The Neighborhood Council Budget Advocates, in a meeting on Wednesday, voted not to support Prop. A, the half-cent sales tax on the March 5 City of Los Angeles primary election ballot.
With voters about to install a new mayor, controller and up to eight new City Council members, now is not the time to raise the city's sales tax.
The city of Los Angeles is facing a deep budget deficit for the seventh consecutive year.
The cost of city services, particularly labor, is expected to grow faster than revenue, even as the economy recovers from the 2008-09 recession. The solution, according to City Administrative Officer Miguel Santana and City Council President Herb Wesson, is Prop. A.
The Budget Advocates urge a no vote on Prop. A.
The recession hit Los Angeles hard, causing unemployment to skyrocket , revenue from property ands sales taxes to drop.
It could not have come at a worse time for city finances – a few months before the recession, in late 2007, Mayor Antonio Villaraigosa and the City Council had agreed to contracts that promised to raise thousands of city workers' pay by 25 percent over five years.
The recession also hammered the city's pension fund, forcing the city to increase its annual contributions to start making up for investment losses.
By 2009, city officials were projecting a persistent deficit that would grow to $1 billion by fiscal year 2011-12.
Creative When Necessary
Although they had to scramble repeatedly, Mayor Villaraigosa and the Council found ways to close the budget gap without borrowing money or raising taxes. Most notably, they persuaded the city's unions to let their members cover significantly more of the cost of their pensions and retiree health plans. They also persuaded the unions to defer – but not cancel – the pay hikes promised in their contracts.
Santana now projects that city revenue will fall $216 million short of the $7.2 billion needed to maintain the current level of services, with similar shortfalls expected in the next several years. Almost half of the city's revenue is dedicated to particular uses, such as roads or sewers; well more than half of the rest is spent on public safety.
For that reason, Santana and Wesson say any budget cuts this time will have to hit the police and fire departments hard. Santana estimates that the LAPD would lose about 5 percent of its force through attrition and layoffs; he has offered no specifics on cuts to the Fire Dept.
The issue for voters, though, is whether to accept the outgoing administration and Council's judgment on how to solve the city's enduring budget problems, or to give the incoming leaders a chance to set their own priorities. All five of the top candidates for mayor have argued against the tax proposal.
A related problem with the timing of Prop. A is that the generous 2007 contracts with public employee unions expire next year, setting up a crucial round of negotiations.
As Santana's budget projections show, the city's labor costs – particularly obligations on pensions and retiree healthcare – are likely to cause deficits even if voters raise the sales tax; the shortfalls two, three and four years from now are expected to be up to 50 percent larger than the one in the coming year.
By filling the short-term hole in the city budget, a tax hike now would dim the prospects of city leaders seeking, let alone winning, the concessions from unions on pay and benefits that the city badly needs for the long term.
They may be right that defeating Prop. A would lead to short-term pain. Indeed, the new city leadership may ultimately find that higher sales taxes are a necessary part of the long-term budget fix. They should have the chance to make that call – after getting through the coming contract negotiations – because the city's structural budget problems will soon be theirs to solve.
Mr. Handal, co-chair of the Neighborhood Council Budget Advocates, may be contacted at sgrest@aol.com
