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Los Angeles Unions Approve $400 Million Health-Care Givebacks

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April 27 (Bloomberg) -- Los Angeles city workers voted to contribute 4 percent of their salaries toward retirement health benefits for the first time to avoid furloughs and job cuts.

About 19,000 full- and part-time employees were eligible to cast ballots yesterday, and 80 percent of the bargaining units approved the plan, the Coalition of Los Angeles City Unions trade association said in an e-mailed release today. The workers currently pay nothing toward the benefits.

“We came together in the best interest of both workers and Los Angeles residents,” Tim Butcher, a heavy-duty truck operator with the city’s Bureau of Street Services, said in a statement from the union. “The changes to our contracts will end furloughs immediately, and that means we can get back to work for the people of this city.”

Governments across the U.S. are asking public employees to contribute more for health-care and retirement costs. Wisconsin Governor Scott Walker sparked a nationwide debate when he signed a law that eliminated collective bargaining for benefits and increased contributions for health care and pensions. Ohio passed a similar law, and New Jersey’s Chris Christie is also seeking to cut worker benefits.

Los Angeles, the second-largest U.S. city by population, faces a $457 million deficit in a general-fund budget of $4.4 billion for fiscal 2012. The accord will save $396 million over the next four years, according to Mayor Antonio Villaraigosa.

Message for Walker

“I have a message for Wisconsin’s Scott Walker,” the mayor said at an April 20 budget press conference. “Collective bargaining works.”

Employees faced the prospect of taking as many as 36 unpaid days off, representing a 14 percent reduction in their salaries, without the agreement, Villaraigosa said.

The mayor has proposed closing the city’s deficit for the year that begins July 1 through a combination of spending reductions, fund transfers and borrowing $43 million.

The health-care contributions, coupled with additional pension payments, mean employees will be putting aside 11 percent of their salaries for retirement benefits starting July 1, up from 6 percent today, according to Miguel Santana, the city administrative officer.

As part of the accord, the city will continue to pay for increases in retiree health-care costs, Santana said in a telephone interview before the vote. Previously, the city maintained that the increases weren’t part of their contracts.

At least 18 states took action last year to reduce their pension liabilities, either by cutting benefits or increasing contributions, according to the Pew Center on the States.

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net