LA WATCHDOG - The City’s $11.76 Adopted Budget for the upcoming fiscal year (2022-23) is an improvement over the Mayor’s Proposed Budget because it has reduced its reliance on the City’s Reserve Fund.
Despite record revenues, the Mayor’s Budget proposed a $106 million transfer from the Reserve Fund. The Adopted Budget, on the other hand, is tapping the Reserve Fund for “only” $17 million, a decrease of $89 million. This was made possible by a $68 million increase in anticipated property tax revenues and a lower level of spending, primarily in the Police Department that is having trouble in maintaining its staffing levels.
The City’s rainy day funds consist of the Reserve Fund and the Budget Stabilization Fund. As of July 1, the beginning of the fiscal year, these funds are expected to have almost $600 million in assets, representing 8% of General Fund revenues of $7.45 billion. The City is projecting that these funds will increase to $740 million by June 30, 2023, or almost 10% of General Fund revenues, the goal that the City has established but has never been able to reach.
But this assumes that the Police and Fire Departments will adhere to their budgets, something that has not happened consistently over the years, and that increased levels of inflation will not adversely impact operating expenditures. And it also incorrectly assumes that the new labor agreements with Coalition of LA City Unions that represent 24,579 employees will not adversely impact the budget.
More than likely, these assumptions will not hold, resulting in considerable pressure of the Reserve Fund. At the same time, as the City experiencing record revenues, it should be increasing its rainy day funds to $1 billion (13.3% of General Fund revenues) so that it can withstand adverse impacts from earthquakes, pandemics, wildfires, mudslides, or other unforeseen events.
Will the City continue to balance its budget during the upcoming year by controlling expenditures? Will the City maintain the current level of its rainy day funds? Or will the City be forced to raid its rainy day funds? Stay tuned.
(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].)
