City of Los Angeles Pension Reform Initiative (May 2013)
Former Los Angeles mayor Richard Riordan was the initiative's main sponsor.
According to Riordan, the city's pension obligations are likely to balloon to $3 billion a year by 2017. This would amount to 50% of the city's annual budget. In 2001, the annual pension payout was $220 million. In 2012, it was $1.2 billion.
The measure Riordan espoused, if it had qualified for the ballot and been approved by the voters, would have:
- Required current city workers to contribute more cash to their own retirement plans.
- Placed all future city hires into a "defined contribution"/401(k)-style system, rather than the "defined benefit" system enjoyed by the city's retirees and current workers.
- Frozen automatic pension increases during times that the pension fund's investments are underperforming.
- Eliminated "pension spiking". Under pension spiking, raises and bonuses in a city worker's final year of employment factor very heavily into the size of the annual retirement payout that a worker will receive during each year of retirement.
- Prohibited "double dipping". Pension "double dipping" is when a city worker retires, drawing a pension, and then moves to another city and takes a job there, so that the person is receiving both a pension check and a salary check.
Richard Riordan was the chief cheerleader for the measure. He said, "We're at the tipping point right now. If the city does not change its pension system quickly — and I mean this year — we will be doomed to bankruptcy within three years. And probably sooner."
Riordan is concerned that as the city's annual payout to its pension plan grows, the revenue available for other city needs will inevitably shrink. He believes that city will then be left with "little or nothing" for parks, libraries, street maintenance, trash removal and other essential city services.
Riordan, who is an independently wealthy retired private equity investor, donated money to pay for the signatures required to qualify the measure for the ballot. David Fleming and Eli Broad, a billionaire, assisted him in paying for the signatures.
SEIU Local 721 opposed the measure. They issued a press release saying, "One of the richest men in the city has just declared war on working people."
Bob Schoonover, the president of SEIU Local 721, also said, "Contrary to what Richard Riordan says, his pension plan wouldn't save L.A., it would wreck it. The plan is wrong-headed, lacks factual support and just plain mean."
Path to the ballot
Approximately 265,000 signatures were required to qualify the measure, an initiated city charter amendment, for the ballot. The campaign in favor of the measure announced at one point that they hoped to have collected the signatures by December 7, 2012.
On Saturday, November 17, unions in the city launched a petition blocking effort in an attempt to prevent supporters of the measure from being able to collect sufficient signatures to qualify the measure for the ballot. According to an article in the Los Angeles Times, on that day, "After a morning rally, about 100 city union members fanned out to 7-Elevens, supermarkets and strip malls across Los Angeles to persuade voters not to sign Riordan's petition."
- Los Angeles Times, "Riordan agrees to debates over city retirement benefits plan", November 15, 2012
- LA Weekly, "Richard Riordan Pension Reform Plan One Step Closer To L.A. Ballot", November 6, 2012
- LA Weekly, "Richard Riordan Pension Reform Surprise", October 18, 2012
- Los Angeles Times, "L.A. mayoral candidates debate Riordan pension overhaul plan", November 15, 2012
- LA Weekly, "Union Fires Back At Riordan Over Pension Proposal, Calls Plan 'Mean'", October 12, 2012
- Los Angeles Times, "Signature gatherers duel over Riordan pension initiative", November 17, 2012