City, County Budget Woes

Unrelated problems have damaged what otherwise would be rosy prospects for the Los Angeles County and city budgets for the next fiscal year. Costs of the Los Angeles Police Department corruption scandal leave a large footprint on the city’s fortunes, accounting for nearly $41 million of the $150.5 million in new city spending, with more to come in following years. A county budget plan that calls for new hires and more money for social programs depends largely on a $255.4-million renewal of a federal waiver of Medicaid rules to once again bail out the county health department.

A huge deficit in the county health department nearly dragged L.A. County into bankruptcy in 1995. Only a federal bailout of $600 million averted the catastrophe, and the money was tied to a promise that the health department would become much more efficient. The federal waiver allows the county to circumvent rules requiring that Medicaid dollars be used on more expensive hospital care rather than cheaper clinics, but it ends June 30 and the county’s attempt to gain a five-year extension has run into obstacles.

Gov. Gray Davis is said to be leery of signing away any part of the state’s surplus to assist the county.

A major part of the problem is what county Chief Administrative Officer David Janssen refers to as wholly unrealistic assumptions on the amount of cost savings the county health department could make. The actual savings fell nearly $200 million short of the sum predicted, according to county officials.

Janssen said at the first of the week that “the Health Services Department has taken significant steps to . . . reduce costs” and that the revenue gap could not be closed by county savings alone. Changes in state and federal reimbursement funding formulas are necessary to make the department self-sustaining, he said. The county Board of Supervisors gave him 30 days to come up with alternatives if the waiver is denied.

In the city, the impact of the police corruption scandal on successive budgets would be mitigated only by Mayor’s Richard Riordan’s proposal to bond $300 million in expected tobacco settlement money to help pay for police misconduct lawsuits. Riordan’s officials said the process--essentially paying the city in advance for money expected to flow in over several years--should begin at once. The City Council rejected the same proposal a month ago.

What’s needed now is close cooperation between the mayor and the City Council and among county, state and federal officials to resolve differences and leave both local budgets on a firm footing.