County Heading for Bankruptcy, Panel Warns

Los Angeles County is poorly managed by too many masters, hamstrung by an unwieldy Civil Service system and powerful unions and heading on a course toward bankruptcy, according to the findings of a special advisory panel released Monday.

The supervisor-appointed Los Angeles County Blue Ribbon Budget Task Force issued its 41-page report after months of what it said were intensive deliberations on the mounting problems facing the nation’s largest municipal government and on potential solutions.

“The county has serious problems, and the sooner they get cracking on fixing them, the better off the county and all its residents will be,” said Joel Fox of the Howard Jarvis Taxpayers Assn., who is vice chairman of the task force. “They cannot put it off any longer.”

At least one of the county’s five supervisors said he would use the report to persuade his colleagues that another round of dramatic budget cuts and other structural reforms are needed in the next fiscal year, which starts July 1.

“I hope that the board will recognize the depth of the problem we have,” said Supervisor Zev Yaroslavsky. “While people will differ with the solutions proposed [in the report], you cannot argue with its contentions about our structural financial problems.”

In their report, the commission’s 10 lawyers, professors, financial analysts and other private-sector appointees criticized Chief Administrative Officer Sally Reed for proposing a budget for next year that does little to alleviate what the commission members said was an estimated $1-billion structural deficit. That deficit is the difference between what the county receives in revenue and what it believes it needs to provide adequate services for its 9 million residents.

Despite the gap, the county has little opportunity to cut because the state requires it to provide certain levels of health, welfare and law enforcement services, the commission members noted.

Those problems, compounded by a leadership vacuum created by the supervisors overseeing an appointed chief executive officer and 37 “competing” department heads, could spell doom in upcoming years, the report said.

“There must be a fundamental rethinking of how the county is managed and how it provides services to its citizens if it is to regain credibility with the public, other levels of government, county employees and the financial markets,” the commission members said in a cover letter to the Board of Supervisors.

Failure to resolve the structural imbalance, they added, “greatly increases the risk of insolvency with consequences far more serious than those experienced by neighboring Orange County. . . . The county cannot simply wait and hope for the restoration of lost revenues or the alleviation of unfunded mandates to solve our problems. Hard choices must be made.”

Supervisor Yvonne Brathwaite Burke said she recognized the need for less reliance on one-time revenues such as employee pension fund profits, and that the board already is implementing some reforms that the task force recommended, such as cutting the health system and consolidating some functions. But she said she will fight most dramatic reductions in jobs and services, at least this year.

“I think we have taken such deep cuts in our programs and departments that it will be tough to do more downsizing this year. Services already have been cut to a minimum,” Burke said.

The committee was created amid the county’s worst-ever fiscal crisis last fall, after Supervisors Gloria Molina and Mike Antonovich said they needed the wisdom and expertise of business and civic leaders to help them formulate short-term and long-term responses to the problems. Neither returned calls seeking comment on the report Monday.

Few of the recommendations made in the report specifically address how to eliminate the financial imbalance in the near future. Instead, they focus on managerial and efficiency issues, such as giving the chief administrative officer far more authority to implement policies set by the supervisors, and reforming the Civil Service system so good employees are rewarded and bad employees are punished.

Another recommendation is to consolidate the county’s “inefficient” network of 37 departments, each with its own director. “If the federal government can operate with 14 major departments,” said the report, “there is certainly room to consolidate within county government.”

Other recommendations were described by some top county officials as vague or obvious--such as one urging the county to reduce the cost of providing services “without decreasing the quality or breadth of those services.” Another urges administrators to “promote more productive employees and reassign job tasks as needed for efficiency.”

Still other suggestions, one county official privately predicted, will be “DOA,” dead on arrival, when the board takes up the task force recommendations as early as today. For instance, the task force recommends reducing the salaries of county employees by $500 million in the coming years, which would be all but impossible given the strength of county employees’ collective bargaining agreements.

But the task force was insistent that no matter how they choose to do so, the supervisors need to reduce their reliance on one-time “quick fixes” that have brought the county to the brink of insolvency in recent years. They particularly criticized Reed for the proposed budget she released late last month.

Reed, who is leaving to head the state Department of Motor Vehicles, used even more of the one-time revenues than the county relied on last year, this time to close a projected $517-million deficit. “Once again, the Board of Supervisors is presented with a short-term solution which does not solve the fundamental problem: County revenues are not sufficient to cover the costs of services that benefit its citizens,” the commission said.

Reed was not entirely at fault, panelists said, since she lacks the power to force department heads to cut their own budgets by the 10% to 20% she said was necessary. Reed, who had no comment on the report, has attributed her decision to leave the county in part to the lack of response to her proposed steep cuts last year.

Yaroslavsky also criticized Reed and even some of his colleagues, saying they have let last year’s crisis pass without realizing the need to continue cutting and changing county government.

“The CAO’s budget is far too unresponsive to the financial realities we face and does not represent the hard choices we need to make,” Yaroslavsky said. “If the board approves it as is, it will mark a return to budgeting in a state of denial. And that is what got the county into the depth of the problem it is in now.”

Gil Ray, a lawyer and one of 10 blue ribbon panelists, agreed. Without finding new revenue sources, or cutting so outgoing expenditures match incoming cash, the supervisors “will continue to plod along. At some point they would run out of on-time fixes. They would run out of money.”

“But I think they would make the cuts before that would happen,” Ray said. “Hopefully, this will help them to move in that direction.”