No Bones for LA’s City Employees … the Cupboard is Bare!

LA WATCHDOG--Mayor Eric Garcetti and the four other members of the Executive Employee Relations Committee (Council members Wesson, Englander, Krekorian, and Koretz) are negotiating new contracts with the Coalition of City Unions and the Police Protective League.  The current agreements expire on June 30, 2018. 

The new contracts that would kick in on July 1, 2018 are expected to cost the City between $50 and $100 million in the first year.  

But how do Mayor Garcetti and Budget and Finance Chair Krekorian propose to pay for these raises given that the City is facing a budget deficit of at least $200 million next year?  This shortfall consists of the current budget gap of $100 million outlined in the most recent Four Year Budget Outlook plus another $100 million (if not considerably more) in higher pension contributions caused by the recent and proposed lowering of the investment rate assumptions for the City’s two pension plans, the Fire and Police Pension Plans and the Los Angeles City Employees Retirement System.  

Including increases in personnel costs, the City is looking at a $250 to $300 million tsunami of red ink.  And this does not take into account the continuing neglect of our streets and the rest of our deteriorating infrastructure and the underfunding of the City’s two pension plans that are $20 billion underwater according to Moody’s Investors Service, the national bond rating agency.  

The first step is to have an open, transparent, and frank discussion with Angelenos about how the City intends to eliminate its Structural Deficit (where expenditures grow more than revenues), repair and maintain its streets and infrastructure, and fund its pension plans.  This would involve developing a comprehensive, long term operating and financial plan with the help of independent parties, including the Neighborhood Council Budget Advocates who were offered and welcome the opportunity to work with the Mayor’s office in developing the budget beginning in September.  

What is unacceptable is another deal where the public is bushwhacked as was the case in June when the City Council approved the contract between the Department and Water and Power and the IBEW within eight days after it was presented to the Ratepayers and the public. Needless to say, the Ratepayers had no input into this contract that included an upfront raise of 4½% in the first year.    

The City also needs to disclose its goals and bargaining position in advance. 

While the City will support business as usual, this is unacceptable given the City’s Structural Deficit, its poorly managed and inefficient work force, and its overly restrictive work rules, all of which have contributed to the “service insolvency” that is plaguing our City.   In other words, the City is able to pay its union employees and fund their benefits and pension plans, but is forced to curtail services to its citizens because the cupboard is bare.    

The City should pursue a program where it benchmarks the efficiency of its operations.  At the same time, it should have the flexibility to outsource work to independent contractors if they are more efficient based on a rational analysis that is not tilted towards the use of the City’s unionized employees.  The City must also eliminate overly restrictive work rules that result in inefficient and costly operations. 

The City should also pursue a policy similar to the UC system that allows new and existing employees to opt into 401(k)-style defined contribution pension plans.  

As it is, the City has not said how it intends to balance the budget and fund employee raises.  More than likely, the City will siphon even more funds from the special revenue departments (Sanitation, Sewer, and Solid Waste), seek higher reimbursements from the three proprietary departments (DWP, LAX, and the Port), and divert new revenues associated with the gas tax revenue from the State, the local return revenues from Metro, the proceeds from the homeless bonds and the linkage fees, and the controversial Exclusive Trash Franchise fees.    

This budget gimmickry will not cover the projected deficit, and as a result, we will see additional cuts in services and the possible raid of the Reserve and Budget Stabilization Funds which have a combined balance of slightly less than $400 million. 

Since Garcetti became Mayor, projected revenues have increased by almost $1.4 billion (31%) through June 30, 2019, but we still have a Structural Deficit with a river of red ink for many years to come.  

Garcetti and Krekorian, we need facts and figures, not more hot air, before City employees are granted another budget busting raise. 

 (Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee and is the Budget and DWP representative for the Greater Wilshire Neighborhood Council.  He is a Neighborhood Council Budget Advocate.  He can be reached at: