Ferraro, Yaroslavsky Call for Package of Tax Hikes and Staff Cuts : Finances: Proposals made to cope with $155-million budget shortfall would result in layoffs of 154.

Faced with a projected city budget shortfall of $155 million, two influential Los Angeles City Council members have called for a new package of higher taxes and layoffs, including staff reductions in the offices of the mayor and council.

The proposal by City Council President John Ferraro and Councilman Zev Yaroslavsky, chairman of the Budget and Finance Committee, would result in the layoff of 154 city employees--about half from the departments of Building and Safety and Planning and half from the offices of the elected officials and other city administrators.

The proposal, to be discussed at a special Thursday council session, is expected to draw substantial opposition--principally from employees fighting layoffs and business people against a surcharge of 7.5% on business taxes.

But the two council members said the “tough decisions” on the budget would have to be faced in order to restore the Police Department to 7,900 officers, from its current 7,800, and to prevent reductions in the Fire Department.

“We are in the midst of the deepest recession since the Great Depression,” Ferraro said. “The situation calls for extraordinary measures and sacrifice on everybody’s part.”

The city’s already bleak financial outlook began to deteriorate in October, when Mayor Tom Bradley announced a $121-million shortfall caused by shrinking tax revenue and a decrease in support from the state. Bradley proposed immediately cutting the deficit by borrowing funds from city pension systems and other measures.

But the budget has taken more losses since then, including a $9-million reduction because of a state initiative that removed the sales tax on snack foods and a $25-million hit caused by a miscalculation of the city’s investment income.

Yaroslavsky and other council members have opposed Bradley’s call to balance the budget by continuing a citywide hiring freeze, saying that the police and fire departments should be exempted to prevent an unacceptable reduction in service.

Yaroslavsky said that he and Ferraro proposed cutting 5% from salaries in the administrative offices, including the mayoral and City Council staffs, to show that the city government is serious about “downsizing” during difficult economic times.

Monday’s proposal replaces an earlier package from Yaroslavsky that called for layoffs only in the Building and Safety and Planning departments.

It also proposes an across-the-board increase of 7.5% in business license taxes. The higher levy would be imposed for two years.

Ray Remy, president of the Greater Los Angeles Area Chamber of Commerce, said any increase would be bad for business.

Yaroslavsky and Ferraro also called for increasing the residential utility tax from 10% to 11% for 18 months.

Councilman Nate Holden, one of three council members running for mayor, signaled the hurdles the budget proposal will have to overcome. He said he would have difficulty supporting the new taxes.

“Some people could afford a 100% increase” on either of the proposed taxes, Holden said. “But if you’re on a fixed income or have a business that is just trying to make it, that is a different matter.”