Neighborhood Council leaders will hold a press conference at 5:30 p.m. Monday outside the Braude Center at Van Nuys City Hall to offer solutions to LA’s budget crisis and call for full community involvement. At 6 p.m., the City Council Budget Committee chaired by Bernard Parks will hold its first in a series of public hearings on the crisis.
Here are proposals that NC Budget Representatives drafted Saturday at the conclusion of a series of meetings of the BudgetLA Committee and the Saving LA Project. Many of them are in line with the proposals jointly put forth by the business community.
1) Pension Reform:Increase employees contributions to reflect market
rates
2) Raise eligible retirement age to social security age
3) Re-evaluate post-retirement health care benefits
4) Service credit purchase based on actuarial value
5) Add a neighborhood council member to all of the pension boards for
transparency and oversight
6) Consolidate the 3 agencies administering LA pension funds
7) Consider additional forms of pension reform including but not limited
to:
a) Defined contribution plans
b) Annuity based plans
Hire an independent legal council proficient in Chapter 9 filings to
explore and advise on the contractual, fiscal, and short/long term
effects of such a filing, and share that information with the
neighborhood council system in a timely manner
9) Review and analyze the amount of payroll reduction vs layoffs to
preserve essential services, not lower employee moral, and avoid
unnecessary layoffs in these troubling economic times.
10) Do a full department by department review and consolidate where
duplicate services exist.
11) Instruct the CAO to do a 5 year balanced budget plan in order to stop
the constant reactionary governing that currently exists. This too will
allow for a streamlining of departments and personnel needs.
12) Do a complete cost benefit analysis of E-RIP.
13) Lower the annual service credit for each year worked and cap total
pension benefits:Currently,
employees of the city accrue benefits at 2.5%a year for public safety
employees, 2.19% a year for general city employees, and 2.1% a year for
DWP employees. Employees can retire at 90%to 100% of their final salary
as a pension benefit, depending on which plan they are in. We believe the
benefits should be capped at 65-75% of the total salary for all city
employees, not including overtime, unused
vacation and sick days, bonuses, or all other forms of
compensation.
14) Defined
benefit vs
contribution-The Mayor’s Budget Committee reviewed the pension reform
measures recommended by the Los Angeles County Business Federation.
In general, we support most of the recommendations. There needs to be
some clarification and possibly some modification of the points raised by
the group (please see the attachment).
In conjunction with the Federation’s proposal, there is another
consideration that must be on the table when renegotiating labor
contracts with the City’s unions.
We believe it is time for the City to transition employees from the
current defined benefit program to a defined contribution plan. We
recognize that the feasibility of such a transition would need to be
analyzed by experts independent of the various boards administering the
civilian and sworn plans.
There would be up front costs, but there
could be potentially significant long-term cost savings to the city and
added flexibility to plan participants. Up front costs could be
financed.
The transition need not be for all employees, for example, participants
nearing retirement or with considerable service should or would be
excluded. However, other segments should be given a choice; more
recent hires along with all new hires should fall under a defined
contribution plan.
The reason for this recommendation is based on the unpredictable costs to
the city associated with funding defined benefit plans. The funding
requirements of these plans are subject to market swings, plan
administrator competence, very subjective assumptions and politics.
Defined benefit plan participants, although they may assume they are
shielded from risk, are not completely- a recent Federal Court decision
involving one of San Diego’s plans defined the City’s subsidy of
pension and other benefit plans as a component of compensation – not a
constitutionally protected vested benefit. In addition, municipal
bankruptcy can require new labor contracts with higher employee
contributions (not to mention lower wages).
Defined contribution plans entail assumption of risk by employees, but
the risks can be minimized by periodic, scheduled re-mixing of
investments, a service offered by managers of almost all such plans. More
importantly, the cost for the City will be predictable and
controllable. Administration of these plans can be outsourced more
easily, thereby eliminating most in-house costs and achieving greater
efficiency.
In summary, the objective of the City must be to strike a balance between
the risks shared by employees and taxpayers with respect to all
retirement and health benefit programs. This is essential to the
long-term financial health of the City and the avoidance of
bankruptcy.
Time is of the essence. The longer we delay pension and benefit
reform, the greater the odds for bankruptcy. The tipping point may
be closer than we think.
15) The committee urges the city council, the Mayor, The CAO, and
the controller not to employ gimmicks, no half way measures, no stop gap
measures and no deferring to the future unless all avenues of the fix
have been explored, analyzed and implemented.
Item 1: No more city pension plans. Convert all employees to Social Security. Give them back the pension money they have that they contributed and usher them to the nearest place that hawks 401Ks.
Item 13: Why are there “other forms of compensation”?, and why the hell are there BONUSES?
The city’s not a for-profit!
The Number One way to balance the City’s budget is simple: abolish the CRA.
This agency provides welfare for the rich. It subsidizes people who make far more money than most taxpayers. Eliminating it would save taxpayers $680 million or so PER YEAR.
Here are other ways to balance the budget and promote full employment:
http://web.mac.com/waltermoore/WalterMooreSays.com/Blog/Entries/2009/12/12_Solutions_For_The_City_Of_Los_Angeles_Part_1.html
Every time an additional responsibility has been added to a city department, they have become used to hiring new personnel to do it. Orlov mentions in his column today that if the law is passed to lower the number of unpaid traffic tickets to three for booting the cars belonging to drivers who owe money, that more personnel would have to be hired.
Why?
What is wrong with the present people expanding their work load and doing the job? That would eliminate those extras I see on any city job-wearimg their uniforms- “overseeing” the ones who are using the shovels or whatever.
Two Mayors have tried to cut an easy $600,000 a year from the budget only to see it restored by City Council both times. I’m talking about CHANNEL 36 that no one watches. Why does the City insist on just giving this money away each year when:
1-It is not a City operated Channel and has no City employees (read no unions to worry about)
2-It pays over 2 million dollars a year to operate its own channel (channel 35) that is part of the City
3-Both channels repeat so much programming that the best of Channel 36′s programming (what little there is of it) could simply be rolled into Channel 35′s schedule.
4-Operating two television channels means two sets of staff, two sets of expensive production equipment and two sets of rent. HOW DOES THAT MAKE SENSE?
The Police and Fire utilize 70% of the budget. Without cuts and efficiencies in these two agencies and the Mayor’s and Council’s large staffs, cutbacks to other employees only will not result in the desired savings.
Police and fire utilize 70% of the budget? That can’t be accurate.
Police and Fire represent roughly 80% of Los Angeles’s budget.
Heard numbers anywhere from 70-80% for Police and Fire. Most of it is LAPD, no contest.
How come the majority of suggestions center on reducing or eliminating employee pensions? What about streamliing city services, charging for events such as the Jackson funeral, eliminating the pork barrel entitelements (money to homeboy industries), reduce staffing in each Department (including City Council and Mayoral Deputies). Why attempt to balance the budget on the backs of employees who have earned their pension? Yes pension reform is needed, but we cannot forget the contract we have with employees who have invested 25-30-35 years of their life with the City. How about cutting the Neighborhood Councils. What do they do, and are they really necessary? That is what I elected my Councilman to do.
How come the majority of suggestions center on reducing or eliminating employee pensions? What about streamlining city services, charging for events such as the Jackson funeral, eliminating the pork barrel entitelements (money to homeboy industries), reduce staffing in each Department (including City Council and Mayoral Deputies). Why attempt to balance the budget on the backs of employees who have earned their pension? Yes pension reform is needed, but we cannot forget the contract we have with employees who have invested 25-30-35 years of their life with the City. How about cutting the Neighborhood Councils. What do they do, and are they really necessary? That is what I elected my Councilman to do.
How come the majority of suggestions center on reducing or eliminating employee pensions? What about streamlining city services, charging for events such as the Jackson funeral, eliminating the pork barrel entitelements (money to homeboy industries), reduce staffing in each Department (including City Council and Mayoral Deputies). Why attempt to balance the budget on the backs of employees who have earned their pension? Yes pension reform is needed, but we cannot forget the contract we have with employees who have invested 25-30-35 years of their life with the City. How about cutting the Neighborhood Councils. What do they do, and are they really necessary? That is what I elected my Councilman to do.
How come the majority of suggestions center on reducing or eliminating employee pensions? What about streamlining city services, charging for events such as the Jackson funeral, eliminating the pork barrel entitlements (money to homeboy industries), reduce staffing in each Department (including City Council and Mayoral Deputies). Why attempt to balance the budget on the backs of employees who have earned their pension? Yes pension reform is needed, but we cannot forget the contract we have with employees who have invested 25-30-35 years of their life with the City. How about cutting the Neighborhood Councils. What do they do, and are they really necessary? That is what I elected my Councilman to do.
City Department Misplaces $5.6 Million
Audit Finds ‘Systematic Failure’ by Dept. of Neighborhood Empowerment
The city department tasked with overseeing 89 Neighborhood Councils has misplaced $5.6 million and doesn’t know where to find it.
An exhaustive audit of the Department of Neighborhood Empowerment (DONE) also found a forgotten bank account containing $160,000.
This is “a systematic failure of accounting and fiscal oversight,” according to a scathing city audit released Jan 12. And, since establishment of the Neighborhood Council system in 1999, DONE has never reconciled its financial accounts. Please click here to view audit, and here for video.
“The audit rightly points out that management was lax in enforcing existing policies and procedures. Some of the findings should have been acted upon earlier. As the General Manager of this Department, I am responsible for ensuring that the program is running properly,” said DONE General Manager BongHwan Kim in an email.
Reports of misused taxpayer money first appeared exclusively in The Chatsworth Roundup in September. At the time, Kim admitted that there might be as much as $100,000 embezzled from the Council system. Presidents or treasurers of as many as nine Neighborhood Councils (NC) were under investigation. Since then, the amount has grown to $276,000 and officers from six Neighborhood Councils have been charged with felonies, according to the audit. For details, click here.
For example, in 2008, one Neighborhood Council chairman/treasurer was arrested for stealing $30,000, in part by making withdrawals of city funds at the Normandie Casino ATM over a three-year period. For details, click here.
And a community activist who had a felony conviction was arrested on suspicion of misappropriating $85,000 in city funds while serving as chairman of his Neighborhood Council. Prosecutors allege he bought money orders and made a series of cash withdrawals and credit card purchases that were not authorized. They also say he spent some of the group’s money on travel and to hire his daughter. For details, click here.
“Since I’ve been general manager I’ve tried to take ownership of the problem and deal with it,” Kim told the Daily News. “But, part of the problem is the (city employee hiring) freeze, and we simply do not have the right personnel to fix the problem.”
Controller Wendy Greuel, whose office conducted the first audit of DONE since 2006, found that many of the
General Manager BongHwan Kim: “We simply do not have the right personnel to fix the problem.”
recommendations in the previous audit were never acted upon, leading to escalating fiscal problems.
“With staff cutbacks at DONE, there is no reason to believe that the backlog of financial paperwork will be reduced. And, with the city’s worsening financial crisis, there is no reason to believe DONE will be given the resources to accomplish the recommendations of the audit,” said Judith Daniels, president of the Chatsworth Neighborhood Council.
The audit revealed that DONE failed to reconcile its books with official city records, which “has resulted in a $5.6 million discrepancy between total available cash per the city’s records and total rollover amounts for NCs.”
Greuel’s audit also found that DONE:
– failed to review 364 quarterly statements submitted as of August 2009;
– failed to enforce a requirement that Neighborhood Councils submit financial reports;
– failed to review Neighborhood Councils’ annual budgets;
– failed to make sure that Neighborhood Councils stay within their credit card limits;
– failed to provide oversight of Neighborhood Councils’ cash advances;
– failed to assess how or for what Neighborhood Councils can spend their money;
– failed to follow up on $880,000 in purchases by Neighborhood Councils that have not submitted quarterly reports within the required timeframes;
– failed to follow up on approximately $45,000 in cash withdrawals that did not comply with DONE’s policies; and
– failed to act on 79 credit card purchases totaling more than $124,000 made by 39 NCs which appear to have been split into multiple charges to circumvent the card’s $1,000 spending limit.
The audit also found that in spot-checks of 14 NC, five were unable to account for 27 pieces of equipment purchased with taxpayer money.
DONE General Manager Kim, who requested the audit, said the NC program has been “under-resourced and inconsistently managed since its inception in 2002.”
Kim has been in charge of the Department since March of 2007. He is responsible for overall management of the
Department, including development of budget, strategic planning, programs and services, policies, personnel and constituent relations, according to a city publicity release.
“I have instructed the accounting staff to embark on a complete forensic accounting for each and every NC since program inception. It is estimated that it will take existing Department staff 2 months (including overtime) to complete this major task,” Kim said.
“We will be announcing shortly, new policies and procedures around such things as standardized budgets and tracking, fingerprinting of treasurers, reduction or elimination of petty cash, returning incomplete payment requests, required Board approval of expenditures (including consequences), etc.,” Kim said in the email.
City Councilman Paul Krekorian, who chairs the City Council’s Education and Neighborhoods Committee, promised a quick review of the audit, especially in light of the city’s financial problems.
“DONE has had a 40 percent reduction in its budget over the past several years,” Krekorian told the Daily News. “We need to look at how the Department can restructure to serve the needs of these citizen volunteers.”
“We need to put in checks and balances to ensure that doesn’t happen again,” Greuel told the Los Angeles Times.
“Dishonesty and mistakes are not unique to the Neighborhood Council system,” Chatsworth NC President Daniels said. “How many city Departments have the exact same issues with their spending? I believe that the good that has come out of Neighborhood Councils far outweighs the small number of Councils that have financial problems. But, of course, that doesn’t negate the need for better rules and oversight.
“Honest people will be honest. Dishonest people will find a way to get around whatever rules you impose. There have been suggestions over the years that NC board members be required to have more ethics training. You can’t force ethics into the head of a person who doesn’t care about ethics or honesty,” she said.
Neighborhood Councils were established in 1999 under the city’s new Charter to enable local residents to have greater impact on city operations from the grassroots level. Each Council was allocated $50,000 annually for local projects until the current fiscal year, when the amount was reduced to $45,000. Unspent funds can be rolled over for up to three years.
As much as I appreciate the intent of the NC’s proposals, it is clear to me they don’t even understand the power the unions hold.
Let’s say the city agrees with this proposal – 65 to 75% of the salary determines the base of pension (not including all of the extras that are given), the minute negotiations start on this, who do you think will prevail? Why, the unions of course.
Moreover, where is it written that with job security (city employees can’t be fired, etc.) a lush benefits package is also part of the deal? Sure that “worked” in 2001 – but not now, and probably never again thanks to the economic downturn, the loss of jobs, manufacturing, etc.
This alone is why the NCs should demand bankruptcy. (Or is that the “Chapter 9″ referred to above?).
Let the second largest City in the US go before a judge and have him make the decisions, cuts, etc., that our elected officials don’t have the ability or courage to make.
Maybe that way other cities across the country will take the necessary steps now to start pension reform after witnessing what happens when a judge takes control. That’s the only way we can stop this nightmare that will ruin what’s left of our country.
As much as I appreciate the intent of the NC’s proposals, it is clear to me they don’t even understand the power the unions hold.
Let’s say the city agrees with this proposal – 65 to 75% of the salary determines the base of pension (not including all of the extras that are given), the minute negotiations start on this, who do you think will prevail? Why, the unions of course.
Moreover, where is it written that with job security (city employees can’t be fired, etc.) a lush benefits package is also part of the deal? Sure that “worked” in 2001 – but not now, and probably never again thanks to the economic downturn, the loss of jobs, manufacturing, etc.
This alone is why the NCs should demand bankruptcy. (Or is that the “Chapter 9″ referred to above?).
Let the second largest City in the US go before a judge and have him make the decisions, cuts, etc., that our elected officials don’t have the ability or courage to make.
Maybe that way other cities across the country will take the necessary steps now to start pension reform after witnessing what happens when a judge takes control. That’s the only way we can stop this nightmare that will ruin what’s left of our country.
I appreciate the Neighborhood Council’s suggestions for resolving the budget crisis. What is missing, however, are suggestions to eliminate their own slush funds that continue to be misused for inappropriate expenditures. Neighborhood Councils should exist, but without any moneys from the city. Since no moneys will be involved, taxpayer money will be saved in audits, prosecution and the necessity for DONE, which also should be eliminated. Each NC can decide on their formal structures, rather than have the City Clerk organize or monitor elections. More job eliminations and cost savings.
Committed citizens will still participate in the NC system and the crap there for free food and embezzelment will be gone. Hope NCs will support this idea. If they are honest, they will.
Yeah I like how the NC’s want to use taxpayer money to hire a lawyer to determine the feasibility of bankruptcy, on a list of suggestions that are supposed to prevent bankruptcy.
Most of the suggestions are actually sensible though, but as 1:18 suggested, there are a ton of other outlets that can be trimmed besides or in addition to pensions in order to alleviate the budget crisis. Focusing entirely on pensions makes it look like the NC’s just have a personal vendetta against city workers.
Everything has to be cut, there is no other way to reduce the deficit. The city’s employees will bear the brunt of the cuts because that’s where the money is. Either accept big cuts or a bankruptcy judge will do it.
Fighting about the NC money is about an useless as tits on a boar.
FOCUS on two things: 70 to 80% of general fund going to public safety. As long as there is going to knee kerk reaction to ANYTHING regarding how the PD and FD spend money, we will never solve our financial crisis. It is high time that the conservatives among us grow a set and take their brains of hero worship when it come to the dollars and cents of public safety.
I will remind everyone that prison guards START at $73,000 annually.
Walter brings up an excellent point about CRA. Liberals among us need to grow a pair when it comes to ” the poor” and the disadvantaged. The affordable housing crisis is such a joke; it has been discussed sincce 1929! 90 years isn’t a crisis; it is a condition.
Jerry and the public employees among us: keep going down your path. Even Willie Brown acknowledges that you are all out of control when it comes to your packages. Keep beating the same old put upon drum and then wonder what happened when the citizenry finally has had enough
“Fighting about the NC money is about an useless as tits on a boar”. Appreciate your erudity. However, this budget crisis is not a one year or two or three year deal. It is an on-going problem, and will not be resolved this or the next year. We have to cut the fat everywhere we see it, and the NCs are part of that fat.
5:31 if you want to spend the time and energy going after 1/10 of 1% of the budget and think that is effective, be my guest.
Let us make the educated guess that 5:31 is one of our public employees frantically trying to point attention elsewhere. Or, as the old saw asked: “Other than that, Mrs. Lincoln, how did you enjoy the play?”
I’m not a public employee. I call it as I see it. The fat should be cut everywhere with NCs being no exception.
5:21, really interesting fact about prison guards, really. But Prison Guards are not City Employees idiot. So what does that have to do with the LAPD? NOTHING
Los Angeles City Pension Plan
Summary of Costs
by Leslie Ayres
Due to the unprecedented global financial and economic crisis, the plan net assets of LACERS as of June 30, 2009 decreased significantly by $2,229,206,000 or 21.5% during the reporting period.
From 7/1/2008 to 6/30/2009 the average monthly benefit
0-10 Years $759 to 25 Retirees
11-15 Years $1,626 to 21 Retirees
16-20 Years $2,348 to 51 Retirees
21-25 Years $3,109 to 63 Retirees
26-30 Years $4,150 to 55 Retirees
Over 30 Yrs $5,513 to 121 Retirees
One thing the City should look at is implementing a cap on Monthly Benefits to an amount not to exceed 2,500 for 16-20 years of service.
There is so much misunderstanding and so much misleading and false information listed in the Blog article and in the mostly anonymous postings, that I hardly know where to begin! Let’s start with a little history. Four and a half years ago the City of Los Angeles had 26 thousand plus employees. At the height of employment in 2009 the City had 30 thousand employees. These people were hired by the Mayor and the City Council. If they had not hired 4 thousand employees, we would not be having this conversation now and the City budget would be balanced. This is not a financial crisis. It is a leadership crisis.
As a City employee, a union leader, a community activist, and having served on the City’s retirement commission and on the Charter Reform Commission, I have personal knowledge of City operations and finances. We do not have a “pension” crisis. In 2000 when I was on the retirement commission it was fully funded and the City was having a pension funding “holiday.” The “normal” cost for the City’s share of funding the retirement system is about 13% of payroll. The employees contribute an additional 6% of payroll. In 2000 the City contributed less than 5% of payroll due to the system being fully funded at that time. Had the City continued to merely fund at their actuarially determined “normal” cost, we would be in much better shape today. One reason we have pension systems is that when you hire money managers to invest 200 million dollars you can reduce money management costs to a very low amount in comparison with an individual hiring a money manager to manage their 50 or 100 thousand dollars of investments for retirement. The investment risk is also lowered considerably. while pension funds have lost 20 to 40 percent of their value during this depression, individuals as a whole have done a lot worse. Controlling risk and minimizing management costs matter to society unless you are an investment manager in the private sector. Drexel Burnham, Merril Lynch and others charge much more to manage your investments–oh! wait, they went bankrupt and were either disolved or taken over by a bank “to big to fail.”
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