The Los Angeles City Council is poised to offer thousands of city employees cash payouts to retire, part of a major push to cut payroll costs during an unfolding financial crisis.
About 2,850 employees, or roughly 8.2% of the city workforce, would be eligible for buyouts of up to $80,000 if they retire in the coming year, city budget analysts said.
The program would result in a major downsizing of the workforce, the largest since the 2008 recession, triggering new reductions in services. Still, Mayor Eric Garcetti praised the initiative, saying it would cut employee costs while relying on fewer employee furlough days to balance the budget.
“It’ll save money. It’ll save costs. And it can perhaps lessen the furloughs,” he said.
The council’s Budget and Finance Committee endorsed the buyouts Monday, setting the stage for a full council vote on Tuesday. If approved, city employees who are eligible to retire — and have been facing the threat of furloughs — can begin applying for the retirement payouts next week.
The proposal comes as City Hall faces a range of dire financial scenarios, triggered both by a drop in projected tax revenue and by costly union contracts backed by Garcetti and the council in recent years.
The city’s employee unions had lobbied aggressively for the retirement program, describing it as a way to avert Garcetti’s furlough plan. Furloughs would have delivered a 10% pay cut to nearly 16,000 civilian city employees, saving the city about $150 million in the next budget year, according to city estimates.
The city will save $23.2 million in the upcoming year if half of the eligible workers agree to retire, said City Administrative Officer Rich Llewellyn, the high-level budget analyst. If every eligible worker takes part in the program, the city will save $58.7 million, he said.
Councilman Bob Blumenfield voiced fears about the buyout strategy, saying it poses risks to the city’s finances and its operations.
“If the economy gets worse and we end up having to do furloughs anyway, then we’ve made a mistake,” he said. “Then we’ve just made it worse by paying out these big lump sum payments.”
Llewellyn said he expects the average retirement buyout will range from $60,000 to $70,000. For each employee, the size of the buyout will depend their salary and years of service.
Jack Humphreville, who serves on the Neighborhood Council Budget Advocates, voiced alarm over the proposal, saying the public has been given little time to study it. The retirement program will be more expensive than furloughs or layoffs and leave the city with a big balloon payment roughly a year from now, he said.
Under the proposal, the city would pay $10,000 to each employee who retires during the fiscal year that starts Wednesday. The remainder of the employee buyouts would be paid out in the 2021-22 fiscal year.
“What they’re doing is kicking the can down the road,” Humphreville said.
If every eligible employee takes part in the program, the city would spend $28.5 million on buyouts this year and another $128.6 million next fiscal year, Llewellyn said.
Bob Schoonover, president of Service Employees International Union Local 721, praised city leaders for moving ahead with the initiative.
“City workers are giving us their all during this pandemic,” he said. “This is a key step in the right direction because at the end of the day, we owe these front-line heroes every possible effort to minimize the impact of the current budget crisis on them and their families.”
During the city’s last major budget crisis, the mayor and council gave early retirement to 2,400 civilian city workers. The decision abruptly cut the size of the workforce. But because it required the city to give workers their pensions ahead of schedule, city leaders had to spread the additional cost over 15 years.
This time around, city workers won’t be eligible for additional pension benefits.
The buyout initiative has been modeled after a program carried out recently at Los Angeles World Airports, which runs Los Angeles International Airport. Agency spokeswoman Becca Doten said 331 employees, or 9% of the department’s workers, have applied for the retirement incentives.
Doten said the airport program was sparked by a dramatic loss of revenue following the coronavirus shutdowns.