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L.A. faces $1-billion deficit by 2013; budget chief calls for pension reforms

November 25, 2009 |  1:26 pm
Los Angeles could be facing a $1-billion deficit by the time Mayor Antonio Villaraigosa wraps up his second term in 2013, a dire forecast driven primarily by escalating employee pension costs and stagnant tax revenues, the city’s top budget analyst said today.

The grim budget outlook comes a day after the city’s credit rating was downgraded by Fitch Ratings, which will probably make it more expensive for the city to borrow money.

City Administrative Officer Miguel Santana, L.A.'s top budget official, told the City Council that deep, severe cuts to departments and services are unavoidable if the city hopes to repair its finances, and that both the mayor and council must consider creative ways to raise revenue, including privatizing the Los Angeles Convention Center and L.A. Zoo.

Closing the budget shortfalls in the years ahead also will require significant reform of the city pension systems, such as creating a lower tier of benefits for retiring city employees. That would require voter approval, Santana told the council.
“None of these solutions are easy," Santana said.

L.A. faces a $98-million shortfall in the current budget year, and the city will probably be forced to dip into its emergency reserve fund to cover the gap. Such a move would probably lead to another downgrade of the city’s credit rating, he said.

The budget outlook comes even after the mayor and council shaved city spending by more than $300 million this year, mostly by cutting salaries of employees and trimming 2,400 jobs from the payroll though an early retirement program.

“It’s no longer an issue of saving a program or saving a department; it’s about the financial health of the city," said Councilman Bernard C. Parks, chairman of the Budget and Finance Committee.

-- Phil Willon at L.A. City Hall

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