LA WATCHDOG - Mayor Karen Bass has approved a budget busting labor agreement with the Police Protective League and will most likely approve new deficit creating contracts with the civilian unions and firefighters that will create a $600 million river of red ink over the next year and a half. And the worst part is that Mayor Bass knew that these labor agreements would have a devastating impact on the City’s budget for this year (2023-24) and next year (2024-25).
She had two coconspirators, Council President Paul Krekorian and Bob Blumenfield, the chair of the Budget and Finance Committee, both of whom also had an intimate knowledge of the devastating impact of the new labor agreements on the City’s finances.
To cover this $600 million shortfall ($170 million this year and $440 million next year), the City may raid the Reserve Fund. But this rainy-day fund is for emergencies (earthquakes, floods, riots, etc.), not to cover operating expenses such as salaries. And besides, the availability would be less than $150 million assuming the City maintained a bare bones reserve equal to 5% of General Fund revenue.
Another source of funds is the Measure ULA tax, the 4% levy on property sales of $5 million or more and 5.5% on sales of $10 million or more. The tax is expected to yield at least $600 million this year, of which only $150 million was appropriated this year because the legality of this tax was being challenged in the courts. In addition, for the sake of argument, assume that this tax will yield another $600 million next year, which along with the remaining $450 million, would result in over $1.05 billion in the ULA fund.
[Note: Many question these revenue estimates based on current trends.]
While a Superior Court judge dismissed the litigation, the plaintiffs have said they intend to appeal. But if the City decides to throw prudence to the wind, it could use a portion of these ULA funds to repay the General Fund the $475 million it contributed to the Mayor’s Homeless Budget this year. That would leave the General Fund with a shortfall of $125 million, an amount that could be covered by the Reserve Fund.
The remaining $575 million would be used to fund the Mayor’s Homeless Budget. But this is $725 million short of this year’s appropriations of $1.3 billion. And next year, the Homeless budget will not be able to use Measure HHH bond money because the last $262 million was allocated this year.
So how will the Mayor fund the Homeless Budget? Will she free up money by cutting basic services such as the repair of our streets, sidewalks, and parks? Will she try to force DWP and the other two proprietary departments to contribute? Will she try to raise taxes through a new ballot measure? Will she rely on grants from the State and Washington as the City did this year?
This is all mind boggling. And while there are many moving parts and priorities, the Mayor, along with Krekorian and Blumenfield, need to be transparent with Angelenos, starting now, and not wait until April 20, 2024, when the Mayor submits her budget to the City Council.
(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].)