too late for our elected officials to show a modicum of political courage and start facing the harsh reality that a lot of its social welfare programs have to go, that the city cannot afford more than basic services — if it can afford even that.
They can play games with the public’s money all they want but the bills are coming due and now is the time to pay them so that LA will actually have a future.