Pension Reform

By Kevin James

To avoid bankruptcy, Los Angeles will need real pension reform.

My ideas for pension reform include the following:

First, pension reform has to include all of the city unions, including the DWP.

Second, we must raise the retirement age. I agree with the proposal to raise the retirement age for civilian employees to 67. As for public safety employees (as well as civilian jobs that require a certain level of physical exertion), we should move those employees to other needed positions requiring less physical strain during later years of their employment if the situation warrants it.

Third, we cannot maintain the current discount rates of 7.5% to 8% - that rate must come down to reality.

Fourth, we must raise the contribution rates that employees contribute to their own pension and health insurance costs. I know some of the unions have agreed to this already, but more is needed.

Fifth, we must further cap an employee's pension collections. This can be done a couple of ways, by capping the amount an employee can receive, or by limiting how much the city contributes each year -- all while recognizing that it might have to be further limited depending on the city's ability to move out of the current financial crisis.

Sixth, limiting pension calculations to an employee's base salary.

Seventh, we must also do something to stop the abuses of the pension system. For example, we should ignore an employee's last year of compensation when calculating pension benefits. That is when you see more abuse of the system.

Two of the more sweeping pension reform proposals that are now being put on the table I believe also deserve consideration. The first proposal is the elimination of the defined benefit pension in exchange for a 401(k)-style individual investment plan. The second (which was floated in the recent story about Riordan's meeting with Mayor Villaraigosa) returns power over the pensions to the voters.

Real pension reform is not an ideological issue, it is an actuarial issue - we simply do not have a choice.

Finally, I have a feeling that I am the only Mayoral candidate that has looked into recent developments in California case law concerning the vested-rights doctrine. Not to get too "in the weeds", but the courts appear to be on a trend toward easing the definition of what constitutes vested rights. That will give future city officials more leeway in renegotiating prior obligations -- especially city officials willing to battle it out in court in the name of saving city services and I am willing to have that battle