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The CAO and the City

NEIGHBORHOOD POLITICS-The City Administrative Officer (CAO) is the chief financial advisor to the Mayor and the City Council, reporting directly to both.

The Office studies and makes recommendations on City management matters and assists the Mayor and Council on all aspects of the City budget. The Office represents management in negotiating all labor contracts, coordinates grants, and performs other duties as requested by the Mayor and City Council. 

City Budget 

Other than sectors addressing homelessness issues, the Mayor has kept a tight curb on departmental budget increases. Unfortunately, he has not done so well in other areas including labor negotiations, addressing the City pensions and the repair and maintenance of our streets and the rest of the City’s infrastructure. 

In June of 2019, the Mayor and City Council approved a balanced budget. The CAO forecast surpluses each year for the next four years. However, that budget failed to account for the new labor agreements that the City was negotiating with police, firefighters, and civilian employee unions. 

In late October, the CAO disclosed that these labor contracts would not only unbalance the current budget but also eliminate the projected surpluses, creating deficits of $200 to $400 million in each of the next four years. There was no opportunity for input from the public on these negotiations nor were there any meaningful public hearings on the contracts. 

The CAO then asked city departments to address this shortfall by reducing costs by 3% or finding additional revenues. This posed a risk to some essential positions since the bulk of departmental budgets go to employee salaries. 

Need for Transparency 

The City Council should never have approved a budget knowing that it did not include a realistic estimate for any projected salary increases. 

Moving forward, Angelenos must insist there be robust and transparent oversight of all negotiations. Contracts can no longer be decided behind closed doors by parties beholden to each other through electoral clout or financial chicanery, whether real or just suspected. 

Over six years ago, the LA 2020 Commission recommended that Los Angeles create an independent Office of Transparency and Accountability to review and analyze in real time the City’s budget and finances and the efficiency of its operations. 

But our leaders did nothing. 

A year ago, in June of 2019, the City Council approved a budget that promised to eliminate the structural deficit and projected a cumulative budget surplus by 2024. 

But these new contracts, negotiated behind closed doors with no citizen oversight, have flipped that projection to a cumulative four-year deficit of $1.4 billion through 2025.  And that was with optimistic revenue and pension assumptions. 

Now we have the coronavirus and civic unrest. 

City Revenue 

In 2019 the City saw additional revenue from billboards, short term rentals, and cannabis sales and, with the economy booming, an increase in the City’s portion of County real estate taxes. These are all expected to fall under the pressure of the pandemic. 

To address the homelessness crisis, the City has issued several series of HHH bonds. And in the future, the CAO is considering issuing bonds to fund public safety and bonds for parks and trees, both of which may require voter approval. 

There is a renewed effort to look at fees for services the City Departments provide.  In general, fees should fully fund the services the City provides, with the exception of certain programs which should be subsidized for those on limited incomes. 

In the Wake of the Pandemic 

The 2020-21 budget brought slash and burn to City departments and services, as the Mayor and City Council attempted to cover the costs of the COVID-19 impact on top of last year’s budget-busting labor contracts. Both the City and State of California are required by law to approve a revenue neutral budget each year. 

To approve such a balanced budget for the fiscal year beginning on July 1, the City will have to slash staff and services. Unions will fight tooth and nail to avoid having their members furloughed or laid off. 

In an emergency, funds are traditionally provided by the federal government which can run a deficit, but these are for hard costs, not revenue losses which are already affecting Los Angeles. 

Demand for goods is what drives the American economy. And, despite the recent rebound of Wall Street, the demand from Main Street has collapsed. 

Not to mention that Los Angeles has seen COVID cases and deaths climb since its soft reopening, and the experts still expect a second wave in the fall. 

Moving On 

The mission of the CAO’s office is to promote productivity, economy, and efficiency in the City’s operations so that available resources may provide the greatest benefit possible to the residents of the City of Los Angeles. 

They may need some help right about now. 

Do you have the next great idea? How can the City improve services AND balance its budget? You can tell it to the CAO here.  

 

(Liz Amsden is a member of the Budget Advocates, an elected, all volunteer, independent advisory body charged with making constructive recommendations to the Mayor and the City Council regarding the Budget, and to City Departments on ways to improve their operations, and with obtaining input, updating and educating all Angelenos on the City’s fiscal management.) Prepped for CityWatch by Linda Abrams.