A day after telling Angelenos the coronavirus pandemic is wreaking more financial havoc on Los Angeles than the 2008 recession, Mayor Eric Garcetti released a proposed 2020-21 budget Monday that calls for reducing services and furloughing about 15,000 municipal workers for roughly a month.
“We’ve already enacted a hiring freeze in our city government, and we will continue that in the coming year,” Garcetti said Sunday night during a somber State of the City address. “Unfortunately, we must also face another painful reality: that our civilian employees will take 26 furlough days over the course of the next fiscal year, the equivalent of a 10% reduction in pay.”
The budget proposal Garcetti unveiled Monday covers spending for the next fiscal year, which begins July 1. The budget must be adopted by the City Council by June 30, according to state law.
The mayor stressed that budget cutting will largely spare critical services, such as police and fire protection and other services that “keep our neighborhoods safe, our streets clean, our families housed and our children and seniors fed.”
“Soon, many departments will have to operate at sharply reduced strength,” Garcetti said during his State of the City speech, adding the proposals he’s made are not easy. “Cherished programs will lose funding, while recreational and community services will see significant changes. We’ll have less to spend on removing graffiti and caring for our urban forest.”
One of the city’s major employee labor unions, Service Employees International Union Local 721, issued a statement Sunday saying it will work to “mitigate and reduce the number of furlough days, and to address the equity of those members impacted.”
The union noted that it had already secured a commitment that no workers will be laid off, along with “the preservation of all city services and an agreement to fund all currently agreed upon future salary increases for city employees.”
Last year, Los Angeles passed a $10.6 billion overall spending plan, the largest in its history, and this year the mayor’s proposal is slightly less than that. And city officials noted the budget will continue to be revised throughout the next fiscal year to address areas affected by the pandemic.
Matt Szabo, Garcetti’s deputy chief of staff, said the city expects much of the money it has spent on the response to the coronavirus to be reimbursed by the federal government, although no federal bailout plan for cities has been developed.
Szabo said the employee furloughs should save the city about $139 million, and the proposal asks the City Council to adopt a budget policy that would ensure furloughs are lifted as soon as possible. it also calls for a policy to return money borrowed from reserve funds as soon as possible.
Overall revenue from this fiscal year is still expected to come in 1.97% higher than last year, but the amount the city is expected to receive is about $231 million less than anticipated, Szabo said. The original budget plan was expected to propose $6.92 billion in general fund spending, but now it’s going to be about $6.68 billion.
The budget proposal anticipates sales taxes of about $557 million, down from the $635 million projection for this year.
One of the biggest declines in revenue the city has experienced is through its airports, which have seen a 95% reduction in air traffic, as well as tourism and entertainment industries, which have been temporarily shuttered.
The Port of Los Angeles has also been operating at about 75% to 85% compared to last year since the pandemic affected global trade.
City Controller Ron Galperin estimated last week the city could see a gap in revenue of as much as $598 million by the end of next fiscal year. He said the shortfalls will strain the city’s ability to provide services and will require “some very difficult budgeting decisions” this year and in the future.
The mayor noted that the city has built up formidable reserve funds in recent years, but even with those rainy day funds, the revenue shortfalls caused by widespread business shutdowns, a virtual halt to tourism and spiking unemployment will have repercussions at City Hall.
The city is expected to use about $190 million of its reserves to make up this year’s revenue shortfalls. The city had $410 million in overall reserves last year, 8.5% of the city’s budget, but there will be about $230 million available next year, down to 3.4% of the budget.
Garcetti made several pointed calls during his speech for federal assistance for cities, including a request to use Section 8 housing resources to help homeless people stay off the streets once they leave temporarily shelters or hotels and motels where many are being moved to protect them from the coronavirus. Councilman David Ryu echoed that sentiment Monday.
“Without federal help, the city’s need for furloughs will cause an unintended ripple effect across our economy as well as reduce city services when our seniors and vulnerable residents need them most,” Councilman David Ryu said.
According to the mayor’s budget proposal, the city’s Housing and Community Investment Department is in the process of creating a rental assistance program as part of an eviction defense program, and the city is issuing “no-fee” micro-loans to businesses affected by the coronavirus, between $5,000 and $20,000.
Garcetti said Sunday that as economies reopen across the nation, “I believe that Los Angeles can inspire the groundwork for a future that is much better than normal ever was.” And he sent a message to leaders in Washington, calling for the passage of a national infrastructure bill.
“This nation has the resources to fund a real recovery,” he said. “… Don’t bail out banks but leave cities with cuts and collapse. If you want to reopen America, America’s cities are where this nation begins. A weakened city brings the pain of laid-off workers, fewer services and sends ripples through every main street and every home. But in resilient and strengthened cities, businesses will find their footing once again, the jobless will find their work and their worth, and communities will protect their loved ones’ health.”