LA WATCHDOG--Four weeks after Mayor Eric Garcetti and City Council President Herb Wesson trumpeted that the City had reached a tentative agreement with the union leadership that represents the City’s 20,000 civilian workers, the details of this budget-busting, backroom deal are slowly making their way into the public realm.
Unfortunately, the City was not able to achieve its goal of freezing salaries for four years. Rather, the employees will be entitled to a 2% cost of living adjustment in June of 2017 and a step increase of 2.75% in January of 2018. This is expected to cost the City an additional $60 to $70 million in the last year of the four year contract (fiscal year ending June 30, 2018) and $90 to $100 million in the following years.
This will wipe out the projected budget surplus of $68 million for the fiscal year ending June 30, 2020.
The City’s projections will also take another hit of around $25 million a year since City workers will not be required to contribute 10% of the cost of their Cadillac healthcare plan, contrary to the City’s expectations.
This, along with the bump in wages, will create a deficit of approximately $55 million in 2019-20, a swing of over $120 million.
The City also caved on major pension reform, eliminating the 2013 reform plan (Tier 2) where new employees would contribute 75% of the annual cost and cover 50% of the investment shortfall. Rather, the new tier (Tier 3) will require the same contribution (11% of pay) as existing employees, but provide modestly lower benefits for employees hired after to the new labor agreement.
The short term impact of the new pension tier on the budget outlook will be modest. But the difference over the longer term may be significant and will be determined by actuarial study prior to its implementation.
The City is also committing to a “hiring goal” of 5,000 additional civilian workers over the next three years. But this will require a massive increase in revenue as the fully loaded cost (salary, benefits, and pensions) for all of these new employees will most likely exceed $400 million a year. This will require a massive tax increase.
There are also provisions that limit outsourcing, a scary thought given the unflattering audits by Controller Ron Galperin of the Bureau of Street Services, the Department of Transportation, and Recreation and Parks.
Garcetti said that this agreement “prioritizes service delivery and strengthens our long term fiscal health” while Wesson piped in that this agreement will put “the City on a more certain financial footing.”
Baloney!
How does this budget-busting labor agreement that forces us to rely on a poorly managed and inefficient workforce benefit all Angelenos? How does this labor agreement help repair our streets and sidewalks, fund our pension plans, and eliminate the City’s Structural Deficit where increases in personnel costs outstrips the growth in revenue? How does this labor agreement help the City fund the Los Angeles River, build affordable housing, and backstop the Olympics?
As our Los Angeles Times editorialized earlier this week, the City should “commission an independent analysis of the short and long term impacts” of this agreement and “allow plenty of time for the public to ask questions and raise concerns before the City Council and Mayor vote on final contracts.”
Amen.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and a member of the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])
-cw
CityWatch
Vol 13 Issue 72
Pub: Sep 4, 2015
