Garcetti Blinks at Worker Benefit Reform

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

It appears Los Angeles taxpayers will continue paying for their health care and someone else’s—that of city workers. 

The Los Angeles Times reported right before the Thanksgiving holiday that, Mayor Eric Garcetti has abandoned his long-stated goal of getting the city’s public employee unions to pay a portion of their healthcare costs.

Garcetti’s action—or non-action—could set up Los Angeles as the canary in the coal mine as what will happen to municipalities if they ignore exploding public worker costs.

Politicians are hiding from one of the biggest problems facing government today—how to meet pension and health care obligations without busting budgets.

None of the obvious solutions are pretty or would come without heated opposition. One is to raise taxes to cover the costs; the other would be to reduce the benefit payments or require greater contributions from public employees. In the first scenario, politicians could offend the voters who put them in office. In the latter, they upset the people they work closest with, and who most often fund their quests for office.

Garcetti backing away from his campaign promise is not a good sign that we are on the road to a solution. During his run for office, Garcetti pledged to require public workers to pay 10% toward their healthcare costs. Not only did he agree to agreements to keep the healthcare costs for city workers at zero, he agreed to reduce some smaller unions’ member payments from 10% to nothing starting in January.

His action will have repercussions throughout California when public worker contributions to health and pension benefit systems are considered as officials continue to grapple with the problem.

If neither healthcare payment from workers are increased nor taxes are raised what happens when the obligation grows to pay the debts is that services are cut. Residents end up paying more for less service.

On the same day as the Times news story, Calpensions reporter Ed Mendel released his column which was titled: CalPERS police-fire hit ‘unsustainable’ level. The report included the following: “A League of California Cities study issued early last year said “pension costs will dramatically increase to unsustainable levels.” The average city is projected to spend 15.8 percent of its general fund on CalPERS costs in fiscal 2024-5, up from 8.3 percent in 2006-7.”

The problem for Los Angeles is that it already dedicates about 20% of its budget to worker benefits. And, city budget analysts last month concluded that the city faces a $200 million to $400 million annual deficit when the new labor contracts are considered.

Hope eternal for those concerned with out-of-control pensions has rested on a coming California Supreme Court ruling that could modify the state’s California Rule that resulted from court decisions starting in the 1950s which is understood to mean the pension offered at hire becomes a vested right and can only be cut if offset by a new benefit of comparable value.

Yet, even if the court rules that politicians can act to reduce public workers benefit costs, the next question is will politicians do so? Garcetti’s decision to back away from his campaign pledge on health care payments sets a bad precedent.

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