Budget Hearing Uncovers L.A.’s Cost-Cutting Challenges

Precisely a month before Mayor Antonio Villaraigosa is scheduled to present his proposals for L.A.’s 2012-13 budget to the City Council, about 60 people gathered in Eagle Rock Tuesday evening to hear about the dire straits the City has been in financially—and what needs to be done to continue providing essential services while cutting wasteful expenditure.

Dubbed as the Northeast Regional Budget Hearing, the special hearing was held at the and hosted by , who was accompanied by City Council Budget and Finance Committee Chair Paul Krekorian.

The evening began with a leisurely public comments period during which about a dozen members of the audience urged the City Council to support certain budgetary expenditures they felt were important.

Budget Advocates

Among the early speakers was Neighborhood Council Budget Advocate Heinrich Keifer, who represents both the and the Historic Highland Park Neighborhood Council in budget negotiations with the mayor.

Currently in his third consecutive year as a budget advocate, Keifer supported what he referred to as the hard-line budget cutting strategies adopted by City Administrative Officer Miguel Santana, who gave the audience an overview of the City’s 2011-12 budget and projected shortfalls for the next fiscal year.

“It is time to focus on core services and to implement structural changes in the way we operate as a city,” Keifer said. “We need to focus on a long list of efficiency recommendations that has been put together by the Budget Advocates.”

He added: “In a way, much of what needs to be done is simply reduce expenses and increase revenues. The question is where in the long list of City services can we cut the most and feel it the least.”

Keifer told Patch that these are all considerations in how the Neighborhood Council Budget Advocates will choose to support or oppose the budget that the mayor will be presenting to the City Council on April 20.

On Friday, the NC Budget Advocates will propose to the mayor a budget solutions document. Better know as the “white paper,” it is the product of more than 15 meetings with various City departments, bureaus and labor unions as well as numerous Budget Advocate Committee meetings aimed at developing what Keifer called “a united voice.” The document will be posted shortly on the Budget Advocates website, which can be viewed by clicking here. (Anyone who has comments, questions or budget solutions may email them to Keifer at HKeifer101@sbcglobal.net.)

The Good News

CAO Santana told the audience that currently, for the fiscal year that will end July 30, the City’s Council-controlled budget of $6.8 billion is balanced, its so-called “reserve fund” is stable and the projected shortfall for 2012-13 has been reduced from a high of $250 million to about $220 million.

That, said Santana, was done through a series of cuts across the City—mostly by not hiring additional staff. “A lot of people criticize the government by saying that there is a lot of fat everywhere—which is nonessential services,” Santana said. “In a very short amount of time, we’ve eliminated about 5,000 positions, which represents about 13 percent of the workforce.” In fact, added Santana, L.A.’s workforce is “down to almost Mayor [Tom] Bradley’s levels.”

The Challenges

One challenge is that the City cannot raise revenue without voters’ approval. “And so we’ve had to make a case that we’ve done everything on our side to be able to live within our budget before we go to you to approve any new tax,” Santana said.

Another challenge: The cost of running L.A. is exceeding the City’s revenue, especially at a time when economic recovery from the 2008 financial meltdown has been painfully slow. “On average, our projected growth on our expenditures is increasing by about 5 percent each year,” Santana said, adding: “Meanwhile, our revenue is increasing by only 2 percent.”

It’s the difference between the two that’s creating the structural deficit of $220 million—“the cost of being in business,” said Santana, adding: “We are a service agency, so our cost is in our people, and the principal drivers of that is our pension cost, healthcare cost, workers’ compensation and employee compensation.”

The bad news, said Santana is that L.A. still has a budgetary shortfall for next year. To try to bridge the gap, the City has eliminated or consolidated a number of departments, including the Office of the Treasurer and the Environmental Affairs Department, Santana said. The City is also exploring changes in workers' compensation and employees' healthcare, which require negotiations with labor unions.

Los Angeles has reached a point where it has as many people retired as are working for the City, Santana said, explaining that expenditure on pensions and retirement account for 20 percent of the City’s $4.3 billion General Fund. “These are obligations we have—commitments we’ve made—and we have no discretion on not making those payments.”

And although Police and Fire account for 37 percent of General Fund expenditures, the City uses its discretionary funds to pay a total of 70 percent of all tax dollars for public safety (including pensions and health care costs for police and fire personnel), Santana said.

“The question that will be discussed over the next several weeks is whether that is enough,” he added, explaining that the public consensus appears to support the City’s expenditures on public safety.

“The challenge here is that, when you see the kind of deficits we’re facing, and everyone agrees that the last thing to be cut is public safety, then you really have very little room left."