Another Fine Mess: L.A. City CAO Warns of 'Fiscal Crisis'
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There are two things you should know about L.A. city finances, according to Chief Administrative Officer Miguel Santana: annual deficits are built into the system and it's impossible for the system -- as it is now -- to save itself.
The city's projected deficit for the new fiscal year is $222 million, a hole that could grow to $427 million by the end of Fiscal Year 2014-2015 (as reported by Kate Linthicumin in the Los Angeles Times).
At some point in the spiral downward, Santana warns, the city will be so burdened that the only alternative will be bankruptcy. And Santana sees no quick rescue. Nothing available in further cost savings or new efficiencies can generate enough revenue, now or over the next five years, to solve the city's debt problem.
The number of non-public-safety employees charged to the city's General Fund has already been cut nearly 40 percent since 1990 (by attrition and by shifting staff members to departments that generate offsetting revenue). New police officers now make an average of 20 percent less than those hired earlier. And their pensions have been structured to increase the share they must pay.
Employee unions have already made some concessions, and by playing more hardball, the city might be able to suspend promised raises of between 6.5 and 11 percent, but only for a year or maybe two. (The hardball is well underway. Mayor Villaraigosa and CAO Santana pointedly include employee layoffs among the options they might propose to the city council. )
Other proposals to raise revenues by increasing the parking tax and doubling the property transfer tax might raise about $140 million a year. Both of these are tax increases that require voter approval.
But that's only a small part of the broken system of government financing that extends from the state capitol to the council chambers of almost every city in California. Politics, the clout of public employee unions, our habit of budgeting by ballot box, and the withering of property-based responsibility for financing municipal services have frozen the current system of finance into immobility. As a result (and as if by design), the hollowing out of all local governments -- underway since the long recession of 1980-1981-- has nearly reached an end point.
Outsourcing municipal services to contractors, limiting retirement benefits, and shrinking public safety employment have their advocates as solutions to the current crisis in Los Angeles. But even the most radical restructuring of how services are provided (and who provides them) might only keep pace with the city's limited revenues, might just stave off bankruptcy.
Unaccounted for are billions of dollars in unmet infrastructure needs. Built all at once between 1890 and 1920, Los Angeles is wearing out all at once, as any driver or any DWP customer can see.
Los Angeles is broke. Dollars and serviceable infrastructure are in diminishing supply. The system is broke, too. The mayor and city council haven't the will to restructure municipal services, and the ability to raise enough revenue was taken from them long ago.
That's why CAO Santana is very afraid.
D. J. Waldie, author, historian, and as the New York Times said in 2007, "a gorgeous distiller of architectural and social history," writes about Los Angeles on KCET's SoCal Focus and 1st and Spring blogs.
