The Los Angeles City Council voted today to declare a fiscal emergency and approved plans to furlough more than 15,000 city employees and carry out early retirement buyouts for another 1,280 employees to try to recoup as much anticipated lost revenue as possible due to the COVID-19 pandemic.
Revenues for the 2021 fiscal year are currently difficult to forecast due to the pandemic, with the City Administrative Officer’s staff reporting they could come in anywhere between $45 million to $409 million below the estimate of $6.68 billion.
City Administrative Officer Richard Llewellyn estimated that Los Angeles has already lost more than $50 million, while noting that revenue projections were based on the economy reopening more fully by July than has occurred.
“We know now … that the best-case scenario ain’t gonna happen,” said Councilman Paul Krekorian, who chairs the council’s Budget and Finance Committee. “So that means … even after we enact furloughs, we’re still going to have a shortfall in revenues that’s going to have to be accommodated.”
Each pay period’s furloughs of city employees represents a savings of $5.79 million, or $104.2 million in fiscal year 2020-2021, according to city documents, so the council may still have to find additional savings.
The furloughs, which equate to about 10% of an employee’s annual salary, are set to begin Oct. 11.
Although Los Angeles is set to receive about $694 million in federal Coronavirus Aid, Relief and Economic Security Act funds, that money cannot be used to replenish lost revenues, only to respond to the pandemic.
City Council members said without implementing the furloughs, they would have to consider laying off employees.
For the early retirement program, the city set a minimum 1,300 participation number, but the council voted to get rid of that requirement as the number of those volunteering to retire came up just short. City staff estimates the buyouts could save the Los Angeles an additional $13 million.
“We can’t sit and hope that Washington will ride to the rescue,” Krekorian said. “We can’t hope that we can reopen negotiations with labor, and within a month, get a solution that is going to save hundreds of millions of dollars. It’s unrealistic and we have to do the realistic thing of acting on these furloughs so that we don’t have to act on worse-(case) scenarios in a few months, because I can guarantee you that if we don’t, we will be faced with choices that are much harder.”
In an opinion piece published Wednesday in the Los Angeles Times, Councilman Mike Bonin laid out a proposal for the council to defer raises and bonuses for the Los Angeles Police Department’s union members.
“These police union raises are forcing budget cuts that will make Los Angeles less healthy, less secure and considerably less safe,” Bonin said.
“Los Angeles cannot adequately protect, serve, or provide for its residents with these cuts and furloughs.”
According to Bonin, members of the police union are getting a 4.8% raise, plus $41 million in new educational bonuses, totaling about $123 million this fiscal year. LAPD officers will get an additional raise in 2022. Meanwhile, cuts to the salaries of other city employees through furloughs will “sharply reduce city services, including public safety programs,” he said.
Llewellyn said any adjustments to the early retirement program or the furloughs would have to be renegotiated with the city’s labor union — something that Los Angeles doesn’t have time to do amid looming budget deadlines, but he said further discussions could take place with certain departments on how to find additional savings.
“Our labor partners came to us and said, `We think we should look at a separation plan as sort of a long-term structural assistance with the choppy waters we were heading into potentially for several years,” Llewellyn said. “Nobody likes furloughs and nobody likes separation plans, nobody likes service cuts, but the separation plan seems to be a reasonable way to proceed.”
Bonin’s deferral motion failed to get support, and he also failed to convince his colleagues to exempt Emergency Management Department employees from furloughs.
One of the red flags council members have brought up in committee meetings is the city’s dwindling reserve funds that were used to respond to the COVID-19 pandemic.
The city’s reserves in the 2020-21 fiscal year are expected to be below the city’s minimum target of 2.75% of the general fund, with about $227 million remaining, but the council voted to find ways to move funds from various departments and resources to raise the reserve fund to $284 million, according to city documents.
This is still well below the city’s aspirations of having 5% in reserves across the board and lower than the almost 8% it had prior to the pandemic.