Los Angeles Mayor Antonio Villaraigosa called for eliminating more than 3,500 city jobs including 61 firefighters and 443 typists to help curb a deficit estimated to reach $485 million in the coming fiscal year.
The mayor today unveiled his budget for the 12 months that begin July 1. Spending from the general fund will drop to $4.34 billion, about 1.3 percent less than set aside for the current fiscal year. The mayor's proposal next goes to the City Council for review. If all the cuts are approved, it will shorten the payroll by about 9.3 percent.
"This is a budget that reflects economic realities and addresses the structural deficit," said Matt Szabo, the mayor's deputy chief of staff.
Far fewer people may wind up unemployed if the mayor's plan is accepted than suggested by the raw numbers, as there are thousands of unfilled positions on the city's workforce. Los Angeles had 38,200 authorized jobs as of January of this year, according to an April 9 report from the Office of the City Administrative Officer. Of those, 3,700 were vacant on Jan. 31.
About 750 current employees may be dismissed under Villaraigosa's plan, with the rest of the cuts coming from a mix of moves including attrition and early retirements, according to Sarah Hamilton, a mayoral spokeswoman.
Unions Propose Alternatives
City union leaders have suggested an alternative to cutting jobs, proposing $432 million in higher fees, increased library fines and deferred spending.
"The mayor's budget plan will make it harder to do business here, harder to raise a family and harder to keep neighborhoods safe," the Coalition of Los Angeles City Unions said on April 16. The group represents 22,000 workers.
"We have put forward a plan that balances the budget, keeps L.A. working and keeps L.A. strong," Bob Schoonover, a mechanic and union president, said today in a statement.
The city's financial condition made international headlines this month after Controller Wendy Greuel said the nation's second-largest metropolis would run out of cash by May 5 and Villaraigosa called for two-day-a-week unpaid furloughs of non- essential city workers.
City Council President Eric Garcetti said on April 8 that furloughs wouldn't be needed after property-tax collections topped projections by $26 million. On the same day, the city's budget planners said Los Angeles will have enough money to pay its bills for the current fiscal year.
The city may end the fiscal year with $39 million, or 0.9 percent of its budget, in cash reserves, well below the 5 percent suggested by rating agencies, the budget planners said.
Ratings Cut
Los Angeles had its debt rating cut one level to A+ from AA- by Fitch Ratings on April 16. The firm cited the city's "low level" of cash reserves and the difficulty that city leaders have had in reaching consensus on closing budget gaps.
"Greater political willingness will be needed to adhere to adopted and prudent fiscal policies," Fitch said in a statement on April 16.
Moody's Investors Service cut the rating on $3.2 billion of Los Angeles debt to Aa3 from Aa2 on April 7.
Villaraigosa nominated Austin Beutner, a former Evercore Partners co-chief executive officer, to serve as interim general manager of the city's Department of Water and Power, the nation's largest municipal utility, on April 19. Beutner had previously served as the mayor's first deputy for economic and business policy.
'Wake-Up Call'
In a recent meeting, German Chancellor Angela Merkel asked if Los Angeles would go bankrupt, Beutner said in a telephone interview.
"It's a wake-up call that she wanted to talk about that," Beutner said.
Los Angeles County, the largest in the U.S. with 9.8 million residents, unveiled its budget yesterday. Spending is projected to be reduced by $885 million, or 3.7 percent, from the current year.
The county budget calls for eliminating almost 1,400 positions, or about 1.4 percent of the current payroll. Judy Hammond, director of public affairs, said that while those positions are already vacant, the county is considering cutting 100 more jobs that are currently filled.
