City’s Budget Gap to Affect Services

Los Angeles is facing a $250-million shortfall in next year’s budget, city officials announced Wednesday as they moved to expand a freeze on hiring workers and warned that some services may soon be curtailed.

A dramatic drop in projected city revenue--the result of a drop-off in tourism, among other things--and a sharp increase in expected costs for workers’ compensation, police reform and other programs means lawmakers must begin wrestling with how to pare back the city’s $3.6-billion operation.

The budget problem may hobble Mayor James K. Hahn’s efforts to address some of his political priorities, notably his campaign to quell separatist sentiments in the San Fernando Valley and other parts of the city, in part by improving city services.

In dollar terms, the shortfall estimates released Wednesday represent a budget gap even larger than the one that confronted Los Angeles in the recession of the early 1990s, when officials raised fees, laid off workers and slashed money from departments.

“I don’t know that there’s any way to minimize it,” Hahn said in an interview. “Any way you characterize it, it’s as bad as any budget problem I’ve seen in my 20 years in office.

“We will be able to keep the city government functioning, but maybe not at the same level and the same way in every department,” the mayor added. “We’re going to try to cut to our core mission.”

In a memo distributed Wednesday, the mayor asked department heads to give him proposals for consolidating or suspending all but their highest-priority programs. In addition, Hahn expanded a hiring freeze he imposed in October to include civilians in the police and fire departments and temporary employees.

Police officers, firefighters and sanitation workers are the only ones exempted from the freeze.

A dismayed councilman said the severity of the shortfall means every city service must be reexamined.

“I can’t single out any one service that’s going to be cut,” said Councilman Nick Pacheco, chairman of the Budget Committee. “Everything but major public safety and public health [programs] is open for discussion.”

Pacheco said residents may see the cuts in reduced library hours, longer lines for permits or delays in public works projects.

“We’re moving aggressively to save people’s jobs,” Pacheco said. But he added, “$250 million is a very serious number.”

Pacheco and Councilman Dennis Zine have proposed a stricter version of the hiring freeze, one that could be changed only by further council action. The City Council will consider that motion next week.

Hahn would not specify what services are being considered for cutbacks, saying he wants to wait to hear from his department heads.

“Obviously, we need to provide public safety, to keep fire, police and paramedic services,” Hahn said. “What we’re hoping to do is find cost savings in other places.”

Julie Butcher, general manager of the city employees union, said city workers will try their best to do more with less.

“We’re going to do everything we can to make sure folks get services they deserve and are paying for,” she said.

But she added that the hiring freeze will hamstring efforts to fix more potholes, trim more trees and improve other basic services.

“The biggest place we need people is in the parks, where we have 150 vacancies for gardeners,” Butcher said. “And unfortunately, you see it when you look at the parks. We can’t keep up with mowing the lawns, keeping the bathrooms clean.”

Department heads, who must give the mayor their reduction proposals by Monday, tried to remain optimistic even as they looked for services to trim.

“We’ll take a look to see what cuts hurt the public the least,” said Susan Kent, who heads the city’s $96-million library system. “I would expect both the mayor and the City Council will have to struggle with these cuts, as we all will.”

The anticipated shortfall in next year’s budget comes even as city officials are struggling with a gap in the current year’s spending plan. The fiscal year ends June 30, and officials are already dipping into the city’s surplus.

“We get through this year by the skin of our teeth, but I think we start off next year with nothing in our reserves,” the mayor said. “What we’re faced with is not saving money fast enough.”

Because of that, the city does not have a cushion to help absorb the projected $250-million gap in next year’s budget.

The shortfall is a result of a $150-million projected drop in tax revenue, along with a $100-million increase in the cost of workers’ compensation, health care and implementing the federal consent decree for reform of the Los Angeles Police Department, said Deputy Mayor Matt Middlebrook.

Hahn added that a large share of the increased costs come from multiyear contracts with employees with built-in pay increases.

The shortfall projected for next year’s budget does not include an estimate of the city’s increased security costs.

The tab for police overtime and other security measures taken since the September terrorist attacks is expected to be at least $45 million by June.

One option that city officials do not have is running a deficit. Unlike the federal government, Los Angeles is required to balance its budget every year.

“Last night, the president said in the State of the Union, ‘Well, there may be a deficit,’” Hahn said. “I can’t be that cavalier as a mayor.”