LA WATCHDOG--The Mayor’s Proposed Budget anticipates General Fund revenues of almost $6.7 billion, an increase of $118 million (1.8%) from this year’s Adopted Budget, and a balanced budget.
But many Angelenos remain skeptical. (Photo Above: LA Controller Ron Galperin speaking, Mayor Garcetti on right)
Over the last seven years, the City has experienced record revenues, up almost $2 billion (40%). And yet prior to the impact of the Virus, the City was projecting a budget deficit of $200 million for the upcoming year as a result of City Hall’s approval of budget busting labor agreements for the police, the firefighters, and civilian workers.
This fiscal mismanagement left the City unprepared for a recession, to say nothing of the black swan pandemic which has shut down the City.
Last year, the City approved a balanced budget, only to have it blown out of the water because of these new labor agreements. Yet at the time the City was approving the balanced budget, they knew damn well that the new labor agreements would result in a $1.6 billion river of red ink over the next four years.
Talk about the lack of trust!
The revenues for the Mayor’s Proposed Budget may be optimistic, especially when compared to the estimates prepared by Ron Galperin who has earned out trust over the last seven years.
Galperin’s developed three scenarios, high, middle, and low, the major variables being the when the shutdown is lifted and the return of tourism. In all three cases, the City’s estimated revenue exceeds Galperin’s revised forecasts by $66 million, $220 million, and $470 million, respectively.
It is very possible that the City is being too optimistic. In its Four-Year General Fund Budget Outlook, the City is forecasting a $275 million (4.1%) increase in revenues for the 2021-22 fiscal year. However, the revenue estimate of $6.96 billion exceeds last year’s forecast by $75 million, a major leap of faith in this economic environment.
The major difference between the Proposed Budget and the Galperin estimates is revenues associated with Licenses, Permits, Fees, and Fines which covers internal transfers from special categories and departments to the General Fund. The city is projecting a $108 million increase while Galperin is projecting a modest increase of $23 million to a decrease of $127 million. This revenue stream will need further analysis, especially given the self-dealing nature of the transfers.
Based on the differences in the revenue projections and Angelenos’ lack of trust in the political establishment, the City would be prudent to abide by the maxim: Plan for the worst, hope for the best.
(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: [email protected].)