Wendy Greuel: The four steps to fix L.A.'s budget problems
- Details
- Category: City News
- Published on Saturday, 01 May 2010 17:07
- Written by Wendy Gruel
A common refrain at City Hall is that city government must act more like a business, spending taxpayer dollars more efficiently and effectively. I couldn't agree more. In fact, the 4 million Angelenos are essentially shareholders in city government and are entitled to know its financial condition and how it intends to manage its finances going forward.
As the City Council is beginning to debate the mayor's proposed budget, the messages coming from City Hall concerning the budget deficit the past few months have been confusing. It's been a roller-coaster ride, fluctuating from warnings about the city's inability to balance this year's budget, to the need for thousands of layoffs, to slightly more optimistic revenue projections, with some suggesting that the city is out of the woods.
As city controller, my job is to control the city's cash flow, pay the city's bills and to alert the council and mayor to any financial shortfalls. My message has been consistent throughout; the deficit is real, steps need to be taken to address it and, given our current course, our cash flow needs will not be able to be met without transferring funds from the reserve to the general fund.
In reality, this year's deficit has remained relatively constant, between $200-$220 million, and it will not be eliminated without substantially depleting the reserve fund. Borrowing from the reserve fund to pay the city's bills is not a fiscally sound or sustainable solution, and I urge the mayor and council to make the necessary structural changes to get the city back on strong financial footing. I believe there are four concrete steps that can be taken to ensure the city's long-term fiscal sustainability.
The first is getting back to basics. The city needs to identify which specific core functions it must provide to Angelenos; among these must be public safety, public works and economic development. Resources must then be shifted to meet the needs of those core services. Identifying these services should not be driven by what positions employees might be able to transfer into, but by a clear policy on the city's priorities.
The second step is budgeting for the long term, not just getting through one year at a time by the skin of our teeth. For years, budget deficits were papered over by the last-minute sale of a property or suddenly increasing our projected tax revenue.
We can't keep treating taxpayer funds like monopoly money. We need an honest accounting of where we are today and where we want to be in five years. To avoid having to make draconian midyear cuts, the council and mayor should use the most conservative revenue projections possible in creating next year's budget.
For instance, the mayor's proposed budget includes over $200 million in anticipated revenue through a public-private partnership for the city's parking garages, and the securitization of revenue from the city parking meters. While steps have been taken on the parking garages, we cannot rely solely on this potential influx of money to save us this coming year without a "Plan B" should these revenues not materialize.
The third step is ensuring that the city's reserve fund remains strong. The city's budget is similar to a household budget in that we have a checking account and a savings account - the general fund and the reserve fund. Bond rating agencies look at the strength of the reserve fund as a critical factor in determining the city's fiscal health. The city's own financial policy states that the reserve fund should be 5 percent of the general fund.
Finally, any honest deliberation of the city's budget - and our long-term fiscal sustainability - must address the city's looming pension obligations. If no changes are made, in the next five years nearly half of the city's general fund will go towards paying pensions. This is unsustainable. While we must maintain the promises that have been made to current and former employees, we must work together to make structural change. Doing nothing is simply not an option.
As we grapple with these unprecedented budget deficits, city leaders must remain levelheaded and thoughtful and avoid at all costs playing petty political games. It is going to take everyone - city leaders, labor, business, and 4 million Angelenos working together to get out of this crisis.
If we are guided by these principles, I believe that the city will join many Los Angeles businesses in surviving this current downturn and emerge with a brighter future ahead.