L.A.’s Pension for Payouts

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In case you haven’t noticed, cities and other governments across California are in competition to see which ones can bankrupt themselves first by heaping ungodly cash on ex-bureaucrats. And it’s a pretty exciting race.

Now, pension payouts never used to be a big whoop when it came to budget expenses of governments. No more. Your creative government-elected officials have sure seen to that.

San Diego’s pension payouts reportedly amount to 42 percent of its total payroll already, and L.A.’s payouts to the rocking-chair set are expected to double just in the next few years to well over $1 billion a year. So those cities are definitely in the race to bankruptcy court, although they’ve got good competition. Don’t kid yourself.

Of course, the little Northern California town of Vallejo is an overachiever. It already beat the others, having declared bankruptcy a few years ago. That’s what happens when you give, say, police officers pensions equal to 90 percent of their final year’s salary, which Vallejo did. But before the town did that, it was sure to mandate that police officers got really good salaries. A police captain gets $300,000 a year. And it was sure to mandate that the police officers can retire at 50.

So if you do the math, you see what genius this is. The city has to pay the former police captain a pension of $270,000 a year for a lot of years, maybe 30 or more. Oh, and hire a replacement for $300,000 a year because you let the first one retire at a young age. Hah! Vallejo probably will even have to starting pay the replacement his pension before the first one dies. Admit it: That’s a pretty creative way to bankrupt yourself.

But Vallejo is a pipsqueak. We all are waiting to see which of the big cities – San Francisco, Los Angeles and San Diego – will go kerplunk first. My money’s on Los Angeles. But maybe that’s just local pride.

Actually, Los Angeles and some other cities are no slouches in this race. Many long ago learned to pay big salaries, let the workers retire young and pay them pensions of 70 percent or 80 percent or 90 percent of their last year’s salaries. But one little trick that helps is to find creative ways to spike the salary of the retiree’s final year. That way, the city has to pay a permanently greater pension to each ex-bureaucrat. Do that enough times, and you’ll get ahead in the race.

Of course, there are annoying critics out there who believe that this race to bankruptcy court is not a good thing. They whine that cities won’t be able to afford to fix streets and overburdened police won’t be able to properly investigate crimes because the cities are paying so much to former employees. They complain the huge pension obligations were quietly foisted on taxpayers without voter approval but guaranteed by contract law, all so that Democrats who control places like Los Angeles, Sacramento and Bell can pay off themselves and/or their union pals. Blah, blah. I say those whiners just don’t appreciate a good race.

Actually, I worry that the fun may end soon. Longtime Sacramento reporter Ed Mendel, writing on CalPensions.com, counted pension-reform ballot measures in eight California cities and one county, including even San Francisco. Some cities want to do things like start a two-tier system in which incoming public-sector employees don’t get the lavish pensions that the existing employees enjoy.

So I looked it up. When we trudge to the polls in three weeks, Los Angeles County voters will see nine state propositions. We’ll have to choose from a gaggle of candidates, and many of us will see one or more of the two dozen local measures scattered across the county. But thank goodness there won’t be one question anywhere in the county about reforming public-sector pensions.

Yup. My money’s still on Los Angeles to win the race.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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