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LA WATCHDOG - The Mayor and City Council are in the process of developing a “balanced” budget for upcoming fiscal year that overcomes a self-inflicted $1 billion budget shortfall. What is missing, however, is an honest discussion of the impact on future budgets, including the budget for next year, of the budget balancing maneuvers or any plans to reform the budget process.
The Mayor’s Proposed Budget calls for layoffs of 1,647 City employees and the elimination of 1,074 positions, resulting in “savings” of $214 million. This has been the major topic of the hearings conducted by the Budget and Finance Committee with the General Managers of the City’s departments, the City’s unions, and citizen advocates, all clamoring for more resources for selected departments, fewer layoffs, and the reconfiguration of the layoffs. In reality, this is just shuffling the deck chairs on the Titanic as revenues ($8.1 billion) have already been determined and may even be optimistic given the uncertainty in the economy.
A better way to track the impact of the layoffs and other budget balancing maneuvers is to develop a two-year budget cycle as recommended by Controller Mejia and the Neighborhood Council Budget Advocates. This would allow the City to have greater insight into its spending decisions, to focus on short and long term planning, to better manage its complex operations, and to develop and implement financial policies that will prevent another fiscal crisis. It would also provide greater transparency, especially now that the City is facing a fiscal crisis.
While the City does not have a long term financial plan as recommended by the Budget Advocates, it does prepare a Four Year General Fund Budget Outlook. But this forecast is flawed, if not fraudulent, because it fails to consider the impact of future labor agreements and the increase in personnel costs that represent over three quarters of the City’s expenditures.
The most recent Outlook forecasts annual revenues increasing by 17% over the next four years (about 4% a year) to $9.4 billion despite the uncertain economy. It shows a surplus of $454 million in FY 2029-30 and a cumulative surplus of $934 million over the four year period.
However, when factoring in new labor agreements for the police and firefighters in FY 2026-27 and the civilian workers in FY 2027-28, the surplus is wiped out and there is a shortfall of over $100 million in FY 2029-30 and the four year cumulative shortfall balloons to almost $300 million.
If lower revenues and higher liability claims were assumed, and this is distinct possibility, the cumulative deficit would exceed $1 billion.
Angelenos deserve an honest accounting of the budget which begins by establishing a two year budget cycle and an Outlook that includes the impact of future labor agreements, as recommended by the Budget Advocates.
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The following are the Budget Advocates seven recommended reforms.
1. The Four-Year General Fund Budget Outlook needs to be updated to reflect anticipated raises for City employees. Personnel costs comprise about 75% of the City’s expenditures. This will give the Mayor and the City Council a better understanding of the City’s budget, finances, and its Structural Deficit.
2. Develop a two-year budget as recommended by the City Controller and the LA 2020 Commission.
3. Conduct open and transparent labor negotiations that require significant outreach to Angelenos before, during, and after the negotiations.
4. Place a measure on the ballot that would prohibit the City from entering into any labor agreement that would create a current or future deficit. In the short term, pass an ordinance.
5. Develop a long-term infrastructure plan to address deferred maintenance and future capital expenditures.
6. Create a robust Reserve Fund that can only be used in declared emergencies, not to balance the budget as is the current procedure.
7. Establish an Office of Transparency and Accountability as recommended by the LA 2020 Commission to oversee the City’s budget and finances in real time.
(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].)
