Year Today … Gone Tomorrow

PERSPECTIVE - David Zahniser’s article [link] in Friday’s Los Angeles Times was buried on page 3 of the LATEXTRA section, but the insight it provided as to the mindset of City Hall was worthy of above the fold material.

The subject was how last year’s robust pension earnings for civilian and sworn employee pension funds will lower the projected deficit for the fiscal year 2013 budget by $100 million.

A nice improvement, but it still leaves the city short by almost $150 million, not counting the projected deficit for the current year of $70 million. It is interesting that the good results have been known for months, yet they were not factored into the original $250 million deficit projection.  Too bad Zahniser did not question CAO Miguel Santana about that.

Zahniser also points out the bad news – fund earnings have been flat since the end of the last fiscal year.  Please note that Calpers’ return rate since June has been an anemic 1.1%, so the drop in earnings at the city is not an anomaly.

It is likely that 2013′s pension contribution will exceed $1 billion. That’s over 20% of the general fund – let’s not even think about the cost of healthcare – and it will continue to absorb a growing piece of the budget pie as the years progress, which means less money available for services.
In what has to be the understatement of the year, the article quoted Santana as saying, “If we ever want to get out of crisis mode, we have to address our ongoing deficit – the gap between revenue and expenditures.”

You don’t have to be a Harvard MBA to figure that out. Homer Simpson could have surmised that much.

The city’s structural deficit problem is nothing new.  Santana’s advice is more than a day late and a dollar short.  The Neighborhood Council Budget Advocates have been harping about this for years – and they are not compensated as the CAO is. Perhaps the mayor should cut Santana’s salary in this next round of budgets before slicing the neighborhood councils’ funding again.

The bottom line is that city officials remain fixated on one year at a time, especially when it comes to pension costs.  There is no plan to address the long-term cost impact of retirement benefits and healthcare, only talk and wishful thinking.

You cannot depend on consistently strong investment earnings to cover future core services, but the mayor and his allies think they can.

(Paul Hatfield is a CPA and serves as Treasurer for the Neighborhood Council Valley Village.  He blogs at Village to Village, contributes to CityWatch and can be reached at:  [email protected]) –cw

Tags: Paul Hatfield, City Hall, Miguel Santana, pensions, budget, city budget







CityWatch
Vol 10 Issue 9
Pub: Jan 31, 2012