When Hollywood produces a sequel, it is because the first film was a hit. This spring’s Budget Deficit IV, starring the City of Los Angeles, does not fall into that category. What started out as a PG rated show three years ago and gained little attention has turned into a horror movie that should scare every resident and taxpayer of Los Angeles.
Some of the actors in Budget Deficit IV would like to make us believe that while the plot is heavy with drama, calling it a horror movie is simply crying wolf. They assert that the villain in Budget Deficit I, II, III and IV is a character called the Great Recession and that if we are just patient, that villain will be swept away as the economy improves. Miguel Santana, L.A.’s City Administrative Officer, says that portrayal of the current budget deficit would be fiction.
Speaking to a group of L.A. Area Chamber members last Friday, Santana said the actual numbers for the past four years and the financial projections for the next four years tell a sobering story about a budget crisis that would have unfolded even without the Great Recession. Santana points to a long-term trend line of increased expenses for personnel, programs and retiree benefits that surely and steadily increased the City’s budget obligations every year and laid the foundation for a budget deficit even when the economy was growing robustly. The budget deficit tsunami is rushing in on Mayor Villaraigosa, members of the L.A. City Council and citizens of Los Angeles, and we can no longer avoid tough cost-cutting decisions.
The City’s rising obligations were obvious the last 10 years, but a growing economy masked the threat. The City’s revenue from the general fund and special funds peaked in FY 2008-09 at $7.11 billion, which represented a 39 percent increase in revenue from five years earlier. Over the next two years, revenue declined by 5 percent to $6.75 billion in 2010-11. Santana is projecting the same level of revenue in FY 2011-12 and a budget deficit of $350 million. This $350 million number should sound familiar because it is approximately the same amount as the budget deficit that the mayor and City Council started with in the spring of 2008, 2009 and 2010.
Santana will be offering Mayor Villaraigosa and City Council a set of options to close the $350 million budget deficit for 2011-12 that include: 1. Reducing the programs and services which the City provides to a set of core services 2. Reducing the number of City employees or increasing the number of furlough days3. Reforming pension and health care benefits for retirees 4. Contracting out for some core City services to reduce the City’s long-term liability for pensions and health care for future retirees.
The Chamber appreciates the transparent analysis that Santana is providing to elected officials and the taxpayers of Los Angeles. The votes in City Council this spring will determine whether this budget deficit discussion ends up being heavy drama or a horror movie with continuing sequels in future years.