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Labor leaders prevail on L.A.'s early retirement plan

September 1, 2009 |  4:53 pm

Giving a victory to several public employee unions, a panel of Los Angeles pension board members agreed today to give city officials the maximum amount of time to pay off the cost of an early retirement plan seen as pivotal to erasing a $530-million budget shortfall.

On a 2-1 vote, the pension committee ignored the advice of its top executive and recommended that the cost of early retirement be repaid over 15 years.

Sally Choi, who heads the Los Angeles City Employees’ Retirement System, had argued that a five-year payment schedule would be the most fiscally prudent strategy for the early retirement plan, which would allow 2,400 workers to leave up to five years ahead of schedule with full benefits.

Her recommendation infuriated the Coalition of L.A. City Unions, which warned that such a strategy would upend the budget by making early retirement too expensive to carry out.

“We think the committee did the responsible thing,” said coalition Chairwoman Cheryl Parisi, whose group favors early retirement as an alternative to layoffs.

The seven-member pension board, which has a majority of its members selected by Mayor Antonio Villaraigosa, is scheduled to take a final vote next week. Villaraigosa spokesman Matt Szabo said the mayor is not seeking a particular timetable.

Mike Keeley, the mayor’s senior budget adviser, beamed and applauded when the committee agreed on the 15-year payment plan.

Segal Co., the city’s actuarial firm, concluded last month that increased retirement contributions from remaining city employees would not be enough to cover the cost of the $250-million plan. Unless the plan is changed, city officials will need to make up the difference at the expense of other programs.

Segal also analyzed five payment schedules for the early retirement initiative and concluded that paying off the cost within one, five, eight or 10 years would be “reasonable.” The company put the 15-year payment plan in a different category, calling that strategy “acceptable.”

Meanwhile, the city’s lawyers told the pension board that its primary responsibility is to safeguard the retirement system, not the city budget. Nevertheless, labor leaders mounted an aggressive campaign against Choi’s recommendation.

Pension board member Roberta Conroy tried without success to convince her colleagues to drop the 15-year payment option. But board member Moctezuma Esparza said his agency’s advisers concluded that 15 years is financially sound.

“I heard that, absent a conflict, it is our obligation to seek the lowest contribution” from the city of Los Angeles “while maintaining the highest duty and loyalty to our members,” he said.

-- David Zahniser at L.A. City Hall