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Flatlining: LA’S Fiscal Emergency

COMMENTARY-Ten years ago, the City – government and stakeholders – was digging itself out of a financial hole created when Wall Street imploded after playing with derivatives fire from the wrong end of the tightrope. 

We clawed our way back. 

In fact, until a year ago, income for Los Angeles was going up and up with expenses, while not under control, were at least more than covered by the cash rolling in. 

Now that income has flatlined. 

And now we are looking at having to dig ourselves out of a far deeper hole, though this time it is at least partially one of our own making. Or at least of our Councilmembers’ making. 

On September 2, the LA City Council approved a Declaration of Fiscal Emergency. A mixed bag of paragraphs starting “WHEREAS” designed to scare people, culminating with an official declaration of emergency and that the Mayor be given authority to implement further furloughs for the period effective October 11, 2020 through June 20, 2021. 

It was passed by the City Council with no discussion. 

Last Friday, the text of what the Mayor will be sending to the City Departments to frame the development of their budgets was released in the LA Times. It is an instruction for fiscal restraint in the wake of the pandemic. It admits that the magnitude of ultimate revenue shortfalls is unclear. 

It talks of lay-off scenarios. It calls for reductions, hiring freezes, full cost recovery for services. 

Yes, we are in a fiscal emergency but what services are we giving up? Where have the funds received from the Federal government gone? 

The City has, in fact, been in a fiscal emergency since last fall when the City approved the labor agreements with the police and firefighters that greatly exceeded what was budgeted. This has been further exacerbated by the pandemic, both by the projected loss of income due to the shutdowns and from expenditures incurred in fighting the spread of the disease. 

While the hard costs relating to the pandemic should be substantially reimbursed from Federal funds, the significant loss of revenue from hotel and sales taxes due to the evisceration of the tourist and film/TV industries will not and cannot be made whole. 

However, BEFORE giving emergency powers to the City government, BEFORE further impacting services for Angelenos and the jobs of City employees, the Mayor and CAO should be required to UPDATE the Placeholder Budget so it reflects CURRENT projected costs and income so all concerned can make an informed decision. 

It's been six months since the start of the pandemic. Another few weeks won't make much difference and fully informing its own employees and the populace would settle matters much more effectively than scare tactics with bits and pieces of conflicting information. 

Everyone wants a resolution to this fiscal emergency but the fact that an emergency exists does not excuse either the lack of transparency or the lack of accountability. 

Are we mushrooms to be kept in the dark and fed sh*t-all? If the rush to move forward is based on more backroom negotiations, we deserve to know why. 

The City Council also approved the amended Separation Incentive Program which allows 1,277 eligible employees to take early retirement at an estimate cost of $85 million. But this will result in savings of only $13 million. 

And it creates exactly the same situation that was most devastating for Los Angeles ten years ago. And for which the City is still paying. 

By encouraging experienced and effective City personnel to retire early, we not only lose their expertise in a time of crisis when that expertise would be of greatest assistance, we also lose the institutional memory of their years of work, institutional memory which will be desperately needed when the crest of the pandemic has passed. 

And then there is the cost of hiring and training replacements. 

But what is truly disturbing is that none of the forgoing will balance the Mayor’s Placeholder Budget. Yes, it may cover the hard costs. At least those they are telling us about now. But it does NOT take into account the negative impact of COVID-19 on the City’s seven economically sensitive taxes – to the tune of $200 to $400 million. 

Or at least according to the CAO. A 12-month projection based on the July-August revenue -- when one throws in the impact on individual Angelenos’ ability to weather this sh*t-storm -- may easily exceed half a billion dollars. 

Last Tuesday, and as reported in the Times article on Friday, the Mayor admitted that the actual income received in July was worse than their most dismal projection. Since the Senate fairies in Washington are unlikely to wave their magic wands towards the West Coast, this will most likely result in additional furloughs and temporary or permanent layoffs. And more slashing of services for Angelenos. 

This deluge of red ink  (and it’s STILL pouring) has already led the City to delve deep into its Reserve Fund as well as slash funds for emergency preparedness for earthquakes and wildfires, equipment for the fire department, gang intervention programs. . . 

And affordable housing, renter assistance, lunches for seniors, support for small businesses, street resurfacing, new traffic signals, sidewalk repair, and maintaining parks and seasonal pools as well as cuts to LAPD neighborhood patrols, harming 911 response times. 

The union agreements will cost the City $1.4B over four years. Corruption now defines our City Council. 

A City Council that after 2008 KNEW what would happen in the next fiscal emergency, knew what they had to do to avert a future catastrophe. Live within its means, establish a reserve equal to 5% of the General Funds, behave responsibly and be fiscally accountable. 

To be fair, the Mayor had increased the Reserve Fund to 6%, but it needed to be 10%, and projections from when the world was rosier now put it at 3.6% for the current year. 

We don’t need the restraint of the Mayor’s words in his memo to the departments. We don’t need pablum. We need chill peppers. 

Hey, folks, there’s an EMERGENCY! Let’s get all hands on deck and figure out solutions. How do we jump-start the heart of our City? 

Angelenos need transparency from City Hall: hard data, real costs, real losses, and real projections in the form of an updated Placeholder Budget. The purveyors of all things budget should realize for whom they work – we the people – and show us the beef before taking action. 

Because, although these particular powers and instructions have been given, they don’t need to be implemented. IF the Mayor and City Council would reach out to a brain pool that exceeds four million, a better solution or solutions might be forthcoming. 

So, I’m asking the Mayor and City Council: Please do the right thing and invite Angelenos to work with you to find solutions. To find revenue instead of flatlining our future. 

In a spirit of transparency and accountability, make this our problem, not just your problem. Give the people of Los Angeles and the brain trust we represent the facts. 

And do it now. Call for help as if our lives depend on it. 

Because they do.

 

(Liz Amsden is an activist from Northeast Los Angeles with opinions on much of what goes on in our lives. She also writes on behalf of the Budget Advocates’ mission regarding the City’s budget and services. In her real life she works on budgets, for film and television, where fiction can rarely be as strange as the truth of living in today’s world.) Edited for CityWatch by Linda Abrams.