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.