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L.A. business leaders press city to address pension costs

Civic leaders, including former Mayor Richard Riordan, push for salary freezes and a ballot measure to let voters decide what workers should collect in retirement.

August 16, 2012|By Kate Linthicum and David Zahniser, Los Angeles Times
  • A pension-reform proposal by L.A. Mayor Antonio Villaraigosa would affect only new city employees. A business group's proposal would open the door for salary reductions for current city staff.
A pension-reform proposal by L.A. Mayor Antonio Villaraigosa would affect… (Luis Sinco / Los Angeles…)

Los Angeles business leaders Wednesday pressed elected officials to address ballooning city employee pension costs, pushing for salary freezes as well as a ballot measure that would let voters — instead of lawmakers — decide how much employees should collect in retirement.

A brigade of civic leaders that included former Mayor Richard Riordan took their pitch to a closed-door meeting of City Hall's labor negotiations committee, which has spent months mulling a proposal by Mayor Antonio Villaraigosa to scale back benefits and increase the retirement age for newly hired civilian employees.

Unlike Villaraigosa's plan, which would affect only new city employees, the business proposal would open the door for salary reductions for current city staff.

The business leaders called for police officers' and firefighters' pay to be frozen when the city's contribution to their pensions exceeded 25% of their salary. Salaries for other city workers, including librarians and maintenance staff, would be frozen if the city's contribution exceeded 15% of their pay.

Employee labor unions, which already oppose Villaraigosa's plan, immediately attacked the proposal.

Bob Schoonover, president of Service Employees International Union Local 721, which represents city tree surgeons, trash haulers and other workers, called the business leaders' plan "pension evisceration." City workers have given enough pay and pension concessions, he said, including an agreement last year to raise their retirement fund contributions.

Business leaders complained that union lobbying of City Council members had stalled Villaraigosa's proposed pension changes. Those include capping pensions for new civilian employees at 75% of their salary and cutting in half the top amount workers would receive for retirement healthcare.

David Fleming of the Los Angeles County Business Federation said the mayor invited the business leaders to bring their proposals to the labor negotiating committee.

Villaraigosa spokesman Peter Sanders said no one in the mayor's office invited the group, but the mayor "applauds the business community for joining other stakeholders in this important debate."

Fleming said the business coalition would take their plan to voters if the labor committee, which is chaired by Council President Herb Wesson and includes several council members, fails to make "meaningful changes" to the pension system.

He and others warned that soaring retirement costs would require new cuts to city services, making the city less livable and attractive to business. Gary Toebben, president of the Los Angeles County Chamber of Commerce, warned that inaction on pension reform could trigger a "vicious cycle" of declining business activity, less tax revenue and deeper reductions in basic services.

Retirement costs now absorb $848 million of the city's general fund budget, which also pays for police, fire, parks, street sweeping and other day-to-day city operations. Pension outlays are projected to grow by nearly 52% over the next four years, reaching $1.2 billion, according to figures provided by City Administrative Officer Miguel Santana's budget analysts.

Toebben said that allowing voters to determine the size of employee benefits would bring "transparency" to the controversial issue of employee pensions.

"Right now these discussions are held … behind closed doors and the public has little, if any, input," he said. Voters already decide the pensions of retired police officers and firefighters in Los Angeles.

Business leaders suggested that the salary freezes could either be approved by the City Council or achieved by asking voters to change the city charter. The decision to turn over pension decisions to voters would also require a ballot measure.

Riordan voiced support for the reform plan offered by business leaders, but said he would embrace any alternatives that would "solve the problem."

"The mayor, the council and the unions … have to come up with the will to do something to avoid insolvency," he said. "We are going broke like every city in California."

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