In 2011 and 2012, Los Angeles enacted highly touted pension reforms. But they weren’t enough, and now LA is paying more to cover pension liabilities than at any point in history. The LA Times reports:
Former Mayor Antonio Villaraigosa said changes he oversaw in 2011 and 2012, which included lower pensions for new employees and higher retirement contributions from city workers, were “the most far-reaching effort in the nation.” Mayor Eric Garcetti echoed that assertion this year, saying L.A. had “done the most pension reform in the country of any big city.”
Yet the numbers tell a story jarringly at odds with the political rhetoric, a Times analysis found. Today, Los Angeles taxpayers are underwriting retirement benefits that are among the nation’s most generous — at a cost that has never been higher.
The city’s general fund payments for pensions and retiree healthcare reached $1.04 billion last year, eating up more than 20% of operating revenue — compared with less than 5% in 2002.
L.A.’s vaunted pension reforms have not cut the city’s pension costs; at best, they have modestly slowed their rate of growth. Since the changes took effect, general fund contributions to the retirement system have grown an average of $66.6 million a year — roughly twice as fast as all other spending controlled by the mayor and City Council.
What really happened here isn’t that LA made big reforms; it’s that politicians rejiggered some of the algorithms and declared victory. Now, they’re facing the consequences of papering over reality.
Nor is the problem confined to LA alone, of course. Six of the ten biggest cities in California devoted over 15 percent of their budgets to funding pension liabilities this year. The Times reports that San Jose devoted nearly 28 percent of its budget to pensions.
Such gross fiscal mismanagement would be a crime if it were committed in the private sector. Yet it’s the basis of blue governance in American cities.