A common refrain at City Hall is that city government must act more like a business, spending taxpayer dollars more efficiently and effectively. I couldn’t agree more. In fact, the 4 million Angelenos are essentially shareholders in city government and are entitled to know its financial condition and how it intends to manage its finances going forward.

As the City Council is beginning to debate the mayor’s proposed budget, the messages coming from City Hall concerning the budget deficit the past few months have been confusing. It’s been a roller-coaster ride, fluctuating from warnings about the city’s inability to balance this year’s budget, to the need for thousands of layoffs, to slightly more optimistic revenue projections, with some suggesting that the city is out of the woods.

As city controller, my job is to control the city’s cash flow, pay the city’s bills and to alert the council and mayor to any financial shortfalls. My message has been consistent throughout; the deficit is real, steps need to be taken to address it and, given our current course, our cash flow needs will not be able to be met without transferring funds from the reserve to the general fund.

In reality, this year’s deficit has remained relatively constant, between $200-$220 million, and it will not be eliminated without substantially depleting the reserve fund. Borrowing from the reserve fund to pay the city’s bills is not a fiscally sound or sustainable solution, and I urge the mayor and council to make the necessary structural changes to get the city back on strong financial footing.

I believe there are four concrete steps that can be taken to ensure the city’s long-term fiscal sustainability.

The first is getting back to basics. The city needs to identify which specific core functions it must provide to Angelenos; among these must be public safety, public works and economic development. Resources must then be shifted to meet the needs of those core services. Identifying these services should not be driven by what positions employees might be able to transfer into, but by a clear policy on the city’s priorities.

The second step is budgeting for the long term, not just getting through one year at a time by the skin of our teeth. For years, budget deficits were papered over by the last-minute sale of a property or suddenly increasing our projected tax revenue.

We can’t keep treating taxpayer funds like monopoly money. We need an honest accounting of where we are today and where we want to be in five years. To avoid having to make draconian midyear cuts, the council and mayor should use the most conservative revenue projections possible in creating next year’s budget.

For instance, the mayor’s proposed budget includes over $200 million in anticipated revenue through a public-private partnership for the city’s parking garages, and the securitization of revenue from the city parking meters. While steps have been taken on the parking garages, we cannot rely solely on this potential influx of money to save us this coming year without a “Plan B” should these revenues not materialize.

The third step is ensuring that the city’s reserve fund remains strong. The city’s budget is similar to a household budget in that we have a checking account and a savings account – the general fund and the reserve fund. Bond rating agencies look at the strength of the reserve fund as a critical factor in determining the city’s fiscal health. The city’s own financial policy states that the reserve fund should be 5 percent of the general fund.

Finally, any honest deliberation of the city’s budget – and our long-term fiscal sustainability – must address the city’s looming pension obligations. If no changes are made, in the next five years nearly half of the city’s general fund will go towards paying pensions. This is unsustainable. While we must maintain the promises that have been made to current and former employees, we must work together to make structural change. Doing nothing is simply not an option.

As we grapple with these unprecedented budget deficits, city leaders must remain levelheaded and thoughtful and avoid at all costs playing petty political games. It is going to take everyone – city leaders, labor, business, and 4 million Angelenos working together to get out of this crisis.

If we are guided by these principles, I believe that the city will join many Los Angeles businesses in surviving this current downturn and emerge with a brighter future ahead.

‘Here is CAO Miguel Santana’s letter to the Mayor and City Council outlining the warnings from Fitch and Moody’s credit rating services. Emphasis was added to quotes from the agencies:

CITY OF LOS ANGELES

Date: February 8, 2010

To: The Mayor
The Council

From: Miguel A. Santana, City Administrative Officer

Subject: COMMUNICATION WITH RATING AGENCIES

This morning, my Debt Management staff received an e-mail from Fitch Ratings, expressing concern on the deteriorating financial position of the City:

“The council deferred making decisions on most budget proposals for 30 days at its Feb. 3 meeting causing the Mayor on Feb. 4 to order the elimination of 1,000 city jobs. This, in turn, generated a City Attorney opinion that the mayor cannot unilaterally order layoffs, particularly with regard to the elected offices. While the city council was able to reduce the Solid Waste Lifeline Rate Program on Feb. 3, it is noteworthy that one of the four votes in opposition to that reduction was the Council President’s, who has also expressed concerns about the proposal to privatize the city’s parking structures.”

Although we did correct the statement concerning the Mayor’s ability and the General Manager’s ability to layoff, it did little to alleviate Fitch’s concerns. This just demonstrates what the investor community is reading in the press, whether correct or not.

After receipt of the above e-mail, we also spoke by phone to Fitch. Fitch restated the three areas that would cause the further downgrade of the City’s ratings:

1. Worsening general fund structural imbalances in an environment of declining tax revenues, a softening property market, and rising personnel-related costs;
2. Failure to achieve long-term personnel cost reductions, particularly through reduction in work force size and modified benefits entitlements; and,
3. Ongoing erosion of general fund reserves.

Fitch is concerned that we have no political consensus between the Mayor and the President of the City Council. This was surprising due to our reports and the meetings with the Principals. They are also concerned about the political vulnerability of the Three Year Plan given the response to the CAO’s financial status report and solutions to this year’s problems.

The conversation ended with this quote: “This is an amazing opportunity for the elected officials to show leadership and for a valid reason. According to the press, though, they can’t seem to step up and make decisions. So if it can’t be done now, then when?”

Later this afternoon, staff had a conversation with Moody’s Investors Service. Moody’s expressed concerns that the City Council had not adopted the necessary budget-balancing recommendations provided in the CAO’s mid-year report, as it had in years past.

Our city is facing the toughest economy we have seen since the Great Depression, and it will take a focused and concerted effort by all city leaders to balance our budget while continuing to provide key services that are essential to getting our economy back on track.

Last October, the Mayor and City Council worked closely with the Coalition of City Unions, which represents a majority of city employees, on an unprecedented agreement that saved $80 million and prevented massive layoffs.

But our national recession continues to severely impact our revenues. Even with thousands of employees voluntarily agreeing to early retirement and many more being furloughed, the City of Los Angeles still faces a $200 million budget gap in the current fiscal year, which ends in June. Worse yet, our budget analysts predict that gap will more than double next year if we do not take swift action that will provide ongoing savings rather than a one-time fix.

On Wednesday, the City Council met in a marathon session to review our current financial situation and passed a number of motions, including those that will encourage more employees to voluntarily retire and move as many employees from jobs funded by our general fund into jobs funded through grants, special funds, or other revenues.

In addition, we instructed city department leaders to identify 1,000 positions that can be eliminated and the city’s Personnel Department manager to move forward with preparations for those layoffs. The following day, Mayor Villaraigosa announced his intention to move forward with layoffs and concurred that we must move forward with preparations. Although the Council agreed not to make a final decision on these layoffs for 30 days while we explore our options to see whether some of these jobs can be saved, both the Council and Mayor’s actions effectively keep the city moving toward layoffs (Motion 10S, page 18). Layoffs are our last option, but we cannot waiver from taking action now to protect future jobs and services.

As this discussion continues, there will be many ways for Angelenos to get information, including media and blog coverage, but none as direct as following along first-hand. Starting on Tuesday, the City Council will hold meetings five days a week and those meetings are televised locally on the city’s cable station (Channel 35) as well as streamed online. All Council motions are available online, including the Financial Status Report and its related amendments, which have most recently been the basis of discussion.

All eyes are on City of Los Angeles leaders as we grapple with the challenge of closing this year’s budget gap and addressing the next – and that’s a good thing to the extent that it allows Angelenos to stay informed and encourages them to engage in the debate about our future as a city.

The City Council is fully committed to working together and with our Mayor, city leaders, union leaders, and community stakeholders to close the current year budget gap as well as provide laser-like focus on planning for future years. Our goal will be to protect core services and maintain our city’s financial health, and failure is not an option.

The City Council did not form the citywide Neighborhood Council (NC) System — or the Department of Neighborhood Empowerment — the voters did.

The Charter-mandated NC members are more than advisers to the individual City Councilmembers. They are extensions of the Councilmembers themselves into their respective districts and communities.

From Sylmar to San Pedro, from Woodland Hills to Westwood, from Del Rey to Downtown, from Boyle Heights to Bel-Air/Beverly Crest, from Hancock Park to Harbor Gateway, from Sunland-Tujunga to South LA, NCs are funding projects for youth and seniors, for the hungry and disabled, and for the cultural and performing arts.

NCs help City Councilmembers by providing an open forum to air constituent issues, by vetting zoning applications, and even screening liquor licenses. NCs are the eyes and ears on the streets for Councilmembers to help reduce crime, to prevent and paint over graffiti. NCs also perform valuable in-depth community outreach for each Councilmember whenever they request it.

Crime is down across the City of Los Angeles, in no small part because of the effectiveness of NC Neighborhood Watch and NC Public Safety activists who supplement the work of the Los Angeles Police Department. That’s why LAPD Chief Beck and Assistant Chief Moore find NCs invaluable partners in their work to reduce crime and promote positive community involvement on the streets of Los Angeles. NCs have worked hard to protect children and neighborhoods from the ravages of gangs.

Without strong funding of the NCs, crime will go up. The choice is not NCs or cops, because the money that funds the extraordinary works of NCs in the communities is a virtual drop in the bucket for the City and constitutes its best possible use of funds.

Appropriate funding of NCs puts CERT boots and other volunteers on the ground within minutes at emergencies before fire and police personnel can arrive. NC members were the first-responders to help survivors at the Metrolink 111 crash in Chatsworth. They were the initial evacuators of burn and smoke victims at the deadly Sayre and Station Fires. They are the ones who are helping Los Angeles with citywide emergency preparedness before future catastrophic events strike.

Thousands of hours of service are provided each day by NC members at no salary, no pension, no compensation and no reimbursement of personal expenses.

The citywide structure of NCs is a complex, deep and rich one that reaches out to every community, every neighborhood and every street. The Department of Neighborhood Empowerment structure helps 90 Neighborhood Councils to function and it needs energy, life and dependable, adequate funding so the NC system itself can breathe and function.

NCs are not insensitive to the extraordinary financial crisis facing the City of Los Angeles. They want to be partners with the City. With that awareness, the Board of Neighborhood Commissioners unanimously voted to recommend the following formulas for the City Council to consider:

1) An additional 10% cut in the annual Neighborhood Council funding program on top of the 10% cut taken already less than a year ago;
2) a 10% cut in the NC rollover monies in 2010;
3) a sweep of any unused, unencumbered rollover funds in the following fiscal year; and,
4) a 10% cut in staff for the Department of Neighborhood Empowerment above and beyond the deep staff and funding cuts the Department has already taken over the last 18 months.

We know that the City Councilmembers appreciate the value of the Neighborhood Council system. Not only are NCs the heart, soul and conscience of democracy itself at the grassroots level, they are the best bang for the buck for the City of Los Angeles.

The Office of the City Administrative Officer (CAO) released its Mid-Year Financial Status Report and Plan today.  The Report contains the following recommendations affecting the Neighborhood Council system:

-Eliminating Neighborhood Council rollover funds and the “suspension and/or elimination of the NC funding program” (page 59, Item J) and further funding modifications (page 23).

-Laying off 19 filled Department positions, which with the elimination of the 5 vacant positions and 2 Early Retirement Incentive Program (ERIP), leaves 17 staff members to service the 90 Neighborhood Councils (page 135).

-Transfers to the Reserve Fund from the Department $151,000 in salary savings, which includes vacant positions and overtime funds (page 39).

-Proposes a Concept Paper (Attachment 13e) which recommends elimination of the NC Funding Program or that the rollover policy be eliminated and NC allocations be reduced or deferred.  It also recommends elimination of the bank card system and redefining/restricting NC expenditure categories.

There is also a proposal for a study to determine the feasibility of consolidating the Department with another larger City department.

BudgetLA will be meeting tomorrow, January 30, 2010, to discuss the impact of these recommendations on the Neighborhood Council system.  Please come and share your ideas.  The meeting will be at 10 a.m. at the Hollywood City Hall, 6501 Fountain Avenue, Los Angeles 90028 – a few blocks west of Vine Street.

These recommendations will be going before the City Council Budget and Finance Committee on Monday, February 1, 2010, at 1 p.m. at City Hall Council Chamber, 200 N. Spring St., Los Angeles.  Please click here for the agenda and to also access other related reports.

Photo by flickr LAFD

City Controller Wendy Greuel has released her appraisal of LA’s budget crisis and provided Mayor Villaraigosa, City Council President Garcetti, Budget & Finance Committee Chair Parks and the LA City Council with her “independent review” of the City’s General Fund cash flow.

“…the situation we are facing is so dire, I am compelled to update you now so that urgent action can be taken immediately. Failure to act now may cause catastrophic cuts to have to be made later this year. Based upon expenditures from the firt 14 pay periods, additional revenue shortfalls, and despite the beginning of the ERIP and other cost saving measures, I now anticipate that the City will face a $199 Million General Fund shortfall by June 30th – the end of the current fiscal year.”

Download letter from Greuel in pdf

His proposals to privatize prisons, curtail teachers’ seniority protections and reduce the number of in-home care workers would be major blows to powerful labor interests. They’re girding for a fight.

Reporting from Sacramento – Gov. Arnold Schwarzenegger has put organized labor squarely in his cross-hairs in 2010, opening a fight that will largely determine the shape of his final year in office.

Schwarzenegger’s proposals would cut the size of the union workforce, reduce pay, shrink future pensions and roll back job protections won through collective bargaining.

Labor and the unions’ Democratic allies are already girding for battle.

“It’s a continuing jihad against organized labor,” said Steve Maviglio, a Sacramento-based Democratic strategist. “The governor thinks public employee unions are Enemy No. 1.”

Among the plans in the governor’s budget: privatize prisons, which would strip members from the influential guards union; curtail seniority protections for teachers, a key union-won protection; and reduce the number of sick, disabled and elderly Californians cared for through the state’s In-Home Supportive Services program — almost all union jobs — while cutting what their caregivers are paid.

Schwarzenegger also wants to permanently lower state workforce salaries by 5% without returning to the bargaining table with public-sector unions. And he would require state workers to chip 5% more into their retirement plans.

“The public sector also has to take a haircut,” Schwarzenegger said, arguing his policies would save California billions of dollars, now and in the future.

Matt David, Schwarzenegger’s communications director, says the governor’s proposed budget makes hard but necessary choices amid a $20-billion deficit.

“This budget wasn’t about attacking any specific group,” he said. “It was about trying to fix what’s broken in this state and prioritize the funding we have so we can protect education.”

Yet even in nonbudget proposals, union leaders see an antilabor agenda. For example, Schwarzenegger has pushed to limit seniority protections for teachers and expand charter schools, which are largely staffed by nonunion teachers. He argues both moves would improve the quality of schools.

Union leaders see their members as the targets. “That seems to be his goal, to basically change a unionized sector of the economy to a nonunion sector,” said Marty Hittelman, president of the California Federation of Teachers.

The unions have spent millions to thwart some of the governor’s past initiatives and hope to do so again.

“To go after unions means tearing down the middle class,” said Laphonza Butler, head of United Long Term Care Workers, a branch of the giant Service Employees International Union that represents 180,000 in-home services workers.

Democratic lawmakers, who hold the majority in the Legislature and are the largest recipients of union campaign money, thus far have given the governor’s plans a chilly reception.

“I did take note that in his State of the State address [the governor] said that we had only Sophie’s choices,” said Sen. Mark Leno (D- San Francisco). “Do we harm seniors, do we harm the disabled, do we harm the poor? But you didn’t hear him suggest there were tax loopholes we could close to pinch corporations.”

State Treasurer Bill Lockyer, a Democrat, explained the legislative balance of power during impassioned legislative testimony last fall: “It’s impossible for this Legislature to reform the pension system,” he said. “I don’t think anybody can do it here — because of who elected you,” he added, making a barely veiled reference to labor’s power.

Top Democratic lawmakers have suggested Schwarzenegger is driven by a corporate special interest agenda.

Assembly Speaker Karen Bass (D- Los Angeles) dismissed the governor’s prison privatization plan as a sop to “another special interest, and that’s the private prisons industry.” One company that operates private prisons, the Corrections Corp. of America, donated $100,000 to the budget ballot measure campaign championed by the governor last year.

From his earliest days as a candidate, Schwarzenegger has railed against the grip of “special interests” on Sacramento. More often than not, he has defined them as organized labor.

Joel Fox, a business advocate who worked closely with the governor during his last big union battle in 2005, said that agenda “goes back to his election in the recall.”

“He had a mind to fix the problem and restructure the way government operates,” Fox said. “The structure right now is heavily controlled by the unions.”

In 2005, Schwarzenegger went to the ballot with four measures that would have rolled back pensions, unions’ abilities to collect dues and job protections.

The unions fought back with a $100-million campaign and defeated all four of the governor’s proposals. Schwarzenegger vowed a more contrite approach en route to his reelection in 2006.

But 2010 has seen a return to confrontation. In part, that’s driven by the state’s huge deficit. In some state programs, particularly healthcare, most of the money pays directly for services. But in most other parts of the state budget — schools, prisons, parks — cutting spending mostly means tackling payroll.

One notable shift from the 2005 battle is that Schwarzenegger has moderated his tone. This year he justified privatizing prisons because it would “save us billions of dollars.” In 2005 he vowed to put “the corrupt people in our prisons on the same side of the bars.”

The strategy of softening rhetoric while still pressing severe proposals dovetails closely with the negotiating philosophy of his influential chief of staff, Susan Kennedy: Always leave interest groups with something to lose.

The California Correctional Peace Officers Assn. has responded to the governor’s plans with a TV ad declaring itself part of the solution for “real reform” in the state’s beleaguered prison system. The union stopped short of attacking Schwarzenegger directly.

“It’s politically smart not to scream bloody murder for your own pet cause when everyone is being slashed,” said Maviglio, the Democratic strategist. But he predicted that Schwarzenegger’s “divide and conquer” strategy — forcing each union to defend its turf simultaneously — could result in a reprise of labor’s united, multimillion-dollar political fight of five years ago.

“It wouldn’t surprise me,” he said, “to see the same 2005 coalition resurrected.”

shane.goldmacher @latimes.com

Copyright © 2010, The Los Angeles Times

The receipts are now projected to be $185.9 million below the adopted budget and $100.6 million below the September and November revisions included in earlier financial status reports.

Download letter in pdf here.

Panel Predicts Major Restructuring to Stave Off Bankruptcy

by Ryan Vaillancourt, Staff Writer

DOWNTOWN LOS ANGELES – In the face of a $400 million budget deficit, the city of Los Angeles is going to have to make significant cuts across city departments, and the perennially untouchable land of public safety can no longer be spared. Otherwise, the city may be headed toward bankruptcy.

That was the overarching tone of a sobering panel discussion sponsored today by the Central City Association. The event at the Millennium Biltmore Hotel featured a trio of key city budget officials, along with Julie Butcher, regional director of labor union SEIU 721, which represents public employees.

Councilman and former police chief Bernard Parks, who heads up the council’s Budget and Finance Committee, said that cuts to public safety are inevitable. The LAPD currently accounts for 27% of the city’s budget costs, and the Fire Department accounts for 9%, according to a presentation by panelist Miguel Santana, the city’s chief administrative officer.

Santana and panelist Gerry Miller, the city’s chief legislative analyst (who functions as the council’s top advisor), both said the city will have to make cuts everywhere and find efficiencies wherever available.

“But the other city departments don’t offer the same kind of opportunity [for savings] as public safety,” Miller said.

Parks, along with the other panelists, acknowledged that bankruptcy is a legitimate concern, but said that it can be staved off with the right collective will.

“I don’t think anybody wants bankruptcy on their resume,” Parks said. “Sometimes city government works best when it’s forced to move.”

Contact Ryan Vaillancourt at ryan@downtownnews.com

LA Times, by David Zahniser and Maeve Reston, January 22, 2010

Even as city officials plan to shed 1,000 jobs to patch a nearly $200-million budget gap, Los Angeles Mayor Antonio Villaraigosa intends to continue hiring police officers, a top aide said Thursday.

Deputy Chief of Staff Matt Szabo said Villaraigosa wants to keep recruiting enough officers to replace those who resign or retire — leaving the Police Department with 9,963 sworn officers — as he and the City Council press ahead with major reductions elsewhere.

“I think there’s consensus on that concept,” Szabo said.

Villaraigosa and five council members tried to display unity Thursday by releasing a letter calling for the job cuts. Yet at least two council members who signed the document, Bernard C. Parks and Jan Perry, said the city also needs to halt police hiring to balance the budget.

“I don’t think you can avoid it,” Parks said at a panel discussion hosted by the Central City Assn., a downtown business group. The session was titled “Is L.A. On the Road to Bankruptcy?”

“You don’t continue to hire more people when you have people taking furloughs,” said Perry, at a separate event.

Parks and Perry made their remarks hours after the city’s top budget analyst revealed that midyear tax revenue is $186 million lower than expected. Tax revenue has declined by double digits for four straight quarters, the worst drop since the Great Depression, City Administrative Officer Miguel Santana said.

To deal with the downturn, Villaraigosa and council members have agreed to slash payroll costs by allowing 2,400 civilian employees to retire up to five years early. But the city’s budget picture is so dire that Santana predicted 1,000 jobs would need to be eliminated, in addition to the 1,000 mentioned in Villaraigosa’s letter, over the next two years to keep the city afloat.

“Our revenues are not going to catch up to the costs of our pension system and our salaries and benefits. [They're] just not,” he said.

Szabo said hundreds of layoffs would probably be avoided if the city allowed additional employees to take early retirement. Or they could be moved to jobs not paid for by the city’s general fund, which covers basic services including public safety. City leaders would also begin looking at services that can be done more cheaply by private contractors, he said.

“Our job is to make sure the job gets done, not necessarily to make sure it’s done by a city employee,” Szabo said.

That concept drew fire from a spokesman for the Coalition of L.A. Unions, which represents 22,000 city workers. Outsourcing city jobs would do little to solve the city’s fiscal crisis and is not “structural change,” said Victor Gordo, secretary-treasurer for the Laborers’ International Union of North America Local 777.

“All it does is take money from employees and opens the door to giving it to private contractors, and in the end, it’s the people of Los Angeles who will be left holding the bag,” Gordo said.

david.zahniser@latimes.com

maeve.reston@latimes.com

Copyright © 2010, The Los Angeles Times

Downtown Councilwoman Talks Bankruptcy, Hiring Freeze

by Anna Scott, Staff Writer

DOWNTOWN LOS ANGELES – Ninth District Councilwoman Jan Perry said Thursday that Los Angeles faces a real threat of bankruptcy, and that the city should freeze all hiring, including police officers, to address a nearly $200 million budget shortfall.

Perry’s remarks were delivered during a Downtown luncheon hosted by the Los Angeles Current Affairs Forum. “I have to laugh when I hear people thinking that it’s not real,” Perry said of the possibility of bankruptcy. Regarding LAPD hiring, she said, “In my mind, you don’t continue hiring people when you have people on furloughs.”

The talk came the same day the Los Angeles Times reported on a letter signed by Mayor Antonio Villaraigosa and five City Council members (including Perry) and addressed to City Administrative Officer Miguel Santana, calling for the elimination of 1,000 city jobs in the next six months. “I’m very pleased that the letter is out,” said Perry, because now the city’s true financial predicament “is out there.”

Perry, without specifically naming former Community Redevelopment Agency CEO Cecilia Estolano, also criticized Estolano’s tenure at the agency.

“I didn’t like the direction the agency had taken,” she said. “It had taken on the veneer that it had a moral imperative, and if you didn’t share that moral imperative then you were demonized.”

Perry added that she was happy with recent “changes” at the CRA.

Contact Anna Scott at anna@downtownnews.com.

The letter calls on Santana to balance the budget, strengthen the city’s credit rating and restore the city’s long term fiscal health and sustainability.

The letter, including the specific recommendations, is attached.

Take a look and leave us your comments at BudgetLosAngeles@gmail.com or here in the comment box below.

Download letter by the Mayor in PDF

NEW: Read the Mayor’s 09 Budget Summary Here

Shared Responsibility and Sacrifice:
Saving Jobs and Protecting Services

Preparing this year’s budget in the midst of a severe national recession presented many challenges and tough choices. Rising unemployment, a high foreclosure rate and the credit crisis have hit Los Angeles just as hard as they have hit families and industries across our country.

The City of Los Angeles provides vital public services, those closest to home. And the City charter requires that the annual budget be balanced. So we face a simple but stark choice in closing an estimated $530 million budget deficit: deeply slash municipal services at the time when families and businesses need them most, while pushing thousands of city employees into unemployment? Or seek fresh ways to live within our means?

The choice is clear. These extraordinary circumstances demand a fresh approach, shared responsibility and shared sacrifice, and the willingness to make lasting changes that close the gap today and lay the groundwork for a secure tomorrow. Therefore, my proposed FY2009-10 City Budget closes the deficit in ways that minimize layoffs and keep vital services intact.

I know that shared responsibility and shared sacrifice is already at work in the homes and businesses across Los Angeles. Working families are stretching and cutting. Employees in the private sector are working fewer hours or taking pay reductions to maintain their jobs and the jobs of their coworkers. Families are reaching out and taking in their relatives in need. These are difficult choices, but the sense of shared responsibility and shared sacrifice is the only way to weather this economic crisis together, and to emerge stronger when we recover.

Our City’s challenges are similar, as is our obligation to weather this crisis with shared responsibility and shared sacrifice. Some of the proposed solutions are as follows:

* Most city departments have been required to cover next year’s increased costs without additional funding. To achieve this, my budget eliminates more than 1,000 vacant positions, and trims less essential programs and services.
* To reduce overhead and concentrate scarce resources, I propose to consolidate several smaller departments.
* The City’s vehicle fleet has been reduced and the replacement cycles for office equipment have been extended.
* Contracts have been renegotiated or in some cases discontinued.
* We are moving forward with a series of responsible public-private partnerships and advertising opportunities which could generate hundreds of millions in revenue over the next several years.

These solutions alone will not balance the budget. In total, if no other action is taken, the remaining deficit would require the equivalent of 2,800 layoffs this year alone. I have already asked the Personnel Department to begin the process for approximately 400 of those layoffs. But layoffs of this magnitude and the service cuts they represent are, in my view, simply unacceptable.

I therefore have proposed more than $200 million in savings to be achieved through ongoing negotiations with city employees and their union representatives. My proposed budget anticipates these savings from every department, including the police and fire departments. And my proposal includes equivalent cuts to the budgets of the City Council, City Controller, City Attorney and Office of the Mayor, including a cut to my own salary.

The full menu of options we can pursue in partnership with city employees and their union representatives to save jobs and maintain services are listed in Exhibit H of my FY2009-10 proposed City Budget, and include the following:

* If every employee took off just one unpaid hour per week, we could save $52 million and prevent more than 580 layoffs
* If each employee contributed just 2% more to our retirement benefits, we could save $63 million and prevent more than 700 layoffs.
* By simply deferring automatic pay raises, we could save $117 million and prevent 1,300 layoffs.

I know these options aren’t easy. Overcoming these challenges will demand patience, focus, collaboration, and creativity. But there are critical city services and thousands of jobs at stake. During this time of crisis, it is up to all of us to think of the greater good, see the bigger picture, and take action to protect jobs and preserve vital services when our families need them most. If we work together as a city, I KNOW we will weather this storm, find a better way forward, and lay the foundation for a brighter future.

Very truly yours,

Antonio R. Villaraigosa