The bill to taxpayers for city pensions is close to $1 billion this and is expected to go far higher in coming years which is the No.1 reason services are being slashed, assets sold and bankruptcy looms as the only way out.
Among the many sweetheart deals over the years that have led unions to finance the campaigns of our elected officials is a little clause that LACERS uses to make sure retirees get 3 percent cost-of-living increases in their pensions even when there is no inflation.
This year, LACERS reports the increase in the consumer price index for 2010 “for the Los Angeles area is negative 0.8%. This is the
first time in LACERS’ history of COLA processing that a decrease in the
CPI has occurred.”
Not to worry, pensions are not being decreased.
“In spite of the negative change in CPI, none of LACERS Members and
beneficiaries will experience a reduction of their retirement
allowances,” LACERS explains on its website.
That’s because increases in pensions are capped at 3 percent and when inflation goes higher than that, the excess is “banked” so it can be applied in hard times like we’re experiencing now.
In other words, retired civilian city workers can always count on 3 percent more every year except for those who started getting their pension in the last few years of low and negative inflation. Here’s the table of increases just approved by the LACERS board:
|
Effective Date of |
Cost-of-Living |
| July 1, 2005 and earlier |
3.0%
|
| July 2, 2005 to July 1, 2006 |
2.8%
|
| July 2, 2006 to July 1, 2007 |
1.3%
|
| July 2, 2007 and after |
0%
|
In contrast, all those millions of Americans dependent on Social Security capped at about $22,000 annually for the highest earners versus 70 to 90 percent of highest pay for city workers — got no increase this year.
Public employee unions see nothing wrong with that, arguing everyone should get as good a deal in wages and benefits that they get, including full pensions at 55 instead of 66 like most of us on Social Security.
The Fire and Police Pension Fund operates differently than LACERS.
There is no cap on the annual increase for nearly all the fund’s retirees so nearly all of them will get 1.4 percent more based on the board’s determination that the CPI was up that percentage for the Los Angeles-Riverside-Orange County area in the 12 months ending Feb. 28.
The taxpayer bill for the LAFPP in the new budget is $360 million, LACERS $300 million and the DWP $150 million. The bills are projected to go up sharply unless there is a sudden economic turnaround or changes are made like raising the contribution rate to city workers or raising the retirement age.
While the future of Social Security and Medicare are very much in doubt, taxpayers are fully liable for the city employees pension and health costs unless a new deal is cut with the unions or bankruptcy forces changes in policies.
Of all the financial problems the city has, the most threatening to LA’s future is the pension and lifetime health costs.
Let me get this straight:
The landlords don’t get to raise their rents 3%, because there has been no inflation this past year.
The unions, however, get to raise their wages 3% because . . . .?
While we’re on the subject of government-dictated price controls, I would like to see a comparison of: a) the percentage amount by which inflation has risen from the time rent-control laws were enacted to the present; and b) the percentage amount by which rent-controlled rents have risen during that same period.
What do you want to bet the former is far greater than the latter?
Ron, you point out that increases are capped at 3% – so when inflation is 10%, City employees still only get 3% – I bet you wouldn’t be calling that a sweetheart deal during those times.
It’s only because there have been so many years when City pensions didn’t keep up with inflation that there is a banked cola to draw upon.
“Not to worry, pensions are not being decreased.”
They might not be worried, but that’s why we’re worried! Except for those who managed to sell their houses and have one-way tickets out of town.
If there were any logic to the way these things work, they would get a 0.8 percent reduction in benefits, just like Social Security recipients aren’t getting any cost of living increases for two years. Ask any SSN recipient of the measly 2+ percent raise ever covers C of L increases. They don’t even keep up with them, and the faster they go the behinder they get.
And is there really a “banked COLA”? Or is it like the Social Security trust fund. Bet the only cola in this city is in 7-11 coolers.
The unfunded liability is dramatically understated, probably by over $10 billion. If the City had to play by the same ERISA rules that private eneterprise does, the payments would be over a billion more.
Again, today, City Council put off, and said they could put off for another few months, layoffs.
The city council must layoff those not yet vested in the pension plan, (employed under 5 years)and change the pension plan for any new hires or rehires. The only thing the CAO is right about is they can’t change those in system now with out bankruptcy and maybe not then. The pension contributions made by city employees has not been increased since 1983!!!,oh yeah, I forgot, a temporary 1% increase this year to cover the ERIP golden retirement parachute. The council could start now – layoff, change pension plan, increase retirement age and bring people back if, really necessary, after pension change in place – but they won’t bankruptcy here we come.
This council is incapable of change.
If city employees were smart, which I guess they aren’t – the 60-70% of them who will be totally dependent on city retirement would tell their unions to go ahead and support pension reform now, layoff, change pension contributions and avoid bankruptcy. The union won’t go for it because with every body out the door they lose union dues.
All city employees were told when hired [yes, the same as teachers, who just received an injunction for layoffs from - a judge(another civil servant)] that the last in, first out policy was followed.
Then give city employees tax-exempt 401k’s with annual employer matching in the tens of thousands like you spoiled folks in private take for granted and use to supplement your social security checks
And raise upper management salaries to be on par with the 100′s of thousands you private industry managers make annually when all you’re doing half the time is going online and checking your stock porfolios
Pension reform is needed but not on the back of retirees who no longer have a voice to defend themselves. As 4:55 p.m. pointed out, changes should be made to pensions of people not yet vested. If unhappy with the new rules they have a choice to leave the system, unlike the retirees who depend on this survival income. That reforms are needed is not the issue. For sure, we need an upper limit on the payouts that dole out over $100,000+ to people like Councilman Parks and hundreds of others. What about the politicians. Do they get a pension? What about General Managers who come here for five years, transfer their pension from other cities and leave with huge pensions. There is plenty that can be done if anyone cares to make the reforms. Since noone in the city is willing to do that, complaining about retired folks is rather mean-spirited.
At DWP, employees have the opportunity to invest in the equivalent of 7.75% GICs (Guaranteed Income Contracts).
7:04, if you want to wrire about the “spoiled” private sector and 401Ks, it would be helpful if you knew what you were talking about.
For 2010, the cap for 401K contrubution is $16,500 or $21,500 if you are over 50. In most companies, the employer matchs the employee contrubtions generally up to 6% of salary. That is hardly tens of thousands of dollars coming from the employer. Additionally, those 401Ks are not tax exempt, but rather tax deferred. Of course, being a public employee means not having to know anything about how finances work.
Ron – according to the listing you published above, there have been no COLA’s since 2006, and before that, the amount was less than 2% for several years. So, what’s wrong with that – hey even Social Security recipients and Military retirees got COLA’s bigger than these numbers!
The City, actually LACERS, program works like this:
1. UP TO A MAXIMUM of 3% COLA calculation per year
2. NEVER a negative COLA (just like Social Security)
3. If the COLA percentage is less than 3%, then the residue goes into the “bank” – example if COLA of 1.75% percent is determined for a year, then (3.00 minus 1.75) 1.25% goes into the “bank”. As the COLA for a future year is determined, the “bank” may be drawn upon – example if COLA is calculated as ‘should be’ 4.9% (big inflation year), retirees would get 3.00 + 1.9% drawn from the “bank” but ONLY if the “bank” balance is high enough.
4. Note that the “bank” is not money – it is simply a holding place for the calculation – no ‘funding’ money is set aside to cover the “bank” – if inflation stayed very low for say 10 years, the “bank” could easily reach 7 – 12%. Again the retirees NEVER touch the “bank” until the actual COLA calculation yields a number larger than the 3%. Then, if there is anything in the “bank”, and only then, the retirees would get a COLA larger than 3%. Once the “bank” is drawn down to 0, this process starts all over again. However, if we have a string of super inflation years (remember Spiro Agnew and 15% CD’s at the bank), these same City retirees get a MAXIMUM of 3% COLA, while their groceries go up 10% – will you come back and write a column at that time about how unfair this is?
You conveniently forgot to mention that as a result of the recent ERIP program ALL City employees will be contributing a larger portion of their salaries to the pension program. The amount is around 6.5%.
Just like Social Security, if an employee doesn’t qualify for a City retirement (quits or dies), ALL of the money he/she has contributed STAYS in the retirement fund to be shared by those who ultimately receive a retirement check.
If you don’t get your in 40 quarters of paying into Social Security or you die before being age- eligible, your contributions STAY in the Social Security fund.
And speaking of Social Security, federal law enacts an offset against any Social Security benefits that an individual may have earned when they start receiving a retirement from LACERS (other other governmental entities). My wife, a recent ERIP individual, had paid into Social Security for 15 years before going to work for the City of LA. She forfeits approximately 75% of her Social Security benefits that she earned. Now that’s free money to pay YOUR retirement Ron – sounds like she got screwed there doesn’t it. If I die, if she files for a widow’s benefit from Social Security based on my earnings record, she also forfeits approximately 75% of that amoount.
Now that doesn’t sound fair to me – does it to you?
How about writing a column on that subject Ron?
An important fact missing is last year when unions were trying to negoiate the city took months bullshitting around and not doing their job. That time was costly at the tune of millions of dollars. Yes, MILLIONS I think someone said $60 mill was lost. The unions are getting beat up on this but again the losers on city council who spend millions on development deals, millions on dumb studies, millions on political payback favors, millions on behind the scene deals are responsible. Tomorrow they will decide whether to layoff 700 exployees. But AGAIN THE LOSERS ON COUNCIL WASTED MONEY not doing their job because they knew people would be upset. In the end the city council is responsible for wasting millions of dollars because there is no leadership and they avoided the layoffs for too long.
“In most companies, the employer matchs the employee contrubtions generally up to 6% of salary.”
And some do 1 to 1 matching of the contribution. My old company when I worked in private matched up to $10k annually. But that’s beside the point. It’s still a huge chunk of free money every year that public employees don’t get that counts toward retirement. Yet you old white folk from the West Valley love to just run a straight social security-pension comparison, ignore everything else, and pretend it’s accurate.
Give me an employee stock purchase program with a 25% discount too while you’re at it.
2:07: You are full of it. There is no way that your old company matched up to 10K annually as the cap of 16K is the maximum contribution allowed for both employer and employee together for 2010 and it was significantly lower each year previous.
Even with your ridiculous numbers, what you are calling a huge chuck is significantly less than the cost of funding a defined benefit program like the city of LA.
Don’t let anything like facts get in the way of your trying to justify the unjustifable.
You have no clue what you’re talking about. $49k is the cap. $16K is the pretax contribution for you only AND you can put in more $$$ posttax if you want.
No wonder you’re having money problems.
You are truely an idiot! $16,500 is the limit for a 401k contribution (you can do an additional $5000 a year if you are over 50). That includes pre-tax and after-tax. How is $49k the cap? What??? Just for your information you can put as much as you want in a taxable account but not in an IRA or 401k.