L.A. Mayor, Unions Strike Deal on Pension, Health Care Costs

SAN FRANCISCO — Los Angeles Mayor Antonio Villaraigosa has reached a tentative deal with a coalition of unions that could help curb the city’s ballooning pension and retiree health care benefit costs.

The pension and health care reform agreement with six city civilian unions representing 19,000 employees could save the city’s general fund $204 million, and $396 million in overall savings in the next four years, according to a statement by the mayor’s office.

The savings would come partly from higher employee contributions to retiree health care plans, by shifting pay hikes to the end of a contract period, and suspending cash overtime.

“The agreement recognizes that in these tough economic times, we all have a responsibility to shoulder our share of the burden,” Villaraigosa, a former union organizer, said in a blog post Friday.

If ratified by rank and file members of the Coalition of L.A. Unions, the higher employee contributions to retiree health care will save an estimated $64 million over the next three years, $317 million over the next 15 years, and $634 million over the next 30 years, according to a statement Friday by the mayor.

Employees would begin to contribute 2% to their retiree health care on April 1, which would increase to 4% at the beginning of the next fiscal year, raising the total retirement system contribution for all active and future coalition-represented employees to 11%, up from 6%.

Villaraigosa’s office said the deal will prevent service cuts and more than 600 layoffs.

The contract gives workers a “no furlough” guarantee through mid-2014.

However, the mayor’s deal with the coalition only covers roughly half of city workers tied to the general fund.

Having started the fiscal year with a $490 million deficit, Los Angeles expects a $350 million budget deficit next fiscal year, according to Miguel Santana, the city administrative officer.

Contributions to city worker pensions for fiscal 2012 are expected to hit  $872 million and spike to $1.28 billion by fiscal 2016, Santana said in a budget update earlier in March. Early this month, more than 73% of Los Angeles voters approved a ballot measure to create a lower level of benefits for newly hired police officers and firefighters.

In the official ballot statement, Santana said Los Angeles will save an estimated $152 million over the next 10 years, “assuming the city continues to hire public safety employees to maintain its current workforce.”

In its most recent report on Los Angeles, Moody’s Investors Service said pension and employee health care benefits will continue to be a challenge to its budget over the next several years. It said the pressures specifically pose a threat to the city’s plan for rebuilding reserves.

The city’s general obligation bonds are rated Aa3 by Moody’s and an equivalent AA-minus by Standard & Poor’s and Fitch Ratings.

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