Federal Spending Cuts--L.A. Barely Aware of Them

Most people probably haven’t noticed yet, but things look a bit spiffier this summer along the 6,600 miles of streets in Los Angeles. City crews are trimming more overgrown trees, sweeping dusty gutters more often and fixing more cracks in the pavement.

These services, as with just about everything cities do these days, are paid for in some part out of the federal budget. And the checks from Washington have been larger during the Reagan years than the President’s record as a budget cutter would suggest.

Los Angeles, in fact--with about $262 million in federal aid this year, give or take a few million--has come through five years of the biggest federal spending cutbacks in history without making major changes in the way it does business and without suffering the withdrawal pains endured in other cities.

Midway through the Reagan presidency, federal aid for basic city services in Los Angeles totals more than in the final year of the Jimmy Carter Administration. The federal aid package decreased under Reagan only if cuts in public service jobs and training funds, which do not affect basic services, are included.

More Federal Aid

The city this year has planned its biggest hiring surge since 1980--more than 900 new regular employees, including 100 police officers--unless Congress imposes new reductions in domestic spending sought by Reagan before the end of the year.

Los Angeles has escaped the brunt of the first Reagan years more by happenstance than by political design.

The city’s rising population made Los Angeles eligible for more federal aid. Also, because the Reagan budgets fell hardest on the poor, the city benefited because the key programs to aid the poor--such as welfare and food stamps--are administered in California by counties rather than by cities.

American Largess

Washington’s practice of sending some taxes it collects directly back to localities, a distinctly American form of government largess, began in the early 1960s with urban renewal. The Great Society programs of former President Lyndon Johnson drove payments higher.

Spending grew for two decades, under Democratic and Republican Presidents, as such programs as revenue sharing and block grants became popular with Congress and powerful constituents back home. They also seemed to be helping conditions in the inner cities improve, however slowly, leaders of both parties agreed.

The high point in federal aid to cities was reached under Presidents Ford and Carter, when money sent directly from Washington accounted for a tenth of all spending by local government.

Reagan took office on Jan. 20, 1981, saying the nation could not afford to spend so much on cities and pledging to close the federal till. He has kept his word, despite the protestations of most big-city mayors that federal aid had become an essential lifeline.

Reagan became the first recent President to reduce payments to local government when he cut grants by $6.6 billion, according to a leading study of the Reagan program conducted at Princeton University. The Reagan Administration also diverted additional grants formerly sent to cities and transferred the grants to states so that state officials could decide how to spread it around.

Congress and the courts blocked White House efforts to kill many of the aid programs outright, or the tally would have been much higher. Even with the relatively limited changes, cities that were weak financially or depended heavily on federal help--such as Boston, St. Louis and Rochester--were forced to scale back programs or lay off employees.

In Los Angeles’ case, however, the burden of Reagan’s first cutbacks in 1981 and 1982 fell mainly on the county rather than on City Hall. Those cuts were aimed at programs for the poor that the county administers.

The city was stuck in bad times anyway during those years, but for other reasons. Since Proposition 13 cut property taxes in 1978, Los Angeles and other California cities became more dependent on the governor and Legislature for money to operate. In the early 1980s the state government was going through its own severe financial distress because of the lingering effects of Proposition 13.

Los Angeles cut its city work force more than 3,500 in the years after Proposition 13 passed, according to city figures. Most of the jobs were lost as a result of a bad economy and the state’s own financial problems.

‘A Small Wavelet’

“The primary reason that the Reagan domestic program had only modest impact in California is that it was a small wavelet in a sea beset by much greater turbulence,” Profs. John J. Kirlin of USC and Ruth Ross of California State University, Long Beach, said in a 1984 study that updated the earlier Princeton study.

In the city of Los Angeles, the effect of cuts made in Washington was further lessened by the formulas used to divide federal funds.

Cities that are growing, as Los Angeles is, with a rising group of people living in poverty, typically receive more money than cities that are wealthier or are losing population.

For instance, the Reagan Administration succeeded in 1982 in reducing the amount of money sent to big cities under the nation’s large, highly regarded program to help redevelop urban areas and provide social services--the Housing and Community Development Block Grant.

Instead of losing money, Los Angeles’ share rose 27%. The increase resulted mainly, federal officials said, from 1980 census figures that showed that the city’s population had jumped and that the housing stock was older and more crowded.

“In 1970 the stock was still young enough, it didn’t compare with the cities in the East. Now Los Angeles is an old city,” said Herbert L. Roberts, the director of community planning for the U.S. Department of Housing and Urban Development office here. “And it’s overcrowded compared to cities in the East.”

Loosening Restrictions

At the same time, the Reagan Administration led a campaign to loosen restrictions so the block grant money--spent mainly in poor neighborhoods in the past--could be more widely used.

In Los Angeles, the rules changes permitted Mayor Tom Bradley and the City Council to distribute the $66-million pot throughout the city, often for programs that were more politically popular.

More of the grant was used, for instance, to make home repair loans to homeowners and help businesses that promise to bring jobs to the city. The new rules allowed loans even to middle-class homeowners.

Richard P. Nathan, the Princeton University professor who edited the leading academic analysis of Reagan’s urban policy, said he believes that this policy will have a long-term negative effect on poor neighborhoods. “The public services funded by the grant . . . tend to be most important to the very poor, so the shift away from services hurts them, as does the geographic spreading of funds outside low-income neighborhoods.”

Advocates for the poor negotiated a federal court agreement with the city in 1982 that guarantees that a minimum share of the block grant funds will be used to help renters and the poor every year. They have been unable, however, to convince Bradley and the City Council to spend significantly more on the poor.

Different in Los Angeles

Los Angeles, unlike Seattle and some other large cities, spends almost no general city revenues for social programs aimed at the poor. Instead, Bradley insists that social programs be paid for out of federal aid, in part so that basic city services are protected if the federal funds suddenly stop coming.

The mayor and his Administration also contend that the city’s poor residents are mainly the responsibility of the county, which receives its own federal aid for welfare and other programs. Thus they feel a limited duty to use general city funds to provide services to the poor and the large homeless population.

“The city feels an obligation to do something (for the poor),” said Douglas Ford, general manager of the Community Development Department. “But we’re looking at problems that other levels of government have failed to solve. That explains part of the resistance to using these monies that have always gone for police, fire and libraries.”

Technically, if all changes in federal spending since 1980 are counted, the City of Los Angeles today receives less aid under Reagan than it did in the final Carter year. That, however, includes public service job funds under the Comprehensive Employment and Training Act, which suffered a loss of $80 million.

That cutback had little effect on city operations, however, and city officials do not consider the job training funds to be part of the package of federal aid for the basic services that residents expect from City Hall--police, fire, sewers and streets.

Slight Dip in Aid

If CETA funds are not counted, federal aid fell slightly in Reagan’s first year, in part because of a 50% reduction in a special grant for the few anti-poverty programs that remain from the Great Society era of the 1960s.

However, federal grants rose again in 1982, when the Administration approved an anti-recession measure that included special money for cities, with about $20 million for Los Angeles. The total federal aid pot dropped slightly again in 1983 and 1984, but by this year the pouch from Washington contained $52 million more for basic services than it did the year Carter left office.

Meanwhile, the city’s income from other sources has risen 10 times faster. The share of the city’s budget that comes from Washington fell to 11.4% this year, compared to 12.8% when Carter left office.

The city is less dependent on the federal dole largely because Bradley and the City Council left in place several local tax increases--including those on utility bills, garbage collection and businesses--that were approved in 1983 as temporary measures.

The taxes were raised when the city faced a fiscal crisis resulting from the national recession. Bad times affect the city because industry and consumers spend less money and the city receives less income from its two biggest sources--property taxes and its share of the state sales tax. The higher taxes averted layoffs and service reductions, Bradley said.

‘Taking the Heat’

With the recession past, income from the taxes has soared. Bradley and the City Council decided this spring to continue the tax increases, however, citing continued financial pressure on the city.

“We chose the course of taking the heat,” said Zev Yaroslavsky, chairman of the City Council’s Finance and Revenue Committee. “We stood up and told people we had to raise taxes. At this level of government you can’t pass the buck. Either the paramedics will come and apply mouth-to-mouth resuscitation, or we have a lot of unhappy widows and widowers.”

Nearly half of the city’s streets--about 3,000 miles of roadway--are overdue for repair, Chief Administrative Office Keith Comrie said. Instead of resurfacing 300 miles a year, which city officials consider desirable, the city is fixing half that, he said.

Parks and recreation centers are open fewer hours than desired, and nearly half the city’s 680,000 publicly owned trees need pruning, Comrie said.

Of all the federal aid Los Angeles receives, most can only be used for specific purposes--to repair major streets or lend money to homeowners to fix their homes, for instance.

The largest such program has brought the city $167 million in the last four years to build treatment plants necessary to meet a court order that Los Angeles pump less sewage into the ocean.

Construction Projects

City officials consider such aid valuable because it pays for such highly expensive construction projects. Thus other city revenues that do not have restrictions can be devoted to general services, such as police and fire.

To the disappointment of Comrie and other local officials, however, the amount of federal aid that comes free and clear of all restrictions, called the revenue sharing program, has not kept up with the 21% increase in the city’s Consumer Price Index during the Reagan years. Revenue sharing has fluctuated slightly but has remained about the same as in Carter’s last year.

City officials would be happy with any amount of revenue sharing, however, because this year Congress finally bowed to repeated requests from the President and agreed to terminate the grant--which began in 1972 under then-President Richard M. Nixon--next year. Comrie, the city’s chief budget official, said the $53-million annual loss will be bearable if the economy does not go bad and if the city receives some relief from unexpected federal requirements that begin later this year.

Those new financial burdens--paying overtime to police officers and firefighters and Medicare premiums for all city employees--will confront city officials with $70 million to $90 million in new expenses they didn’t face last year, Comrie said.

Reagan’s proposal to simplify the income tax system would cut further into city budgets, according to Comrie’s analysis. The President’s plan, which still must clear tough congressional opposition, would remove the tax benefits for investors who buy the tax-exempt bonds issued by cities to finance housing and other major building projects.

Eliminated From Program

Reagan cutbacks already have indirectly eliminated Los Angeles from consideration for grants from a special federal account set aside to help declining cities attract business and development.

In past years the city received some of the largest awards, called Urban Development Action Grants. City officials say the grants were a major factor in keeping the wholesale produce industry in downtown Los Angeles and convincing other job-producing developments to locate in Los Angeles. The new Los Angeles Theatre Center that opens this month in a seedy stretch of downtown Spring Street was partly financed through grant money.

But since Reagan reduced funds for the program, few Western cities have succeeded in competition with older Eastern and Midwestern cities for the declining grant money.

Although the residential areas of Los Angeles are growing old and decrepit, the process of approving projects for this grant rewards cities where most of the housing was built before 1940, regardless of the condition of the housing.

As a result, Los Angeles--with its miles and miles of poor neighborhoods and with huge suburbs built after 1940--is ranked 377th among all large cities by need.

FEDERAL AID TO LOS ANGELES Federal aid to the City of Los Angeles pay for basic services--police, fire, streets and sewers--has increased under the Reagan Administration. The city is less dependent on federal funds, however, because the city’s income from local fees and taxes has risen faster than aid from Washington. Federal aid in millions As percent of total city revenue

Last Carter Year 84-85 83-84 82-83 81-82 Year General Services: $94.1 $85.4 $96.3 $64.5 $94.0 housing, community improvements, programs for the poor, elderly and renters, and economic development. Wastewater Treatment: 64.3 43.9 36.4 23.0 12.3 to defray costs of sewers, treatment plants. Revenue Sharing: 53.5 55.1 56.3 56.2 52.4 unrestricted grants Highways and streets. 10.5 10.5 10.5 11.3 11.3 All U.S. Aid for Services 222.4 194.9 199.5 155.0 170.0

During this same period, city revenues from other sources also have grown rapidly:

Total City Income 1937.5 1692.9 1472.3 1417.3 1323.6 Share from property tax, 1211.2 1167.6 968.0 910.6 860.8 state sales tax, city fees.

Sources: City Administrative Office and Community Development Dept.