Mon, Jul

City Faces Idea Deficit for Curing Budget’s Ills


VILLARAIGOSA BUDGET - The good news is that the Mayor appears to understand the need for long-term solutions to address the escalating payroll, pension and benefit obligations.  

This apparent understanding is demonstrated by the elimination of full-time positions and the tentative agreement with the Coalition of LA City Unions.  

Unfortunately, however, the Mayor’s proposal is short on long-term solutions and long on short-term solutions.

Did anyone notice that the Mayor’s 2011-12 Budget Proposal actually projects a very slight increase in general fund revenues?  General fund revenues are projected to go up roughly $4 million next year (from $4.375b to $4.379b).  

Taken in context, projected revenues (emphasis on the word “projected”) are basically stable.  The $458 million deficit we face in the upcoming year (roughly 10% of the city’s expected general fund revenue), therefore, reflects a spending problem.

Dealing with the Spending Problem.

With projected deficits in subsequent years growing even larger than what we are facing today, and a significant portion of the general fund being spent on mandatory items such as pension, benefit and debt payments, long-term structural reforms are critical.  

While Mayor Villaraigosa’s proposal acknowledges the growing crisis (which is good), he remains content on leaving the heavy lifting to his successor.  

Let’s start with some of the better points in the Mayor’s proposal.

First, the proposed/tentative agreement with the Coalition of LA City Unions that would increase employee contributions to retiree healthcare is an important step in providing long-term solutions.  

While ratification of the deal will require members to contribute 4% of their pay for the cost of retiree healthcare coverage (without ratification we will face serious furloughs resulting in further reductions in the quality of services), much more work must be done in negotiating with our city unions.  

Even if the agreement is ratified (and there is some doubt it will be as many Coalition members are exempted from furloughs), opponents of the agreement point out that it provides Coalition members with new guarantees and even more leverage in upcoming negotiations.

Second, the proposed “data-driven” Fire Deployment Plan which replaces the former so-called “Modified Coverage Plan” (a/k/a the poorly-planned and dangerous rolling brown-outs) certainly sounds good as described in the Mayor’s proposal.  

The Times says it is a “smarter approach to fire stations that replaces underused and expensive ladder trucks with more badly needed paramedic teams.”  It will certainly be a “smarter approach” if it works and public safety is not compromised.

Third, the Mayor describes the “Police Sworn Salary and Overtime Reductions” valued at $100 million as “long term.”  I hope he is right.  

While eliminating 105 vacant civilian positions is long-term, even Councilmember Parks acknowledges that the Mayor’s “assumption” that overtime savings through the management of compensated time off and deployment of sworn resources will total $80 million is “uncertain.”  

Furthermore, an added $20 million in “targeted savings” through LAPD “operational efficiencies” (whatever those are) could be long-term savings if they can be implemented and public safety is not compromised.  Obviously, these “assumptions” and “targets” are risky.

Fourth, consolidation of duplicative city offices and departments is a long-term structural solution, as is the elimination of 680 full-time positions (although if they were already vacant, we are not paying employees in those positions now anyway).  

I appreciate that the Mayor has found some departmental duplication to eliminate in the last two budget proposals.  However, more work can be done here.  

Even if it is proving difficult for the Mayor to find departments that duplicate the work of other departments, there are many divisions of city departments that are duplicative.

A few elements of the Mayor’s proposal that are particularly troublesome.   

The Mayor offers many one-time solutions that do nothing to improve the city’s long-term fiscal solvency.  While these “one-timers” may kick the can down the road to the next budget year, all they really do is paper-over the lack of leadership in City Hall.   

The fact that we are going to borrow $43 million to cover a mortgage payment on the convention center ($22 million) and to cover costs related to the city’s Early Retirement Incentive Program ($21 million (that was supposed to have been cost neutral in the first place)) means we are borrowing money to pay more money we already owe.  In other words, we are using the Visa Card to pay the Discover Card bill.  Not only are we extending the life of the debt, we are going to pay much more for it.     

It is also unfortunate to see the “continued reduction of general fund support for capital improvement projects”– this means $48 million less for infrastructure maintenance and improvements previously funded at 1% of the general fund.

While I certainly support real budget cuts in both the Mayor’s office and City Council offices, I am very skeptical when I hear about reductions to this Mayor’s budget and City Council budget.  This year the proposal is an 11% reduction for the Mayor and a 10% reduction for the City Council.  What we are not being told is how much the budgets of the Mayor and City Council have grown over the last few years.  

A 10% or 11% budget reduction does not impress me if that budget has seen constant growth in recent years.  

Indeed, one could argue that it is really no budget reduction at all.  The Daily News reported on August 10, 2010 that the Mayor’s staff has grown to 206 “dwarfing that of former Mayor James Hahn, who had 121 employees, and former Mayor Richard Riordan, with 114.”

An example of a cut in the Mayor’s proposed budget I would not have made is the 10% reduction to the annual appropriations to Neighborhood Councils (“NC”).  The city’s NC system results in hundreds of thousands of volunteer hours given to the city every year by NC board members.  There are well over one thousand NC board members.  

Further cuts to their funds (money used to pay for meeting space, rentals, copies, refreshments, and community activities, etc.) only makes it harder for them to do their jobs – as volunteers – and discourages more extended involvement in the NC system.        

An example of “new revenue” proposed by the Mayor that I would not seek is the increase in net revenue that spending money to hire additional traffic officers would allegedly bring.  

Putting more traffic officers on our streets to hound city residents and customers of our city’s private businesses with annoying and outrageous traffic/parking fines levied as a result of ridiculously confusing and ambiguous parking signs/rules is not a way to increase revenue.  

It is a way to drive customers out of our city and away from our businesses and into communities that are not so obsessed with abusive traffic/parking fines for nice patrons who are one minute over on the 7 pm deadline on the third Saturday of the fifth month of an odd-numbered year as depicted on the parking sign three blocks away with four different signs (some of which are spray-painted over).  

I recognize that parking fines are projected to bring in $141 million next year, but I also believe that a city can go overboard and drive business away thereby resulting in a net loss in revenues.

In the spirit of shared sacrifice, I was hoping to see a proposed transfer to the city’s Reserve Fund of some of the discretionary funds of the Mayor and City Council.  

You know, the slush funds or “street-furniture” funds as they are called that elected officials use (as the Times put it regarding the Board of Supervisors) to “burnish their public images, pay for chauffeurs, hold parties for friends and lobbyists and support pet projects.”  That is an example of a funds transfer I would propose that was not in the Mayor’s budget proposal.

I was also hoping to see a category reflecting real improvements in the city’s revenue collections and revenue enhancements.  The city is in need of significant improvements in the areas of revenue collections, tax compliance, accounts receivable collections, new revenues, centralized billing, and implementation of prior audits.  

The Commission on Revenue Efficiency offered 65 specific recommendations for reform – the need for many of which have been known for years.  Nevertheless, the Mayor’s proposal offers nothing in the way of a solution to this continuing problem.

General Fund Revenues.

It is important to note here that the revenue numbers in the Mayor’s proposal for 2011-12 are merely projections – an estimate.  The Times pointed out that the Mayor’s estimate is $130 million higher than the Controller’s latest revenue projection for the year.  

Councilmember Parks pointed out that revenues from 2010-11 were “$60-plus million under the projection.”  It is worth noting that last year’s budget contained projected revenues of approximately $53 million from the long-term lease of parking garages from a make-believe deal that never existed.  

So there is cause for concern surrounding the current projected revenue figures.

Finally, I refuse to accept the current level of general fund revenues as the best Los Angeles can do.  Current city leadership has offered very little, if anything, in the way of ideas to grow general fund revenues.  

At this point, tax and fee increases (which current leadership loves and has tried) and tax incentive “gimmicks” (which current leadership has tried) do much more harm than good.

Los Angeles can do better.  We can increase our general fund revenues without raising taxes and fees.  A fair and equitable across-the-board reduction in our business tax burden and simplification of our business tax structure would make operating a business easier for our existing businesses (small, medium and large) and encourage new businesses to come.  

The increase in volume (i.e., the number of entities doing business in the city) will cause an increase in business tax revenue, sales tax revenue, utility users’ tax revenue, parking users’ tax revenue, and even revenue from licenses, permits, fees and fines.  

In other words, we would see an increase in revenues from five out of eleven sources of general fund revenue.  (There is much more on this coming from me in the coming months).

(Kevin James hosts the Kevin James Show on conservative talk radio station KRLA in Los Angeles. He is also a candidate for Mayor of Los Angeles. More about James at krla870.com)    Graphic credit: WitnessLA        -cw

Vol 9 Issue 34
Pub: Apr 29, 2011

Get The News In Your Email Inbox Mondays & Thursdays