Los Angeles' city budget shortfall may soar to $1 billion within two years, forcing it to cut services and trim jobs as the recession deepens, officials told the City Council on Wednesday.
Interim City Administrative Officer Ray Ciranna predicted the budget deficit - $430 million this year - will worsen as revenue declines in virtually all areas, including taxes on sales, hotel rooms and parking. The city also is likely to lose more than $70 million in state funding for law enforcement, education and transportation programs, officials said.
Another reason for the soaring deficit is the projected loss to the city's pension system from its investments in Wall Street. City revenue sources will have to fund an estimated $427million more for the pension system next year and $680 million the following year to offset the plunge in investment earnings.
As the recession deepened, city government made a 3 percent cut in December that reduced spending by $74 million, but Ciranna said an additional $35 million in cuts is needed.
He recommended changes in several areas, such as consolidating programs in the Recreation and Parks Department. In adopting the financial report, the council temporarily exempted the Los Angeles Fire Department from a proposal that requires the CAO to approve any new hiring. "As we look forward, I believe the city will be downsizing, and it's important for us to begin this year to minimize the number of layoffs we will need," Ciranna said.
Councilman Richard Alarcon, citing the work of firefighters during the recent Sayre Fire, said it is important to allow the LAFD to continue filling vacancies.
"I have serious trepidations any time we are reducing our public safety personnel," Alarcon said. "I am very concerned that we don't know how much we are saving when we do this."
Mayor Antonio Villaraigosa warned last month that city government is facing financial problems, and he said he hoped to reduce the work force by 4,800 to save an estimated $400 million. But Ciranna said the City Council needs to act now to reduce the need for layoffs. Chief Legislative Analyst Gerry Miller said the 4,800 workers equates to 35 percent of the city's work force apart from police and firefighters. "It's an issue we have to deal with right now," Miller said.
Ciranna said he foresees no chance for city government to be bailed out by any financial windfalls. "I've been telling people if they see a rabbit out of a hat to grab it," Ciranna said. Villaraigosa has said he will fight to prevent any layoffs in the Los Angeles Police Department. Councilman Bernard Parks, who chairs the Budget and Finance Committee, cautioned that there may be no choice but to reduce the LAPD along with other services.