Los Angeles Mayor On City's Pension Plans
He says the word "bankruptcy" is not in his vocabulary. Still, Los Angeles Mayor Antonio Villaraigosa is doing everything he can to avoid it. Host Guy Raz speaks to Villaraigosa about his city's struggle to bridge its budget deficit and fully fund its pension plan.
GUY RAZ, host:
Now, one big-city mayor who's wrestling with soaring pension costs and falling revenues is Antonio Villaraigosa of Los Angeles. I sat down with Mayor Villaraigosa at city hall this past week.
Mayor Villaraigosa, thanks so much for joining us.
Mayor ANTONIO VILLARAIGOSA (Democrat, Los Angeles): Thank you for having me, Guy.
RAZ: Let me ask you about pensions because I know that this year, the city contributed or will contribute about half a billion dollars to the municipal employees' pension fund. This is one of your biggest expenses. In cities across the country, paying into these pension funds is, in some ways, draining the budget.
As, you know, almost nobody in the private sector receives a pension anymore. Do you think it's time to rethink the system of pensions for future city employees in places like Los Angeles?
Mayor VILLARAIGOSA: Well, there's been a whole debate around the idea of providing defined contributions instead of defined benefits. And while I've said that I don't believe we should go down that track, I do believe that we need to redefine the magnitude, the size of the benefits because they're not sustainable.
RAZ: I mean, at what point does a city run out of money to pay those pensions?
Mayor VILLARAIGOSA: One of the things we're saying to our friends in labor is that at a minimum, we have to renegotiate for the future new employees. Under state law, we can't renegotiate current employees unless we provide them with a benefit in exchange for cutting their retirement, but there's no question that we're moving toward a time when the level of these benefits are unsustainable.
RAZ: About a month ago, it was estimated that the city could face bankruptcy if it didn't cut up to $200 million in spending. Is bankruptcy now or was it ever a real possibility for the city?
Mayor VILLARAIGOSA: Well, I've made it absolutely clear that that word is neither in my vocabulary nor a possibility for Los Angeles. The fact is we're going to have to make tough decisions. We balanced the budget last year. We balanced about $400 million of a $500 million deficit this year. Next year, we're looking at a $486 million deficit. Like cities all around the country, we're struggling to make ends meet.
Eighty percent of the cost of our government is payroll, pensions, benefits. So what I've asked our employees is to take the lead that I've shown over the last two years, where I've taken a 16 percent cut, and I've said if everybody took a 15 percent cut, we would be able to resolve $450 million of the $486 million deficit.
If we all shared in the sacrifice, if there was support for some of the public-private partnerships around parking garages and meters, our convention center and the zoo, we could generate the kind of savings that we need to put ourselves back on a sound financial footing.
RAZ: What do you think makes Los Angeles, this city, particularly complex to govern?
Mayor VILLARAIGOSA: California cities are constrained by various propositions which limit your ability to raise revenues.
RAZ: You can't raise taxes.
Mayor VILLARAIGOSA: Without a two-thirds vote of the people, and so that revenue opportunities just are a lot more difficult to try to take advantage of.
RAZ: With such a high unemployment rate here in the city that you face, this budget deficit that you still might face before July and then this estimated half-a-billion-dollar deficit for next year, what leverage do you have as the mayor?
Mayor VILLARAIGOSA: You hit the nail right on the head. The fact is there aren't a lot of options here. We have contracts with our employees that we have to abide by. So unless they agree to sharing in the sacrifice in these tough times, I won't have a lot of options.
RAZ: Except to?
Mayor VILLARAIGOSA: Except to lay off thousands of people.
RAZ: Do you think realistically the jobs that have been cut here in the city, even if the city recovers financially, will ever come back?
Mayor VILLARAIGOSA: We're going to have to reduce the size of our government, identify priority in core services, police and fire, sanitation, street services, libraries and parks, and get out of some services that historically we've provided.
There is no way for us to get back on a sound financial footing with the size of the workforce that we have today, which is why I've said we've already eliminated a thousand positions last year, early retiring another 2,400, may lay off - unless our unions share in the sacrifice, may lay off up to another 4,000 employees.
RAZ: That's Antonio Villaraigosa. He's the mayor of Los Angeles.
Mayor, thank you so much.
Mayor VILLARAIGOSA: Thank you.
Copyright © 2010 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.
Accuracy and availability of NPR transcripts may vary. Transcript text may be revised to correct errors or match updates to audio. Audio on npr.org may be edited after its original broadcast or publication. The authoritative record of NPR’s programming is the audio record.