What Happens When City Retirees Outnumber City Employees?

Gary Toebben
President & CEO of the Los Angeles Area Chamber of Commerce

In the City of Los Angeles, the budget deficit for 2011-12 begins at $350 million fueled in large part by the rapidly growing cost of pensions and health care for retirees. Last week, Mayor Antonio Villaraigosa called for two significant reforms to keep the problem from getting worse. He called for raising the retirement age for non-sworn city employees to 65 and he urged the members of the Fire and Police Pensions Board to reject a 7 percent increase in the health care subsidy given to public safety retirees. The current health care subsidy for fire and police retirees is $1,025 per month and the 7 percent monthly increase would add another $4.8 million dollars to the City’s budget deficit. The Chamber and other business and community organizations joined the mayor in support of both proposals.

On Friday, the Fire and Police Pensions Board ignored Mayor Villaraigosa’s plea and thus added another $4.8 million to the City budget deficit. Put another way, the Fire and Police Pension Board forced the mayor and City Council to cut another $4.8 million in city services like street maintenance, libraries, parks and police and fire protection.

The City of Los Angeles has more than 30,000 retirees, nearly equal to the 32,000 employees on the active payroll. The City’s current pension plan coupled with annual cost of living increases for pensions and health care, make it impossible for the City to overcome its structural budget deficit without eliminating the public services that citizens pay taxes to provide.

Time is running out for Mayor Villaraigosa, the City Council and the taxpayers who are getting less and less in actual public services for their hard earned tax dollars. Three years of debates over layoffs, furloughs and spending cuts have yet to make a dent in the real problem, which is the unsustainable cost of pensions and health care for a retiree population that will soon outnumber the active employees serving our City.

The anger is palpable and justified. The Chamber’s Government & Civic Issues Council met with the L.A. Neighborhood Council budget committee leaders last week and we found complete agreement on this issue. Business and neighborhood leaders know that the next few months will be a watershed moment for Angelenos. It’s an opportunity to reshape our City budget so that it works for all of us in the long-term.

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