Last week Miguel Santana, Los Angeles' Chief Administrative Officer (i.e. our city's budget honcho), issued a report about the state of the city's finances. The city currently has a $222 million budget deficit. That number is only expected to increase in the next few years.
The report painted a dismal picture: While revenues have fallen, costs -- specifically costs of paying employees -- have not.
The city has cut close to 5,000 jobs in recent years, but it is still living beyond its means. The question is how the city will pay the bills. The report recommends taxes, potential layoffs, and farming out certain city services (like management of the zoo and the convention center) to private companies. An unsurprisingly contentious proposal suggests that we study different ways to provide for ambulance transport in the city. Read this as meaning different ways of hiring private companies. Currently the Los Angeles Fire Department (LAFD) provides such services. Four out of five calls to the LAFD are for medical emergencies. Would this be a smart economic move or a public health tragedy?
The city is also looking at increasing two taxes, the parking tax and the tax on the property sales. Increasing those taxes could bring in approximately $140 million. But will we do it? Voters would have to approve those taxes.
The city is also considering either (or both) layoffs and asking city employees to forgo raises. Santana has said that giving up raises for the next two fiscal years could prevent further layoffs. Employees represented by the Coalition of L.A. City Unions are set to receive 11% pay increases. However, it remains far from clear that city unions will agree to those conditions.
Most options include asking city union members to make changes, including increasing their share of healthcare costs or raising the retirement again.
Mayor Antonio Villaraigosa will unveil his proposed budget in a few weeks. A big question will be how consistent the Mayor's recommendations will be with Santana's report.
How, when, and perhaps even whether we get out of this current fiscal mess is far from clear. Angelenos want their city services, but they don't want higher taxes. City workers want their bargained-for pay increases, and they don't want to make more concessions. Something will have to give.