Los Angeles Careens Towards Bankruptcy – Retirement Benefits Are Biggest Driver
The Los Angeles 2020 Commission studied among other things the sorry state of LA’s pension mess. In a case of can-kicking extraordinaire, its recommendation was to appoint another commission to further study the problem.
Please consider Report Finds Los Angeles at Risk of Decline
A scathing verdict on Los Angeles’s civic health that was delivered in a one-two punch — the second on Wednesday — by a committee of lawyers, developers, labor leaders and former elected officials who make up something of the Old Guard here. The Los Angeles 2020 Commission presented a catalog of failings that it said were a unique burden to the city: widespread poverty and job stagnation, huge municipal pension obligations, a struggling port and tourism industry and paralyzing traffic that would not be eased even with a continuing multibillion-dollar mass transit initiative.
The first part of the report was released in December. Its bleak portrait of Los Angeles’s future was designed to break through and draw attention to the city’s plight like “an alarm clock,” said Mickey Kantor, a former United States Secretary of Commerce who is the co-chairman of the commission, adding that the committee wanted to ensure that the document did not become “another report gathering dust on the shelf.”
But as exhaustive as Chapter 1 was in laying out problems, the follow-up presented here on Wednesday was strikingly less ambitious and specific, testimony to what municipal leaders have long said was the intractability of the challenges, the difficulty in getting things done in a community with a history of lackluster civic involvement and an institutionally weak mayor.
On what is widely seen as perhaps the biggest threat to the long-term fiscal stability of the city — the crushing cost of pensions and worker benefits — the commission recommended appointing another commission.
Mr. Kantor and Austin Beutner, a former deputy mayor and Wall Street investment banker who is the other co-chairman, said they did not have the expertise needed to suggest what the city might do. Hence, the proposal for a “Commission for Retirement Security.”
“Yeah, we did kick the ball to someone else, because we didn’t have the staff at the time, the resources to really do what would be a professional job in coming up with correct recommendations in this very technical area,” Mr. Kantor said.
The 2020 report is sure to gather dust like all studies before and after until the inevitable happens. The inevitable is “bankruptcy”. The only conceivable way LA can meet its pension obligations is to reduce them. And given that unions will not negotiate, the only conceivable way to reduce them is bankruptcy.
LA is already bankrupt, the only missing ingredient is political recognition of that simple fact.
About the Author: Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education.