L.A. County sees $200M shortfall
Troy Anderson, Staff Writer
Created: 06/28/2010 08:28:10 PM PDT
Stung by an $8 billion pension fund loss last year, Los Angeles County supervisors will be asked today to spend an additional $200 million to shore up its wilting retirement system.
If the money is approved, the taxpayer tab for county employees’ pensions would soar in the fiscal year beginning Thursday from $787 million to $987 million.
And officials warned that additional increases would be needed in future years – with the price tag for taxpayers reaching $2 billion by 2015 – to cover investment losses and enhanced pensions for the legions of county-employed baby boomers reaching retirement age.
“It is expected the employer costs will rise sharply in the coming years depending on the severity and longevity of the economic downturn,” Gregg Rademacher, CEO of the Los Angeles County Employees Retirement Association, wrote in a letter requesting the funding hike.
“It is foreseeable the employer’s contribution rate could rise from the recommended 14.22 percent to approximately 23 percent of active member payroll when the sustained losses are fully reflected in the employer’s contribution rate.”
Pension costs have been soaring even as county departments have slashed services in response to a sharp decline in property tax revenues caused by the weak economy.
Despite these steps, the county’s $23.2 billion budget faces a potential loss of $1.25 billion in state funding when lawmakers finalize California’s budget this summer or fall.
David Kline, a spokesman for the California Taxpayers Association, said local and state governments will be demanding huge increases in taxpayer contributions to keep their public-employee pension funds solvent.
“The pensions for government employees simply aren’t sustainable at their current levels,” Kline said. “We would encourage officials to look for ways to reduce the burden on taxpayers through various pension reforms.
“Clearly,” he said, “every dollar that taxpayers are paying for the pensions for retired employees is a dollar that can’t be used to pay for current employees to provide services.”
The Los Angeles-based Reason Foundation released a report this month that said that elected officials have bestowed massive pension and benefit improvements upon government workers in the last two decades and that the systems are now underfunded by more than $500 billion.
Statewide, taxpayers are spending $17 billion to $18 billion annually for public employee pensions and retiree health care costs.
And the state Legislative Analyst’s Office says the tab is increasing at a rate of several billion dollars a year, eating into funding for public services.
In the libertarian Reason Foundation report, policy analyst Adam B. Summers wrote the current pension system is unfair to taxpayers who are forced to pay more to “recessionproof government workers’ pensions” even as they are struggling to save for their own retirements.
“As we see these pension obligations eating up a larger and larger portion of state and local budgets, people are finally starting to realize that this is something that has to be tackled right away,” Summers wrote.
“All this extra money we are putting toward public pensions is money not being spent on public safety, education or some of the other
highest-priority programs in government. So it really necessitates a serious re-evaluation of government priorities.”
Despite the potentially large increases needed to shore up the county’s pension fund, officials said the county is doing better than many public entities throughout the state that could see their annual pension contributions increase even more steeply.
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