SAN FRANCISCO — Los Angeles Mayor Antonio Villaraigosa late Thursday ordered administrators in the nation’s second-biggest city to begin cutting 1,000 jobs to help close a $212 million general fund budget deficit in the fiscal year that ends in five months.
Chief administrative officer Miguel Santana urged the City Council to take immediate action to balance the budget Wednesday, warning that the city could face multiple-notch credit rating downgrades without action.
But the council delayed action on the budget-balancing plan for one month after labor and community groups lobbied to the block cuts.
“We have been living beyond our means, and now we have difficult choices to make,” Villaraigosa said in a statement announcing his layoff order. “Each day we fail to act, we lose an estimated $300,000.”
The Democratic mayor also requested that the council return $40 million of its uncommitted funds to the reserve fund, which was forecast to end the year at $232 million, or 5% of expenditures, before an unexpectedly large drop in revenues hobbled the city budget.
Santana said the city’s deficit for the current year would have been $515 million if not for cuts already agreed to by a coalition of labor groups.
The new job cuts will be targeted at labor groups that didn’t sign on to
the concessions and at non-union employees.
Villaraigosa asked the city Personnel Department to move as many of the workers as possible to open positions at the city’s enterprise funds, including the Los Angeles Harbor Department, the Los Angeles Department of Water and Power and the Los Angeles World Airports.
The city began the year with an unbalanced budget, hoping to exact enough concessions from labor to bring spending back into line with revenues, but it has suffered sharper-than-expected declines in tax collections in the 2009-10 fiscal year. Sales taxes are down 11% from a year ago.
“The last time we’ve seen such a dramatic drop in revenue was during the Great Depression,” Santana told the City Council Wednesday, calling the situation a “crisis.”
He pushed for quick action to help protect the city’s reserve fund and credit ratings.
Santana said he recently met with all three credit rating agencies and expects downgrades, but he wants to limit the severity of the downgrades to maintain access to low-cost capital next year.
Los Angeles’ general obligation bonds are currently rated AA-minus by Fitch Ratings, AA by Standard & Poor’s and Aa2 by Moody’s Investors Service. Fitch downgraded the city in November.
“It is hard to imagine how we’re going to make it through next year without having to do some level of borrowing,” said Santana, adding that his staff is looking at options such as a pension bond issue to ease next year’s budget crisis.