A word about the budget…

This week, Los Angeles County—like local jurisdictions throughout the state—will officially open budget season when the County’s Chief Executive Officer unveils his proposed spending blueprint for the 2010-11 fiscal year beginning on July 1.

Like cities and counties throughout California, our County has been squeezed hard by the ailing national economy and lagging tax revenues. Thankfully, for all that, we are still in much better financial shape than most of our urban local government colleagues.

At a time when the budget woes in the City of Los Angeles seem to lead the news on a daily basis, people often ask me how the County has managed to stay solvent and financially stable. It was not always this way, but the reasons today are pretty simple: Since 1995, we have managed our finances with prudence and restraint. In short, we have lived within our means.

For me and my fellow members of the Board of Supervisors, the events of early 1995 taught us a harsh but essential lesson in fiscal discipline. Shortly after I was sworn in as County Supervisor, and not long after Orange County declared bankruptcy, Los Angeles County was faced with near bankruptcy itself, because at that time we were spending $1 billion a year more than we were taking in—by any definition, a prescription for trouble.

I remember the day we were advised that one of the banks that was holding our bonds wanted to have a conference call with the Board of Supervisors—all five of us. The bank—based in Switzerland—informed our Executive Officer that they were scheduling the call for a Tuesday at 10:00 a.m. They were told that would be impossible, because it would conflict with the Board’s weekly public meeting every Tuesday at 9:30 a.m.

Zurich replied loud and clear: “We will call at 10:00 a.m. on Tuesday, and we want the entire Board on the call.”

When your bank lender calls like that, you better take the call, so at the appointed hour we recessed our meeting and reconvened in a conference room with our bankers on the speaker phone. They wanted to know how serious we were about getting the county’s finances in order, and specifically: What we were going to do about it? How would we address our employee compensation issues? Were we prepared to cut spending in other areas? Were we willing to pare down the number of County employees? What steps were we prepared to take to ensure that our budget would be structurally sound, not perpetually out of whack?

We assured our Swiss partners that we were serious and outlined exactly what we were prepared to do. Not only did we convince the Swiss bankers, even more importantly we convinced ourselves. From the moment we hung up the phone on that call, we collectively committed never again to allow ourselves to come face-to-face with municipal bankruptcy.

Since then we have operated on a set of basic but essential fiscal principles. When times are flush, we don’t initiate programs that we can’t sustain through the inevitable lean years. And that’s also the moment for us to set aside a healthy reserve on which we can later draw to see us safely through the inevitable hard times.

Equally important, we have cultivated and nurtured an open and mutually trusting relationship with our employee organizations, asking their members to join in the necessary sacrifice during tough times with the expectation that we would make it up to them when the economy got well again. As much as anything, this partnership based on mutual respect and trust has helped smooth out the peaks and valleys that most other governments are struggling with today.

So, here we are, two years into the worst economic downturn since the Great Depression, and the County has avoided the kind of draconian measures that the State of California and many local governments have already been forced to embrace. We have seen no mass layoffs; no furloughs; no pay cuts. Not yet.

The paradox of county budgeting is that demand for our brand of social services—health and mental health care, child protection, public assistance, juvenile justice—tends to rise dramatically just when the economy and revenues are slumping. It makes running a county significantly more complicated than a city, which primarily takes care of municipal services and infrastructure maintenance than human services like health and public welfare.

Make no mistake, the county’s proposed budget for the upcoming fiscal year will be lean with cuts that will be felt. It calls for the elimination of more than 1,000 positions that are now vacant as well as a relatively small number of layoffs. While we’ll be unable to significantly expand our programs, we won’t be slashing them, either.

Sheriff Lee Baca, for example, will be downsizing one of his jails, but has avoided shutting it down altogether. We may have to consolidate the services provided at our Community Public Health Centers, but the services will continue to be available. And, some of our libraries may have to reduce their hours, but no one is closing their doors.

If the economic recovery, of which there is some evidence, should once again slip into reverse, even the most tightly managed County budget will take further and more painful hits. On the bright side, if things continue to pick up, and our tax coffers are steadily refilled, the County will make it through the current economic crisis without great drama.

Ongoing fiscal discipline and an unshakeable commitment to living within our means have served us well for the past 15 years. Had we managed our finances less prudently, we would once again find ourselves teetering on the brink of insolvency. But because we can remember our fiscal past, we are not condemned to repeat it.

Posted 4-19-10

Click here to read more blog entries.