Early Retirement Offers Could Be Costly

In many places around the country, workers are being asked to retire early, in order to for cities and counties to save payroll costs. Los Angeles is contemplating offering early retirement to get 2,400 workers off of the city payroll, saving $138 million this year. As more and more cities are scrambling to balance their budgets, early retirement offers are becoming prevalent.

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In an article in the Daily News, they discuss whether this short-term fix will end up being more costly long-term by increasing the city’s pension liability.

It’s these kinds of short-term solutions that will continue to cause fiscal problems. Though it’s tempting to do whatever cities can do to put a dent in their multi-million dollar deficits, things need to be thought all the way through.

According to the Daily News, the city will need to increase its contribution to make sure that their pension funds are fully funded. The article states: “The city contribution is expected to jump from roughly $660 million this coming year to more than $1.6 billion by 2013.”

Those are astronomical numbers and certainly something for city leaders to consider before offering the more than 2,000 workers early retirement packages. Quick fixes aren’t the answer for long-term fiscal stability.