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Budget Lies & Liars

LA WATCHDOG--When Mayor Eric Garcetti presented his “balanced” budget on April 18, the Four Year Budget Outlook prepared by Richard Llewellyn, the City Administrative Officer, showed that the City would generate a surplus in each of the next four years, topping out at $78 million in 2024.  The four-year cumulative surplus was $200 million. 

But on October 24, the First Financial Status Report prepared by Llewellyn presented a very different and alarming picture despite record revenues.  

For the first two months of the fiscal year, the CAO identified almost $150 million in “overspending” because of “additional salary obligations pursuant to various new labor agreements.”  This amount is understated because other labor agreements are currently being negotiated. 

Overall, it appears that the City’s budget deficit for this fiscal year will be in the range of $200 million.  

As a result of the new labor agreements, the projected surpluses for the next four years have turned to deficits “ranging from $200 million to $400 million per year.”  Put another way, the projected cumulative four-year surplus of $200 million in April has turned into a cumulative shortfall of an estimated $1.2 billion, a swing of $1.4 billion.  

Underlying these deficits are the new budget busting labor agreements with the City’s public sector unions that were negotiated behind closed doors with the campaign funding leaders of the City’s unions.   

But these agreements did not see the light of day because of a cover up orchestrated by Mayor Eric Garcetti and City Council President and wannabe County Supervisor Herb Wesson.  CAO Richard Llewellyn prepared flimsy memos that failed to detail the financial impact of the new labor agreements.  Paul Koretz railroaded the agreements through his Personnel Committee.  Budget Chair Paul Krekorian did not even hold any hearings.  The Wesson led City Council approved these agreements without discussion.  And Garcetti said nothing.   

What is particularly worrisome is that the City is racking up huge deficits in a booming economy but entering into budget busting labor contracts as the economy is starting to turn.  This is similar to 2007 when Mayor Antonio Villaraigosa and City Council President Eric Garcetti approved a five-year, 25% salary increase for the City’s civilian unions just as we entered the Great Recession.  

What’s next? 

The City must balance this year’s budget without raising taxes or tapping into the Reserve Fund.  This will require eliminating numerous unfilled positions and possible layoffs as well as finding other savings. There can be no new hires despite union demands.  

The City Council needs to instruct CAO Llewellyn to update the Four-Year Budget Outlook to reflect the new and pending labor contracts and to prepare a detailed financial analysis of the impact of these labor agreements.  

The Budget Committee must also have open meetings where the financial impact of the new labor agreements is discussed in detail and how the City intends to eliminate the $200 to $400 million annual deficits over the next four years. 

The CAO must also update its Official Statement so that the City is not misleading investors. 

The CAO should also revise its policy of not assuming any wage or benefit increases in the budget or the Four-Year Budget Outlook because by doing so, it presents a misleading picture of the City’s finances.  Rather, modest assumptions should be used. 

In the future, all labor negotiations should be open and transparent, not behind closed doors. 

The budget lies are unacceptable.  They constitute fraud and gross negligence.  They understate the Structural Deficit that is already expected to exceed $1 billion in 2024.  It results in an even greater Service Deficit where our infrastructure and services are short changed.  And it promotes even greater Intergenerational Theft that will burden generations of Angelenos with the debts of today. 

We need an Office of Transparency and Accountably (or an Inspector General) to oversee the budget and finances of our City.  We cannot trust the liars and fraudsters who concocted this mess: Llewellyn, Koretz, Krekorian, Wesson, and Garcetti. 

 

 

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Reference Material

 

  • A deficit looming for L.A., city departments are asked to find a way to save $100 million

Dakota Smith / Los Angeles Times

October 29, 2019

 

  • First Financial Status Report

City Administrative Officer

October 24, 2019

 

  • Angelenos Mushrooms? The Cover Up of the High Cost of Labor Contracts Continues

22 AUGUST 2019

On Wednesday afternoon, the Personnel Committee of the City Council “considered” and “submitted to Council for its consideration” new labor contracts with the three unions representing the police, the engineers and architects, and command officers.  CityWatchLA

 

  • Backroom Government Continues at Your City Hall: Garcetti and Wesson Cover Up New Labor Contracts

12 AUGUST 2019

The lack of transparency concerning the economics of the new labor contracts for the City’s civilian workforce is nothing short of a cover up orchestrated by Los Angeles Mayor Eric Garcetti and City Council President Herb Wesson.  CityWatchLA

 

  • LA’s Labor Negotiations: Plenty of Conflicts of Interest, Zero Transparency!

08 AUGUST 2019

On Friday, August 9, the Los Angeles City Council will approve 21 Memorandums of Understanding for the Coalition of City Unions (the “Coalition”) without any public comment.  These MOUs will cost the City $300 million over the three-year life of the contracts (July 1, 2018 to June 30, 2021).  CityWatchLA

 

 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at:  lajack@gmail.com.)

-cw