CITYWATCH SPECIAL REPORT--In 2001, the Los Angeles City Employees’ Retirement System or LACERS* was 100.4% funded, it had a surplus of $557.7 million (no unfunded liability), and its annual contribution from the City was approximately $70 million.
In 2019 LACERS is 73.1% funded, its unfunded liability is $6.5 billion and its most recent annual contribution from the City was $676.7 million. (The Truth about LACERS is a series and will run weekly on Thursdays.)
LACERS should propose to the City Council that the City Charter be amended to stipulate that an appointed board member may be removed prior to the end of his or her term, but only for cause relating to the board member’s fiduciary or statutory duties, and that if an appointed board member is removed from office prior to the expiry of his or her term, that the reason(s) for such removal be publicly disclosed.
This recommendation is from 2013 Management Audit of LACERS conducted on behalf of the City Controller, City Council, and Mayor (not LACERS). It is not a coincidence that this recommendation was made after two perfectly good LACERS board members, Roberta Conroy and Jerry Bardwell, were dismissed from the board (their pre-signed letters of resignation were accepted) by then Mayor Antonio Villaraigosa.
So, what is wrong with the Mayor removing board members? For most City boards, the Mayor probably should have the authority to dismiss board members without specific cause, but pension systems are different. By law, the primary duty of California public pension board members is to the members of their pension plan – not to the Mayor or anyone else. The California Constitution indicates that, “A retirement board’s duty to its participants and their beneficiaries shall take precedence over any other duty.” This helps protect the pension systems from political influence, especially in a situation like LACERS where the Mayor appoints a majority of the board members -- four of the seven members.
When LACERS board members need to discuss items that may impact the City budget, it can be difficult for them to have that discussion free of political influence – explicit or perceived – if the Mayor’s representative is pacing in the back of the board room, having a conversation with them in the hallway just before their vote (real life examples), or if they believe the Mayor may dismiss them from the Board if they vote in a way he may not like (as Ms. Conroy appeared to be in 2011).
Appointed LACERS Board Members with real or perceived axes over their heads are more likely to act in the same short-sighted manner as term-limited politicians. Short-sighted decisions by the LACERS Board will not be beneficial to the long-term interests of LACERS members or City taxpayers.
So, what happened to the common-sense audit recommendation from 2013 from the audit conducted on behalf of the Mayor and other City leaders? Mayor Garcetti’s staff was not surprisingly uninterested in moving forward with the suggested Charter change, so the recommendation died, but the issue remains.
(Tom Moutes has served at LACERS for approximately sixteen years, the last seven of those years as the General Manager of the pension system. He retired in 2018. Tom can be reached at firstname.lastname@example.org.) THE TRUTH ABOUT LACERS is a series and will be posted weekly on Thursdays, in CityWatch.