Long Beach Plan to Close $90-Million Budget Gap OKd

Facing a financial crisis, the Long Beach City Council has approved a budget plan to eliminate a $90-million shortfall over the next three years.

But California’s fifth-largest city remains in financial peril unless deep cuts are made, the city auditor said.

“I am hopeful that we act on this [plan] as soon as we can,” city Auditor Gary Burroughs told the mayor and nine-member City Council on Tuesday night.

“I have some very serious concerns about our bond ratings, about our cash flow and our cash balances,” Burroughs said. “I think our problems could just be more serious than what we’ve represented them to be here.”

Although he could not bring himself to say bankruptcy, which he called “the B word,” Burroughs stressed the gravity of the situation, adding that the budget plan assumes several uncertainties: that pension costs not rise and that negotiations are successful with city employee unions to reduce benefits, a possibility labor has already vowed to fight.

The plan is not a budget but a guide by which future annual budget decisions will be made, and the City Council approved it with conditions that included exhausting all options before cutting city employee compensation.

Burroughs said a sizable amount of the proposed cuts are not scheduled until 2005 or 2006, and he urged the council to act even more aggressively on the 2004 fiscal budget.

He endorsed the budget plan compiled by Acting City Manager Gerald Miller and his staff, though Burroughs deemed it “overly optimistic.”

The unanimous City Council approval capped six months of civic soul-searching prompted last fall after then-City Manager Henry Taboada announced a $50-million shortfall for the 2003 budget that was balanced by drawing on the reserve fund or from unexpected income that came the city’s way.

Alarmed, the City Council fired Taboada, who said before departing that the City Council has final approval on all budgets and should not have been surprised given a 15-year city practice of spending millions more than earnings and balancing the budget with unreliable revenue.

Burroughs estimated that $85 million has been depleted from reserves in recent years to balance budgets.

Amid all the finger-pointing, longtime City Hall critics blamed the City Council for lax oversight and failing to get tough with city employees whose unions -- such as the Long Beach Police Officers Assn. -- endorse and financially support candidates in elections.

With input from town hall meetings and a citywide survey called “voice your choice” that 11,000 residents returned listing their city service priorities, Miller and his staff drew up a plan that called for $11 million to $12 million in work force reduction, and a $23.4-million reduction in workers’ compensation, benefits and work practices (overtime, pension and health-care costs).

A standing-room-only crowd of mostly unionized city employees packed council chambers Tuesday after picketing City Hall before the meeting.

When Long Beach Police Officers Assn. President Stephen E. James asked Police Department employees in the audience to stand if they would quit over compensation cuts, about 150 stood.

The public comment before the vote was charged but mostly civil.

The plan calls for across-the-board cutbacks of 9% or 10% in work force compensation. This prompted one city employee to call on council members -- who make about $25,000 a year and represent 52,000 residents per district -- to forgo their salaries and take $1 a year.

Initially, the work force cutback would be handled through retirement and attrition but may require layoffs, Burroughs said. What remains to be seen is whether agreements can be reached with the unions.

Financial consultant Len Wood warned the City Council last week that the city of 461,000 would become bankrupt if it failed to cut its ballooning pension and payroll costs, which are 70% of the city’s expenses.