* City expects $4 billion in savings in 30 years
* Retirement age at 65 for new staff, with lower payments
* "Politicians scrambling" to avoid taxpayer anger
By Jim Christie
SAN FRANCISCO, Sept 27 California's largest city
has joined the nationwide push for pension reform, marking
another setback over retirement benefits for public-sector
unions in the most populous U.S. state.
Over labor's outcry, the Los Angeles City Council on a 14-0
vote earlier this week approved changes to pensions for future
civilian employees projected to save, according to the city's
administrative officer, more than $4 billion over 30 years.
Critics say the overhaul does not go far enough as pensions
of current employees remain unchanged. Advocates say current
workers have already helped bolster the city's finances by
raising their pension contributions to pay for retiree
healthcare over the last three years when nearly 5,000 of the
city's civilian employees were sacked.
Mayor Antonio Villaraigosa, a former labor organizer,
pressed for the changes along with council President Herb
Wesson. Both previously were speakers of California's Assembly,
where public-sector unions have enjoyed considerable clout.
Political sympathies are, however, taking a back seat
because city services have been on the chopping block in recent
years while legal constraints and contracts safeguard payments
for city retirees and pension benefits for current city
employees, Wesson said.
A new look for the city's pension plans is essential, Wesson
told Reuters, noting that "Governing is not about doing what you
want to do. Governing is about doing what you have to do."
Los Angeles' pension changes include raising the retirement
age for new non-safety workers to 65 from 55 and new formulas to
reduce their pension payments. New workers also face higher
contributions to help with unfunded pension liabilities when
financial markets turn down.
VOTERS READY FOR CHANGE
Los Angeles' leaders also had a political incentive to act.
"Politicians are scrambling to get out ahead of voter anger,"
said Dan Schnur, director of the University of Southern
California's Unruh Institute of Politics.
Pension reform has become a political issue across the
nation, and in California it spurred voters in San Diego and San
Jose, the state's second- and third-largest cities, in June to
approve local pension reform measures by "avalanche"
proportions, said Steven Frates, research director of the
Davenport Institute at Pepperdine University's School of Public
"They've come to recognize that as these exploding pension
costs suck up more and more, the less there is for them," he
The San Diego measure gives new city employees, with the
exception of police officers, 401(k)-style retirement accounts
instead of traditional pensions. San Jose's measure reduces
pension benefits for city workers who do not increase their
contributions to their retirement accounts.
The easy victories boosted Governor Jerry Brown's push to
overhaul pensions for new state and local government workers
covered by state pension plans. His fellow Democrats, who
control the legislature, sat on his proposals for months, but in
August approved many.
The governor has signed the changes into law. They include
higher retirement ages and reduced pension benefits for new
public workers. They will also split payments to pension
accounts at least evenly with employers, who gain more authority
to negotiate 50-50 contributions with current employees.
ASKING FOR MORE
Villaraigosa pushed for pension changes for months - like
San Diego and San Jose, Los Angeles has its own pension fund -
and reforms backed by the city council mesh with his proposals.
The changes will help rein in Los Angeles' pension spending
years from now, leaving open the matter of tackling it over the
near term, Frates said, echoing a criticism of reforms approved
by California's leaders.
Increased contributions by current employees to their
pension accounts may be on the bargaining table between Los
Angeles and its unions when it comes time to renegotiate
contracts, Wesson said.
Unions would object but the request would be in line with
pleas by city officials across the state in recent years. Asking
for higher contributions has been widespread in California given
how weak local finances have been, said Rod Gould, city manager
of Santa Monica: "Already over two-thirds of cities have adopted
greater employee cost sharing."