Sept. 18 (Bloomberg) -- Los Angeles should raise the retirement age for new city employees to 65 from 55 to help save as much as $4.3 billion over 30 years, the city administrator said.
Miguel Santana, the chief administrative officer who raised the specter of bankruptcy in April, said the changes, including a limit on pension income to 75 percent of wages, would help “ensure fiscal stability” in the second most-populous U.S. city.
Los Angeles has been spending more than it takes in for 10 consecutive years and almost ran out of cash in 2010 when its municipal utility withheld money. Many of the recommendations mirror state changes signed into law last week by California Governor Jerry Brown. Those revisions didn’t affect the city of 3.8 million, which has a greater degree of local control under its city charter.
“The city is not alone in considering a new retirement tier for new hires,” Santana, 43, said today in a report to Mayor Antonio Villaraigosa and the City Council. “Several major public sector entities in California and across the nation have either implemented or are in the process of implementing significant pension reforms for new hires.”
While Los Angeles has reduced its workforce and increased employee health-care contributions, the city remains in a “dire” fiscal situation, Santana said.
Employee retirement costs are projected to increase $154 million, or 45 percent, by June 2017, he said. That sum is enough to hire 770 police officers or firefighters, buy 11 helicopters or fill 7.3 million potholes, Santana said.
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