On Tuesday, February 1st, the Long Beach City Council took a significant step towards reducing future pension costs. After many rounds of negotiation over an extended period of time, the City formally declared negotiations at an impasse and will move forward to unilaterally implement reduced pension benefits for new employees of the Long Beach Association of Engineering Employees (LBAEE).
Pension benefits will be reduced from the existing 2.5% per year of service, retirement age 55, based on highest year salary to 2.0% per year of service, retirement age 60, based on three year salary average. Additionally, new employees will pay their full 8% of payroll contribution to CalPERS.
In 2001 and 2002 Long Beach increased pension benefits, thereby creating an unsustainable pension system. General Fund pension costs have grown from $6 million in FY2003 to $46 million in FY2010. This expense growth has resulted in fewer Police Officers, fewer Firefighters and fewer services for Long Beach residents. And without significant change, it will only get worse. It appears these unions would prefer to have fewer employees and reduced service levels rather than be our partner in meaningful change.
While I hope that every Long Beach employee labor union will realize the necessity of this action and will willingly agree to these reduced pension benefits, I have no doubt the City Council will impose these reductions if unable to obtain the changes through normal negotiation processes. Furthermore, it is likely that the City will take the position that we will not hire any additional public safety employees until reduced pension benefits are in place. It doesn’t make financial sense to add more employees to a broken pension system. Fortunately we have an outstanding Police Department which just achieved a year of record crime reductions, and a top-notch Fire Department with a well-deserved reputation of excellence. Both of these organizations have met the challenge of “doing more with less” and have the leadership in place to provide the best possible service with the funds they are allocated.
The days of exempting Public Safety unions are over. With 2/3 of the City’s General Fund budget allocated to Police and Fire services, and over 80% of the General Fund associated with labor cost, there simply isn’t any other choice. The only question remaining is whether we will proactively solve our pension problem or kick the can down the road as long as possible.
If we don’t solve the problem now and allow it to continue to grow, it is likely municipalities will move away from defined benefit programs in favor of defined contribution programs, as well as seek legal remedies to modify pension benefits for existing employees.
As a result of Tuesday’s vote, the City Council has demonstrated that we are determined to roll back pension benefits to what they were before they were generously increased in 2001. The City is close to approving agreements which include a reduced pension tier for several additional unions within the next few weeks; however, our largest unions (Police, Fire and IAM) currently appear to be unwilling to accept these changes.
Gary Delong is a Long Beach City Council Member.