Sally Reed’s Legacy to L.A. County: Fiscal Real Politik

Sally R. Reed, who’s leaving her post as chief administrative officer of Los Angeles County, loves to tell the story about the time she returned a lost dog to her Pasadena neighbor. She didn’t figure the neighbor would know who she was, but her name did ring a bell. “Oh, yeah,” the neighbor said. “You’re the don’t-kill-the-messenger lady.”

For 2 1/2 years, Reed specialized in delivering bad financial news to the Board of Supervisors, and, in the end, she decided the frustrations of doing so outweighed the rewards. She became the third county CAO to be chewed up by the job in the last decade.

The sheer turnover says something about the rewards of working in local government. Reed’s departure triggered some huzzahs among her enemies--especially the public-employee unions that believe she loves to lay off people. Yet, despite the controversy she inevitably created, Reed actually did accomplish something during her time in Los Angeles: She got the politicians to begin thinking about the hard fiscal realities that the county will have to face every year for the foreseeable future.

The post of county chief administrative officer is probably the most thankless governmental job anywhere. Los Angeles County, with about 80,000 employees, deals mostly with the underbelly of society that everybody would prefer to ignore--social services, indigent health care, criminal justice. Yet, it’s also the center of a dizzying set of political agendas, including five elected supervisors of varying ideological stripes, an elected sheriff, an elected district attorney and powerful employee unions.

This unstable mix is made all the more volatile by the fact that the county simply doesn’t have enough money to do its job. State law requires it to deliver certain basic services, which, in a county of 9 million people, is a behemoth task requiring a huge bureaucracy. But other state laws, in the form of Proposition 13, don’t give the county enough property tax to do the job right. Appointed by the Board of Supervisors, the CAO is really a kind of glorified political traffic cop trying to balance the budget, keep the county’s doors upon and hold the lid on all conflicting agendas simultaneously.

Given this job description, the temptation for most CAOs it to try to find a pot of gold to make everything all right. James C. Hankla, now the city manager of Long Beach, sought to raise extra cash by developing the county’s real estate during his 1985-87 term. Richard Dixon, the former county treasurer who succeeded Hankla, was a nationally recognized miracle worker with public debt. He sought to balance the budget by endlessly floating bonds. Hired in 1993 from Santa Clara County, where she established a strong budget-cutting reputation, Reed forsook pots of gold in favor of castor oil. Among other things, she proposed laying off 20% of the county work force and closing County-USC Hospital, a key piece of the county’s health-care system.

The prevailing opinion among liberals is that Reed is little more than a bean-counter, a kind of public-sector equivalent of corporate chieftains who have little idea of what the company makes but reflexively lay off people whenever profits are under pressure. True, Reed is a bean-counter by nature. True, she lacks a broad, affirmative vision of what government can do. And she minces few words when she asserts that the end result of her policies in Los Angeles County would have been to deny government services to many people, most of them poor. “We are going to be like a lifeboat that can hold only so many passengers,” she said in an interview a few months ago.

Yet, Reed has always been able to employ her bean-counting nature for worthwhile strategic purposes. By imposing fiscal discipline and adopting a hard-nosed persona, in which “honest accounting” was supposedly an extension of her own personal integrity, Reed has sought, mostly successfully, to force the county’s power structure into making hard financial decisions when the natural political inclination would have been to skate around the problem. One example of her approach was the way she forced a resolution on the long-delayed Walt Disney Concert Hall.

For years, construction of the hall itself has been stalled as costs have increased and fund-raising has stalled. Meanwhile, the county has laid out $100 million in bond money to build a parking garage on the site. The county needs Disney Hall’s parking business to pay back the bonds. Last year, with the garage almost ready to open, Reed played hard ball with the Disney Concert Hall Committee; she was willing to put her money--or the county’s, at least--where her mouth was. She told the concert-hall people that she was prepared to eat the cost of the garage (a $7-million to $18-million drain on the county’s general fund) if the hall wasn’t built. Backed into a corner, the Disney committee then agreed to raise $150 million in four years or forget the building altogether. In the nine-year history of the Disney Hall project, Reed was the first person ever to raise the question of what would happen if the hall were not built. Her willingness to do so changed the entire negotiation.

It’s amazing that Reed didn’t get fired from L.A. County, or anywhere else, for that matter. The unions, in particular, despised her budget-cutting approach. Their view, apparently, is that the CAO’s job is to unearth or invent money wherever possible to save union jobs. “A CAO has to be innovative enough to come up with ideas that will generate the revenue to provide these services. She wasn’t,” said Gilbert Cedillo, head of the Service Employees International Union local that is the county’s biggest union.

But the current political climate makes it hard to sustain a smoke-and-mirrors approach. The state and federal governments are dwindling sources of funds for the county--and they are likely to become even less forthcoming as both the Congress and the Legislature come under the influence of suburban Republican leadership. Debt tricks won’t work, either. The county mortgaged almost all its real estate during the Dixon era to raise short-term cash.

As hard as it was to swallow, Reed’s castor oil was better for Los Angeles County than another financial miracle. She didn’t create the budget crisis last year, nor did she create the county’s structural financial problems. She just forced them into the limelight, where the politicians and the voters will now be able to assess whether they can live with the idea of a shrinking lifeboat that doesn’t have enough room for everybody.*