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LA WATCHDOG - A recent Los Angeles Times editorial declared: L.A. is Broke. And the Budget Crisis is Self-Inflicted. While there any many reasons for the City’s financial mess, the overriding question is what will Mayor Karen Bass do to eliminate the City’s Structural Deficit that is expected to be $900 million over the next four years? Or will she continue to kick the can down the road?
Underlying the projected deficit are the budget busting labor agreements with the police and civilian unions. These were negotiated behind closed doors and approved by the City Council without any hearings or public outreach. The budget shortfall has been worsened by over $250 million in liability claims and overly optimistic revenue assumptions.
As a result, the Reserve Fund, which at $330 million (4.1% of General Fund revenue) is already below the 5% minimum level, will be under considerable pressure, possibly requiring the City to declare a fiscal emergency.
While there are many short-term solutions, including raiding Special Fund balances, reductions in service levels, the issuance of judgement obligation bonds, furloughs and layoffs, there are three recommendation that are can be implemented if Mayor Bass is willing to risk her political capital.
The first is to update the City’s Four-Year Budget Outlook to include estimates of future increases that will occur from new labor agreements. In her budget memo to the City’s general managers, the Mayor said that “significant deficits are expected until fiscal year 2028-29” when the Outlook shows a surplus of $160 million. However, when the Outlook is adjusted for the impact of new labor agreements, the surplus turns into a deficit of over $200 million.
By using more realistic assumptions, the Mayor will be able to have a better understanding of the City’s Structural Deficit and its serious financial issues.
The second recommendation is to require open and transparent labor negotiations similar to the Civic Openness in Negotiations plans used in other California cities. This may include the use of outside negotiators, a transparent discussion of offers and counteroffers, an independent analysis of the fiscal impact of any labor agreements, adequate time for public review and comment, and the disclosure of private communications.
While open and transparent labor negotiations would help Angelenos understand the impact of any new labor agreements, we cannot trust City Hall to protect us from the campaign funding union bo$$e$ that lead the City’s public sector unions. The third recommendation is for the Mayor and City Council to place on the ballot a measure that would prohibit the City from entering into any labor agreement that would create a current or future budget deficit. Any labor agreement would have to fully financed in advance, not based on wishful projections.
These structural issues are easy to implement if the Mayor and the Harris-Dawson led City Council are willing to use their political capital to protect the City’s treasury and Angelenos from the adverse impact of budget busting labor agreements. Or will they continue to kick the can down the road?
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. He can be reached at: [email protected].)
