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New hires strain DWP pension plan

Utility faces higher retirement costs after absorbing 1,600 city workers facing layoffs.

October 14, 2010|By David Zahniser, Los Angeles Times

Facing new pressures on its pension system, the Los Angeles Department of Water and Power says it can no longer cover much of the retirement cost for the employees it has hired away from other city agencies.

About 1,600 workers have transferred to the DWP from other city departments over the last six years, finding higher pay while avoiding furloughs and layoffs elsewhere.

Those new arrivals have created a $183-million pension burden for the utility, according to DWP officials. To deal with those costs, Mayor Antonio Villaraigosa's appointees on the DWP board voted last month to suspend, at least temporarily, full pension coverage for any new employee hired by the utility from another city department.

That decision infuriated some members of the City Council, which voted unanimously Wednesday to veto it. Over the last two years, the council has demanded that the DWP, which is separate from the city budget, hire workers from agencies facing major cuts.

Councilman Richard Alarcon called the DWP's move "coldblooded" and warned that it would make it harder to find positions for city employees if more layoffs occur. "We need DWP right now. We need them to provide jobs to the city employees," he said.

Los Angeles is expected to face another huge budget shortfall next year, with few easy options to eliminate it. Villaraigosa Deputy Chief of Staff Matt Szabo said Wednesday that "it is hard to imagine a scenario" for balancing the budget that avoids layoffs.

DWP pension officials said they are looking at shifting more of the cost of those new hires to the Los Angeles City Employees' Retirement System, which provides pension benefits to other civilian city employees. Meanwhile, at least one pension board member has argued that the utility's pension system has no obligation to solve the city's financial problems.

"Our concern as trustees is not layoffs at the city. Our only focus is the integrity of the plan," DWP pension board member Javier Romero told a council committee last week.

The debate comes at a time of intense distrust between the council and the utility. And it has played out as Villaraigosa and council members weigh various proposals for scaling back retirement benefits.

The city's two civilian pension systems — the Water and Power Employees Retirement Plan and the City Employees' Retirement System — reached a reciprocal agreement in 1980 that covers city workers who move between the two systems.

For example, a clerk who works 25 years in the Department of Transportation could move to the DWP and see all 25 of those service years covered by the DWP when he retires.

A clerk who spent 25 years at the DWP could leave to work at another city department, forcing the City Employees' Retirement system to pick up the retirement tab for those years. But those moves are far less common because workers in other city agencies typically earn less and receive less generous pension benefits.

Only 270 DWP workers have quit to take other city jobs over the last six years. Councilman Bernard C. Parks said utility officials should have put a greater emphasis on scaling back retirement benefits throughout the agency. "The more generous pensions were never considered," he said.

One pension official said another issue is that some city workers get jobs at the utility, work a single year and retire — a move that inflates their retirement benefits. That scenario troubled Councilman Tom LaBonge, who worked at the DWP before running for office.

"I'm proud of those who serve the city. But some people just try to get that one year," he said.

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