Supervisors Face Harsh Budget Facts

With earthquake relief efforts well under way, members of the Los Angeles County Board of Supervisors on Monday shifted their attention to a man-made disaster: their own budget.

In a special three-hour meeting that marked the beginning of fiscal 1994-95 budget deliberations, county budget analysts told supervisors that they are already facing a $1-billion deficit that is largely of their own making.

County analysts reported that by borrowing hundreds of millions of dollars on a high-stakes gamble that the economy would pick up by this year, the Board of Supervisors went seriously into debt in the past two fiscal years and much of the bill is now coming due. Supervisors had borrowed money from various sources, including employee retirement funds, to fund continuing operations such as public health, welfare and law enforcement.

“I would encourage our re-examining our past practices,” said County Auditor-Controller Al Sasaki. “I believe we need to consider more prudent fiscal practices in order to maintain our solvency.”

Indeed, Sasaki reported that in addition to its borrowing, the board has been ignoring mounting costs of workers’ compensation, long-term disability, medical malpractice insurance and other liabilities that will have to be paid in the years to come. Sasaki pegged these unfunded liabilities at about $1.7 billion.

County Chief Administrative Officer Sally Reed, hired several months ago largely on the strength of her ironfisted budgeting skills, recommended that the supervisors take a pledge to spend only money that they have in hand.

In unanimously adopting Reed’s recommended five-point set of budget principals, the board agreed to follow the same well-accepted budgeting guidelines now in place in most businesses and households.

The principles agreed to are: Fund ongoing costs with ongoing revenues; fund one-time costs with one-time revenues; fund liabilities when they are first recognized; base the budget on realistic estimates, and establish a reserve for contingencies of about 2% of the budget, or about $26 million--up from the currently budgeted $3 million.