June 30, 1993 - From the June, 1993 issue

Zev Yaroslavsky: Budget Crisis Looms for the New L.A. Mayor

In our February issue, we presented an interview with Councilman Zev Yaroslavsky, chairman of the City Council's Budget and Finance Committee, on the impending budget crisis facing Los Angeles. That interview helped focus the attention of the press and (for a time) the mayoral candidates on a critical issue that had previously been ignored. 

With the mayoral election now upon us and the expected heavy cuts from Sacramento to local governments only a month away, The Planning Report thought it appropriate to revisit the budget situation with Yaroslavsky in this month's issue.


"We’ll end up losing some good, young, energetic professionals from the Planning Department while their less creative, less energetic supervisors will replace them. That’s a conundrum that Con Howe has to deal with…"

With the City's budget going through Council to approval, could you tell us what us impact will be on departments affecting land-use policies in the city? 

The budget we approved is only the tip of the iceberg: it's the preliminary round to the real thing, which we'll know more about in July after we find out what the State does. 

There was a $180 million gap that needed to be filled in this first round. The Mayor proposed to fill it, and the Council largely went along with him, by doing several things: by continuing the hard hiring freeze, by deferring capital improvement programs, and by laying off over 100 employees, mostly in Building and Safely, but 21 of them from the Planning Department. There were no major revenue shifts or tax increases. 

I don't think the impact on land use will be that severe. There have been concerns expressed because this is the first time the city will be laying people off. The problem is that we'll end up losing some good, young, energetic professionals from the Planning Department while their less creative, less energetic supervisors will replace them. That's a conundrum that Con Howe has to deal with, one brought on by the city's seniority system. But I don't think you'll see a major impact out or this first round. 

Let's then discuss the second shoe that's likely to fall in July in reaction to the State taking funds from the cities. What are your expectations? 

My expectation is that it's going to be substantial - with anything over $25 million being substantial, and I think it will be much higher than that. The impact will be devastating: it all depends on how we decide to close it. We'll have a new mayor at that time and we'll all be waiting with bated breath, holding copies of the detailed campaign promises they've made spelling out how they'd solve the problem.

But in all seriousness, there are only two ways to solve the problem: by raising taxes or making cuts. I don't see a big appetite for raising revenues: I think anyone who’s been on the campaign trail this year will be reluctant to walk into that trap as their first act or a new term. On the other hand, we're going to be faced with very distasteful cuts, but cuts we're going to have to make. Frankly, if libraries are open five days a week instead of six, it’s not the worst tragedy in the world. 

Seventy percent of our budget is police, fire, and rubbish collection, and we have thus far exempted these areas from our cuts. So we make cuts only from the other 30 percent, which is everything else we do. That 30 percent amounts to $700 million. If the State cuts us $200 million, we have to wipe out almost a third of everything else we do. This places our city in an impossible situation; the closing of a third or our parks or libraries, reducing the street paving program, city attorney’s office etc. would dramatically and adversely affect the citizens of Los Angeles. 

Does the Council have the fortitude to go through this in a major way this summer?

I don't think the Council has a choice because failure to act is an action in itself. We have to make the cuts or raise the revenues. I believe most of the members of the Council understand the problem we have and, with the election over, will be prepared to make tough decisions. I hasten to add that we will have a new mayor who will be expected to weigh in with his proposals before the Council acts. 

Is there a difference between the two mayoral candidates on this issue? 

Both candidates have been very superficial when it comes to the budget. It's almost as if their advisers have said lo them, "Say the least you can say about the budget and still get away with it." I don't take at face value most of what's been said on the campaign trail. 

I will say that Mike Woo's concept of cutting all departments to preserve basic services is a sound, albeit politically difficult concept. Leasing the airport is not doable and shouldn’t be done. On the budget items, Mike has been somewhat more candid: he has not said "no new taxes." In the debate I moderated, Riordan said no new taxes and no new fees, which is odd because one or the things he’s proposed is franchising rubbish collection, which will lead to a new collection fee. But either one will be tested during their first days in office. 

During the first round of cuts you had to tap some of the proprietary departments such as CRA and the Harbor Department. How do you balance the budget in the short run without hampering the engines of economic growth that will improve our fiscal situation in the long run? 

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It's very simple. When your household is rolling in money, you have the luxury or being able to open a savings account or invest in stocks. But when your household doesn't have enough money to pay the mortgage or put food on the table, you don't save for the future because your children would starve. That's the situation we're in. We must take care of first things first. 

The big picture is that the State of California, in an effort to balance its budget, has thrown out the rulebook and said, "We'll rip off all local property tax money because we at the state level don't have the courage to raise taxes. We don't have the courage to freeze or cut salaries." The State is giving its employees a 5% pay raise next year and is not laying off a single employee, while we have frozen salaries for two years and are laying off employees. San Diego is actually cutting salaries. 

That is a fundamental restructuring of the relationship between state and local governments: we are the depository for all that is wrong with Sacramento - the buck stops in City Hall. It’s time we fight back. Local governments need to be given financial stability and financial independence. The state ought to give us the right to tax liquor, tobacco and extend the business tax to banks and savings and loans. Those three sources of revenue alone would close our budget deficit. 

There will be many proposals for privatizing city services in this debate. What's your reaction to these restructuring suggestions? 

Every idea for restructuring ought to be evaluated. Some of the ideas are good; some are bad. We ought to privatize those things which we don't do well and where there's something in it for the taxpayer. However, we should never privatize those things that we do well and which benefit the taxpayer simply for the sake of privatizing. 

I'm very skeptical of any idea to lease the airport or harbor - to sell off our crown jewels. If there's money to be made from the airport - and there is - the city should make 100% of that money, not share it with a middleman. Do we want to have a deal at the airport like the County has at the Marina, where they gave away the most valuable land in the county for practically nothing? No. Never has so much been projected out of so little as with the airport lease concept.

On rubbish collection: if it ain't broke, don't fix it. If there's one thing we do well in this city, it's collect garbage: I never get a complaint. It’s collected every week, on time; we have no strikes or union problems as you do in privatized cities. Why take a system that works and dismantle it? 

With Peter Uebberoth stepping down from RLA and the next mayor promising to take a more hands-on role in the rebuilding process, are you satisfied with the Council's role in rebuilding Los Angeles? 

When the Mayor tapped Peter Uebberoth to form RLA, it was a brilliant stroke. Few people in America represent success and possibility as much as Uebberoth - especially to the private sector. That's exactly what L.A needed after April 29, 1992 - to inspire private sector confidence in L.A. and prevent total abandonment of our economic future.

What RLA failed to realize is that the public sector must be a partner in the rebuild effort. RLA has given many the impression that, like the Olympics, the private committee could go it alone. That notion is folly. L.A’s future is dependent on an effective public sector and a courageous private sector; one without the other will not do.

The new Mayor should move quickly to consolidate the various rebuild efforts under his command. Uebbcroth's departure makes it possible for that to happen. In short, Peter did the city a great service by taking on this task last year, and he may have performed an equally important service in stepping aside now. 

Lastly, with an opening at General Manager for the Department of Transportation, what would be your hopes for that Department? 

One of the things we should talk about is restructuring within the city: the Planning Department, CRA, and DOT offer many possibilities for consolidation. I don’t think that's going to happen overnight, but the new mayor has the opportunity to move in this direction. There are transportation planners in the Planning Department, transportation specialists at the CRA, and planners in all three departments. There's redundancy in the system, and we can do better than we're doing. 

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