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LA WATCHDOG - It is not even the end of the first quarter and the City’s balanced budget is already in the crapper. But this financial meltdown could have been avoided if Council President Paul Krekorian, Budget and Finance Chair Bob Blumenfield, and Mayor Karen Bass had endorsed an open and transparent budgeting process that relied on facts and not on their wishful thinking.
According to recent memos by the City Controller and the City Administrative Officer, the Reserve Fund balance, a barometer of the City’s financial health, was $330 million, 4.1% of the City’s General Fund budget of $8 billion. This is below the 5% minimum dictated by the City’s Financial Policies.
This a far cry from the January 2023 Reserve Fund balance of $648 million, 8.2% of the General Fund budget. Due to overly optimistic revenue projections in the 2023-24 budget, budget busting labor agreements with the police and civilian unions, significantly higher liability claims because of City Attorney Mike Feuer’s mismanagement, and numerous over expenditures, the Reserve Fund was raided for $300 to $400 million to cover the operating deficits.
This negative trend is continuing. Revenues are expected to be below projections by at least $50 million. Liability claims for the current year have already exceeded the budgeted amounts and will most likely be $100 million in the red, again thanks to Mike Feuer. We can also expect significant over expenditures, especially as it relates to Fire and Police overtime.
This raises the question of how the City will pay for the upcoming shortfall of more than $150 million when the Reserve Fund is below its minimum. And what if there is a real emergency, or if there are lower revenues if the economy slows, or if additional funds are required for the homeless.
The City Council and the Mayor should follow the advice of the City Controller.
“Given the gravity of the situation, we reiterate our call for a multi-year, strategic approach to fiscal sustainability. We have consistently proposed reforms including more honest budgeting such as including anticipated costs in the budget like liability claims and compensation increases, a two-year budget; a comprehensive and realistic Capital Improvement Plan; performance-based budgeting that realistically accounts for what it costs to provide excellent services; expansion of participatory budgeting to engage our residents; and a systemic approach to reorganizing and streamlining the City’s operations to work better and cost less.”
A final thought. The fiscally irresponsible Mayor and members of the City Council want us to approve Measure A, the $1.1 billion, half cent permanent increase in our sales tax to finance the Homeless Industrial Complex’s inefficient operations that have been criticized by Federal District Court David Carter who has ordered a consultant’s report because he did not believe City, County, and LAHSA officials.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. He can be reached at: [email protected].)
