Budget Day: Bad News for City Workers, Worse News for City Residents

EDITOR’S NOTE: The mayor makes his pitch today on the city budget, continuing  most of the same one-time solutions and cooking the book tricks with the exception of civilian workers being asked to pay a portion of their health care costs for the first time. Click here to read City Administrative Officer Miguel Santana’s explanation. Here’s what the Coalition of City Unions put out to members today to get them to ratify the proposal or face loss of pay through furloughs.

Mayor’s Budget Released; $400+ Million Budget Gap to be Balanced with 36 Furlough Days For Workers in Units That Don’t Agree to Contract Amendment

Voting Continues Through April 26 at 5 PM for Most Units

April 20, 2011

Today, Mayor Villaraigosa will release his spending plan for fiscal year 2011-12.

“The [City's] shortfall is expected to reach $457 million and could result in as many as 36 furlough days for non-public safety workers who do not agree to contribute more toward their retiree healthcare… Los Angeles Mayor Antonio Villaraigosa’s [budget]… relies heavily on concessions from various labor unions to close the city’s huge budget gap. If those givebacks are approved, the city will not need to lay off a single employee, said Matt Szabo, Villaraigosa’s deputy chief of staff.” Los Angeles Times, April 19, 2011.

Because of a series of glitches encountered by the mail house, voting has been extended through April 26 at 5:00 PM. This extension provides an opportunity to clarify some of the concerns we’re hearing from members, particularly regarding retiree health care and the holiday shutdown.

Retiree Health Care
There has been a lack of clarity regarding the changes to retiree health care under this tentative agreement. Your pension benefits and your retiree health care are vested (guaranteed) benefits. However, the question of whether or not the annual increase in the City’s subsidy for retiree health care is vested is under debate. The City believes that the increases are not vested.

The City of LA provides a subsidy to LACERS for retiree health care. For 2011, the subsidy is $1,190 per month and that amount has increased each year to keep up with health care inflation. In 2000 for example, the subsidy was $702 per month and has increased an average of 4.9% per year since that time. Although the City has historically covered retiree health care inflation, they have now taken the position that increases to the subsidy amount are not vested.

In an effort to cap costs during these difficult budget times, CAO Miguel Santana has proposed to freeze the subsidy amount at the 2011 level. If the City is correct that increases are not vested and we do not take action to assure that increases are vested, then retirees will be required to pay for the cost of health care inflation out of pocket.

With the cost of medical insurance constantly on the rise, this means that more and more of your retiree pension check will be eaten up by medical insurance costs as the years go on. You will either have to pay thousands of dollars a year out of pocket to maintain your current two-party coverage…or you’ll have to drop spousal coverage.

So what does agreeing to increase your contribution by to LACERS by 4% “buy” you? It buys you a guarantee, or a “vesting.” This vesting provides a subsidy that will be increased by the City every year by the amount of the increase in the two-party Kaiser rate. By contributing 4%, employees will have a guarantee that your retiree medical subsidy will keep up with the increasing costs of medical benefits.

How Will the Holiday Shutdown Work?
Under this tentative agreement, if ratified…. In fiscal year 2011 and 2012, City services that can be shut down between Christmas and New Year’s will be shut down. Workers represented by unions affiliated with the Coalition who work in these service areas will be able to take an extended holiday and will still receive a paycheck for those pay periods.

In fiscal year 2011-12, those four days off (32 hours) will be funded with a 1.5% pre-tax pay deduction taken out throughout the entire year. The 1.5% will be restored to paychecks on July 1, 2012, and members will have no pay deduction in fiscal year 2012-13 for the four days off (32 hours) between Christmas and New Year’s in 2012.

Any department or service area that cannot shut down will be required to submit an alternate plan to the CAO. Affected bargaining team members will then meet with the City to determine the best way to provide the four days (32 hours) off.

Where’s the “Shared Sacrifice”?
The total budget deficit facing City leaders is more than $400 million and there’s very little meat left to cut on the City’s budget bones. Absent a negotiated solution, this means additional furlough days in more departments, as well as layoffs. The City has also made it clear that they will freeze the retiree medical subsidy at current levels.

In our discussions with the City, we refused to carry more than our fair share and that’s what this tentative agreement does. There will be proportional savings throughout the City in both sworn and civilian areas.