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Los Angeles' deficit drops, but cuts and hiring freezes still likely

A new budget report suggests the deficit for fiscal year 2013-14 has dropped -- to $150 million. Drastic cuts remain on the table.
A new budget report suggests the deficit for fiscal year 2013-14 has dropped -- to $150 million. Drastic cuts remain on the table.
Alice Walton/KPCC

Despite a reduction in pension costs and signs that revenues to the city of Los Angeles are improving, closing a multimillion-dollar deficit remains “a daunting challenge,” according to a new report. One councilman is suggesting that could result in extending a hiring freeze to the Los Angeles Police Department.

City Administrative Officer Miguel Santana on Friday submitted an update on the fiscal year 2013-14, which starts on July 1. In it, he suggests that the $216 million deficit has dropped to somewhere between $165 million and $150 million, which he attributes to a reduction in pension obligations, positive trends in the economy, and a reserve that holds $80 million.  

Balancing the budget may depend, in part, on reducing employees’ pay and healthcare benefits. Services could also be cut and departments consolidated, he said.

Prior to the release of the report, Mayor Antonio Villaraigosa told the Los Angeles Times that with an improving economy, “I don't expect that we're going to have draconian cuts."

However, in response to the latest budget report, mayoral spokesman Peter Sanders struck a more somber tone.

"The Mayor understands that the actual budget deficit remains in flux and will be finalized at the time his budget is released on April 20" he said. "Regardless of how much the deficit is reduced this year, it remains a fact that the out years will continue to be challenging as they relate to the structural deficit."

L.A. City Councilman Paul Krekorian, chair of the Budget and Finance Committee, expects cuts to be drastic. 

“There’s no question that we still have a very significant deficit that is going to have to be dealt with through cost reduction," he said in an interview. "That’s going to mean diminished services. It’s going to be mean a continuing freeze on hiring. And I believe it’s going to have to include expansion, even, of that freeze to include a freeze on police hiring.

“The council has been committed to at least hiring to attrition so that we could maintain the size of the department. I don’t believe that that will continue to be viable,” he added.

According to the budget report, $130 million is needed to maintain service levels in the police and fire departments and replace emergency vehicles. 

Earlier this week, voters rejected Measure A, a half-cent sales tax increase that would have provided the city with an additional $200 million a year. City leaders warned that without the tax increase, police hiring would stop