New Labor Agreement Projects to Widen Structural Deficit in Los Angeles
In August, the Los Angeles Times awarded Mayor Eric Garcetti a C for his performance during his first two years in office. While Garcetti received a B+ on his Vision, his overall ranking was dinged by a C- on Leadership and D on Political Courage.
Unfortunately for all Angelenos, the “smooth on the podium” Garcetti has not shown leadership or political courage when addressing our cash strapped City’s budget, its lunar cratered streets, its massive $15 billion in unfunded pension liability, and its antiquated management information systems.
One of the major financial goals of the City over the past decade has been to eliminate its Structural Deficit, where the growth in expenditures (primarily personnel costs – salaries, benefits, and pension contributions) exceeds the increase in tax revenues. And of course, Garcetti pledged to eliminate the Structural Deficit as part of his Back to Basics program where the City would “live within its financial means.”
But the political rhetoric is not consistent with reality as the City is now projecting a cumulative four year deficit in the range of $300 million, in large part because of a new labor agreement with the City’s civilian unions. This deal with the campaign funding management of the civilian unions turned a projected surplus of $68 million in 2020 into a deficit of $100 million, a negative swing of $168 million.
This $300 million cumulative deficit does not include any money for the City’s ambitious homeless initiative, the systematic repair of our lunar cratered streets, the proper funding its pension plans and management information systems, the “goal” of hiring of 5,000 new employees, or any new labor contracts for the City’s 32,000 employees.
Mayor Eric Garcetti pledged to eliminate LA’s structural deficit, but instead seems to be increasing it.
However, these deficits are very difficult to comprehend as projected revenues over Garcetti’s first eight years (July 1, 2013 to June 30, 2021) in office are anticipated to increase by 35%, or $1.6 billion. This shows that our City has a spending addiction, a problem that the mayor has refused to address.
Garcetti’s lack of leadership and political courage was evident by the fact that he was missing in action when the LA 2020 Commission recommended two finance related reforms. These reforms included the adoption of a three year budgeting cycle and the establishment of an Office of Transparency and Accountability to oversee our city’s precarious finances.
The LA 2020 Commission also suggested the formation of a Commission on Retirement Security to review, analyze, and make recommendations to stabilize our City’s seriously underfunded pension plans. As it is, the financial demands of the City’s two pension plans threaten to devour our City’s future and burden the next two generations of Angelenos with tens of billions of obligations. But where was our Back to Basics mayor?
The Mayor has also failed to develop a comprehensive operational and financial plan to repair and maintain our streets, some of the worst in the nation. At the same time, the City receives a kickback of over $200 million a year from the Metropolitan Transportation Authority to help maintain our streets and transportation systems. Instead, our mayor is crowing about fixing 2,400 miles of streets a year. But this pothole filling strategy is just a band aid that does not address our thousands of miles failed streets and neglected alleys.
Garcetti tell us that he wants LA to be the best run big City in America. But this is not in the cards unless the City is willing to devote the significant resources to update City Hall’s antiquated management information systems with new enterprise software systems that are necessary to run complex organizations in this ever changing world.
Mayor Garcetti has been blessed by an improving economy that has resulted in a huge increase in revenues. But he has squandered this opportunity to stabilize the City’s finances by failing to address the Structural Deficit, our failing infrastructure, our seriously underfunded pension plans, and our antiquated management information systems.
Mayor Garcetti has failed us and as a result, he has flunked Budget and Finance and deserves the failing grade of D.
About the Author: Jack Humphreville is a LA Watchdog writer for CityWatch, President of the DWP Advocacy Committee, Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and Publisher of the Recycler