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L.A. labor pact could be in jeopardy

Some city leaders say Los Angeles cannot afford to allow 2,400 employees to retire up to five years early with full benefits with the city facing a $400-million shortfall. A final vote is scheduled Tuesday.

September 11, 2009|David Zahniser and Maeve Reston

Three months into its fiscal year, Los Angeles still faces a $400-million budget shortfall that could torpedo Mayor Antonio Villaraigosa's effort to allow 2,400 city workers to retire ahead of schedule, forcing the City Council to reconsider layoffs.

Budget advisors met privately with council members over the last week to stress the magnitude of the financial woes -- the city is spending $1 million per day more than it receives in revenue -- and urge them to take decisive action.

With a final vote on early retirement scheduled for Tuesday, some council members said they no longer believe that the city can afford the plan, which would allow members of the Coalition of L.A. City Unions to retire up to five years early with full benefits.

"There's two choices on the table at this point in time," Councilman Greig Smith said. "One is, we go back to the unions and inflict more pain, [and] they agree to more pain. Or we go to massive layoffs. There is no other choice."

Councilman Bill Rosendahl said that, based on figures he has seen, he is prepared to vote against the plan unless there are changes. And Villaraigosa has begun voicing his own doubts, saying through a spokesman that he has "grave concerns about the viability of the early retirement proposal given the city's rapidly deteriorating financial situation."

The mayor and the council are scheduled to receive a budget update today from their financial team.

Early retirement is part of a larger pact between the city's elected officials and the union coalition, which represents 22,000 city workers. The agreement, which also comes up for discussion Tuesday, promises no layoffs or furloughs for the coalition's members as long as they agree to wait two years for pay raises that were supposed to begin this summer.

Councilman Bernard C. Parks contends that the agreement will box the city into a corner, forcing dramatic cuts to public safety even as the civilian workforce is spared. Parks said the Los Angeles Police Department is considering imposing as many as 30 days of furlough for rank-and-file officers, a move that would preserve Villaraigosa's plan for hiring 1,000 new police officers.

"I don't think there's 10 votes" to get early retirement approved, Parks said. "All you need is five people to say no."

Labor leaders are threatening to go to court, if necessary, to ensure that early retirement is carried out. On Thursday, they warned that council members have no backup plan for the budget crisis if early retirement is defeated.

"For the city to attempt to undo the deal over a month after we ratified the deal would be a fiscal and legal mistake," said attorney Victor Gordo, the secretary-treasurer for Laborers' International Union North America Local 777, a member of the coalition.

Killing the early retirement plan could have other consequences. If the deal with the unions failed to go through, the city would need to immediately provide raises that were due to coalition members July 1 but were deferred as part of the negotiated agreement. That would add $26 million more to the shortfall, city officials said.

Villaraigosa heralded the early retirement plan three months ago, saying it was part of a landmark agreement to shave $200 million each year off the city's payroll. In a June news release, the mayor said remaining city employees would cover the net cost of the early retirements, ensuring that the program would not burden the pension system.

Since then, however, the city's actuary has concluded that the proposed additional contributions from the workforce won't be enough to cover the program's cost.

Workers represented by the union coalition agreed to contribute an extra 0.75% of their salaries toward their retirement benefits to pay for the program.

The actuary said those workers would need to provide between 1.07% and 1.51% of their salaries to cover the full cost.

As a result, as much as $198 million will need to come out of the city's budget over the next 15 years to pay for the early retirement, according to a report submitted to the city's pension board.

The city's financial team "laid it out and said the numbers don't crunch anymore," said Councilwoman Janice Hahn, who has not said how she will vote on the plan.

Even if early retirement is approved now, the plan will deliver no more than five months worth of savings in this fiscal year because of repeated delays in getting the necessary approvals.

After Tuesday's vote, a second council vote on early retirement would be required in October. After that, employees would have 45 days to apply for early retirement.

That slow pace has exasperated Smith, who warned that every day the council fails to take action, the budget shortfall gets worse.

"It's a growing sinkhole is what it is," said Smith, who represents the northwest San Fernando Valley.

"And just like the firetruck got devoured" by a sinkhole this week in Valley Village, "this City Hall is getting devoured by that sinkhole."


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