LA budget is $300 million in the red

Just a third of the way through its fiscal year, the Los Angeles City Council Wednesday was scheduled to discuss some dire financial news: The city has already overspent its budget by nearly $300 million, according to a report released this week by the city administrative officer, as Frank Stoltze of LAist reports. The city is in “a particularly challenging financial position,” the report states, noting increased legal liability and labor costs across a number of departments, LAist reported Wednesday morning.

“L.A.’s reserve fund has dropped to 4% of revenues, according to the report. The city has a policy of keeping the fund at a minimum of 5%. If it drops below 2.75%, the council would need a two-thirds vote to withdraw money from it.” So, how’d it get so bad, so early in the fiscal year?

A cynic might say, that’s government spending for you. And they would not necessarily be wrong. Quite large aspects of the problem involve massive new wage and benefits hikes to employees. But there are external societal circumstances at play here. Over a third of the red ink comes from big payouts to individuals and groups with lawsuits against the city. L.A. City Hall has already had to overspend its liability claims by $112 million four months into this fiscal year, more than twice what was budgeted for the entire year. Legal settlements involving abuse by the LAPD, for instance, account for about 40% of the payouts. There were also numerous slip-and-fall suits involving city sidewalks.

Councilman Bob Blumenfield, chair of the City Council Budget Committee, said: “Juries — not just in Los Angeles, but across the nation — are coming back with much higher judgments and of course that has a ripple effect on the settlements.”

But Angelenos can’t help but notice that unjustified pay hikes agreed to by the council are a big factor. The Fire Department has more than $90 million in overspending after firefighters got an annual 3% increase in base wages and a 5% annual increase to their health benefits. Blumenfield notes that cuts in city services are inevitable to balance the books. They wouldn’t be so inevitable if the City Council ever developed a backbone and refused to meet public employee union demands for pay increases citizens can simply not afford.