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LA WATCHDOG - In January, Councilwoman Katy Yaroslavsky will become the Chair of the Budget and Finance Committee. This is the most influential council committee, signifying her rise to power after only two years on the City Council. But she is inheriting a fiscal and operational mess because the City is “broke.”
The projected shortfall for the upcoming fiscal year that begins on July 1st is estimated to be in the range of $350 million. The Reserve Fund will be dangerously close to the Emergency Reserve, even after raiding the Budget Stabilization Fund for over $200 million. And balancing the budget will require significant cuts in services and may even require furloughs and layoffs.
Her first order of business is to update the Four-Year General Fund Budget Outlook. This will give her a better understanding of the fiscal cliff that she needs to overcome.
According to City of Los Angeles Information Statement dated July 1, 2014 that is supplied to investors and filed with the Securities and Exchange Commission, the City is anticipating a surplus of $160 million for the fiscal 2028-29. And over the four-year period, the cumulative shortfall is $175 million. But this is misleading because it is not true and complete in all material respects. Quite frankly, this borders on fraud.
This forecast needs to be updated to reflect the increases in personnel expense over the next four years, recognizing that this category represents about 70-80% of General Fund expenditures.
By assuming modest increases in future labor agreements with the City’s public sector unions, the surplus of $160 million in 2028-29 turns into a shortfall of around $300 million. This also assumes questionable increases in revenues over the four-year period.
Furthermore, the City is projecting a cumulative shortfall of $160 million over the next four years. But adjusting for modest increases in personnel costs, the shortfall is over $1 billion.
Updating the forecast does not involve any heavy lifting, just tweaking a few assumptions in the computer model. On the other hand, the campaign funding bosses of public sector unions may not appreciate this transparency since the current system works to their advantage. But it is the time for great transparency that will allow for more realistic budgets.
Katy, do you support transparency that is in the best interests of Angelenos? Or do you support the continuing fraud that is not in the best interests of Angelenos?
(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].)
