L.A. plans to declare a fiscal emergency, cutting worker pay

L.A. is about to declare a fiscal emergency. That could mean pay cuts for city workers

Sept. 2, 2020 5 AM PT

Two months ago, the Los Angeles City Council hatched a plan for weathering its latest financial crisis: Give thousands of city employees up to $80,000 to retire, and hope the savings would be enough to avoid pay cuts for other city workers.

Now, with the budget outlook still grim, and interest in employee buyouts falling shy of initial hopes, the city’s elected leaders have decided to pursue both strategies: paying workers to leave their jobs, while reducing salaries 10% for many who remain.

The council is scheduled to vote Wednesday to give buyouts to an estimated 1,277 employees and clear the way for more than 15,000 workers to begin furloughs, or one unpaid day off every two weeks.

To carry out the furloughs, the council must approve a declaration of fiscal emergency establishing that the city has sustained a major hit to its sales taxes, hotel taxes and other revenue. That type of declaration is L.A.’s first since 2012, when the city was clawing its way out of the last recession.

The city’s negotiating committee, made up of Mayor Eric Garcetti and four council members, recommended the cost-cutting measures last week. Councilman Paul Krekorian, who sits on that panel, said the emergency declaration will allow the city to act immediately on “urgently necessary” reductions, including furloughs.

Councilman Bob Blumenfield is also leaning toward approving the cuts. Both furloughs and buyouts will be “terrible” for the city, he said, pushing out experienced workers and making it more difficult to provide services to the public.

“But we can’t spend money we don’t have,” he said. “We have to figure out how to maintain our city and our finances during these horrible, dark times.”

The furloughs, which are scheduled to go into effect Oct. 11, won’t apply to police officers, firefighters, nurses, sanitation workers, librarians or employees at the Department of Building and Safety, which processes permits for new construction projects. Even with those workers excluded, furloughs are expected to save more than $100 million between October and June.

Josh Geller, president of the Los Angeles City Attorneys Assn., said the city lacks the legal authority to unilaterally impose a reduction in pay and hours for his union’s roughly 500 members. Such changes in pay must be negotiated, he said.

“We’re in a closed contract that does not allow for furloughs,” said Geller, whose union sued the city over furloughs a decade ago and ultimately reached a settlement.

Bob Schoonover, president of Service Employees International Union Local 721, called the furloughs “illegal” under existing salary agreements and irresponsible in the middle of a pandemic. “The last thing L.A. city needs is more working families struggling to keep a roof over their heads or food on their table,” he said.

Garcetti spokesman Alex Comisar said the crisis created by COVID-19 has simultaneously increased the city’s costs and reduced the taxes needed to pay for public services. As a result, he said, the city is facing its worst year since the depths of the 2008 financial crisis.

“The mayor will continue working with labor to find alternative cost savings, but furloughs may be necessary to balance the budget given COVID-related revenue loss,” Comisar said.

Geller and Schoonover have argued that the city would see significant savings from buyouts and say they want to negotiate a better alternative. City budget analysts, on the other hand, contend that the buyout program has fallen well short of its initial promise.

When council members backed the buyout initiative in June, they had hoped that as many as 2,850 employees — roughly 8% of the workforce — would take part, producing around $56 million in savings in the program’s first year. Instead, only 1,277 workers applied, below the minimum number set by the council for moving forward.

Krekorian, who heads the council’s budget committee, said the city’s financial analysts now believe the buyouts will save just $13 million this fiscal year. He still favors the initiative, calling it “one small step of many” for cutting costs.

Meanwhile, critics have warned that the buyouts could pose additional financial risk, since they come with a delayed balloon payment.

Under the city’s plan, retiring workers would receive $10,000 this budget year to leave, followed by another, much larger payment — as much as $70,000 — in 2021-22.

If the city’s finances get worse, those payments could become a significant burden.