Torrance will require some new hires to pay retirement contributions
Affects a small number of positions in the city's 2,000-employee work force

by Nick Green

Daily Breeze

August 18, 2010Reversing an almost 20-year-old policy, the city of Torrance will require some new hires to pay their own retirement contributions.

The city pays each employee's 9 percent retirement contribution for its firefighters and police officers and 7 percent for all other municipal workers.

For now, the move is largely symbolic.

The requirement affects a small number of positions in the city's 2,000-employee work force - primarily executive and management positions but also some miscellaneous jobs not covered by union contracts. All told, about 150 positions are affected.

But it is a harbinger of things to come.

Officials plan to negotiate the same deal with the city's public employee unions as current labor agreements expire. City workers have received the perk since November 1992.

The goal is to save money in the wake of a fiscal year that ended in June with an $8.9 million budget shortfall.

City officials pledged then they would seek the concession from employees and followed through Tuesday by unanimously endorsing the move.

"(Savings) grow tremendously," said Finance Director Eric Tsao. "That's the beauty of it."

The policy will apply to new employees hired after Aug. 29.

City officials estimate achieving an average savings of $505,000 in each of the first four years of the program.

That will increase as turnover occurs. Today taxpayers pay $8.7 million annually for the employee perk, Tsao said.

That figure visibly annoyed local government watchdog Newt Young, the lone member of the public present in the council chambers during the discussion of the item, who observed that the public is "fed up with public employee unions."

He noted that the figure was pretty close to last year's budget deficit, which required cuts to many community programs, including the Fourth of July fireworks show.

"There was no reason for all the cuts ... because of this one budget buster," Young said. "Think of all the infrastructure that could have been repaired with this $150-$160 million (over the years)."

Council members listened patiently to Young, but bristled when he called the perk "an unwarranted gift to public employees."

"It's not a gift of public money," retorted Councilman Pat Furey. "It was something they negotiated."

The benefit was likely given in lieu of a raise, city officials said.

The wages and benefits given to public employees have come under greater scrutiny since the revelation that officials at the city of Bell were hauling in massive salaries.

That's compounded public anger over shortfalls in the state's Public Employee Retirement System, which Tsao said lost about 30 percent of its assets during the economic downturn. Taxpayers are on the hook if the system can't meet its pension obligations.

In Torrance, Tsao said the retirement fund for miscellaneous employees is 99.2 percent funded, with retirement funds for firefighters and police funded at 87 percent and 82 percent, respectively.

That sounds pretty good, but it means Torrance's unfunded pension liability stands at $130.1 million - $71 million for police, $38 million for firefighters and $21.1 million for all other city employees, Tsao said.

Mayor Frank Scotto noted that the performance of the investment fund backing the retirement system means the amount of money can increase to cover the shortfall. But the deficit could also increase if stock markets underperform.

Any unfunded liability is paid by increasing the city's amount paid to PERS to amortize it over 25 years, Tsao said.

The reforms initiated Tuesday by the council are long overdue, Scotto said.

He said that in addition to the city paying the employees' contribution to the retirement system, it's also required to pay the city's share. Torrance's obligation stands at 10.5 percent for miscellaneous employees, 33.9 percent for firefighters and 37.9 for police, he said.

Combine those figures with the contribution the city wants to shift back to its employees and today Torrance pays almost 50 percent of the pay for police in the form of retirement benefits.

And that, Scotto said, is unsustainable.

"It's definitely a step in the right direction," he said of the council's action Tuesday. "We've got to fix this because us as taxpayers can't afford to continue to pay (these benefits)."