New York City and LA Budget Turmoil: Different Crisis, Different Times
- 18 Nov 2011
- Written by Jay Handal
SETTING THE RECORD STRAIGHT - In his CityWatch article [link] “How to Drop the Curtain on LA’s Never Ending Budget Drama”, columnist Jack Humphreville makes some assertions that as a member of the Neighborhood Council Budget Advocates Committee I feel need some clarification. It is important that the facts are presented.
Here’s the way I see it:
Humphreville: “LA needs to establish a Financial Control Board, just like New York did in 1975 when nobody trusted the political leadership of The Big Apple.”
The circumstances in New York City that motivated the State of New York to establish the Financial Control Board in 1975 are drastically different than the circumstances Los Angeles faces today.
Earlier this fiscal year, the City issued $1.2 billion in Tax and Revenue Anticipation Notes (TRANs), short-term debt for cash-flow purposes, and received a 0.26% yield on the bonds. This was the lowest yield the City ever received on its short-term borrowing – significantly lower than the County of Los Angeles received this year. This low rate, and the City’s AA category bond ratings overall, reflect the financial community’s confidence that the City of LA has and will continue to make difficult but necessary budgetary actions to ensure the payment of debt as well as ongoing fiscal solvency.
Humphreville: “But he neglected to tell the disbelieving Budget Representatives the whole story.”
Humphreville accuses the Mayor of not telling the Budget Representatives the whole story at Community Budget Day. First of all, it is completely unreasonable to expect the Mayor to present a comprehensive and detailed analysis of the City’s budget in a 10 minute introductory speech at Community Budget Day. It is also wrong to accuse the Mayor of not telling the whole story while at the same time distorting and misrepresenting the information that was provided at Community Budget Day.
Humphreville: “And he failed to mention that of the almost 5,000 positions that were eliminated, 2,400 employees received $355 million in enhanced retirement benefits, and that less than 500 were laid off, implying that over 2,000 were transferred to other non General Fund departments, including the Department of Water and Power.”
The problem with this criticism is that Humphreville himself fails to mention that all civilian employees agreed to contribute an additional percent of their paychecks towards the pension system in order to offset the cost of the enhanced retirement benefits. The Early Retirement Incentive Program (ERIP) was intended to be cost neutral. If there is reason to believe it is costing more than advertised, then it is fair to advocate for it to be audited. It is however unfair to distort the facts.
Humphreville also inaccurately infers that 2,000 positions were eliminated due to transfers to non General Fund departments. The City has actually eliminated over 1,000 positions due to transfers and the remaining positions that have been eliminated were made vacant through regular retirements and attrition. The City has put in place an aggressive managed hiring process (basically a hiring freeze) in which every department must request unfreeze approval from the Mayor/CAO/CLA before they are able to fill a single position. This has allowed the City to shrink the workforce through the elimination of vacant positions instead of through painful employee layoffs.
Humphreville: “Nor did the Mayor mention that the increase in employee contributions to the pension funds was an offset to the elimination of furloughs or that the value of future benefits for Los Angeles City Employee Retirement System and Fire and Police Pension Plans have increased by $5.7 billion (21%) for the three ending June 30, 2010.”
The irony here is that Humphreville himself fails to mention that the CAO, Mayor and the other members of the City’s Executive Employee Relations Committee (EERC), did not threaten but instead requested that the civilian pension board phase in the $20-$30 million impact of the proposed assumption change in order for the City to have time make the budgetary adjustments necessary to meet a higher contribution amount.
Humphreville: “Rather than rely on the Mayor and City Council to develop and implement a five year operational and financial plan for the City, we need to establish a Financial Control Board…And like New York City’s Emergency Financial Control Board, LA’s Financial Control Board would have the right to review and approve any financial plans and borrowings as well as any and all major contracts, including those with the City’s unions.”
Humphreville does identify some very important problems, but does not offer any possible solutions. Establishing a multi-year financial plan is absolutely something the Neighborhood Council budget advocates should urge the Mayor and Council to develop. And the City should be more transparent about its pension issues and labor contracts. But advocating for some kind of financial control board with unbridled authority over City finances is no silver bullet, and in fact, possibly detrimental to the borrowing power of the city.
Humphreville: “Rather than developing long term solutions for the City’s perennial budget deficits, our infrastructure, our underfunded pension plans, and its bloated, inefficient, and poorly managed work force, the City is considering a variety of tax increases that total over $250 million.”
Humphreville slams City leadership for beginning to even consider a handful of potential revenue generating ballot measures. City departments have been significantly cut back over the course of the last few years. Humphreville must be out of touch with reality and NCs if he thinks the City shouldn’t consider a balanced approach to eliminating the City’s long-term deficit, one that includes cuts and revenue increases.
Humphreville: “And while the Budget Advocates will review and analyze the operations and finances of the City’s General Fund and special revenue departments and make appropriate recommendations, they will also be asked to more fully develop the establishment of a Financial Control Board to protect the interests of the 99% of the Angelenos who do not work for the City.”
Neighborhood Councils were established to actively engage residents and community members in all aspects of City government. The NC Budget Advocates are elected by representatives from their communities to advocate for the needs of their regions and to hold our elected leaders accountable.
We shouldn’t punt this responsibility to a financial control board with undefined members and authority. Like last year, the Budget Advocates should be encouraged to roll up their sleeves and engage the numerous City stakeholders on the budget to identify the biggest problem areas and develop potential solutions.
In closing, as a leader in the NC Budget Advocate process, I believe we need to shift the mood of the budget dialogue away from a combative, cynical approach and instead advocate for a partnership and engagement with the City.
The NC budget advocate process, while not perfect, does represent a true and well-meaning commitment on the part of the Mayor’s Office to solicit the input and participation of NCs in budget development.
Like no other time in recent memory the Mayor’s Office has worked with NCs to shape the vehicle with which the City receives input from its constituents, whether it be through partnered development of an online budget survey or joint organization of Community Budget Day. This is a good opportunity to continue this engagement, and it shouldn’t be squandered.
While it is easy to focus on the problems, it is imperative that we work together to offer up real solutions. Instead of highlighting the pension liability, which we all agree is a significant problem, the NCBAs should be pushing the establishment of a new civilian tier of pension benefits for new employees that among other changes would increase the retirement age (perhaps up to 67 – social security).
So, as we enter the new NCBA year, I urge the new group to stay focused, not make it personal, and really dig into the city fiscal issues and bring forward good solid recommendations for positive change.
(Jay Handal was Chair of the 2011 Neighborhood Council Budget Advocates Committee.) -cw
Tags: Los Angeles, New York, city budget, Neighborhood Council Budget Advocates, Jack Humphreville, pensions, Mayor Villaraigosa, Community Budget Day
Vol 9 Issue 92
Pub: Nov 18, 2011