As Los Angeles County’s fiscal crisis deepens, emergency legislation has been introduced in Sacramento to create a powerful state authority to take charge of the county’s financial affairs.
The measure, introduced by Assemblywoman Debra Bowen (D-Marina del Rey), is expected to be vehemently opposed by the County Board of Supervisors, which would see its power substantially eroded if the bill becomes law.
The legislation would create a five-member panel appointed by the governor and legislative leaders to oversee the county’s financial affairs, prepare management and financial recovery plans, provide state loans to prevent defaults on county bonds and avoid interruption of county services.
“The key is to create some fiscal discipline, which will be a new concept for L.A. County,” Bowen said Monday. “The board has been relying on one-time fixes and borrowing, rather than fundamentally restructuring county government.”
She said the state authority needs to be established immediately to help guide the county through the fiscal crisis that threatens to cause drastic service reductions, particularly in health care for poor and uninsured county residents.
Without greater accountability, Bowen said she will not support giving the county the power to impose new taxes.
“Simply pouring money into L.A. County would be like trying to give the Taj Mahal a face-lift while it’s sinking into the quicksand,” she said. “That’s just not going to fly, given the current political climate and the anti-tax mood of the electorate.”
In a memo to the supervisors, county Chief Administrative Officer Sally Reed said the introduction of the bill represents “a legislative acknowledgment of the deteriorating financial condition of Los Angeles County.”
But Reed said she and County Counsel DeWitt Clinton believe the measure is unconstitutional because it infringes on the county charter, approved by the voters in 1913, which grants extensive powers to the supervisors to run the county.
Reed said the county will “aggressively oppose” those provisions of the legislation that “undermine the mandate of the electorate” by diminishing the power of the supervisors.
The measure was introduced at a special session of the Legislature on Aug. 1--before two major Wall Street bond rating agencies downgraded the county’s credit rating because of concerns that the county’s new $12-billion budget fails to resolve a deep and chronic budget deficit.
Bowen’s measure would create a California Intergovernmental Cooperation Authority to assist the county in solving its budgetary and financial problems and in helping it to maintain access to the capital markets for future borrowing. The bill would authorize the state authority to issue new debt on behalf of the county to prevent a default on existing bonds and short-term notes.
The legislation is already drawing strong protests at the Hall of Administration.
Supervisor Zev Yaroslavsky said the bill would only create another layer of decision-making.
And he questioned why state lawmakers would want to give the county authority to borrow more money, when increasing amounts of debt have only aggravated the county’s fiscal problems. “That’s just what we don’t need,” Yaroslavsky said.
The authority would have the power to help the county achieve financial stability, avoiding defaults on its debts, and eliminate or finance budget deficits.
It would have the ability to approve all budgets, contracts and financial recovery plans prepared by the county. If the county violated any provision of a plan, the legislation says the state panel “may assume all of the legal rights, duties and powers of the Board of Supervisors.”
The supervisors would regain their power when the state authority determines that “future compliance with the recovery plans is probable.”
“We don’t need a Board of Control [to oversee financial operations],” said Michael Bustamante, spokesman for Supervisor Gloria Molina. “We need revenue-raising authority.”
Bustamante said Molina believes the measure is unnecessary. He drew a sharp distinction between Los Angeles County’s fiscal problems and those of bankrupt Orange County.
Legislation is pending to establish a state trustee to take charge of Orange County’s financial affairs in the wake of the largest municipal bankruptcy in the nation’s history.