L.A. faces three more years of deficits, budget official says

Los Angeles faces budget deficits through 2018 even if elected officials keep a lid on spending and secure new concessions from the workforce, the top financial analyst at City Hall warned Thursday.

In a memo to the City Council, City Administrative Officer Miguel Santana said lawmakers won’t have the money to rebuild services cut during the recession until the 2018-19 fiscal year, unless new tax revenue is found or other programs are cut. That year, the city is expected to experience a $20.9-million surplus, he said.

That situation could limit Mayor Eric Garcetti’s ability to expand core services during his four-year term. Garcetti has promised to take a “back to basics” approach to city government, proposing a budget with modest hikes in service — additional library hours, more code enforcement inspectors and an expansion of road repairs from 2,200 lane miles to 2,400.

Deputy Mayor Rick Cole said Garcetti is working on ways to generate savings for the city that offset Santana’s projections in future years. The mayor is focusing on limiting workers’ compensation costs, improving the city’s purchasing process and increasing productivity through technology, he said.

“All of these fundamental reforms translate into improved and expanded services,” Cole said.

Santana’s memo also warned that Garcetti has not allocated the money needed for road repair expansion or enhanced ambulance service outlined in the budget he sent to the City Council. Cole said the mayor is looking to accomplish the added road repairs in part by being more efficient and scaling back overtime hours.

At the Fire Department, Garcetti aims to keep ambulances in the field by “deploying other resources and sources of funding,” Cole said.

Santana released his budget memo three days after Garcetti proposed his administration’s first spending plan, which is designed to eliminate a $242-million shortfall for the fiscal year that begins July 1. The council must decide whether to approve or rework Garcetti’s 2014-2015 financial plan next month.

Even after a budget is passed erasing next year’s revenue shortfall, more deficits will follow due to rising employee costs, Santana’s memo said.

Santana projected a $165.2-million deficit in 2015-16; a $186.8-million deficit in 2016-17; and a $73.9-million deficit in 2017-18. Each of those figures assumes that the council will approve Garcetti’s gradual reduction in the top business tax rate over the next four years.

Garcetti has argued that the tax reductions would make the city more attractive to businesses. His strategy is expected to remove $45 million in yearly business tax revenue from the budget by 2018.

Thursday’s memo offered messages that Santana has repeated in recent months. He called for no cost-of-living increases for the city’s workers and pushed for employees to pay 10% of their health insurance premiums. Even with a stronger economy, the salary, benefits and pension costs are outstripping tax revenues, he said.

Santana also issued a warning about Police Department funding, saying Garcetti’s budget does not provide money needed to deal the city’s growing “bank” of unpaid officer overtime.

Since the recession, city leaders have expanded the practice of delaying payment of police overtime years into the future. That strategy helped balance budgets in lean years but has left the Los Angeles Police Department with $112 million in unpaid employee hours. When the city’s salary agreement with rank-and-file officers expires this summer, the number of overtime hours that can go uncompensated in the short term will drop precipitously, Santana said.

david.zahniser@latimes.com