BUDGET/20inches/1stjc/mark2nd

JOE BEL BRUNO Staff Reporter

Though the next city budget won’t be unveiled until April, concern already is building at Los Angeles City Hall over the 1997-98 spending plan.

The $2.5 billion general fund that finances police, street cleaning and other services will likely face a $30 million to $100 million deficit, said Chris O’Donnell, budget director for Mayor Richard Riordan.

That’s on top of an existing budget deficit estimated at $53 million by the city’s chief legislative analyst.

And as a result of voter approval of Proposition 218 last November, the city’s ability to raise fees and other new revenue is sharply limited, officials said.

In years past, the city has transferred funds from other sources, including the Department of Water and Power and the airports, to provide extra revenue.

But utility deregulation means that the DWP will have to cut rates to be competitive thus limiting that revenue source while the Federal Aviation Adminstration is moving to block additional transfers of airport funds.

“There have been many years where we have counted on the DWP transfer to pay for city services, and that’s coming to an end,” said Councilman Michael Feuer. “The question is where do we make the cuts? The city has been trimming and cutting for years, and there isn’t that much left.”

The concerns of Feuer and others are likely to create additional tensions between the mayor and the council when Riordan releases his proposed budget by April 20, analysts say.

“The first year Riordan gave the council a budget, they went along with it,” said Xandra Kayden, a professor of public policy at UCLA. “The second year they were skeptical. And, this year, they are really going to be questioning.”

The toughest assignment for Riordan will be to continue his buildup of the Los Angeles Police Department.

The LAPD now takes up $1.2 billion of the city’s $2.5 billion general fund budget. Police Chief Willie Williams and the Police Commission want that budget increased by $250 million.

The challenge for Riordan will be to find funds to continue the buildup without raising taxes.

O’Donnell said the solution will be in cutting expenditures, but he said he is not prepared to explain how.

“I wouldn’t say that we’re anywhere close to where we want to be in reducing the city’s expenditure base,” O’Donnell said.

“The deficit we have now is manageable, and there are still areas of the city that can be cut. There are opportunities there,” he said.

O’Donnell said his office is looking closely at the “internal and administrative bureaucracy” of the city. Spared from such cuts would be departments like the city’s library system, street sweeping and parks and recreation.

“There are no plans for layoffs, but certainly we could save money through our hiring freeze and through attrition,” he said.

But the expected loss of DWP revenue will hurt.

Long regarded as a cash-cow, the DWP has provided the general fund upwards of $100 million each year.

But in order to prepare for upcoming competition in a deregulated power market, the DWP has told the city it will reduce the transfer this year and eliminate it altogether by 1999.

In addition, the city won’t be able to take advantage of a $31 million transfer from the Department of Airports to cover past city investments at Los Angeles International Airport. The FAA had previously ordered Riordan to return the money to which the mayor pledged to appeal the order.

Feuer recommends that the council and Riordan begin exploring issues now, instead of waiting months to begin the budget process.

But the city’s revenue options are severely limited by Proposition 218. The measure requires voter approval for fees and fee increases making it difficult for the city to raise such things as business license fees, as it has in years past.

Fees for sewer service and trash collection are specifically exempted by 218, but in past years both the mayor and the council have resisted imposing a trash collection fee and any discussion of one is not likely to surface until after the April 8 municipal election.

Riordan’s primary challenger for reelection, state Sen. Tom Hayden, D-Los Angeles, contends that the city is heading for bankruptcy and that Riordan is papering over the problem.

“What Riordan is doing isn’t conservative economics, not supply-side economics, not liberal economics it’s typical budgeteering where you put the image of good fiscal management ahead of reality,” he said. “That would be fine if there was a minor trickle of red, but you’re talking about bleeding and hemorrhaging.”

Hayden had no detailed proposals to cut spending or raise revenues, but called for an analysis of spending on police and other programs.

“We need to have a frank discussion on this, not keep it hidden and try and paint a rosy picture of fiscal health,” he said.

O’Donnell said the mayor realizes the city has a structural deficit problem. He said the city has been downsizing during the past three years in an attempt to offset such problems, and is prepared to cut more fat.

But others say there is little fat to cut these days.

“They are going to have to get more creative, rather than just bumping here and grinding there,” said Richard Lichtenstein, a political analyst with Marathon Communications.