Economists now argue whether our "new normal" will actually yield growth rates of 7.5% or 5% or lower, but the city's current budget situation should make something clear: The new normal now includes pension obligations to police and fire retirees that will reach 19% of the city's budget in five years, up from 8.7% this year. Meeting that obligation would require continuing cuts and layoffs. And that's just the public safety portion, not counting other city workers.
Another undisputed aspect of the new normal is that medical costs for retirees have risen an average of 10% a year for each of the last 10 years. The city has traditionally paid those costs, although it is under no charter obligation to do so. The new normal also includes retirees living longer, with medical costs that rise with age.
As Mayor Antonio Villaraigosa noted this week, Los Angeles can no longer afford to pay retiree medical care without any employee contribution. He has proposed a modest — in our view, a too-modest — 2% annual contribution. It's OK as a minimum, but the city can't afford it to be carved in stone as the maximum contribution.
Nothing can or should undermine the city's obligation to current public safety retirees and employees. But the City Council must now ask voters to offer a more rational, although attractive, retirement benefit to new police and fire recruits at pre-2001 levels. The council has until Nov. 3 to put a measure on the March city ballot.
It will not be enough to protect the city's budget, but if the city continues to hire at a steady pace to replace retiring police officers and firefighters, the proportion of employees working toward the more rational benefit will increase. It's step one in addressing the city's pension crisis. |
