Tue, May

Eric Garcetti’s Voodoo Economics


LA WATCHDOG - Wannabe Mayor Eric Garcetti has been touting his credentials as a “fiscal hawk,” opposing the half cent increase in our sales tax to a job crippling 9.5%, one of the highest rates in the nation; proposing the elimination of the $450 million business tax to stimulate job growth; leading “unprecedented pension reforms saving hundreds of millions in taxpayer dollars;” and balancing the budget through work place reform.

However, as City Council President for six years, Eric Garcetti is one of the prime architects of the city’s financial woes because of his unwillingness to face economic reality and confront the campaign funding union leadership. Rather he continued to “kick the can down the road” to insolvency which will saddle our children and grandchildren with tens of billions of unfunded obligations.  

In 2007, the City entered into a budget busting contract with a coalition of public unions, despite the fact that the City was experiencing financial difficulties with an already existing Structural Deficit in an environment where the economy was beginning to slow and head south.

As the President of the City Council, Garcetti, along with our globetrotting Mayor Villaraigosa, was one of the primary authors of this deal that would haunt the City and its residents for the next seven years and beyond.

Garcetti has touted his decisive leadership in eliminating 5,000 General Fund positions, allowing the City to “balance” its budget when the revenues dipped 3% ($132 million) in 2010.  

However, Eric fails to mention that the Early Retirement Incentive Program and the dumping of over 2,000 City employees on the Department of Water and Power, the Port, LAX, and the special revenue departments would end up costing the City and Ratepayers billions.

Nor does Garcetti mention that City revenues have increased by $250 million (6%) since 2010.

“Balancing” the budget also involved Enronesque accounting shenanigans, such as banking police overtime and deferring civilian raises.  In return for temporary concessions, the coalition of unions agreed to extend their contract to June of 2014, the year after the City elections since Garcetti did not want the union contracts to be an issue in the 2013 Mayor’s race.

Other budget “balancing” tricks approved by the Garcetti-led City Council included raids on the already seriously underfunded pension plans.  This was accomplished by surreptitiously manipulating the underlying pension assumptions that allowed to City to lower its Annual Required Contribution, “saving” hundreds of millions of dollars.

Garcetti also promotes his leadership capabilities by reminding us that he orchestrated the plan where City employees would contribute an additional 4% to the pension system to fund their post retirement medical benefits.  But what he conveniently fails to mention is that from July 1, 2005, the average wage of City employees has increased by over 25% through June 30, 2012 and is anticipated to increase another 10% by end of the contract in June of 2014.

Garcetti claims to have led pension reform saving hundreds of millions of taxpayer dollars.  However, the recent pension reform for new civilian workers results in penny ante savings of only $15 million in the fifth year, about 1% of the projected 2017 pension contribution of $1.3 billion.

This is the same Eric Garcetti that summarily rejected Mayor Riordan’s plan for pension reform without any review or analysis.  However, the Riordan plan would have eliminated the Structural Deficit within four or five years, made a significant reduction in the unfunded pension liability, and saved DWP Ratepayers over $125 million a year.  

Garcetti has also proposed the elimination of the business tax that generates revenue of $450 million, or about 10% of the General Fund’s revenue.  Yet, despite the very real concerns of the City Administrative Officer, he has not identified any offsetting revenue or spending cuts, reminiscent of the George Bush tax cuts that generated nothing but red ink.

Garcetti also voted against the permanent half cent increase in our sales tax to a job crippling 9.5%.  However, this appears to be a disingenuous, throw away vote.

During the three week rush to place the sales tax on the ballot (reminiscent the 2008 monkey business associated with Measure B, the Mayor’s Solar Initiative), Garcetti did not even attempt to make the increase temporary, as was the case with Governor Brown’s successful Proposition 30.

And when it came time to sign the Opposition Argument for the Voter Information Guide, both the Garcetti and Greuel camps were missing in action, refusing to respond to repeated requests, unlike Jan Perry and Kevin James who both stepped up to the plate and signed the Opposition Argument.

Today, the City’s finances are a mess.  

Next year’s projected deficit is $216 million, caused by a $300 million increase in salaries.  And over the next four years, increases in personnel expenditures will exceed the growth in revenues by $300 million, resulting in a four year cumulative deficit of $1.1 billion.

The City has an unfunded pension liability of $11.5 billion (68% funded).  Our streets, sidewalks, parks, street lights, and the rest of our deteriorating infrastructure require an investment of more than $10 billion.

And yet, Garcetti has not developed a detailed plan on how to eliminate the deficit over the next four years, relying on nebulous plans to grow the economy and create jobs.    

Eric Garcetti refuses to even consider a charter amendment that requires the City to LIVE WITHIN ITS MEANS for fear of alienating his partners in labor.  

This common sense amendment would require the City to develop and adhere to a Five Year Financial Plan, approve two year balanced budgets based on Generally Accepted Accounting Principles, and, over the next ten years, provide adequate funding for the elimination of the City’s unfunded pension liability and for the repair and maintenance of our streets, parks, sidewalks, and the rest of our crumbling infrastructure.

So ask yourself, can we and the City of Los Angeles afford four years of Eric Garcetti?

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee,  the Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Humphreville is the publisher of the Recycler Classifieds -- www.recycler.com. He can be reached at: [email protected])

Vol 11 Issue 6
Pub: Jan 18, 2013

Get The News In Your Email Inbox Mondays & Thursdays