Approving the Mid-Year Financial Status Report and Ensuring an Acceptable Solution for the LA City Budget
Posted by Councilmember Englander on March 24, 2017 at 1:42 PM
On Monday, the Budget and Finance committee approved the Mid-Year Financial Status Report (FSR), and it was passed unanimously in Council on Tuesday.
The Mid-Year FSR is an important vehicle by which the City Council can make adjustments, as necessary to the City's budget in order to mitigate revenue shortfalls and move funds between accounts, and departments to maintain solid financial standing.
For example, my previous instruction to the City Administrative Officer (CAO) to do a 5% expense reduction for all general-funded departments yielded $10.6 million to help close the budget gap in the current year. All in all, there were $391 million worth of appropriations, transfers and other budgetary adjustments.
The City continues to feel pressure in Police, Fire and the City Attorney's office, as well as greater than expected general fund exposure from clean-ups related to homelessness. As a result, the Reserve Fund reflects a balance that is slightly under the 5% required by the City's Fiscal Policies. To me, this is unacceptable, and I added an amendment asking the CAO and CLA to figure out a solution that identifies the additional $1,139,374 necessary to bring the Reserve back to 5%.
Maintaining a healthy reserve fund is crucial so that in the event of an emergency or unexpected downturn, the city can continue to provide uninterrupted services. Additionally, I believe that with the Reserve Fund back up to a healthy 5%, there will be no need for the City to issue a Judgement Obligation Bond for $50 million-$70 million, as previously authorized for excessive legal settlements. (I was the lone vote opposing this action).
I also asked that we take a look at the Controller's March 1 Revenue report that predicts a 0.5% shortfall in General Fund Revenues for the current year. Since the Reserve is supposed to be 5% of General Fund revenues, it is quite possible that if the current year budget was revised to this lower number - then the City could already be at 5%. All of these possibilities are more sound that taking on Judgement Obligation debt and signaling to the financial markets that the City needs to borrow for it's ongoing expenses.
Here is the exact language from my amendment:
Ask the CAO and CLA to work together the $1,139,374 necessary to bring the RF balance back up to a full 5% - Which would eliminate the need to issue a Judgement Obligation Bond. Additionally, look at downwardly adjusting general fund revenues for the current year to reflect the Controller's March 1 report prediction of a 0.5% revenue shortfall. This action would then have a requisite effect on the Reserve Fund - requiring a lower dollar amount to achieve 5%.
Yesterday, the Controller issued his own letter to the City Council advising against issuance of a Judgement Obligation Bond. To see the text of the Controller's letter, click here.
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