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LA Mayor Warns Of Deep Pain But Vows: 'We Are Not Broken... The Real Question Is How We Come Back'

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In his “State of the City” speech this evening, L.A. Mayor Eric Garcetti addressed a stark new reality due to the havoc coronavirus is wreaking on the city’s budget. He set the stage for what will likely be massive cuts when he presents his 2020-21 budget to the city council tomorrow.

"All of us remember the 2008 recession, until now, it was the biggest economic low of our lifetime, and it hurt. There's no way to sugarcoat. This is bigger, and it will hurt more."

He laid out steps already underway to address projected budget shortfalls in this unprecedented crisis including:
  • Already borrowing $70 million from city special funds and reserve fund
  • 26 furlough days for all civilian employees, the equivalent of a 10% paycut
  • Cuts to many city departments, which "will have to operate at sharply reduced strength"
And also defined, broadly, what he says he will not cut:
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"I have drawn a red line around the foundation of our common good. Those back-to-basic investments that keep our neighborhood safe, our streets clean, our families' housed, and our children, and seniors fed."

Garcetti cited across the board losses in revenue, including a 95% drop in passenger traffic through LAX and a cratering of hospitality services from restaurants to hotels.

To put that into perspective, he explained: "After 911, our airport closed for two and a half days. Passenger traffic fell by as much as a third that month and it took us 10 years to claw our way back."

After laying out broad strokes of painful choices already underway, Garcetti outlined a vision for using the crisis to remake the city and, potentially, tackle long-standing problems.

“The soul of our recovery will shape the contours of our city’s future for decades to come,” Garcetti said. "Long before this crisis, too many Americans have been forgotten by a country that speaks about the many, but too often favors the few."

Garcetti's voice wavered with emotion as he described how significantly the pandemic has reshaped life in L.A.

"Our city is under attack. Our daily life is unrecognizable. We are bowed and we are worn down. We are grieving our dead. But we are not broken. Nor will we ever be. So the real question is how we will come back.”

The mayor's speech came just days after City Controller Ron Galperin released a staggering revised estimate that forecast:

  • A $231 million revenue shortfall for this fiscal year, which ends in June
  • Up to $598 million next year, which begins July 1

Last year, during the halcyon days of economic growth, Garcetti’s budget proposed boosting spending on police overtime and infrastructure improvements, including road repairs. The 2019-20 plan also requested more be set aside for the city’s budget reserves, which include a budget stabilization fund -- bringing the total to $399 million. Just last fall, the mayor was predicting the next budget could build further on that cushion.

But even before the crisis hit, the city was in belt-tightening mode because of new labor agreements signed after the budget was adopted last May. Pay raises and expanded benefits for police, firefighters and civilian employees wiped out projected surpluses. As a result, the city was projected to run $200 to $400 million deficits in the coming years, according to a report by the City Administrative Officer, Rich Llewellyn.

But the economic downturn some economists saw on the horizon is instead a pandemic-driven fiscal cliff. The bottom line: It won’t take long for the city’s “rainy day” fund to be swallowed up by the gaping revenue hole left by COVID-19.

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As he has before, Garcetti appealed to the White House and Congress for aid for struggling local governments hit hard by both revenue losses and emergency spending to address the virus.

"I've called on the federal government to either loosen restrictions on emergency funds that prevent us from using them to replace lost revenue or in the next CARES [Coronavirus Aid, Relief, and Economic Security Act] package help bail out America's cities, just as you bailed out the banks."

Among the things he is calling on the federal government to:

  • Back an eviction moratorium
  • Greatly expand Section 8 vouchers
  • Make college free for those who want to attend
  • Pass a national infrastructure bill to create jobs
  • Open every part of the recovery to immigrants, regardless of their status