* Downsizing would be largest for Los Angeles in decades
* Most of 3,500 job cuts would be through attrition
* City, utility reach deal on rate hikes
LOS ANGELES, April 19 (Reuters) - Los Angeles Mayor Antonio Villaraigosa on Monday proposed cutting the work force of America’s second-largest city by nearly 10 percent to close a $485 million budget deficit projected for the next fiscal year.
The mayor’s plan, conveyed in a letter to the City Council ahead of his formal budget presentation on Tuesday, would permanently eliminate 3,546 municipal jobs in the biggest downsizing by Los Angeles in at least three decades.
Most of the cuts, about 2,400 positions, would be achieved through early retirement incentives, attrition or transfers of workers to openings in self-supporting agencies, such as L.A.’s public utility, the Department of Water and Power (DWP).
But the mayor said that as many as 750 jobs would be lost through layoffs in the fiscal year that starts July 1. The city already has dismissed more than 100 workers to help fill a budget shortfall of more than $200 million this year.
On a more positive note, municipal officials said they had reached an accord with the DWP to end a stalemate over energy pricing that had threatened to deepen the city’s budget crisis and further erode its credit rating.
Under that deal, the City Council and the utility agreed to a smaller rate hike than was originally sought by the DWP and backed by the mayor -- amounting to a 0.6 cent per kilowatt hour increase.
The DWP previously rejected a similar increase as too small and said then that it lacked the cash to make a surplus-revenue payment that Los Angeles officials were counting on to help plug this year’s budget deficit.
UTILITY REVENUE PAYMENT NOW EXPECTED
Sarah Hamilton, a spokeswoman for the mayor, said city officials now expect the DWP will be able to make good on most of the $73.5 million transfer payment that had been scheduled. That in turn would enable the city to go into the next fiscal year with more of its reserve funds left intact.
However, the city still faces a deficit for 2010-2011 that has put Villaraigosa, himself a former labor activist, at odds with unions representing 98 percent of the city’s work force.
The 3,500-plus jobs he proposes eliminating amount to more than 9.5 percent of the 37,000 positions that acting city budget chief Ray Ciranna said are currently on the payroll of City Council-controlled departments. That payroll makes up 80 percent of the city’s budget.
Hamilton said the last time the city was forced to make a “significant reduction in force” was in the late-1970s, in the aftermath of then-newly enacted limits on property taxes. But most of the positions cut then were paid for with federal dollars, she said.
The latest budget crisis has been attributed mainly to plunging tax revenues blamed on the region’s sagging economy, falling property values and double-digit unemployment.
Villaraigosa repeatedly has urged unions to consider pay cuts as an alternative to avoiding further layoffs.
Union leaders have instead recommended a hiring freeze for the city’s police and fire departments, along with improved tax collections and other measures.
The mayor has rejected that plan as unrealistic. Hamilton said he plans to continue hiring police officers to fill vacancies created through attrition.
While Hamilton said the mayor would refocus the city government on providing “core services,” City Councilman Bernard Parks, who chairs the council’s Budget and Finance Committee, said cutbacks will be keenly felt. (Reporting by Steve Gorman; editing by Carol Bishopric)
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