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The City Council stiffs organized labor on pensions -- for now

September 25, 2012|By Jon Healey
  • Los Angeles City Council President Herb Wesson, shown at a hearing in November, won preliminary approval Tuesday for a plan to reduce pension benefits for new civilian employees.
Los Angeles City Council President Herb Wesson, shown at a hearing in November,… (Los Angeles Times )

Here's something you don't see every day in Los Angeles: a unanimous City Council gave preliminary approval Tuesday to a plan to roll back pension benefits for newly hired civilian workers, despite fierce opposition and a lawsuit threat from organized labor.

The plan, which The Times' editorial board endorsed before the vote Tuesday, is considerably less generous than the current offering. It would reduce the maximum benefit by 8%, move back the age for retiring with full benefits 10 years, require workers to cover a higher percentage of the cost of their benefits, reduce cost-of-living adjustments and deny retiree health benefits to spouses and other dependents, among other cost-saving features.

Representatives of the affected unions said the changes were too harsh and too narrowly focused on a group that has already made multiple concessions to help the city with its fiscal woes. They also argued that imposing a new tier violated the unions' contracts with the city, and that the change would cost more in the short term than it would save.

The latter two points are worth exploring. On the contract issue, Victor M. Gordo, general counsel for Local 777 of the Laborers International Union of North America, said the unions' agreements with the city cover positions, not people. That means even people who haven't been hired yet are covered. And those agreements state that any change in the pension plan has to be agreed to by the unions before the council can bring it up for a vote.

There's a certain logic to this argument. If the council could unilaterally change the pensions for new hires, what would stop it from changing the salary, health benefits and other items negotiated by the unions? The city attorney's office, however, maintains that there is no obligation to bargain over pension plans for people who aren't yet city employees.

As for the cost savings, the unions argue that closing off the current system to new employees will raise the city's costs because it will leave that system with an aging population. Under the accounting rules used by the pension fund, employees cost the system more the longer they remain on the payroll, accruing ever-larger retirement benefits.

But that seems like bookkeeping legerdemain. Granted, City Administrative Officer Miguel Santana has proposed accounting for the new employees in a way that spreads anticipated pension costs evenly across their tenure, rather than piling them on in later years. But the actuaries hired by Santana found that the proposed change in pensions would save money every year, and the savings would be even larger under the new accounting method.

That makes intuitive sense. The inevitable result of reducing pension benefits for new workers is less spending, not more.

It's conceivable that the council's vote Tuesday was just meant to bring the unions back to the bargaining table. The new plan won't become law until the council gives it a second thumbs-up vote, which isn't scheduled to happen for 30 days. City negotiators will try to strike a deal with the unions in the meantime, as per the suggestion of union-friendly Councilman (and would-be mayor) Eric Garcetti.

Whether those talks yield anything depends on how strongly the union believes it can block the council from moving unilaterally on pensions for new employees -- and how much the council trusts the city attorney's advice on that point.

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Follow Jon Healey on Twitter @jcahealey

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