Los Angeles chief administrative officer Miguel Santana last week told the City Council that the nation’s second-largest city faced a $98.1 million budget deficit this fiscal year.
The city may use money from its $267 million of reserves to cover the deficit.
“In the coming months, this office will continue to submit budget balancing options for your consideration,” Santana said in a report.
The general fund deficit is expected to expand to $408 million in fiscal 2010-11 and to more than $1 billion in 2013-14, according to a four-year budget outlook presented to the council’s Budget and Finance Committee.
The city began the current 2009-10 fiscal year with a $405 million budget deficit and negotiated about three-quarters of it away in deals with public employee unions. Among the labor cost savings, $47 million came from early retirements, $62.9 million from a police contract revision and $34 million from furloughs of city engineers and architects.
About $107 million of the savings negotiated this year will yield ongoing structural reductions in the city’s budget, while $298 million were temporary measures, according to Santana.
He said the major causes of the growing budget deficits are declining sales and hotel tax revenue and rising costs for salaries, health care benefits and pensions. The city expects sales tax and hotel tax collections to decline 7% in the current fiscal year.
Fitch Ratings last week downgraded Los Angeles’ general obligation bonds to AA-minus from AA. Standard & Poor’s rates the GOs AA, while Moody’s Investors Service rates them Aa2.
