LOS ANGELES — Striving to ease a budget crisis, Mayor Antonio Villaraigosa announced a watershed deal Thursday with city unions that will require civilian workers for the first time to pay part of their salary toward retiree health benefits.
The tentative health care agreement with the Coalition of L.A. City Unions could generate $64 million over three years and help City Hall avoid sweeping municipal layoffs, as the mayor and City Council try to close a projected $500 million budget shortfall.
A sickly economy, double-digit unemployment and a housing crisis have left the nation's second largest city starved for cash, and unions faced a stark choice: Agree to concessions or see jobs eliminated. Already, the city has cut library hours, reduced park maintenance and cut loose employees to save money.
Labor strife has caused chaos in Wisconsin and elsewhere, but thus far Villaraigosa has been able to find common ground with city workers in the midst of a complicated budget mess.
"Los Angeles has a message for Madison, Columbus, Indianapolis and every city or state capital where public employee unions have been vilified as the cause of budget problems and economic woes: Collective bargaining works," Villaraigosa said in a statement. "Unions are our partners, not our enemies."
Civilian workers now pay nothing toward retiree health benefits. Under the deal that must be ratified by unions, workers would contribute 2 percent of salary toward those costs beginning in April, increasing to 4 percent in July.
With earlier pension changes, a worker after July 1 will invest 11 percent of salary toward overall retirement benefits – pensions and retiree health care combined. A worker now pays 6 percent of salary toward pensions.
The deal covers the coalition, which represents about 20,000 civilian workers. Police and firefighter negotiations will take place separately.
"Everybody knows they have to do something here. Nobody is happy about it, but they have to do something to sustain these benefits and help the city out of the quagmire," said Bob Schoonover, president of Service Employees International Union, Local 721.
The Democratic mayor, a former labor organizer, has been pushing other changes that would raise the retirement age for new hires and award them less generous pension benefits compared to today's retirees.
The health care payments are part of a broader labor pact that will save the city's general fund about $200 million over several years, in part through delaying pay raises and a temporary suspension of cash overtime. It also includes a no furlough guarantee for workers covered by the deal, through June 2014.
The situation in Los Angeles mirrors much of the U.S., where state governments and municipalities are struggling to control soaring costs for public workers, including retirees.
City documents state taxpayer contributions to the civilian retirement system are projected to grow to $791 million by 2015, up from $407 million this year. Increased contributions to police and firefighter pensions and health care could nearly double that figure.
The city faces a projected budget gap of up to $500 million for the fiscal year that begins July 1.