So, Who’s to Blame for Mayor Garcetti’s Unbalanced City Budget?

LA WATCHDOG--Despite a very healthy $340 million (5.6%) increase in General Fund revenues, the proposed $6.2 billion budget for the fiscal year beginning July 1, 2018 is not balanced or fiscally responsible, contrary to pronouncements by Mayor Eric Garcetti.  

This record setting budget that has been fueled by a booming economy fails to account for the raises for the City’s civilian workers whose contracts expire on June 30.  According to City Hall insiders, the new contract will cost the City an estimated $40 million next year. 

Unfortunately, Garcetti and Councilman Paul Krekorian, the Chair of the Budget and Finance Committee, have not addressed the Structural Deficit.  This is where expenditures (primarily for salaries, benefits, and pension contributions) grow faster than revenues, creating a river of red ink for years to come. 

Despite record tax revenues, the projected budget gap for the following fiscal year beginning July 1, 2019 is $159 million.  But this does not include raises for the civilian workers, the police, and the firefighters.  If these were included, the budget deficit would increase to at least $250 million. 

The City is projecting that the cumulative budget deficit over the following four years beginning July 1, 2019 will be $77 million.  But when you factor in raises for the city workers over this four year period, the deficit soars to almost $1 billion. 

Unfortunately, there is more bad news. 

The proposed budget fails to adequately fund the City’s rainy day fund to the tune of $100 million a year as it diverts this amount from the Budget Stabilization Fund to pay for its ongoing capital expenditure improvement program. 

The City does not have a plan to repair and maintain our streets, especially the one third of our streets that are failed.  According to Councilmen Englander and Buscaino, the City needs to spend an additional $200 million a year to fund this this effort.  

And this not include money needed for our sidewalks, our parks and restrooms, our urban forest, and the City’s buildings, facilities, and information technology infrastructure. 

The City is also short changing the City’s two underfunded pension plans by about $500 million as it relies on an investment rate assumption of 7¼%, a level considered overly optimistic by knowledgeable investment professionals, including Warren Buffett, the hayseed from Omaha whose views are dismissed by Councilmen Krekorian and Koretz. 

Nor does the budget address the billions that are required to fund the Civic Center Master Plan surrounding City Hall, the expansion of the Convention Center, the revitalization of the Los Angeles River, and the compliance with the Clean Water Act. 

Outside of the budget, the annual ticket for the rainy day fund, our failed streets, and the pensions is in the range of $800 million a year.  And when added to the short fall of $250 million a year when the increased personnel expenses are considered, the City is looking at red ink of $1 billion a year and $4 to $5 billion for the remainder of Garcetti’s term in office.  

Mayor Eric Garcetti, is Intergenerational Theft where you and the Herb Wesson led City Council dump billions and billions on the next generations of Angelenos being fiscally responsible?  No way.  

It is time for you and the City Council to address our City’s finances in a realistic manner, beginning on Friday at the Budget and Finance Committee that is chaired by Councilman Paul Krekorian.   

(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:  [email protected].)

-cw