The City of Long Beach’s City Council has taken action to protect its residents from future foolish decisions that rob the city of much needed resources.

In 2001 and 2002, the City Council voted to adjust its pension formula for city employees. Under the renegotiated labor agreements, the retirement age for public safety employees dropped from 55 to 50, while their benefits increased from 2% to 3% percent. The retirement age for non-public safety employees also decreased from 60 to 55, and they went from 2% to 2.7%.

These were increases of more than 50% and 33% respectively.

And the increases were also applied retroactively.

This agreement meant that if a police officer worked his or her twenty sixth year in 2002, they would have received 3% credit for all twenty six years, and not 2% for the first 25 years and 3% for the 26th.

This increase amounts to hundreds of thousands of taxpayer dollars over the life of an individual employee’s retirement, and led to tens of millions in increased costs to the city.

The City only provides online access to budgets since the 2003 Fiscal Year, but the comparisons are still striking:

  • In 2003, the City’s pension fund had a $14 million reserve and was paying $97 million per year in benefits.
  • In 2004, reserves had dropped to $4 million and payments had reached $118 million.
  • In 2009, pension costs had surpassed $204 million, and the city had less than $4 million in its pension reserve.
The increased pension liabilities depleted available General Fund resources and are difficult for the city to continue to absorb.

“In the 2003 Fiscal Year, the pension costs from the City’s General Fund was $5.8 million,” said Long Beach City Councilmember Gary DeLong. “In the 2009 Fiscal Year, those cost went to $48 million.”

This year, the City facing another $18.5 million deficit in its general fund, and the City Council has run out of options.

Labor negotiations are ongoing in Long Beach, but so far neither the City nor the three largest labor unions have been able to reach an agreement. As a result, the City has been forced to layoff employees to lower costs. This year, there will be fewer police or fire fighters on the streets.

“Thousands of employees benefitted from the increase in the benefits package,” said DeLong. “We looked at the deficit and identified $11.3 million that Labor would have to provide – either through cuts or concessions. The other $7.2 our City manager and departments would have to come up with through increasing efficiency.”

While the current budget situation wasn’t caused solely by the 2001 decision, it certainly hasn’t helped.

The City Council voted 7-1 to pass the resolution opposing “retroactive pension spiking” and will recommend that State Legislators pass legislation banning the process in the future.

“It’s one thing to say that we’ll increase pensions for public safety employees going forward, but its entirely different saying we’re going to back credit to your first day on the job,” said DeLong. “It’s outrageous to say you can’t retroactively reduce (pensions), even if labor agrees, but you can retroactively increase them. That’s crazy.”

The issue will now be sent to Assembly Members Isadore Hall, Bonnie Lowenthal, Warren Furutani, as well as Senators Alan Lowenthal, Jenny Oropeza, and Rod Wright for review and state-level action.