L.A. County faces new budget problems

Los Angeles County faces new budget problems. Today, county supervisors consider shifting $35 million from a reserve fund to cover an immediate budget shortfall. That shortfall's only expected to grow as tax revenues fall and more people seek help from the county during tough economic times. Next year, supervisors face at least a $173 million budget gap. Supervisor Zev Yaroslavsky spoke with KPCC yesterday about L.A. County's money problems.

Zev Yaroslavsky: Our sales tax revenues are down. Our property tax revenues are down below what we anticipated. The economic situation is severe, and it's affecting county government as it is affecting the state and everybody else.

On top of which, the state has yet to finish resolving its budgetary issues, and we depend on the state for a good percentage of what we do. The state controller is talking now about deferring payments to the counties for things like welfare, and health, and mental health, and the consequences of that would be horrendous to us.

Frank Stoltze: This comes as unemployment goes up and welfare caseloads in Los Angeles County are swelling. Talk a bit about that.

Yaroslavsky: Well that's the irony, the paradox of county government. Demand for our service goes up when the economy goes haywire, so at the very time when people depend on us most, we are least able to provide full services.

And it's exacerbated by the state's inability to close its budget deficit and make good on its obligations to us, so that we can make good on our obligations to the people. The number of people on general relief is increasing at a rate of about a percent and a half a month.

Somewhere between 80- and 90,000 people on general relief when this recession started, and if you're going up a percent a half a month, that adds up to 18 percent increase. That could be another 15,000 people who are on general relief.

I mean, these are individuals whose lives, through no fault of their own, have been turned upside down. They've lost their jobs, they've been evicted from their apartments because they haven't been able to pay their rent, they've been foreclosed on because they got a bad subprime loan.

Stoltze: The county chief executive officer, in a memo to the board, also says that the county's retirement system has taken a big hit because of the stock market falling so dramatically, and that the county is going to have to sharply increase its contributions to that system.

Yaroslavsky: Yes. There is no question that our obligation to funding the pension system is, because the earnings have dropped, the county general fund is obligated to make up that difference. We have a number of options. We're looking at how to manage that crisis, and that's a big crisis.

That's a nine figure crisis. It's in the hundreds of millions of dollars, unless the economy turns around very quickly, which is not likely. We have some time to deal with that.

It's not as immediate as the state budget crisis is for us, but over the next 18 months, we're going to have to figure out how we make up the gap between what the law requires us and our accounting principles require us to fully funding our pension plan, the shortfall that we have.