(Updates with Santana comment in fourth paragraph.)
Oct. 25 (Bloomberg) -- Los Angeles’s biggest public pension fund lowered its anticipated rate of return to 7.75 percent from 8 percent and said it would implement the change in phases to reduce its affect on the city deficit.
The Los Angeles City Employees’ Retirement System administers pensions for more than 43,000 current and retired civilian employees. The $10.8 billion fund returned 22.6 percent for the fiscal year that ended June 30. Its investment performance for 10 years was 6.2 percent, according to the fund’s website.
A lower assumed rate will require Los Angeles to increase payments to the plan. Implementing it would boost the city’s bill by $22 million, raising the city’s estimated deficit for the fiscal year that begins next July to $272 million, City Administrative Officer Miguel Santana told the fund’s board.
“We are already struggling with figuring out how to deal with a $250 million deficit,” Santana told the board. “The $22 million burden only makes this problem harder.”
The board voted to phase in the new rate over five years, reducing the additional cost to the city to $4.3 million in 2012-13 and rising to $26.6 million in 2016-2017, according to a memo Santana sent the board yesterday.
Los Angeles would have had to fire 400 employees if the $22 million increase took effect all at once, Santana said. The city is already operating with its lowest level of workers since fiscal 1994, the result of 4,200 job reductions over the past five years, Santana said in a presentation to the board.
--Editors: Pete Young, Ted Bunker
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