City Financial Health / Rate of Expenses / FY 2019-20 / FY 2020-21 / Revenue Generating Activities / Furlough Implementation

Los Angeles City Charter Section 312 requires that the Mayor release a proposed budget on
or before April 20 each year for the fiscal year that begins on July 1 until June 30 of the
following year. Subsequent to the release of the proposed budget, the Budget and Finance
Committee holds hearings to consider the Mayor’s proposed budget, hear about its
potential impacts on our City departments, and review the various choices for expenditures
contained therein. The scope of this process involves far more than the committee
members, their staff and the committee clerk.

In a normal year, hundreds of staff spanning departments as well as the City Administrative
Officer's office and the Chief Legislative Analyst's office, representatives of the City's labor
partners, members of the public and other stakeholders gather, sometimes in one room, to
participate in the process.

This is clearly not a normal year.

There are two significant complexities that make considering the Mayor’s proposed budget
a significant challenge. The first is that the committee cannot and will not gather all of the
required staff in one place due to the directives from public health authorities and out of a
desire to ensure that staff remains safe and healthy by avoiding close quarters contact with
other people. The second is that there remains a great deal of uncertainty about the state of
the economy over the next fiscal year and the likely impact that will have on city revenues.

According to the CAO, the proposed FY 2020-21 budget bases its projections of
economically-sensitive revenues based on only 2-3 weeks of experiential revenue data, and
the City's experiences with prior economic downturns, which do not provide adequate
guidance because the current emergency has no contemporary peer. Ordinarily, the
proposed budget is based on months or even years of historical revenue data.

If the Council were to change the basis for its assumptions, it would do so either more
conservatively or less conservatively than the mayor, and each carries a risk. If the Council
were to assume more revenues, that would likely result in even more painful future cuts if
the economy fails to improve or even worsens. If the Council were to assume less revenues,
we would necessarily have to make deeper cuts to achieve a balanced spending plan; unlike
the federal government, the City cannot run a deficit in its annual budget and must balance
revenues and expenditures. If the economy improves, we will have to rebuild that which
we would have cut in order to maintain balance.

As a result, it would behoove the members of the Budget and Finance Committee to hear
from its senior advisors about the state of the City's finances in anticipation of initiating its
consideration of the Mayor*s proposed budget, to consider whether the spending plan
adequately balances the service and emergency response needs of the city right now with
our sluggish revenues, maintains adequate reserves to get us through the economic
difficulties of the next fiscal year, as well as the 2021-2022 fiscal year and whether the Council will have any better data to base its assumptions than those before the Mayor's
budget team.

WE THEREFORE MOVE that the City Council INSTRUCT the Chief Legislative Analyst and
the City Administrative Officer to report with:

1) An analysis of the city's financial health as it ends the 2019-2020 Fiscal Year and
approaches the 2020-2021 Fiscal Year in light of the current state of the national
and local economy; and

2) An analysis of the current rate of expense across all departments during the COVID19 emergency for the remainder of the 2019-20 Fiscal Year and whether the
proposed budget for 2020-21 will sufficiently prepare the city for the period of the
continuing emergency declaration.

3) An analysis of the Mayor's 2020-2021 Proposed Budget and the furlough, its impact
on city operations and programs, and on services for the most vulnerable residents
and families.

WE FURTHER MOVE that the City Council INSTRUCT the Office of Finance to report on its
revenue generating activities and the rate of growth or recession for the revenue categories
it oversees.

WE FURTHER MOVE that the City Council INSTRUCT all departments impacted by
furloughs proposed in the Mayor's Proposed Budget for Fiscal Year 2020-2021 to report
within 7 days on their plans to implement furloughs for their impacted personnel.