The city of Los Angeles overpaid police pensions this fiscal year by about $40 million, Los Angeles City Controller Kenneth Mejia announced in a social media video on May 20.

The overpayment comes at a time when the city’s financial picture is “dire” as it faces a $1 billion budget deficit and hundreds of staff layoffs, he said.

“[Recently,] we found out that the city was contributing more than we contractually needed to when it came to the police pension contributions,” Mejia said.

The city’s pension costs are nearly 20 percent of its general fund expenditures, according to Mejia.

As controller, he is the city’s chief accounting officer, auditor, and paymaster.

The Los Angeles City Council approved a four-year contract with the police union in August 2023. The new contract included a series of bonuses and pay raises intended to address issues of retention and recruitment, along with increased health care benefits and patrol incentives.

Los Angeles Mayor Karen Bass said the Los Angeles Police Department (LAPD) was facing a hiring and retention crisis at the time, and the LAPD’s sworn force dipped below 9,000 for the first time since 2002.

Under the contract, starting pay for a new police recruit was $86,193, a 12.6 percent increase, and provided four raises of 3 percent over the following four years.

As part of the deal, the city and police union agreed that the raises and bonus pay for officers with less than 20 years of service would not figure into the calculation for pension contributions, according to Mejia.

Chief Administrative Officer Matthew Szabo told city councilors at the time that it would be very expensive for the city to make the extra pension payments tied to the raises and bonuses, the current city controller said.

“Well, he was right,” Mejia said. “This is difficult to manage fiscally.”

Usually, the city contributes nearly 40 percent of a police employee’s pay to his or her pension account, depending on which pension fund the employee belongs to, according to the city controller.

Los Angeles City Hall on Aug. 7, 2024. (John Fredricks/The Epoch Times)

Employees contribute between 8 percent and 11 percent, depending on which tier they belong to, Mejia said.

The pension contributions are then invested, and the funds are used to pay for current and future retirees.

However, the city treated the pay increases and the bonuses as part of the total amount qualifying for pension contributions this fiscal year. Police employees did not contribute their share, because it was not in the contract to do so.

As a result, the city overpaid by about $40 million from its general fund starting July 1, 2024, a fiscal year that has turned into one of the city’s worst, according to Mejia.

“No one really talks about pensions in City Hall because of the complexity,” he said. “That means pension costs go unchecked.”

In April, the police department reported that it started the fiscal year on July 1, 2024, with 8,689 sworn officers.

The LAPD also reported the city’s proposed budget for fiscal year 2026, which starts July 1, includes the elimination of 403 civilian positions, or about 15 percent of its civilian workforce, which includes crime scene photographers, evidence specialists, and forensic print specialists.

The department would be forced to close the Hollywood, Pacific, and Harbor jails if the budget passes as is.

The city council proposed a $13.9 billion budget on May 16 and hosted public hearings on May 20 to discuss amendments to it. The budget includes 650 proposed staff layoffs.

In April, Bass’s office blamed the city’s deficit on reduced revenues and downward economic trends stemming from a volatile stock market, uncertainty in Washington, a post-pandemic tourism lag, recent wildfire damage, and increased personnel costs and liability payments.

She also said the city’s outlook is still positive.

“This budget makes investments to continue our progress on critical challenges like decreasing homelessness and crime while bringing the city’s finances into balance and driving change including common sense consolidations of related departments,” Bass said in a statement. “Homelessness is down. Crime is down. These are tough challenges, and our progress shows we can do anything in this city of limitless potential.”

Bass’s office did not return requests for comment about the pension overpayment by publication time.