The agency that delivers retirement benefits to thousands of Los Angeles city employees is looking to scale back its investment projections — a move that could blow a hole in an already precarious municipal budget.
The board that oversees the Los Angeles City Employees’ Retirement System will meet Tuesday to consider cutting its “assumed rate of return,” the yearly expected earnings for its investment portfolio, from 7.5% to 7.25%.
The move is expected to shift about $38 million in retirement costs onto the city’s general fund, which pays for police patrols, firefighter staffing and other basic services, in mid-2018. The pension board also has the option to pursue a more dramatic step: taking the investment assumption to 7%, which would add $93 million to the city’s yearly pension burden, officials said.
City Councilman Paul Koretz, who represents part of the Westside, said he thinks a move to 7% would be “way too extreme” for the city budget.
“If you take that much out of the general fund every year, you’re talking about reduced services,” he said.
Koretz, like other council members, has no direct power over the pension board, which oversees benefits for more than 41,000 active and retired civilian city employees. The seven-member board is made up of appointees of Mayor Eric Garcetti and representatives of current and retired city employees.
The pension system, known as LACERS, has three sources of funding: contributions from city employees, earnings from its investment portfolio and payments from the city budget. The lower the investment return, the larger the payment from the budget to cover the system’s benefits.
Almost 20% of the city’s general fund — more than $1 billion — will be devoted to retirement costs this year.
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