2012 budget day presentation
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TRANSCRIPT
Budget OverviewP R E S E N T E D BY M I G U E L A . S A N TA N A
C I T Y A DM I N I S T R AT I V E O F F I C E R
City of Los Angeles COMMUNITY BUDGET DAY
November 17, 2012
Topics
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2012-13 Budget General Fund and Special Funds
Revenues Appropriations
Reserve Fund Issues and Challenges Economy Federal and State Pensions
Development of the 2013-14 Budget Outlook Five Guiding Principals Solutions
FISCAL YEAR 2012-13BUDGET COMPONENT
AMOUNT($ Millions)
AuthorizedPositions
City Budget $7,246 31,817General Fund $4,550 21,724
Special Funds $2,695 10,093
Proprietary Department Budgets
$12,003 14,514
Airports $4,341 3,534
Harbor $954 994
Water and Power $6,708 9,986
Grants & Other Non-Budgeted $1,337Total City Government $20,586 46,331
Fiscal Year 2012‐13 Budget at a Glanceo The City’s General Fund
supports most of the municipal services in the City such as Fire and Police services.
o Special funds are generated for a specific purpose, typically approved by voters for a specific service like sewer construction.
o Proprietary Departments are governed by separate boards but still fall within the jurisdictional review of the Mayor and City Council.
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Fiscal Year 2012‐13 Adopted Budget
o General Fund revenue fluctuates depending on economic conditions. Diversity of revenues helps stabilize volatility.
o Most budget decisions pertain to the General Fund.
o Special funds provide stability for the City and its services by ensuring a dedicated source of funding for key services, but offer minimal flexibility.
o No single source of income comprises more than one third of the City’s revenue base.
o 69% of General Fund revenue comes from six economically sensitive categories:o Property Tax
o Utility Users’ Tax
o Business Tax
o Sales Tax
o Transient Occupancy Tax
o Documentary Transfer Tax
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Fiscal Year 2012‐13 General Fund Revenue Sources
o Public Safety continues to be a priority for the City, with the Police and Fire Departments accounting for more than a third (38%) of total General Fund Appropriations.
o The next largest appropriation is to Pensions and Retirement (19%) which almost equals the collective amount budgeted for all other City departments (20%).
Fiscal Year 2012‐13 General Fund Appropriations
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o While the Police and Fire Departments accounted for only 38% of total General Fund Appropriations, combined they account for 72% of unrestricted revenue expenditures. These expenditures include their allocation of pensions and health care costs.
o Restricted Revenues include sewer revenues, gas tax, grants, and fees for special services.
Fiscal Year 2012‐13 Distribution of Unrestricted Revenues
Police55% Fire
17%Public WorksStreet ServicesTransportationEngineeringCapital
ImprovementsBuilding & Safety
Planning7%
Library4%Parks and
Recreation6%
Other11%
2012‐13 Budget Unrestricted Revenues
$3,780 million
Public Safety, 72%
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Fiscal Year 2012‐13 Adopted Budget – Reserve Fund
o The July 1, 2012, Reserve Fund balance was $227 million (4.99% of the General Fund).
o The Actual Reserve Fund Balance was $8.97 million more than the Adopted Budget.
The financial backdrop for this year’s budget and for next year’s budget continues to be dominated by: global fiscal uncertainty; slow recovery in the US; and high unemployment
Slow Recovery/Recessionary Environment
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0
71
143
214
286
357
429
500
0
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6
8
10
12
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96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
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Fiscal Year Ending
Local 1% Sales Tax and Local Unemployment Rate
Unemployment Rate -- Seasonally Adj. Sales Tax
Federal and State Actions
Federal The looming “fiscal cliff” threatens recovery with the expiration of the
$440 billion in tax cuts and the implementation of mandatory $100 billion across-the-board spending cuts, should a budget compromise not be achieved. The Congressional Budget Office projects that the economy would contract at an annual rate of 0.5 percent in the first half of the year resulting in a recession.
State The approval of Proposition 30 will generate $8.5 billion for the state
to avoid reductions to education. It will not generate any additional revenue or State funding for the City.
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Data shown is as of July 2012 and does not include recent changes pension plans based on new employee agreements or revised actuarial assumptions.
Pensions and Benefits – Estimated Contributions
$999
$1,121
$1,213$1,285
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Pension Reform
The Civilian Tier II will reduce the City’s future pension costs by: Increasing the normal retirement from 55 to 65 Lowering the maximum retirement factor from 2.16% to 2% per year of service
Capping the maximum retirement allowance at 75% of an employees’ final compensation
Limiting healthcare to retirees only
The Sworn Tier VI will reduce the City’s future pension costs by: Requiring employees to contribute 2% towards retiree healthcare Lowering the minimum Pension Percentage from 50% to 40% for 20 years of service
Calculating final compensation based on two year average instead of a one year average
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Projected Deficits from 2013‐14 to 2016‐17
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Actions Taken by the City
The FY 2013‐14 deficit has been reduced from a projected $1 billion to $216 million by implementing the following structural solutions:
Eliminating of over 5,000 positions Increasing employee contributions to retirement plans and health insurance
Imposing a 20% salary reduction for new sworn police Eliminating non‐essential functions and consolidated departments Refinancing debt to lower interest rate Reducing service contract costs Improving citywide billing and collections
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Five Guiding Principles
• Prioritize services and fund accordingly, including support costs
• Reestablish a base service level for priorities consistent with available funding
• Realign services across departments based on core-competencies
• Maintain a strong Reserve Fund
• Make smart investments
Responsible Fiscal
ManagementFocus on
Core Services
• Implement alternative service delivery models
• Establish a managed competition process for select services
Alternative Service Delivery Models
• Reduce the ongoing cost of the City’s workforce with minimal service impact
• Reduce the ongoing cost of the City’s workforce through strategic size reductions
Sustainable Workforce
• Maximize the General Fund
• Enhance existing or establish new revenues sources
Revenue
I II. III. IV. V.
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Potential Solutions to Offset the $216 Million Deficit
Potential Revenue to Eliminate the $216 Million Deficit
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• Sales Tax is 7% of General Fund receipts
• The City receives $.0075 for ever taxable dollar spent in the City
• FY 2011-12 sales tax revenue was $323 million
• FY 2012-13 is projected to be $332 million
An half cent sales tax increase would generate an additional $215 million in General Fund Revenue
State Rate 6.25%
Statewide Bradley-Burns Rate (1%)County Transportation 0.25%Local Point of Sales 0.75%
Local Sales (Transaction) Taxes (capped at 2%)Proposition A 0.50%Proposition C 0.50%Measure R (exempt from 2% cap) 0.50%
Total Tax Rate in the City 8.75%*
*The approval of Proposition 30 will increase the City’s tax rate to 9.00% 1/1/2013 through 12/31/2016
Next Steps in the Budget Development Process
2012 September 28 Mayor released his Budget Policy Letter to departments October 9 CAO released budget instructions based on the Mayor’s
policy direction November 15 Department budgets are due to Mayor and CAO November 17 Community Budget Day
2013 Jan./Feb. Budget meetings with Mayor’s Office and departments March 1 Controller’s revenue projections March Final budget decisions April 20 Mayor’s Budget due to City Council April/May Budget and Finance Committee reviews budget May City Council considers budget June 1 Charter deadline for Council to consider budget
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FOR ADD I T IONA L BUDGET I N FORMAT ION AND ONL IN E BUDGET DOCUMENTS P L EA S E V I S I T :
CAO . L AC I T Y.ORGBUDGET. L AC I T Y.ORG
CONTROL L ER . L AC I T Y.ORG /ADOPT EDBUDGET/ I NDEX . H TM