Los Angeles mayor's budget plan closes $216 mln deficit
SAN FRANCISCO, April 23
SAN FRANCISCO, April 23 (Reuters) - Los Angeles city employees would be spared the layoffs and furloughs of the recent past under Mayor Antonio Villaraigosa's $7.7 billion budget plan, but would have to pay more for health care and surrender raises to help close a $216 million deficit.
Villaraigosa's plan comes as the California economy gradually improves, lowering its unemployment rate to 9.4 percent in March from 10.7 percent a year earlier and bringing stability to the finances of local governments across the most populous U.S. state.
But Villaraigosa, a Democrat who ends his second term at the end of June, called on his successor to limit spending to help mend the city's finances, which have been in a roil for five years.
City Controller Wendy Greuel and Councilman Eric Garcetti, both Democrats, are running to replace Villaraigosa, who has overseen steep spending cuts to keep Los Angeles' books balanced.
In his final budget plan for the government of California's biggest city, Villaraigosa also proposed providing for a reserve of more than 5 percent of general fund revenue and spending a modest surplus on deferred infrastructure projects.
Under Villaraigosa, Los Angeles, the second largest U.S. city, has cut more than 5,000 city jobs in recent years, eliminated and consolidated some departments and cut pension and retired city workers' health care expenses to reduce its structural budget deficit.
Los Angeles' revenue is growing stronger as home prices, retail sales and tourism improves, providing $111 million in additional general fund revenue, but the city will have to restrain spending to balance its budget, according to Villaraigosa.
The city's voters last month rejected an increase to their sales tax to raise revenue to prevent more spending cuts.
"The ability of our administration to present a responsibly balanced budget that includes surplus revenue investments is the result of progress we have made together in cutting costs, creating a more efficient city government and realizing the benefit of increasing city revenues," Villaraigosa said in a statement.
If his budget plan is implemented and the next mayor and city council hold the line on spending, Los Angeles' structural deficit would be eliminated and the city would have a $15 million surplus by the 2017-2018 fiscal year, according to City Administrative Officer Miguel Santana.
But Los Angeles would be "significantly challenged" in closing the deficit in four years if city leaders reverse course or do not follow through on pension, labor, revenue and organizational reforms, Santana told the city council in a letter on Monday.
He noted Los Angeles, a city of about 3.8 million people, could lose $4 billion in pension savings over the next 30 years if a new pension plan for civilian employees that comes into effect in July is not implemented.
Like Villaraigosa, Santana called for more austerity, including the elimination of a 5.5 percent pay increase for more than 60 percent of the city's civilian workforce scheduled to going into effect next January.
Additionally, to close the city's structural deficit, city employees would have to pay more for medical coverage and Los Angeles' government must stay at current levels, according to Santana.
If services are restored, they must be paid for with new ongoing revenue or offset by cuts in other city programs, Santana said.