City of Los Angeles Budget Overview Presentation 2012
City of Los Angeles Budget Overview Presentation 2012
City of Los Angeles Budget Overview Presentation 2012
March 2012
Topics
General Overview
Overview
Good News 2011-12 is in balance at this time Reserve Fund stable (no transfer required at this time) Projected shortfall for 2012-13 reduced from as high as $250 million to
is what supports most of the municipal services in the City such as Fire and Police services.
FISCAL YEAR 2011-12 BUDGET COMPONENT City Budget General Fund Special Funds Proprietary Department Budgets Airports Harbor Water and Power
AMOUNT ($ Millions)
Authorized Positions
$6,872
$4,386 $2,486
32,274
22,103 10,171
generated for a specific purpose, typically approved by voters for a specific service like sewer construction.
Proprietary Departments
are governed by separate boards but still fall within the jurisdictional review of the Mayor and City Council.
47,126
fluctuates depending on economic conditions. Diversity of revenues helps stabilize revenue volatility.
are made on the budget year after year pertain to the General Fund.
General Fund 64%
flexibility but provide stability for the City and its services by ensuring a dedicated source of funding for key services.
Top 6 economically
Documentary Transfer Tax, 2% Transient Occupancy Tax, 3% Other Taxes, 2% Power Revenue Transfer, 6% Other Transfers, 1% Other Revenues, 5%
3.5
1.9% 0.8%
0%
2.5
-5%
-4.8%
2.0
1.5
Budget
Major General Fund taxes currently account for more than 70% of all General Fund revenue. The balance is fees, transfers from other funds, interest income etc. These taxes grew at an average annual rate of 3% during this period, but it took 5 years to exceed 1991-92 revenue after the recession of the early 1990s and it will take at least another year to restore these City taxes to the 2008-09 level.
$ Billions
5%
3.0
$4.1 million. Beginning 2012-13, ongoing reduction will be $15 million. Power Transfer: Audited financial statement for the Power Revenue Fund reduced the budgeted transfer from that fund by $3.9 million.
Risks to Revenue: Documentary Transfer Tax: receipts through January are slightly above last years level,
but are $3.6 million below budget. Utility Users Tax: because of falling natural gas prices, gas users' tax receipts will fall below budget by about $6 million.
Revenue Growth: Two economy-sensitive revenues are showing growth reflecting
improvements in the local economy. Sales Tax: Receipts to date are currently $7.6 million above plan however, no adjustments are recommended at this time. Taxable sales for the Christmas quarter will be available in late March and that will provide a basis to revise the sales tax estimate. Transient Occupancy Tax receipts are $8.9 million above plan at January. Based on strong growth in all segments of the travel industry and increasing occupancy and room rates, this revenue will likely exceed budget. The estimate will be revised after reviewing tax receipts for February and March.
receipts through January are slightly above last years level, but are $3.6 million below budget.
Actual
Budget
200
175
falling natural gas prices, gas users' tax receipts will fall below budget.
UTILITY USERS' TAX 12-MONTH MOVING SUM ACTUAL
685
$ Millions*
150
125
107 102
100
75
04
05
06
07
08
09
10
11
12
REVISED
PROPOSED
660
$ MILLIONS
635 $628
$625
610
585
06 07 08 09
FISCAL YEAR ENDING
10
11
12
460
2011-12 Estimates
18%
440
9.6%
12%
420
$ Millions
6%
400
0%
380
xb
-6%
360
-12%
-17.1%
-18% 10 11 12
Sales tax performace has been steadily improving and increased by 9.6% in the Summer quarter. The City tax rate was changed from 1% of taxable sales to 3/4% as part of a state budget balancing plan. The 1/4% is now remitted to the City as part of the property tax. For comparative purposes, this table shows sales tax at the 1%-tax rate.
160
150
$ Millions
140
130
120
110 06 07 08 09
Fiscal Year Ending
10
11
12
10
months for Business Tax. The budget for this year is $439 million which is $20.8 million more than last year's actual receipts.
Recent City changes to taxation of mutual funds are projected to reduce
$423 million which is $16 million less than budget. However, more will be known after March.
General Fund revenue. Pursuing the recommendations from the Business Tax Advisory Committee will result in the loss of $106 million in revenue for the first year and another $106 million in each of the next four years. This Office contracted with a firm to complete a study of a variety of business tax options, and further information will be provided at the conclusion of the study.
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to be a priority for the City, with the Police and Fire Departments accounting for more than a third (37%) of total General Fund Appropriations.
appropriation is to Pensions and Retirement (20%) which almost equals the collective amount budgeted for all other City departments (21%).
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Fire Departments accounted for only 37% of total General Fund Appropriations, combined they account for over 70% of unrestricted revenue expenditures. These expenditures include their allocation of pensions and health care costs.
Fire 17%
Library 3.7%
Restricted Revenues
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the Fiscal Year that it has addressed through interim budget actions. The pattern of reporting shortfalls during the year will continue as long as the City is confronted by restricted revenue growth and increasing costs. For this year, the deficit has been addressed.
Citywide Mid-Year Deficits Addressed (millions)
2008-09 $110
2009-10 $209
2010-11 $54
2011-12 $72
$155
($72) million
Other Remaining Solutions Deficit $30 million ($20) million Mid-Year FSR Revised Deficit ERIP $19 million Other Remaining Solutions* Deficit $27 million ($0) million
($46) million
200
100
120.6 50
120.6
120.6
120.6
120.6
Current
5 Percent
Higher than projected departmental savings resulted in a Reserve Fund balance on July 1, 2011 that exceeded the 2011-12 adopted budget by $23.5 million. The current Reserve Fund Balance is nearly $199.8 million (4.56% of the General Fund), after providing for transfers and loan repayments. Meeting the 5 percent requirement established by the Citys Financial Policies would require a balance of $219.3 million, or an increase of $19.5 million. FY 2001-02 first and last time Reserve Fund was budgeted at 5% or more of the General Fund.
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Other reasons for maintaining a strong Reserve Fund: Ardon v. City of Los Angeles related to the Telephone Users Tax.
Unknown liability.
Sluggish economic recovery. Actions by the State or Federal governments
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Issues of Concern and Challenges: Actions the State and Federal Governments
Actions by the State on its budget will
continue to have an impact in the City (e.g., additional cuts will be triggered due to revenue targets not being reached). Additionally, the State eliminated the Citys VLF payment as of July 1, 2011. The cut in 2011-12 was partially offset from prior year payments and additional grant funds. However, the Citys loss in 2012-13 and beyond will be $15 million. More recently, the LAO has pegged the States deficit at nearly $13 billion as opposed to the more optimistic forecast used by the Governor of $9.2 billion.
the deficit may result in reductions to Federal grants received by City departments including the HOME Investment Partnerships program, the Community Development Block Grant (CDBG) program, and proprietary departments.
Photo: US Capitol Building
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Compensation, 2) Health Benefits, 3) Pension Contributions, and 4) Workers Compensation will significantly increase from the current base level of $4,077 million for 2011-12. However, General Fund Revenue during this same period is not expected to increase at the same rate.
Five Year Projections of Cumulative Labor Cost Increases Compared to Cumulative General Fund Revenue Increase for Same Period (Base Year FY 2011-12)
$1,000
$943 $828
$800
$683
Millions $600
$479
$400
$208
$200
$205 $73
4 Key Labor Cost Drivers - Cumulative Increase Above FY12 Base of $4,077 million General Fund Revenue - Cumulative Increase Above FY12 Base of $4,386 million
Revenue Growth: 1.7% for FY13; 3% for FY14; 3% for FY15; 3.5% for FY16; 3.5% for FY17 Pension Returns: 0% Market Value of Assets for FY12; 7.75% per year thereafter Authorized City Staffing in FY12: 32,274
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Five Year Projections of Cumulative Labor Cost Increases from Current Level (Base Year FY 2011-12)
$943 $900 $700
Millions
$127 $53
$311
$98 $137
$100 $(100)
20
$218
$125 $(47)
-1 3
-1 4
-1 5
-1 6
12
13
14
15
20
20
20
Fiscal Year
Pension Returns: 0% Market Value of Assets for FY12; 7.75% per year thereafter
20
16
-1 7
19
25%
20%
15%
10%
5%
0% FY2006-07 FY2007-08 FY2008-09 City Attorney (29) FY2009-10 Coalition FY2010-11 EAA FY2011-12 Sworn FY2012-13 FY2013-14
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$1,288
$107
$1,281
$130
$80
$1,181
$1,137
$1,151
$52
$1,078
$19
$988
$858
Fiscal Year Combined Total: April 2011 Combined Total: Jan & Feb 2012 (0%) Combined Total: Jan & Feb 2012 (7.75%)
April 2011: 8% Return on Market Value of Assets for 2010-11 and 8% per year thereafter. Jan & Feb 2012 (0%): 0% Return on Market Value of Assets for 2011-12 and 7.75% per year thereafter. Jan & Feb 2012 (7.75%): 7.75% Return on Market Value of Assets for 2011-12 and 7.75% per year
thereafter.
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Estimates in July 2011 showed the deficit for FY2012-13 at around $200 million. However, revised estimates are being developed and may move the deficit closer to $220 million.
$5,400
$5,307
$5,200
$5,131
$5,000 ($Millions)
$4,937
$4,951
$4,800
$4,723
$(220)
$4,600
$4,386
2014-15
2015-16
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and Recreation and Parks exempted from cuts due to their priority status, would equate to eliminating the entire General Fund budgets of the following departments:
Illustration of the Equivalent of $220 Million In Expenditures
DEPARTMENT Animal Services City Attorney Finance Board of Public Works Board of Contract Administration Bureau of Engineering Bureau of Street Services Total
2011-12 ADOPTED GENERAL FUND (In Millions) $20 $92 $37 $10 $19 $26 $16 $220
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focused on:
Ongoing Expenditure Reductions Ongoing Revenue Enhancements Over the last several years, the City has been focused on expenditure reductions and
this uncertainty.
Responsible Fiscal Management Focus on Core Services Alternative Service Delivery Models Sustainable Workforce
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Four Pillars
I
Responsible Fiscal Management Stable Reserve Fund Reduce or Eliminate General Fund Subsidies Maximize Flexible Funding Strengthen & Streamline Central Administration Functions & Contracting Process Pursue New Revenue
II
Focus on Core Services Re-evaluate Discretionary Programs Consolidate Services Evaluate and Redesign Core Services
III
Alternative Service Delivery Models Partner with Nonprofits, Foundations and Private Sector Maximize City Assets Strengthen Core Functions
IV
Sustainable Workforce Reduce the Size of the Workforce Reduce Healthcare and Workers Compensation Costs Control Pensions and Retiree Health Costs Align Compensation Eliminate Furloughs through Concessions
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centers
Completed transfer of Northeast Valley Animal Care Center to Best Friends in January 2012 RFP for other care centers released
For FY 2012-13, the Mayor has called for 6% and 12% reduction proposals
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pays)
Unpaid holidays Reductions in the cash-payment of overtime Salary-step freezes No cash-payment of excess sick leave accumulations
Adopted pension and retiree health reform for current and future
employees:
Active Member contributions towards retiree healthcare Medical subsidy freeze for Active Members that do not make an
departments
Close to 470 employees laid off since March 2010 Normal attrition without backfilling
Fiscal Year 1990-91 Fire and Police Departments All Other Departments 2,751 11,569 2011-12 3,515 5,388
14,320
8,903
-38%
29
(13)%
32,274
13,807
13,805
13,832
13,944
14,244
20,000
15,000 21,701 10,000 22,080 22,167 21,610 22,324 22,723 22,929 22,718 21,852 19,225 18,597
5,000
01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09 09-10 10-11 11-12
Fiscal Years
All Others Police (sworn and civilian) Series1
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$53 million in GF salary savings in 2012-13 Additional $73 million in GF salary savings in 2013-14 Additional $37 million in GF salary savings in 2014-15 $75 million in GF savings on pensions from 2012-13 to 2014-15
$10 million in GF savings for direct and related costs in 2012-13 $27 million in GF savings for direct and related costs in 2013-14
4. Require 10% Employee Contribution to Healthcare (civilian employees only)
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property sale value, double the current tax of $4.50. Requires 50+1 approval in a General Election or in a Special Election if Emergency Resolution is passed. Approximately $100 million in additional General Fund revenue
2. Parking Occupancy Tax Increase: Increase tax to 15% (from 10%) on
parking fees collected from patrons at parking facilities. Requires 50+1 approval in a General Election or in a Special Election if Emergency Resolution is passed. Approximately $40 million in additional General Fund revenue
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Mayor releases his Budget Policy Letter to departments CAO releases budget instructions to departments based on Mayors policy direction Community Budget Day
Budget meetings with Mayors Office and CAO Budget meetings with Mayors Office and departments Controllers revenue projections Final budget decisions for Mayors Proposed Budget Mayors Budget due to City Council Budget and Finance Committee reviews budget City Council considers budget Charter deadline for Council to consider budget
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For additional budget information and online budget documents please visit: cao.lacity.org budget.lacity.org controller.lacity.org/AdoptedBudget/index.htm
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