Posted on 11/20/2016 7:17:21 PM PST by SeekAndFind
Back in the summer of 2012 the City of Los Angeles realized that they had a serious budget problem on their hands and the culprit, as in so many other cities, was the city’s extremely generous pension plan for municipal workers. Mayor Antonio Villaraigosa, backed by the city council, jumped into the fray and passed what was then described as sweeping pension reform and patted themselves on the back for a job well done. (LA Times, 2012)
Despite a raucous protest and threats of a lawsuit from city labor unions, the Los Angeles City Council voted Tuesday to roll back pension benefits and boost the retirement age to 65 for new civilian employees.
The council voted 14-0 to approve the plan, which budget officials say will save $30 million to $70 million over a five-year period. The changes will not go into effect until a final vote in 30 days. In the meantime, the council instructed city negotiators to meet with union leaders “to find common ground and to avoid litigation.”
Good thing they got that sorted out, eh? Really dodged a bullet there. So, four years down the line, how well have those reforms worked out? Well… let’s just say that things could have gone better. (LA Times, this week, emphasis added)
Today, Los Angeles taxpayers are underwriting retirement benefits that are among the nation’s most generous — at a cost that has never been higher.
The city’s general fund payments for pensions and retiree healthcare reached $1.04 billion last year, eating up more than 20% of operating revenue — compared with less than 5% in 2002.
L.A.’s vaunted pension reforms have not cut the city’s pension costs; at best, they have modestly slowed their rate of growth.
It’s only the fact that Hollywood and a few other big dollar enterprises keep their revenues far above average that’s stopping L.A. from sinking into fiscal dysfunction. Having 20% of your budget going to pension payments isn’t just massive… it’s unsustainable in the long run. Going back to the 2012 article I linked, the answer was right there in front of them. None of the modest reforms they enacted applied to current employees (who number more than 20K), only to new workers. Several large groups, including firefighters, police and water department workers were excluded from the reforms. And all of those pensions for existing workers are based on their salaries, which average anywhere from 20 to 42 percent higher than their civilian counterparts. No wonder their budget has this massive hole in it.
How many cities and states have seen seen this pattern repeated in? Pensions basically bankrupted Detroit. Chris Christie has spent a huge amount of his term fighting the bloated pension system in New Jersey. Cities from Cincinnati to Billings, Montana, Charleston, Portland and Chicago (which is at the top of the list) comprise the dozens of municipalities with the most massive unfunded pension debts hanging over their heads. Have we learned nothing?
If we’re to be brutally honest about how we got to this point (as well as what to do going forward), failure was baked into the cake from the beginning. The real issue is found in the fact that government employee unions were the ones negotiating with the municipal and state governments for the best, most expensive benefits they could manage. Unfortunately, in virtually every major city in the country, the government was run by the Democrats. Given what you no doubt already know, think about that for a moment. It means that the Democrats were negotiating against the Democrats. Nobody was representing the taxpayers and, perhaps even more seriously, nobody was there to keep their own appetites in check.
Now the chickens are coming home to roost in too many of these cities and the unions have crafted their deals so carefully that there is little the government can do to dig themselves out of massive budget holes. Los Angeles isn’t going under yet because of their fat budget, but looking at the bottom line on their ledgers it’s easy to see that it would only take one bad economic turn in their fortunes for the bottom to fall out of it. The public workers unions have feathered their beds quite nicely at the expense of everyone else, but you always wind up killing the goose that’s laying the golden eggs eventually.
They save up all their (generous) holiday and untaken "sick days" and load them into the last year of "work" ...so boosting the last year of employment and the ultimate pension
Nice work if you can get it.
Spokeshave whom is still working at 74.5---(yea, but I just passed the 360 lb leg press mark)
“One routine irritation for me is the pension bump game played by public safety folks who take a promotion with a jump in pay in their last year on the job, work a year, then pass that along to the next guy.”
Yes, years ago I worked with a guy who was involved in kids baseball. One of the other coaches was a retired NYPD cop who had moved to CA and gone to work for the USPS. From what I was told, back then the NYPD did this game that promoted the “good guys” who were near retirement because their retirement payouts were driven by the last three year pay. So this guy had an NYPD retirement and was working to get a second on from the Postal Service. We had a governor, Deukmejian as I recall, who was going to get three pensions. One from the military, one for being a judge, and one for being governor. It all has to stop, but my guess it will go to the brink before anyone makes the necessary changes, because here the RATs run the government and the RATs run the PE unions. Here our local fire board has FF’s (who now live here but work elsewhere) and they are now the majority, so you can bet that it will be Katy bar the door when it comes to pay.
“Most California counties soak up the lions share of property taxes, leaving cities to survive on fees and sales tax. Any hit the economy takes, immediately impacts city budgets.”
Actually that’s not quite true. Schools take up the lion’s share of property taxes, but you are correct that the cities and towns rely mostly on sales tax subventions. Where we live, we are essentially a bedroom community, but we did manage to get Costco to put their local warehouse store just inside our town limit. That place provides 35% of our town’s budget by itself. The other thing that municipalities seem to have a penchant for is expanding their boundaries, and when they do, you know that the developers will stick the current residents with big chunks of the infrastructure costs that they incur.
Our development process includes sizable impact fees, and off-site improvements the developer has to put in that are supposed to offset the infrastructure costs, but they never completely do.
There’s an often-told story of a firefighter in southern California who arranged his schedule so he could commute from South America.
A wise old monk I met somewhere in SE Asia once summed up this kind of situation and failed leadership by saying “Fuck them. They voted for these fools so let them suffer from them”.
He was a very wise old man.
You didn’t know that I spoke “monkenese” did you?
I learned couple years ago,City pension has 6-8 % guaranty return.
i think I see the problem right here:
“Mayor Antonio Villaraigosa, backed by the city council, jumped into the fray...”
and it seems like I’ve been hearing about the “screw the new guy” solution all my life - great for morale and retention when you’re doing the same job as the guy/gal who started a year before you did but they’re getting twice the compensation:
“None of the modest reforms they enacted applied to current employees (who number more than 20K), only to new workers.”
In any cases, that simply isn’t true. Those currently in power cannot cut benefits, it’s illegal. Look, for example, to the Illinois Constitution. Article VIII, section 5 states:
Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.
And in the case of Los Angeles, aside from direct medical benefits, they still have nearly 9 billion in debt they owe to CALPERS from the 2000 dot Com crash which they've just been paying the 8 percent interest on. Sadly, they've also passed bonds which half of those proceeds went to pay some of that interest.
There is a fundamental conflict between the budgetary powers of current councils and the largess of previous councils. And as multiple bankruptcies across the state have shown so far, band-aid fixes from courts only last a short amount of time.
When Los Angeles goes bankrupt in about 6 years, hopefully by that time we'll have a solution. Because the one thing that isn't a solution is continuing the status quo.
Well, here you go “fellow Texans,” after bleating about how bad things are here in California, “wonder of wonders Dallas” is about to go bust! And for exactly the same reasons as the cities here have had to go through Chapter 9, the effing cops and fire fighters exorbitant pay and benefits! Welcome to the realities of life today. “Gravity” really does exist in that “land of milk and honey,” Texas!
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