Los Angeles Mayor Antonio Villaraigosa's plan to balance the city's $7-billion budget is filled with ideas that are starting to draw heat from the public: cuts in Sunday library hours, mandatory employee furloughs and a 38% hike in trash fees, to name a few.
But within City Hall, one proposal generating fierce debate is a little-known plan to delay an $81-million payment to the city's employee pension fund until next year -- a move criticized by some as an accounting gimmick.
Delaying that payment would cost taxpayers more than $15 million in penalties, according to a document issued Friday by the city's top budget analyst. By 2013 -- which could be Villaraigosa's eighth and final year as mayor, should he win a second term -- the rearranged payment schedule would have cost the city $85 million, a sum larger than the payment being delayed this year.
The City Council's Budget and Finance Committee is scheduled to discuss the plan today, the first day of budget hearings. But some council members are raising doubts about the payment proposal.
"The fundamental question at the end of the day is, are we being penny-wise and pound-foolish?" asked Councilman Richard Alarcon.
The plan works like this: Instead of continuing to make one payment of about $300 million at the start of each fiscal year, the mayor would send smaller installments to the pension fund every three months.
Because the pension fund would lose some of the interest it would have earned from a larger, lump-sum payment, the city would be charged more for paying quarterly. But because that fourth quarterly payment wouldn't come due until fall 2009 -- three months after the end of the upcoming fiscal year -- Villaraigosa will be able to take an $81-million expense off this year's books.
The mayor's budget aides defended the payment plan, saying that they have few other palatable choices. Faced with a $406-million shortfall, Villaraigosa already is raising fees by $90 million and eliminating 767 jobs.
The council and the mayor probably will have to find more service cuts if they don't shift the pension fund to quarterly payments, said Deputy Mayor Sally Choi, Villaraigosa's in-house budget advisor.
"It is going to cost the city more in the long run," Choi said. "But in difficult times like this, this is something we had to consider."
