--- [ LA WATCHDOG ](https://mail.citywatchla.com/index.php?option=com_content&view=category&id=12) # His Honor and the Grasshoppers Raid LA’s Rainy Day Funds LA WATCHDOG--While the City’s General Fund revenues have increased by $1.24 billion (27%) over the last five years, why is the cash balance of City’s Reserve Fund projected to be $21 million below the policy goal of $289 million, an amount equal to 5% of General Fund revenue of $5.8 billion? But more to the point, why are the combined balances of the Reserve Fund and the Budget Stabilization Fund $215 million short of the $578 million policy goal (equal to 10% of General Fund revenue) recommended by the City Administrative Officer? Over the years, the CAO has been a broken record, stressing that the City maintain healthy and growing reserves because they are an important component supporting the City’s high investment grade bond ratings. This is especially true given the City’s Structural Deficit (where the growth in personnel costs exceed the increases in revenues), the City’s massive unfunded pension and deferred maintenance liabilities, and the volatility of the Southern California economy. Underlying this deficit in the City’s reserves is the fact that City Hall has raided the Reserve Fund for $213 million over the last three years. This is despite healthy increases in revenues. As a result, the cash balance is projected to be $268 million on June 30, 2018, only 4.6% of General Fund revenue, the lowest level in years. But this estimate may be on the high side because the Reserve Fund may have to cover budget shortfalls for this fiscal year caused by lower than expected revenues and higher than anticipated legal settlements. There may also be budget shortfalls for the upcoming fiscal year because of continuing legal liabilities that may exceed the projected budget of only $109 million. City Hall was unable to divert funds from the Reserve Fund for the upcoming fiscal year because the cupboard was bare. But that did not stop the financial wizards from diverting $75 million from the $95 million Budget Stabilization Fund. The City has funded the Budget Stabilization Fund with excess revenues from seven economy sensitive taxes: Property Taxes, Utilities Users’ Tax, Business Tax, Sales Tax, Transit Occupancy Tax, Documentary Transfer Tax, and Parking Users’ Tax. Revenues are considered excess when they are more than 3.4% above the prior year’s budgeted revenues. But rather than devote the $75 million of excess revenues to the rainy day funds, City Hall allocated this cash to the Capital Improvement Expenditure Program, claiming these funds were devoted to one time capital expenditures. But the Capital Improvement Expenditure Program is an integral part of every annual budget, not a bunch of one off expenditures as City Hall would like us to believe. In years of plenty, prudent stewards of our money would put excess cash into reserves so that we will have adequate resources when the lean years are upon us. But the grasshoppers who occupy City Hall have not learned this basic lesson of life and finance as they continue their spendoholic ways and ignore the realities of our volatile Southern California economy. City Hall will more than likely issue $60 million of Judgment Obligation Bonds to help shore up the Reserve Fund. But this is only an interim, ill conceived, debt financed maneuver. The real question is whether Mayor Garcetti, Budget and Finance Chair Paul Krekorian, and the rest of the Herb Wesson led City Council have the political will to do the right thing and sock away enough cash so we can endure the down economy. The odds say no way. *(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council. He is a Neighborhood Council Budget Advocate. He can be reached at:* [*lajack@gmail.com*](mailto:lajack@gmail.com "mailto:lajack@gmail.com")*.)* *-cw* Written by Jack Humphreville on May 04 2017. ![](https://mail.citywatchla.com/images/stories/May-2017/15036z3.png) [](https://www.addtoany.com/share) [Comments](#disqus_thread) LA WATCHDOG--While the City’s General Fund revenues have increased by $1.24 billion (27%) over the last five years, why is the cash balance of City’s Reserve Fund projected to be $21 million below the policy goal of $289 million, an amount equal to 5% of General Fund revenue of $5.8 billion? But more to the point, why are the combined balances of the Reserve Fund and the Budget Stabilization Fund $215 million short of the $578 million policy goal (equal to 10% of General Fund revenue) recommended by the City Administrative Officer? Over the years, the CAO has been a broken record, stressing that the City maintain healthy and growing reserves because they are an important component supporting the City’s high investment grade bond ratings. This is especially true given the City’s Structural Deficit (where the growth in personnel costs exceed the increases in revenues), the City’s massive unfunded pension and deferred maintenance liabilities, and the volatility of the Southern California economy. Underlying this deficit in the City’s reserves is the fact that City Hall has raided the Reserve Fund for $213 million over the last three years. This is despite healthy increases in revenues. As a result, the cash balance is projected to be $268 million on June 30, 2018, only 4.6% of General Fund revenue, the lowest level in years. But this estimate may be on the high side because the Reserve Fund may have to cover budget shortfalls for this fiscal year caused by lower than expected revenues and higher than anticipated legal settlements. There may also be budget shortfalls for the upcoming fiscal year because of continuing legal liabilities that may exceed the projected budget of only $109 million. City Hall was unable to divert funds from the Reserve Fund for the upcoming fiscal year because the cupboard was bare. But that did not stop the financial wizards from diverting $75 million from the $95 million Budget Stabilization Fund. The City has funded the Budget Stabilization Fund with excess revenues from seven economy sensitive taxes: Property Taxes, Utilities Users’ Tax, Business Tax, Sales Tax, Transit Occupancy Tax, Documentary Transfer Tax, and Parking Users’ Tax. Revenues are considered excess when they are more than 3.4% above the prior year’s budgeted revenues. But rather than devote the $75 million of excess revenues to the rainy day funds, City Hall allocated this cash to the Capital Improvement Expenditure Program, claiming these funds were devoted to one time capital expenditures. But the Capital Improvement Expenditure Program is an integral part of every annual budget, not a bunch of one off expenditures as City Hall would like us to believe. In years of plenty, prudent stewards of our money would put excess cash into reserves so that we will have adequate resources when the lean years are upon us. But the grasshoppers who occupy City Hall have not learned this basic lesson of life and finance as they continue their spendoholic ways and ignore the realities of our volatile Southern California economy. City Hall will more than likely issue $60 million of Judgment Obligation Bonds to help shore up the Reserve Fund. But this is only an interim, ill conceived, debt financed maneuver. The real question is whether Mayor Garcetti, Budget and Finance Chair Paul Krekorian, and the rest of the Herb Wesson led City Council have the political will to do the right thing and sock away enough cash so we can endure the down economy. The odds say no way. *(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council. He is a Neighborhood Council Budget Advocate. He can be reached at:* [*lajack@gmail.com*](mailto:lajack@gmail.com "mailto:lajack@gmail.com")*.)* *-cw* [![](https://mail.citywatchla.com/images/ME%20DENTAL%20SPA/me%20dental%202026%20final.jpg)](http://medentalspa.com/) ![](https://mail.citywatchla.com/images/banners/signup-for-cw.png) ## Get The News In Your Email Inbox Mondays & Thursdays Website [ ![LA DWP #2 (Pay Your Bill Help)](https://mail.citywatchla.com/images/LADWP/dwp%20level%20pay%205-7-25.jpg) ](https://mail.citywatchla.com/component/banners/click/82 "LA DWP #2 (Pay Your Bill Help)") [ ![Home - HHR Rent is too High - SB-2](https://mail.citywatchla.com/images/HHR/AHF-rent-too-high.jpg) ](https://mail.citywatchla.com/component/banners/click/104 "Home - HHR Rent is too High - SB-2") --- ## Featured CityWatch Stories [ ![](https://mail.citywatchla.com/media/yootheme/cache/fd/064h-fdb0b507.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=29355:remembering-ken-draper-citywatch-and-transparency-are-his-legacy&catid=12) ### [Remembering Ken Draper: CityWatch and Transparency Are his Legacy](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=29355:remembering-ken-draper-citywatch-and-transparency-are-his-legacy&catid=12) LA WATCHDOG - Ken Draper, the editor and publisher of CityWatch for more than 20 years, passed away on August 8, 2022… [ ![](https://mail.citywatchla.com/media/yootheme/cache/0f/061a-0f1ada2f.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33148:brace-yourself-for-a-worse-housing-crisis&catid=398) ### [Brace Yourself For A Worse Housing Crisis](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33148:brace-yourself-for-a-worse-housing-crisis&catid=398) PLANNING WATCH - The California State Legislature will soon vote on the following draft legislation. Please carefully… [ ![](https://mail.citywatchla.com/media/yootheme/cache/ab/063e-ab3b1ba1.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33174:nithya-raman-loses-the-homelessness-gavel-her-record-explains-why&catid=396) ### [Nithya Raman Loses the Homelessness Gavel — Her Record Explains Why](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33174:nithya-raman-loses-the-homelessness-gavel-her-record-explains-why&catid=396) THE BOTTOM LINE - Raman wants Los Angeles voters to promote her to mayor. Before handing her the keys to City Hall, v… [ ![](https://mail.citywatchla.com/media/yootheme/cache/45/063l-45ec6c05.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33179:californias-hidden-debt-bomb&catid=385) ### [California’s Hidden Debt Bomb](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33179:californias-hidden-debt-bomb&catid=385) THINK ABOUT IT - Let me tell you how it will be There's one for you, nineteen for me Cause I'm the taxman – The Beat… [ ![](https://mail.citywatchla.com/media/yootheme/cache/54/064j-54f0ecbd.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33204:be-prepared-to-protect-our-democracy-in-november-from-a-trumpian-plot&catid=9) ### [Be Prepared to Protect Our Democracy in November From a Trumpian Plot](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33204:be-prepared-to-protect-our-democracy-in-november-from-a-trumpian-plot&catid=9) BE AWARE - Back in the days when conservatives were so hungry for media platforms that they’d come on progressive shows… --- ## [ LA WATCHDOG ](https://mail.citywatchla.com/index.php?option=com_content&view=category&id=12) [ ![](https://mail.citywatchla.com/images/stories/July-2026/059m.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33110:citys-assessed-value-increases-to-926-billion-despite-the-palisades-fire&catid=12)### [City’s Assessed Value Increases to $926 Billion Despite the Palisades Fire](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33110:citys-assessed-value-increases-to-926-billion-despite-the-palisades-fire&catid=12) [ ![](https://mail.citywatchla.com/images/stories/July-2026/056n.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33053:lineage-warehouse-fire-the-lawyers-feast&catid=12)### [Lineage Warehouse Fire: The Lawyers Feast](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33053:lineage-warehouse-fire-the-lawyers-feast&catid=12) [ ![](https://mail.citywatchla.com/images/stories/July-2026/055q.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33023:city-attorney-calls-for-independent-audit-of-stay-housed-la&catid=12)### [City Attorney Calls for Independent Audit of Stay Housed LA](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=33023:city-attorney-calls-for-independent-audit-of-stay-housed-la&catid=12) [ ![](https://mail.citywatchla.com/images/stories/June-2026/051k.jpg) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=32941:las-budget-woes-increase&catid=12)### [LA’s Budget Woes Increase](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=32941:las-budget-woes-increase&catid=12) [ ![](https://mail.citywatchla.com/images/stories/June-2026/048l.png) ](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=32898:mwd-taxing-homeowners-to-cover-up-true-cost-of-water&catid=12)### [MWD Taxing Homeowners to Cover Up True Cost of Water](https://mail.citywatchla.com/index.php?option=com_content&view=article&id=32898:mwd-taxing-homeowners-to-cover-up-true-cost-of-water&catid=12)