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Threats this week by Los Angeles’ powerful municipal utility to
withhold $73 million from the treasury helped reveal a city that has
become increasingly dependent on indirect and onetime sources of
revenue to pay its bills.
Combined with the worst economic decline since the Depression,
those dwindling sources of cash have forced city officials to confront
a problem they have long tried to ignore — a steady growth of the city
payroll for the last decade.
The city’s core 35,000-member workforce increased by at least 3,000
between 2000 and 2009. During the same time, Los Angeles’ yearly
pension contributions more than tripled to $723 million, fueled by
investment losses but also by the larger payroll.
When the effects of the failing economy surfaced in late 2007, Mayor
Antonio Villaraigosa and the City Council approved significant raises
for union workers and pressed ahead with a police force expansion even
as they talked openly of a need for cutbacks and threatened layoffs.
"It’s a head-scratcher," said Jack Kyser, a Los Angeles County Economic
Development Corp. economist. "If you know that tough times are coming,
you should be ultra-cautious. You’ve had ongoing warnings about the
magnitude of the downturn and they haven’t been listening."
Now, the city’s $4.4-billion general fund — which pays for police,
libraries, parks and other city services — has a $212-million budget
deficit that could grow to $1 billion in four years without drastic
cuts. Publicly, city officials have blamed the steep drop in tax
revenue, but concede that the payroll increases have played a major
role as well.
–Phil Willon