Pension changes
It's an important first step, even if it doesn't provide short- and medium-term solutions
For cities, public pension commitments are a heavy burden that intensifies with budget troubles. Regarding this, Los Angeles took an important step in resolving this type of crisis in the future.
The City Council’s unanimous approval of an initiative to reform its retirement system for public employees is a wise decision, even if it is limited to future hires. However, this means that the anticipated savings will hardly be noticeable in the short- and medium-term, especially when public employees aren’t being hired.
Nevertheless, whether or not the cumulative savings reach between $30 and $70 million as expected, the changes won’t be any less worthwhile. It was necessary to increase the retirement age from 55 to 65 (with exceptions), change the formula for fund contributions and limit health care benefits for the spouses of retired workers.
It is disappointing that the reform excluded Department of Water and Power (DWP) employees, since this is exactly the area with the highest pensions and represents a large portion of the city’s budget.
As was to be expected, the majority of the unions are dissatisfied, especially because the changes were made by Council members instead of bargained at the negotiation table. Despite the unsuccessful efforts the city has made to approach the unions, a lawsuit is almost certain.
At any rate, the Council’s decision needs to be voted on again in 30 days in order to enter into effect next year. During this one-month period, there will be negotiations with the unions to find a better plan.
The municipal decision taken a few days ago is the first step in openly addressing the public pension issue. We hope this negotiating path bears fruit; otherwise, there could be a ballot initiative on the way.
