Layoffs Loom in L.A. City, County

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Layoffs Loom in L.A. City, County

By HOWARD FINE

Staff Reporter

State and local financial woes will hit home this week as county and city officials release budgets that must close deficits in the hundreds of millions of dollars for the next fiscal year.

Layoffs and cuts across a broad spectrum of local government services are expected everything from reduced hours at local libraries and reductions in funding for law enforcement, to the closure of probation camps and slashes in child welfare support services.

“Everything will get hit,” Los Angeles County Supervisor Zev Yaroslavsky said last week. “Things that people until now have taken for granted are going to be on the table for cuts.”

Just how much will be sliced depends in part on whether local government officials can find a way to change Gov. Arnold Schwarzenegger’s plan to shift $1.3 billion in local property tax revenues to the state’s general fund. As of late last week, negotiations were continuing in advance of a signature submission deadline to place a measure on November’s ballot that would put the property tax shift to voters.

If the diversion stands, it would add $290 million to a county budget deficit already pegged at between $100 million and $150 million. The city of L.A. stands to lose $135 million, bringing its total budget deficit to between $225 million and $300 million.

These numbers are made even more daunting because they come after two years of austerity, certain to be followed by at least one more year of tough budget constraints.

Stamina needed

All the while, pent-up demand for services is increasing, as the region’s population swells and new jobs remain relatively scarce.

“We’re not going to be out of this budget crisis for at least another year or two,” said L.A. City Councilman Bernard Parks, who chairs the council’s budget committee. “This means we have to have the stamina to stay the course and not take actions that would make next year’s budget deficit any worse.”

At the county level, spokeswoman Judy Hammond said that a significant number of layoffs were likely to be contained in the county budget, which is set to be released Monday. In past years, a significant portion of layoffs centered on the elimination of vacant positions, so it was unclear just how many people lost their jobs.

As of last week, no layoffs were expected at the city level, although there was talk about reopening some union contracts to generate more savings.

The property tax diversion also could offset the only piece of really good news in this year’s budgets: property tax revenues are expected to show hefty increases as home prices have hit month after month of record highs. While much of these increases were already factored into previous budget projections, the prolonged real estate boom is likely to result in city and county revenues over and above what had been forecast.

At the city level, revenues are running slightly ahead of forecast “up less than 5 percent,” according to Doane Liu, deputy mayor for operations. On the plus side are property and sales tax revenues and business tax receipts; on the down side are utility taxes and the volatile documentary transfer tax on real estate transactions.

In addition, Liu said city costs have gone up more than $200 million. Most of these costs are related to city employees, including an increase of $135 million in pension obligations; $50 million in cost-of-living adjustments, or COLAs; and $25 million each in workers’ compensation and health insurance costs.

Thanks to a hiring freeze and other belt-tightening measures this past year, the city tucked away $150 million to $160 million in reserves, much of which can be used in the upcoming fiscal year. That could reduce the budget deficit to a more manageable $75 million to $150 million.

However, Parks said he foresees a possible showdown over how that reserve money is spent.

“There’s going to be a major debate over whether those reserves should be used to fund one-time expenditures like upgrading a library or cover ongoing program costs,” he said.

There could even be a battle between L.A. Mayor James Hahn and the City Council similar to one last year, Parks said. This time, though, instead of whether to add police officers, the debate could center on what cuts need to be made in the budget to fund replacement hires to keep police staffing at current levels.

City budget cuts

Liu would not comment on specific cuts. He said this year the mayor has taken a different approach to budgeting, in which funding for all services starts at zero and then gets apportioned according to what is deemed most important.

“We went to neighborhood councils and other groups and asked them what their priorities were,” Liu said. “At the top of the list was public safety, followed by street services.”

In keeping with this priority-based budgeting approach, Hahn last week announced plans to double the number of miles of road and sidewalk surface improvements.

Hahn also announced plans to add $9.5 million to the affordable housing trust fund, bringing the total up to the long-targeted $100 million.

Yet to be determined is where the cuts are coming to offset these increases.

Parks, who has taken the first step toward challenging Hahn in next year’s mayor’s race, said he isn’t sure this priority-based approach will hold up in council.

“In the hearings we have held on budgeting, what we’ve found is people favor everyone taking a little cut rather than eliminating entire programs,” Parks said. “Just look at the uproar last month when word got out that Hahn planned to eliminate the Cultural Affairs Department.”

Ultimately, Hahn was forced to retreat from that plan. He then set up a citizen advisory panel to look for alternative sources of funding for cultural services, including funding from the private sector.

At the county level, Yaroslavsky said the cuts are likely to focus in two areas: general fund services such as libraries, parks and law enforcement; and health and human services such as child welfare support, probation camps, health care and foster care.

Yaroslavsky said he did not expect most of those cuts to show up in this week’s budget. “This is a placeholder budget; we’re waiting to see what happens in Sacramento,” he said. “The real decisions will have to be made once the state budget is passed.”

While employee “givebacks” may be on the table at City Hall, Yaroslavsky said the county budget is unlikely to include any further cuts in employee salaries and benefits.

“We reached what I consider a good agreement with our unions last year in which there is no pay increase in the first year (the upcoming fiscal year) and only 2.5 percent in each of the next two years,” he said. “There’s also an unprecedented agreement that if there is a fiscal emergency, those increases can be put on hold.”

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