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Budget chief urges L.A. to cut deficit, not expand services

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Los Angeles' top budget official Monday advised city leaders to resist the temptation to expand services, saying they should work instead toward eliminating a recurring deficit by 2018.

In a 37-page report, City Administrative Officer Miguel Santana said a rebounding economy and greater stability in the city's finances have created new pressure to add or expand local government. He recommended that council members focus on initiatives to stabilize the budget, such as reducing entry-level city salaries and securing new healthcare concessions from the workforce.

No raises should be provided for three years, Santana said.

"In summary, while our economy is recovering, we are not in a position to restore old services or add new services," Santana wrote. "Instead, we need to stay the course."

Santana's report comes in a year when city leaders must negotiate new multiyear contracts with an array of public employee unions. Service Employees International Union Local 721, one of the groups currently in talks, issued a statement saying across-the-board cuts to middle-class city workers would "only make things worse by taking more from our communities."

"Cuts impact small businesses, homeowners and our local economy," said trash truck driver Andy Morales, who serves on the union's executive board. "That's exactly the opposite direction L.A. should be going in," he said.

Monday's report arrived a month before Mayor Eric Garcetti is to release his first yearly budget proposal, a document that will be the subject of multiple hearings by the City Council.

Garcetti must come up with a strategy for eliminating a shortfall estimated at $242 million. His spokesman, Yusef Robb, said the mayor's team will go through the report and "incorporate it into our thinking."

"The mayor certainly agrees with the need for pension, healthcare and salary reforms, including new contracts that have salary freezes and increased healthcare contributions," Robb said.

On some levels, Santana's report serves as a response to a document released in January by the L.A. 2020 Commission, which painted a dire picture of the city's economy and government services. That panel pointed to the city's growing pension obligations and warned that the city is facing "continued economic decline."

Santana said the city had made major strides in addressing its economic woes, reducing the size of the workforce by 14%, or by 4,750 employees, since 2007. Still, he pushed for additional measures to bolster the city's economic health, including:

•Increasing the emergency reserve.

•Conducting a new study on the size of the workforce at the Los Angeles Police Department.

•Preparing a long-term plan for improving city technology.

•Asking voters to support a new tax to pay for street and sidewalk repairs.

Santana described a tax hike as "the only way" that reconstruction of pockmarked streets will get done. He waded into the debate over employee benefits, saying workers should pay at least 10% of the cost of their individual healthcare premiums.

"Simply put, the structural deficit makes it impossible to adequately invest in the city services demanded by Angelenos and sought by the mayor and City Council," he wrote.

Santana did offer one potentially positive set of numbers. He predicted that the city's rapidly growing pension obligations will peak in two years. According to his projections, payments to the pension system will grow from $942 million this year to $1.125 billion in 2016, then begin to taper off.

david.zahniser@latimes.com

Times staff writer Emily Alpert Reyes contributed to this report.

Copyright © 2014, Los Angeles Times
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