1. City of Los Angeles
COMMUNITY BUDGET DAY
Budget Overview
P R E S E N T E D B Y M I G U E L A . S A N TA N A
C I T Y A D M I N I S T R AT I V E O F F I C E R
November 17, 2012

2. Topics
 2012-13 Budget
 General Fund and Special Funds
 Revenues
 Appropriations
 Reserve Fund
 Issues and Challenges
 Economy
 Federal and State
 Pensions
 Development of the 2013-14 Budget
 Outlook
 Five Guiding Principals
 Solutions
1

3. Fiscal Year 2012‐13 Budget at a Glance
o The City’s General Fund
supports most of the FISCAL YEAR 2012-13 AMOUNT Authorized
municipal services in the BUDGET COMPONENT ($ Millions) Positions
City such as Fire and City Budget $7,246 31,817
Police services.
General Fund $4,550 21,724
o Special funds are Special Funds $2,695 10,093
generated for a specific
purpose, typically Proprietary $12,003 14,514
approved by voters for a Department Budgets
specific service like sewer Airports $4,341 3,534
construction.
Harbor $954 994
o Proprietary Departments
Water and Power $6,708 9,986
are governed by separate
boards but still fall within Grants & Other
the jurisdictional review of Non-Budgeted $1,337
the Mayor and City Total City Government $20,586 46,331
Council.
2

4. Fiscal Year 2012‐13 Adopted Budget
o General Fund revenue
fluctuates depending on
economic conditions.
Diversity of revenues helps
stabilize volatility.
o Most budget decisions
pertain to the General Fund.
o Special funds provide
stability for the City and its
services by ensuring a
dedicated source of funding
for key services, but offer
minimal flexibility.
3

5. Fiscal Year 2012‐13 General Fund Revenue Sources
o No single source of
income comprises
more than one third of
the City’s revenue
base.
o 69% of General Fund
revenue comes from
six economically
sensitive categories:
o Property Tax
o Utility Users’ Tax
o Business Tax
o Sales Tax
o Transient Occupancy Tax
o Documentary Transfer Tax
4

6. Fiscal Year 2012‐13 General Fund Appropriations
o Public Safety continues to
be a priority for the City,
with the Police and Fire
Departments accounting
for more than a third
(38%) of total General
Fund Appropriations.
o The next largest
appropriation is to
Pensions and Retirement
(19%) which almost equals
the collective amount
budgeted for all other City
departments (20%).
5

7. Fiscal Year 2012‐13 Distribution of Unrestricted Revenues
o While the Police and Fire
Departments accounted for
2012‐13 Budget
only 38% of total General Unrestricted Revenues
Fund Appropriations, $3,780 million
combined they account for Police
72% of unrestricted revenue 55% Fire Public Works
17% Street Services
expenditures. These Public Transportation
expenditures include their Engineering
allocation of pensions and Safety, 72% Capital
health care costs. Improvements
Building & Safety
Planning
7%
o Restricted Revenues include Library
sewer revenues, gas tax, Parks and 4%
grants, and fees for special Other Recreation
services. 11% 6%
6

8. Fiscal Year 2012‐13 Adopted Budget – Reserve Fund
o The July 1, 2012, Reserve Fund o The Actual Reserve Fund Balance
balance was $227 million (4.99% was $8.97 million more than the
of the General Fund). Adopted Budget.
7

9. Slow Recovery/Recessionary Environment
The financial backdrop for this year’s budget and for next year’s budget continues to be
dominated by: global fiscal uncertainty; slow recovery in the US; and high unemployment
Local 1% Sales Tax and Local Unemployment Rate
Unemployment Rate -- Seasonally Adj. Sales Tax
14 500
12 429
Unemployment Rate %
10 357
Sales tax -- $ Millions
8 286
6 214
4 143
2 71
0 0
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Fiscal Year Ending
8

10. Federal and State Actions
 Federal
 The looming “fiscal cliff” threatens recovery with the expiration of the
$440 billion in tax cuts and the implementation of mandatory $100
billion across-the-board spending cuts, should a budget compromise not
be achieved. The Congressional Budget Office projects that the economy
would contract at an annual rate of 0.5 percent in the first half of the year
resulting in a recession.
 State
 The approval of Proposition 30 will generate $8.5 billion for the state
to avoid reductions to education. It will not generate any additional
revenue or State funding for the City.
9

11. Pensions and Benefits – Estimated Contributions
$1,285
$1,213
$1,121
$999
Data shown is as of July 2012 and does not include recent changes pension plans based on new
employee agreements or revised actuarial assumptions.
10

12. Pension Reform
 The Civilian Tier II will reduce the City’s future pension costs by:
 Increasing the normal retirement from 55 to 65
 Lowering the maximum retirement factor from 2.16% to 2% per year
of service
 Capping the maximum retirement allowance at 75% of an employees’
final compensation
 Limiting healthcare to retirees only
 The Sworn Tier VI will reduce the City’s future pension costs by:
 Requiring employees to contribute 2% towards retiree healthcare
 Lowering the minimum Pension Percentage from 50% to 40% for 20
years of service
 Calculating final compensation based on two year average instead of
a one year average
11

13. Projected Deficits from 2013‐14 to 2016‐17
12

14. Actions Taken by the City
The FY 2013‐14 deficit has been reduced from a projected $1 billion
to $216 million by implementing the following structural solutions:
 Eliminating of over 5,000 positions
 Increasing employee contributions to retirement plans and health
insurance
 Imposing a 20% salary reduction for new sworn police
 Eliminating non‐essential functions and consolidated departments
 Refinancing debt to lower interest rate
 Reducing service contract costs
 Improving citywide billing and collections
13

15. Five Guiding Principles
I II. III. IV. V.
Responsible
Fiscal Focus on Alternative Service Sustainable
Management Core Services Delivery Models Workforce Revenue
• Maintain a • Prioritize services • Implement • Reduce the • Maximize the
strong Reserve and fund accordingly, alternative ongoing cost of General Fund
Fund including support service delivery the City’s
costs models workforce with • Enhance
minimal service existing or
impact establish new
• Make smart • Reestablish a base • Establish a
investments revenues
service level for managed
• Reduce the sources
priorities consistent competition
ongoing cost of
with available process for select
the City’s
funding services
workforce
through
• Realign services strategic size
across departments reductions
based on core-
competencies
14

16. Potential Solutions to Offset the $216 Million Deficit
15

17. Potential Revenue to Eliminate the $216 Million Deficit
An half cent sales tax increase would generate an additional
$215 million in General Fund Revenue
• Sales Tax is 7% of General State Rate 6.25%
Fund receipts
Statewide Bradley-Burns Rate (1%)
• The City receives $.0075 for County Transportation 0.25%
ever taxable dollar spent in the Local Point of Sales 0.75%
City Local Sales (Transaction) Taxes (capped at 2%)
Proposition A 0.50%
• FY 2011-12 sales tax revenue
Proposition C 0.50%
was $323 million
Measure R (exempt from 2% cap) 0.50%
• FY 2012-13 is projected to be Total Tax Rate in the City 8.75%*
$332 million
*The approval of Proposition 30 will increase the City’s tax rate to 9.00% 1/1/2013 through 12/31/2016
16

18. Next Steps in the Budget Development Process
 2012
 September 28 Mayor released his Budget Policy Letter to departments
 October 9 CAO released budget instructions based on the Mayor’s
policy direction
 November 15 Department budgets are due to Mayor and CAO
 November 17 Community Budget Day
 2013
 Jan./Feb. Budget meetings with Mayor’s Office and departments
 March 1 Controller’s revenue projections
 March Final budget decisions
 April 20 Mayor’s Budget due to City Council
 April/May Budget and Finance Committee reviews budget
 May City Council considers budget
 June 1 Charter deadline for Council to consider budget
17

19. F O R A D D I T I O N A L B U D G E T I N F O R M AT I O N A N D O N L I N E
B U D G E T D O C U M E N T S P L EA S E V I S I T:
C A O . L A C I T Y. O R G
B U D G E T. L A C I T Y. O R G
C O N T R O L L E R . L A C I T Y. O R G / A D O P T E D B U D G E T/ I N D E X . H T M