LA City Council Announces Fiscal Emergency

By Dana Cruz Sep 03 2020, 04:15 AM EDT

The Los Angeles City Council declared a fiscal emergency Wednesday, approving plans for furlough and retirement buyouts.

The fiscal emergency was declared to establish more than 15,000 furloughs and 1,280 buyouts approved by the City Council, the CBS Los Angeles reported.

Two months ago, the City County devised a plan to face the economic impact of the COVID-19 pandemic. This includes giving city employees up to $80,000 to retire, according to Los Angeles Times.

They were hoping to avoid pay cuts for other city workers, but savings were not enough and they had to declare a fiscal emergency.

Now, the City Administrative Officer's staff said that revenues for the 2021 fiscal year could fall anywhere between $45 million to $409 million. This is way below the estimated $6.68 billion, the NBC Los Angeles reported.

Two months prior, there was an estimated loss for the city of more than $50 million by City Administrative Officer Richard Llewellyn. But that was based on the assumption that economy is ready to reopen by July.

"We know now...that the best-case scenario isn't going to happen," said Paul Krekorian, Councilman and Budget and Finance Committee chair. "So that means... even after we enact furloughs, we're still going to have a shortfall in revenues that are going to have to be accommodated."

Taking Up New Strategies

As the budget outlook for Los Angeles is still grim, employee buyouts are falling shy of what the city first hoped. This pushed them to use both the new strategy and the one for the supposed July reopening.

The city is now paying workers to leave their jobs and also reducing 10 percent salaries for those who remain in the work force.

The city's negotiating committee, made up of Mayor Eric Garcetti and four council members, recommended the measures last week.

Krekorian, who sits on the panel, said the declaration will let the city to act immediately on much needed cuts, like furloughs.

The Realistic Approach

Councilman Bob Blumenfield also approved of the cuts. He said both the furloughs and buyouts could push out skilled workers from the city, making services hard to provide to the public.

He did reiterate, though, that the city is short on funds. "We have to figure out how to maintain our city and our finances during these horrible, dark times," he said.

While Los Angeles is set to get about $694 million in funding from the CARES Act, it can't be used to help with lost revenues but only on COVID-19 response.

The City Council said not pushing through with it might only lead to layoffs for city employees. When it comes to buyouts, the city staff also estimated an addition $13 million in savings for the city.

"We can't sit and hope that Washington will ride to the rescue," Krekorian said.

The council said they city will have to do the "realistic thing" regarding the furloughs to avoid worse-case scenarios. "I can guarantee you that if we don't, we will be faced with choices that are much harder," Krekorian said.

Los Angeles alone isn't the only one suffering from economic loss due to the COVID-19 crisis. The U.S., as a whole, is seeing $3.3 trillion in budget deficit because of coronavirus spending.