When the Chief Administrative Officer (CAO) for the City of Los Angeles begins a 50-page report on budget options with an introduction titled “A cautionary Tale: The City of Stockton, California,” it is clear that a serious fiscal challenge faces the second largest city in the nation. On Feb. 28, 2012, the Stockton City Council adopted a resolution to pursue a state mandated process in an attempt to prevent insolvency and bankruptcy.
According to the CAO report, “Stockton’s story provides a cautionary tale for the City of Los Angeles and other cities struggling to remain solvent. Getting to the doorstep of bankruptcy did not happen overnight. Some of the factors were external — such as the Great Recession and the anemic recovery. However, too many factors were self-inflicted — such as unsustainable labor contracts, reliance on one-time solutions, failure to prioritize services or create new revenues. Perhaps most detrimental to Stockton’s position was a failure by the City to plan and establish a roadmap to fiscal sustainability: a plan to restore City government finances for the long term while continuing to provide services City residents depend on.”
In the report released last Friday, CAO Miguel Santana projected the City’s budget deficit for the next four years to be $222 million, $342 million, $427 million and $373 million respectively. He warned of major cuts in basic city services and indicated that the City of Los Angeles must adopt five guiding principles in order to achieve long-term financial health:
Pursue ongoing solutions instead of one-time fixes
Focus on core services by prioritizing and implementing efficiencies
Pursue alternative service delivery models that reduce the costs of providing quality services
Maintain a sustainable workforce through a fair and equitable compensation system, managed healthcare costs, and controlled pension obligations
Raise new revenues through support from voters and efforts that grow the economy
As an example of short-term fixes utilized in the past, the CAO noted that “vacant positions were targeted for elimination to achieve the highest savings possible with the least layoff impact. The end result has been short-term budgets with long-term price tags.” He also observed that “the elimination of positions and programs have not always been based on a strategic plan that takes into consideration the needs of departments and whether the impacted services are core services of the City.”
The report stated that “while this form of crisis management offers immediate budgetary relief, it also creates an environment with little to no planning for the City’s future, limited investment in capital improvements, and an avoidance of answering the central question of what services the City should no longer provide.”
Miguel Santana provided a straightforward warning about the serious fiscal challenges facing the City of Los Angeles and the negative impact of continuing to pursue short-term solutions. The Los Angeles Area Chamber of Commerce agrees. It is time to start using long-term math rather than short-term politics to solve our city’s fiscal crisis. Join us for a discussion with CAO Miguel Santana at the Chamber’s Government & Fiscal Affairs Council on Tuesday, April 17, 11:45 a.m.-1:30 p.m. at the Chamber.
Gary Toebben is the President & CEO of the Los Angeles Area Chamber of Commerce