The Los Angeles City Council directed Chief Administrative Officer Miguel Santana to begin work on a new pension tier for new civilian hires. We applaud this action and urge the City Council to create a new tier that will greatly reduce the pension obligations of the City in future years.
At the same meeting, the Chamber presented a proposal that would begin to address the unfunded liabilities of the existing pension plans for current employees. This proposal would begin to reign in the City’s growing obligations and leave more money in the budget for City services like police, fire, streets, parks and libraries.
In the world of politics and policy, we do not see a lot of situations that are black and white. Most of the time we are doing all we can to navigate the gray. This is not the case when it comes to the City’s growing liabilities in its three pension systems. The City has a civilian employee system that covers City employees except for the Department of Water and Power, the Department of Water and Power civilian system, and the system for sworn employees in the Los Angeles Police and Fire Departments.
From 2002-2012 the City and DWP’s obligation to fund these three pension systems has increased more than 20 percent a year. In the current budget, City civilian and sworn pension costs eat up nearly 19 percent of the general fund. In four years, the CAO projects that number to be 25 percent. The total amount of taxpayer and DWP ratepayer payments into these three systems this year is $1.3 billion dollars.
How does this pension obligation compare to the cost of other City services? It is more than the $1.2 billion LAPD budget and two and one-half times the LAFD budget. It is six times the cost of the Bureau of Sanitation, which picks up our trash, and eight times the cost of the Bureau of Street Services, which paves our streets and fills our potholes.
These growing pension costs from these unsustainable systems leave elected officials with two choices every year, cut more city services or raise taxes and DWP rates. At the same City Council meeting last week, the Council voted to consider two tax increases.
While the politics may be gray, this situation is very black and white. If our City leadership takes actions that whitewash our growing pension liability, the cuts in services and the increases in taxes are as predictable as death and taxes. We are at a crossroads. It’s black and white.
Gary Toebben President & CEO of the Los Angeles Area Chamber of Commerce