- Written by Jack Humphreville
19 Apr 2011
LA WATCHDOG - It is Budget Season. And surprise, surprise, we have another budget crisis.
This year, the newly announced budget gap is $463 million, up from $350 million just a month ago.
But as we go through the theatre of balancing the budget, ask yourself the following two questions.
Do you trust Mayor Antonio Villaraigosa, Controller Wendy Greuel, and City Council President Eric Garcetti (the “Little Three”) to do what is in the best interests of the Citizens of Los Angeles?
Or do think that Villaraigosa, Greuel, and Garcetti have sold out to their campaign funding Partners in Labor to protect the City Family to the detriment of the Citizens of Los Angeles?
Unfortunately, the Little Three have yet to develop a long term solvency plan, despite the fact that former Mayor Riordan and Alex Rubalcava stated in a widely read Wall Street Journal opinion piece said the City would be bankrupt in 2014.
Nor have the Little Three made any concerted attempt to eliminate the “Structural Deficit” by addressing the ever escalating costs associated with payroll, benefits, and pensions, despite constructive suggestions by the City Administrative Officer, which included those of the Little Hoover Commission relating to reduction of current retirement benefits.
Once again, the Mayor has elected to “kick the can down the street” by relying on one time budget solutions and gimmicks to balance the budget.
The projected budget deficit is $463 million. However, the major components of the increase from the $350 million deficit projection of last month have been known for months: the return to cash based over time for the police ($80 million) and the elimination of “rolling brownouts” for the Fire Department ($41.2 million). There is also a revenue reduction of $40 million due to the slow economy and lower telephone tax receipts. (Link)
While this implies a budget deficit of $511 million, the Mayor’s financial wizards have deferred $48 million related to the Capital Improvement Expenditure Program, calling it an expenditure reduction, not part of the solution.
Hence, we have a budget deficit of $463 million, but lower than the $492.4 million that we had a year ago.
The Mayor, his budget team, and his sound bite specialists have devised many one time “solutions” to close the budget gap, but few, if any, address the Structural Deficit.
The “solutions” include yet to be negotiated concessions of $51 million and $100 million respectively from the always cooperative Fire and Police Departments as well as “savings” of $115 million from Coalition and Civilian furloughs. There is another $101 million of unspecified “savings” from “Reductions, Efficiencies & Other.”
There are $40 million in Special Fund Swaps where the City transfers responsibilities of the General Fund to a Special Revenue Fund. For example, the responsibility for cleaning our 800 miles of alleys will be offloaded from the General Fund’s Bureau of Street Services to the Bureau of Sanitation, a special revenue department that is funded by our ever increasing trash tax.
There are also $40 million of one-time savings related to the refinancing at very favorable rates the obligations of the Convention Center and the Early Retirement Incentive Plan. ( link)
Conspicuously absent is any funding to repair and maintain our infrastructure, such as our lunar crater streets, crumbling sidewalks, and our deteriorating parks. Nor is there any conversation about properly funding of the City’s two pension plans that are $11.7 billion underwater (64% funded).
In reality, our budget deficit is north of $1 billion.
On Wednesday, April 20, the Mayor will present his budget to the City which will reveal the details of the various “solutions.” But no doubt, they will be convoluted and difficult to understand, even if you are familiar with the City’s less than transparent accounting policies and antiquated management information systems.
And needless to say, there will be politics underlying every decision, many of which may not be in the best interests of all Angelenos.
The Mayor and his gang will no doubt discuss all the hard choices they have made over the years.
The spinmeisters will discuss how they have reduced the work force by 4,000 positions. However, 2,400 were the result of the Early Retirement Incentive Plan where participating senior employees were incented with over $150,000 extra in retirement benefits, burdening the already underfunded Los Angeles City Employee Retirement System with over $200 million in increased liabilities after counting higher employee contributions.
And a number of City employees were transferred to special revenue or the three proprietary departments. The net is that less the 500 employees were laid off.
Or the Mayor and Eric Garcetti may tout the recent “pension reform” where employees contribute an additional 4% to fund their retirement healthcare benefits. Unfortunately, this plan is not actuarially sound, severely restricts the City’s operational and financial flexibility, provides the Coalition of Unions even more leverage in the renegotiation of their MOU, and extends the contract so that union wages and benefits will not become a hot button issue in the 2013 mayoral election.
After considering the two questions of whether you trust the Little Three and whether they have sold out to the highest bidder, you will realize that they are not acting in the best interests of all Angelenos, but working to protect their campaign funding Partners in Labor, the City Family, and their own political ambitions. .
That is why we need an independent, well funded, and empowered CITIZENS ADVOCATE to oversee the operations and finances of the City and to help develop and implement solutions to eliminate the Structural Deficit, to repair and maintain our rapidly deteriorating infrastructure, and to insure that our pension plans are actuarially sound.
Otherwise, we will continue to be mushrooms in the dark with manure piled on top of us.
Vol 9 Issue 31
Pub: Apr 19, 2011