When I arrived in Los Angeles in 2006, Mayor Antonio Villaraigosa and the L.A. City Council were facing a $200 million budget deficit even though the economy was booming and city tax revenue was growing by 5 percent annually. The Council balanced the budget with cuts in expenditures, but in 2007, the same story unfolded again. The economy was strong and city tax revenue was growing by more than 5 percent, but the projected budget deficit was still $200 million. Some of us asked the question, why do we have a significant budget deficit every year when tax revenue is growing at a rate much higher than inflation?
Good times helped mask the problem, but the Great Recession tore off the mask. Today, most in City Hall blame the Great Recession for the budget gap and the elimination of 5,000 jobs. They forget that the City budget deficit existed many years prior to the recession. They also forget that the City’s general fund revenue dipped by only 2.7 percent during the Great Recession. While that dip amounted to $118 million for the City, most businesses saw a decline in sales during the Great Recession that was much larger than 2.7 percent. And unlike the City, whose revenue is up 3 percent since the start of the recession, many businesses have still not returned to their pre-recession level of sales.
Last week, City Council President Herb Wesson announced the formation of a group of private citizens to study the financial health and long-term trends of the City. The volunteer group, named the 2020 Commission, will be co-chaired by former U.S. Secretary of Commerce Mickey Kantor and former L.A. First Deputy Mayor Austin Beutner. Three of the 11 other 2020 Commission members are Chamber Board members.
Modeled after the Christopher Comission, the 2020 Commission will ask piercing questions in private meetings and present a report on the current fiscal state of the City shortly after the new mayor and City Council take office on July 1, 2013. The Chamber applauds Council President Wesson for suggesting that a new set of eyes study the long and short-term fiscal trends of our city. We also applaud the volunteer members of the commission whose first job is to reach out for input from the public and interested citizens.