Ex L.A. Mayor Riordan Says City Will Go Bankrupt
Happy Cinco de Mayo, L.A! In a Wall Street Journal opinion piece dated May 5, former Los Angeles Mayor Richard Riordan and co-writer Alexander Rubalcava state that " ... between now and 2014 the city will likely declare bankruptcy."
They cite city forecasts that pensions and post-retirement health-care benefits will cost the taxpayers about $2.5 billion dollars in the next four years -- money the city doesn't have as it grapples with a $485 million deficit due July 1. The pair writes that Mayor "Antonio Villaraigosa and the City Council have been either unable or unwilling to face" the serious work ahead in righting the city's ship.
They single out Villaraigosa for helping to add 5,000 workers during his first term and standing by as the interest returns on pensions were overestimated, helping to put the city in its current position. The City Council doesn't get a pass either, as the duo points to the body for "wincing at the mere thought of layoffs."
Riordan and Rubalcava have a list of recommended fixes, including cutting the city workforce so that its back at 2005 levels, putting new hires on 401k plans instead of pension programs, increasing current employees' pension contributions, and raising the retirement age to 65.
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We've been writing about how the mayor and council have been looking for easy fixes for the budget problem while avoiding cutting the largest costs -- namely employees.
Even in a big city like L.A. elections are highly local and turnout is low, so City Hall politicians rely on city unions to get out the vote. In exchange, local politicians expected to support the unions' demands for more jobs and higher pay, which they largely have. However, as you can see, the math starts to go sideways in a down economy.
No one council chambers wants to stand up and say, 'Let's fire people.' That would be political suicide. But in the meantime, the city's budget is jumping off a cliff, and there's no leadership in sight.
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