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The People’s Hero, Sally Choi: City’s Sweetheart Early Retirement Deal Blowing Up

In an extraordinary session two months too late, the City Council was thrown into turmoil Tuesday by facing the facts of the real costs of the sweetheart early retirement deal it offered to city unions.

It took Sally Choi, general manager of the largest city pension fund LACERS, to courageously lift the veil of ignorance and incompetence from the Council members with only Bernard Parks showing the intelligence and common sense to see the deal is a financial catastrophe for the city.

Armed with actuarial information form Segal consulting, Choi faced repeated attacks from Council members who leaned heavily on her to consider the impact on the general fund of her recommendation that the estimated $250 million cost to the pension fund of giving 2,400 employees five years extra credit in their pensions (12.5 percent more) be paid back within five years.

She noted five years is the recommended payback period for early retirement incentives and that the council offer of raising employee contributions by .75 percent to 6.75 percent was inadequate to  provide full cost recovery as the council has claimed.

The increase in employee pension contributions won’t take effect for two years and the gap that the city faces paying out of the general fund is about $150 million plus $43 million for cash payments to early retirees. That doesn’t count the $4 billion the city must pay to keep LACERS — one of three troubled city pension funds — solvent because of investment losses in the economic downturn.

Parks pointedly noted that coercion of the pension fund, its board or managers could be illegal and tried to distance himself from the pressure put on Choi.

At the end of the session, union leaders insisted the Council live up to the terms of the deal but got no firm commitment. It will be fascinating to watch the mayor and Council regroup and try to get around the problem they created with their imprudent offer to the unions — a deal they originally said was unaffordable.



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21 Responses to The People’s Hero, Sally Choi: City’s Sweetheart Early Retirement Deal Blowing Up

  1. K says:

    So what ended up happening, Ron? Was anything voted on, decided on, etc?

  2. Anonymous says:

    There’s an example of the one good reason to support Parks and his overly excessive $250K pension. Until he retires, he’ll do anything to save it and ensure that the fund doesn’t go bankrupt. SARCASM, SARCASM, SARCASM
    Actually, we should allow the City of Los Angeles go broke so that all pension obligations can be deemed null and void.

  3. In Eagle Rock says:

    The City Council members are so predictable and unfortunately for us, they tend to continue ignoring warnings of disaster from any and every source.
    Instead, they turn deaf ears to the message, try to discredit the messenger and anything else that will keep them on their determined path to a bad outcome.
    If there is a source that provides information they want to hear, they suck it up- like when the controversy arose about their support for the Proposition B solar energy measure and all the gliterring generalities that were eagerly sucked up as such sales pitches are intended to be by the pitchmen. Such optimum results in terms of benefits and economy were only going to be possible in their minds, with nothing like true facts to be shown.
    The CMs have burned up so much time on these bad deals that they don’t want to put in any more work on the issues. They don’t care (as usual, unless it might affect their re-election chances) so they will try to be done with it and maybe the few cautious members might be able to put the brakes on the city’s early retirement package folly.
    A lot of this has come about due to the “fantastic leadership” (MY sarcasm, THEIR favorite phrase) whereby they do not want to layoff ANYONE, lest they generate some bad feelings. LAYOFFS might have made the most sense but these leaders would rather put the city behind the 8-ball again instead of work to pull it out of the financial death spiral.
    Voters need to start taking notes for the next elections to refute the expected campaign blah-blah-blah of achievements of each CM, while they put in a new batch who might work for the city’s benefit and not their own and that of their special interest benefactors.
    Of course, some of the CMs might decide to break away from the pack and show some GOOD decisions and actions but I suspect the silent agreement is that they all sink or swim together on issues so voters don’t see the real picture, only the one they present.
    Just an opinion from observation.

  4. Anonymous says:

    LACERS has no money for additional benefit payouts. The LACERS pension fund must be so bad off that it JUST WON’T HAVE THE FUNDS to pay for anyone wanting to take early retirement.
    They are trying to tell the City Council, “We don’t have the money to pay for this.”

  5. Anonymous says:

    Richard Alarcon is such a fraud. What a joke! He’s bought and paid for by the public employees unions. No wonder he’s trying to trip up Sally Choi.
    Ms. Choi did a very good job.

  6. KK says:

    Do I understand this correctly, it will cost the city between 150 to 250 million dollars over the next 5 to 15 years to balance the books for this year? And, to keep the cost down to THAT level, NONE of the people who take early retirement can be replaced.
    This plan will cost the city out of pocket a minimum of 91 million dollars over the next two years and will led to 29 cents out of every general fund dollar going to pay pension costs in the next year.
    Finally, and worse of all, any city worker who does not agree to contribute more for his retirement after the next two years can SUE the city because he did not agree to a different benefit.
    PLEASE TELL ME THAT I AM WRONG!

  7. I watch Ch. 35 says:

    For anybody who wants to watch the whole actuary presentation, go to Item 58:
    http://lacity.granicus.com/MediaPlayer.php?view_id=130&clip_id=6462
    So what did we learn?
    1) ERIP will cost $250 million plus
    2) The current unfunded pension liability will go from $2 Billion to $4 Billion
    3) City retirement contributions go from 19% of payroll to 29% of payroll, and won’t be coming down soon.
    4) The City Attorney’s office thinks any change the retirement plan is subject to legal challenge by ANY plan member
    Boys and girls, it is reality time. The payroll must be cut, and that means service cuts. Furlough is the way to start, and then come the layoffs. It is pretty simple–your spending must be in line with your revenues, and you shouldn’t be using your credit card to pay for basics.
    Hooray for Sally Choi for doing the legal and right thing, and having the fortitude and composure to stand up to people like Alarcon.

  8. something to say says:

    As a member of the coalition who voted AGAINST the ratification, I am happy to hear the truthful cost of the ERIP finally coming out.
    I believe the coalition was dishonest in their presentation to their members. The City of Los Angeles is in no position to fund this program. Thank goodness for Sally Choi and the entire LACERS Dept. who reported the true cost.
    One has to ask, why should only a few benefit from the ERIP, especially at the cost of someone else.

  9. Anonymous says:

    SECESSION NOW

  10. M V E R says:

    one thing is for sure city hall are all crooks and liars
    they will get alway doing this for some time till the voters get mad and go to city hall
    in masses and demand they begin doing there job what we the voters putt them in office, for not what there special interest and lobbys and unions there are working for .

  11. robert smith says:

    Thank goodness this was also on the front page of the LA Times and was given the same coverage as Michael Jackson’s passing.
    What’s that? It wasn’t? Oh, sorry.
    Thank you Ron and thank you Ms. Choi, whatever the reason, for standing up and being honest.
    If the City were a corporation the suits for wase and mismangeent would have been filed already.

  12. Anonymous says:

    LACERS and other city pension funds are in trouble due to their bad management decisions on investments. Some of that pension money was used to fund real estate deals. Some of the beneficiaries were funds like Henry Cisneros “City View” fund, whose manager, Sean Burton is sitting on the City Planning Commission. What returns did these pension funds get from their real estate forays. We’d all like to know that.

  13. Anonymous says:

    Choi said that LACERS lost 19% when the recession hit last year. She said that they expected the lost to be 25%, so they didn’t do as bad as they originally thought. Many people lost 40-50% of their money retirement funds if they invested their own money in the stock market. So clearly, LACERS didn’t mismanage their funds.

  14. The Wizard says:

    The Mayor appoints 4 of the 7 members on the Retirement Board. Game over. There will be 4 votes to pass the ERIP. Lawsuits will follow. Time will pass until nothing is accomplished by mid-year and then it will be too late and the Council will be forced to layoff the employees, however, the number to be laid off will be HIGHER than 2,400 due to the time delay in acting in July.

  15. Anonymous says:

    FYI: Sally was the Mayor’s Budget Director before moving to LACERS.

  16. DOUGLAS G GILLARD says:

    Hey Ron Kaye, why don’t you come talk to some of us city workers who are just trying to retire instead of expressing ignorant opinions. Yes I stand to gain a little from early retirement but since I have only 152 days until I can have an unreduced retirement, it doesn’t matter. However, a lot of other people need this package to keep from being layed off or have their pay reduced. As far as Sally Choi being a “hero of the people”, horse manure! Who do you think is getting the early retirement? The city council? Sally Choi has had plenty of time to input her opinions! She claims to only make sure the retirement system is well so she wants to muddy the water now that the deal is done. Funny, she had no problem taking the money of people when it came to buying military time for extra service credit, which in my case was about 15,000 dollars! Ron Kaye, I have worked hard for 28 years and I’m getting tired of people like you badmouthing me! DOUGLAS GRAHAM GILLARD

  17. Anonymous says:

    The LADWP, LAPD and LAFD Pensions are not part of LACERS. They are seperate. They are very generous. LACERS is nothing close and pays less in benefits than the Feds, County or State. Idiots hoping pension funds go belly up are just ignorant and jealous. If the City had to pay into Social Security it would cost the taxpayers more and right now. LACERS was unfunded during the Mayor RearEnd years when he chose to withold the City contribution to hire cops. No outcry then. Reagan Republican Kaye is all about making money himself while decrying anyone else who does. I say bring layoffs and service cuts. Let Kaye empty his own trash, fix traffic signals and potholes, inspect sewers while the cops eat doughnuts and LAFD watches DVD’s and works out as they plan whats for dinner. All those who want to see pensions cut – I will follow your lead as you agree to cut your own pension.

  18. Ed O'Shea says:

    Sally Choi for MAYOR!!!!!!!!!!!!!!!!She has a solid foundation of integrity!

  19. Disgusted says:

    How can you reason with the highest paid city counci in the nation, that has deputies making six figure salaries.

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