Pension Reform

By Steven E. Presberg

Reforming the City's Pension system is the highest priority

Haven't we all been horrified to read about retirees from some City receiving a pension larger than any salary they ever received? Or a government retiree receiving multiple pensions? Or a politician retiring and receiving a pension, then going back on the payroll to receive another one? Public employees who manipulate the system to essentially steal a larger pension should be candidates for a criminal indictment, rather than a pleasant retirement.

Thankfully, such instances, while making headlines, are not the norm. Most public employees earn and receive modest pensions, and frequently receive either no social security benefit or a reduced benefit. Nevertheless, we have to confront a serious crisis here in the City of Los Angeles regarding our pension funds.

Funded by our City's General Fund, payments into our pension funds now take nearly 20% of all our annual revenue - and this amount is only trending upward. In dollars, we now must pay in over $800 million each year to the City employee pension funds. Estimates are that this will continue to increase and soon exceed $1 billion.

For several years we have had a recurring budget shortfall of $200 - $300 million, and this is projected to continue into the foreseeable future. We close this budget gap by continually reducing public services, by laying off workers, and by "one-shot" revenues such as selling City assets. This cannot continue. Either this issue is dealt with in a responsible way, or the City will be functioning primarily to fund its pension obligations, rather than to provide public services such as public safety, street repairs, parks and recreation, etc. Taxpayers will rightly not accept this.

The City cannot continue paying close to $1 billion (or more) out of the general fund into the pension plans. I support the reforms proposed by Mayor Villaraigosa that would apply to future employees, such as increasing the normal retirement age, but much more is necessary. To protect our City budget from being overwhelmed by these costs, and frankly, to safeguard the pensions of even current City employees, we must constrain the growth of the benefits to be paid out.

We must consider substantive actions, such as those taken by our colleagues in San Jose and San Diego, to limit the growth of employee pension benefits. No employee should have their pension benefit taken away, but rather, the growth of any future benefit must be capped in order to protect the entire system. Our public employees must share the same real world that everyone else lives in. Taxpayer dollars are limited. Employees must share more of the responsibility for funding retirement benefits, which must be capped and supplemented by individual retirement savings. While we all would love to have guaranteed six-figure pensions, our tax base will simply not support the current and future projected payouts.