L.A.’s budget challenge

In the weeks leading up to last Tuesday’s election, voters in Los Angeles heard conflicting messages from city officials and candidates about Proposition A, a proposed half-cent increase in the sales tax. Mayor Antonio Villaraigosa, City Council President Herb Wesson and Police Chief Charlie Beck all argued that the city desperately needed the tax hike to avoid damaging cuts in public safety and other services. The candidates vying to take Villaraigosa’s place in City Hall, however, insisted that the increase was the wrong way to solve the city’s fiscal problems. That may have had more to do with politics than policy, but their view prevailed: Voters rejected the tax hike by a margin of 55% to 45%.

Then, the moment the election was over, some of the main advocates of Proposition A started walking back their dire warnings. On Thursday, officials revealed that the projected deficit for the coming fiscal year had shrunk from $216 million to $100 million or less, thanks to brighter revenue forecasts and lower anticipated pension costs. Though City Administrative Officer Miguel Santana said Friday that the deficit may still be more than $150 million, Villaraigosa said the improving economy should rule out any “draconian cuts.”

Voters can’t be blamed for feeling conned, especially given that the mayor had received the rosier forecasts the week before the election but failed to tell the public. Nevertheless, the reality is that the city isn’t out of the fiscal woods — not even close. Even if the more optimistic forecasts come true, the city will still face a sizable deficit in the coming year and larger ones in the years after that. That’s why Councilman Eric Garcetti and Controller Wendy Greuel, who will face each other in a May 21 runoff to replace Villaraigosa, should be more forthcoming and realistic with voters in the weeks ahead about how they plan to put Los Angeles on a sound fiscal footing for the long term.

PHOTOS: L.A. candidates’ misleading campaign fliers

Villaraigosa and the current council, Garcetti included, must leave the new mayor a balanced budget for the fiscal year that starts July 1. But with Proposition A defeated, they’re likely to rely more on stopgap measures and leave major changes to the incoming administration.

And even if the budget is legitimately balanced, that won’t be enough. Some core city services have suffered notably in recent years — witness the widespread complaints about how long it takes to get a street or sidewalk repaired, trees trimmed or a permit issued for a new business. The next mayor will have to find the resources to meet those needs as well.

Part of the problem for the city is the lingering effects of the housing market collapse and subsequent recession, which slashed property values, sent unemployment through the roof and dampened consumer spending. Another part, though, is the steadily mounting cost of pensions, health benefits and salaries. Villaraigosa and the council — including Garcetti and Greuel — agreed to contracts in 2007 that raised most city workers’ pay by more than 25% over five years.

PHOTOS: A rogues’ gallery of L.A. mayors

Since then, Villaraigosa and the council have made ends meet by laying off employees, transferring hundreds more to jobs paid for by special funds (for example, at the Department of Water and Power) and offering less generous pensions to new hires. They’ve also persuaded unionized city workers to start paying for the health benefits they’ll receive as retirees and to delay part of the pay hike they negotiated in 2007. But the unions have refused to accept lower raises, putting the city in the absurd position of having to boost salaries for 70% of the civilian workforce by 1.5% on July 1 and 5.5% on Jan. 1, 2014, even as it cuts $100 million to $200 million from its budget.

The failure of Proposition A gives city leaders more leverage to try to reopen the current contracts and reconsider those raises. The next mayor and new council also will be negotiating contracts for 2015 and beyond. Garcetti has said he’ll ask unionized workers, who pay nothing today for their current health coverage, to cover 10% of the cost. That would ameliorate the budget problems, but it wouldn’t solve them.

A crucial question for voters is which of the two candidates is most likely to get the right results in those talks. Both Garcetti and Greuel have been friends to organized labor, but the unions representing the vast majority of the city’s workers have lined up behind Greuel. Garcetti says that he won’t be beholden to unions but that Greuel will; Greuel counters that her relationship with labor gives her the credibility needed to extract concessions.

That debate should continue as the campaign goes forward. So too should the scrutiny of the candidates’ budget plans. Among other measures, Greuel touts the savings and efficiencies she identified in the audits she performed as controller, but those steps wouldn’t help as much as she suggests. Garcetti’s plan, meanwhile, counts mainly on a stronger economy and improved collections to help close the short-term budget gap, along with concessions by employees. But none of those is guaranteed to happen.

By rejecting Proposition A, voters gave the next mayor and new council members the chance to pursue their own fiscal solutions, rather than being handed a permanent increase in tax revenue. In a sense, they were rejecting the judgment of today’s leaders in favor of those who will take their place. Garcetti and Greuel should lay out a clear picture of how they would not just close the budget gap but generate the resources needed to restore vital city services. Then voters can decide whether their confidence was well founded.