CommentsLA WATCHDOG--In April, Mayor Eric Garcetti submitted his “balanced” budget to the City Council. He also claimed that the City had eliminated the Structural Deficit.
In May, the Herb Wesson led City Council approved the adopted budget, at which time, Paul Krekorian, the Chair of the Budget and Finance Committee, crowed,"This is easily the best budget we've seen in 10 years."
After all, the City was experiencing record General Fund revenues of $6.6 billion, an increase of over $2 billion (44%) since Garcetti was elected mayor.
But this fraud on Angelenos was exposed on October 24th when the City Administrative Officer’s First Financial Status Report revealed that the City’s budget for the current fiscal year was not balanced, but was about $200 million in the red. Furthermore, the City was projecting a Structural Deficit over the next four years of an estimated $1.2 billion, a material adverse change from the June estimate of a $200 million surplus.
Underlying this $1.6 billion adverse swing in the City’s budget over the next 4½ years are the new budget busting labor agreements with the public sector unions representing the police, firefighters, and selected civilian workers where the Mayor and City Council gave away the store, knowing damn well that these new contracts would result in a river of red ink.
So what’s next, especially given that the City has a huge deficit despite record revenues and a robust economy that is showing signs of slowing down.
A first step would be for the City Administrative Officer to update the Four Year Budget Outlook so that we have a better understanding of the City’s financial position. The CAO should also prepare information outlining the financial and other terms of the new labor contracts with all of the City’s unions. Importantly, this would include any plans to increase the City’s employment levels pursuant to the Service and Workforce Restoration Letter of Agreement.
The Budget and Finance Committee should then hold extensive open and transparent meetings to discuss how the City intends to balance this year’s budget and eliminate the $1.2 billion Structural Deficit over the next four years.
Short term, solutions to balance this year’s budget will most likely include “savings” derived from cuts in services (streets, sidewalks, parks, urban forest) and in key backbone departments (IT, Personnel, EMT) and tapping the City’s already underfunded Reserve and Budget Stabilization Funds. More than likely, the City will put a hold on new hiring, a move that will not be well received by the leaders of the City’s public sector unions.
Longer term, there will be additional cuts in core services and possible reductions in the City’s head count which may require difficult negotiations with the campaign funding leaders of the City’s unions. But this represents a blatant conflict of interest which is why all labor negotiations must be conducted in an open and transparent manner.
Once again, Garcetti and the City Council are relying on a “Leap of Faith” to eliminate the Structural Deficit that is in the range of $200 to $400 million a year. In this case, they will be promoting the November 2020 “Split Role” ballot measure that will alter Proposition 13 and allow municipalities to tax commercial properties based on their market value as opposed to their purchase price. Needless to say, our friends in City Hall will not tell us that this added cost will be passed along to us in higher prices.
In 2020, the efforts to pay for these union contracts and to balance the City’s budget will suck all of the oxygen out of the room and crowd out basic services. At the same time, we will need our hip boots to wade through all the garbage and half-truths thrown our way by the Mayor, the members of Nury Martinez led City Council, and their spinmeisters.
Happy New Year. May the Dodgers win the World Series. And pray that the economy does not tank. Otherwise, the spaghetti and meatballs will really hit the fan.
(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].)
-cw
