There are so many issue piling up on my plate. I didn’t need another one, but the City Council and Mayor deemed otherwise.
At least I will not have to comment extensively. I have been beating the drum on the pension issue for many weeks. Anyone who has been part of my distribution knows where I stand on the dangers of the unfunded pension liabilities at both state and city levels, not to mention growing employee compensation costs in general.
The City’s latest attempt to deal with the deficit disturbs me to say the least. I won’t reiterate all of the details contained in this article in the June 25th edition of the Los Angeles Times, but I encourage you to read the entire story by following this link: http://www.latimes.com/business/la-me-la-budget25-2009jun25,0,1596972.story
There are a few paragraphs that are worth reading closely:
The Los Angeles Area Chamber of Commerce sent Mayor Antonio Villaraigosa and the City Council a letter demanding that taxpayers receive more information on the financial consequences of the proposed five-year labor agreement with the Coalition of L.A. City Unions, which represents 22,000 workers.
Chamber president Gary Toebben warned in the letter that the agreement is poised to “deliver the kind of short-term political gain and long-term financial pain that has contributed to California’s fiscal implosion.”
With both funds experiencing large financial losses last year, the city’s required contribution is expected to increase annually from approximately $660 million next year to more than $1.6 billion by 2013-2014 — or more than a third of the city’s discretionary budget, according to a May 12 analysis by Acting City Administrative Officer Ray Ciranna. That increase “far exceeds any projected revenue growth” and is not sustainable, Ciranna wrote.
Sally Choi, who heads the City Employees’ Retirement System, said the city is required by law to complete an actuarial analysis of the early retirement plan. Choi said she has not seen such an analysis. “I’ve only seen what’s been reported through the unions and in the papers,” she said
Council President Eric Garcetti believes the increased employee contributions included in the proposed package would cover the additional burden created by accelerated early retirement. But what about the overall unfunded liability? Look at the projected increase in the City’s portion of the contribution in boldface above.
Councilwoman Wendy Greuel called the plan the “quickest, most humane, most cost-effective way” to reduce the size of the city’s workforce.
Wendy is our rising City Controller. As many of you know, I campaigned aggressively against her in favor of Nick Patsouras. I questioned her financial competence. As part of the City Council’s Budget Committee, she routinely ignored the warning signs of economic decline and its impact on revenues, not to mention the unsustainable employee benefits plans. It is a statement such as the one she made above that further validates my assessment of her.
How the Mayor and Council can even consider this package without a new actuarial study is proof of their incompetence, political cowardness and dependence on the unions. This is not even qualify as a budget patch, much less a plan.
Those of us in CD 2 have an opportunity to elect a sensible person in September to fill Wendy’s seat. Please consider one of several alternative candidates. The campaign will start in July, with forums following soon after. Do not be persuaded by the slick mailers the big names and interest groups will unleash like a tsunami.
As always, feel free to share my comments with anyone. Let me know if you would like to receive previous comments I made on this subject.
Paul Hatfield, CPA
Treasurer, NC Valley Village