Mayor Tom Bradley on Friday announced a city hiring freeze prompted by a slowdown in the local economy and unexpected cost increases.
The freeze, the first since the early 1980s, will apply to all city departments. However, police officers, firefighters and sanitation workers will be exempted, Bradley said in a letter to department heads.
“Exceptional cost increases and a slowdown in the economy have created a need for financial belt-tightening,” Bradley said in the letter.
The move is expected to save the city $3 million through June 30, the end of the fiscal year, Bradley said.
“We think we’re razor close this year, but we’ll make it through,” said Keith Comrie, the city’s chief administrative officer. The city’s reserve fund is down to $5 million and analysts project an unusually low carry-over for the next fiscal year, Comrie said.
Comrie said the budget squeeze was caused by a number of factors, including a $20-million drop in revenue from parking tickets caused by a work slowdown among city Department of Transportation employees. Parking tickets were expected to bring in about $100 million this year, but will only bring in $80 million, he said.
About 600 traffic officers have participated in the yearlong slowdown in a dispute over wages, he said.
Unexpectedly high bills to settle lawsuits against the city also were a factor in the bleak financial picture. Last week, a woman who was paralyzed in an accident during a 1985 police chase won a $7.65-million verdict against the city.
The city had budgeted $15 million for such losses this year, but more than $20 million has already been spent, officials said.
Most revenue sources have been “holding” according to expectations and some, including sales, property and business taxes as well as interest earnings have been slightly higher, he said.
Bradley is now finalizing his budget proposal for the 1990-91 fiscal year and is scheduled to announce it next month.
“He’s looking at a lot of bad news,” Comrie said. “Costs are high and revenues are fairly moderate. The closer the mayor gets to the budget, the more he realizes we’re going to have to tighten our belts.”
Comrie said the news will not affect the city’s high bond rating. Bonds are rated on the basis of “managerial and political will to balance the budget,” Comrie said. “The mayor and the council have always had that.”
The city’s general obligation bonds are rated AAA, the highest designation, and its revenue bonds are rated AA, he said.
The $3-million saving will come from 300 to 400 jobs that will be lost to attrition and not filled, Comrie said.
A major concern in the next fiscal year will be the unanticipated $32-million cost of losing a legal fight over pension benefits for police officers and firefighters hired before 1981, Comrie said.
Through a Charter amendment approved by voters in 1982, the city had attempted to impose a cost-of-living cap on the pension benefits. However, the city lost a legal challenge to the cap and the U.S. Supreme Court refused in January to hear the city’s appeal.
As in the private sector, rapidly escalating health insurance costs also are a problem, he said.
The city’s $100-million health insurance bill will jump by $30 million next year, Comrie said.
Costs for the Police Department also will rise as the last of 500 new officers authorized this year go on the payroll, he said.
Councilman Zev Yaroslavsky, chairman of the City Council’s Finance Committee, said he was not surprised by Bradley’s action.
“When your reserve fund is $5 million, you’re going to have to do something,” Yaroslavsky said. “I think the mayor is right in putting a freeze on. It sets the tone that needs to be set around City Hall. Department heads as well as politicians need to set their sights much lower about how they’re spending money.”
Yaroslavsky said the city payroll has increased dramatically over the last decade, from a low of about 26,000 employees after Proposition 13 to the current high of 33,000.
“The real proof of the pudding will be what’s in the 1992 budget and whether there are cuts in the city budget that reflect the problems that we are having,” he said.
Bradley will have to make “deep cuts” in order to make the budget balance next year and may have to extend the freeze after June 30, Yaroslavsky said.