Finance Principles & Objectives

            Policy goals are meaningless without funding to support their implementation. The County is entering a precarious financial time brought on largely by events it cannot control. It is imperative that the next Supervisor understands the complexities of public finance and the importance to all services of maintaining a balanced budget. The County cannot be allowed to drift into chronic, deep and prolonged deficits like State government has. The next Supervisor must protect the public purse rather than give away the store.
           As Police Chief with responsibility to manage the single largest General Fund budget in the City of Los Angeles and as Chair of the City Council’s Budget & Finance Committee, I am keenly aware of the importance of prudent stewardship of the taxpayer’s dollar. I am also acutely aware of the impact of a declining economy on public revenues and the growing imbalance between those revenues and the increasing demands made upon them. Budgeting in a time of fiscal constraints is a particular challenge. I will bring my municipal experience and expertise to the finances of the County along with a set of Principles and Objectives to inform my judgments and guide my actions as a County Supervisor.

• Protection of state and federal funding sources.

• Money for the County’s $22.5 billion budget comes from a variety of sources. Nearly 45% comes from the state and federal governments to carry out state and federal health and welfare programs. While there is no imminent threat of significant federal cutbacks, major state cutbacks have already begun and more are proposed.

• The Governor’s proposal to close the $14.5 billion state budget deficit carries a high price tag for the people of Los Angeles County. Current year cuts to County programs total $25.9 million and include significant reductions in state funding levels for CalWORKS reforms, substance abuse and crime prevention programs, alcohol and drug programs, and mental health and Medi-Cal provider rates.

• The impact in the next fiscal year will be even more severe, with proposed reductions totaling $219.8 million. In addition to additional cuts in the programs already identified, the 2008-2009 reductions the Governor proposes will adversely impact Child Welfare Services, HIV/AIDS Treatment and Prevention, Medi-Cal Administration, Food Stamp Administration, Juvenile Probation and Camp funding, Juvenile Justice Crime Prevention, Adult Protective Services, Family Health programs and libraries.

• Protection against State raids on City and County revenues.

• As we have seen before, the state does not hesitate to balance its budget at the expense of cities and counties. The result of the last contorted effort to solve the state’s budget crisis cost the County and its cities $1 billion in property tax revenue. Local government cannot continue to be the ATM machine for a Governor and a Legislature that cannot keep its checkbook straight.

• Equitable distribution of State bond funds to the region and within the county.

• In examining the allocation of funds for previous state bond measures, I find that allocations between Northern California and Southern California are more often than not skewed to the North and that allocations within the County are based more often than not on noise rather than need. Very good examples of both can be found in the allocation of water bond and park monies over the past ten years. As Supervisor, I will be especially alert to the allocation of Flood Control, Housing, Water and Transportation funding under measures approved by the voters in 2006 and will insist on an equitable allocation by geographic region of the State and an equitable allocation based on need within the County.

• Alignment of County fees to cost of County services and full recovery of costs for services.

• I have learned in my service to the City of Los Angeles the importance of periodically reexamining the relationship between the cost of a fee-based service and the fee actually charged. On occasion, such a reexamination will show that the fee exceeds the cost; more often, the cost exceeds the fee. To assure fairness in fee relationship between the County and its customers, the County’s fee structure needs to be evaluated annually as part of the budget process to assure that the fees are properly aligned with the costs.

• The County must also be diligent and persistent in recovering money it is owed in fines, property taxes, concession fees. Failure to have a diligent collection system not only costs the County revenue but is also unfair to those who do pay their obligations on time.

 

• Take full advantage of State and Federal grant opportunities and assure accountability for the expenditure of grant funds.

• Experience in the City shows the importance of maintaining a centralized database of grant funding opportunities, the application process, real-time status of grant applications, grants received and projects and programs that receive funding. On examination, we found that the process was scattered, that departments were competing against one another for the same funds and at any given time we had no idea what state or federal agency was providing funds to what City project or program. As a result, the City’s grant funding success was uneven at best and not close to where it should be for its size. I want to assure that the County receives the grant funding it deserves by assuring that the process for securing grants does not stand in the way of actually receiving them.

• It is also crucial to future success that there be full and rigorous accountability for the expenditure of grant funds. That can be assured through public oversight, much as the City does for Storm Water and Water Quality funding and as the LAUSD does for school construction. Certainly for the application process and for the expenditure of grant funds in the Second Supervisorial District, I will appoint Citizen Oversight Committees to help make sure we get the money we are entitled to for the programs and projects we need and to assure that there is public accountability for the expenditure of the grant funds we do receive. 

• Establishment of County Financial Policies.

 

• As Chair of the Budget & Finance Committee, I developed the Financial Policies for the City of Los Angeles, a model that is being emulated by municipal governments throughout the country. Those policies provide a known guidebook for prioritizing budget expenditures, capital improvement funding, the minimum level of reserve funds, the disposition of City-owned property, fee waivers, pension and retirement benefit funding and much more to prevent City financial planning and practices from being performed on an ad hoc basis. Even in a very difficult budget time, the Policies work. I will develop and seek the implementation of formal Financial Policies to guide the County, much as I have done for the City of Los Angeles.

• Labor/management cooperation on pension and post-retirement issues.

 

• The unfunded pension and post-employment benefit liability of the County can be a ticking time bomb if not defused. Depending on the actuarial assumptions used, the retiree benefits liability ranges from $13 billion to $20 billion, mainly in health care costs. While imposing, that obligation is manageable, provided public employee unions and County management take a cooperative approach and regard the challenge as a shared one. For starters, the County must not do what the Governor and Legislature have done, and that is to “delay” annual payment of pension obligations as yet another gimmick to try to balance the State budget.

• In collective bargaining negotiations, both sides must pay at least as much attention to the pension and retiree benefit costs of compensation formulas as they do to the immediate annual budget impact of compensation increases. We must be mindful of the future costs of present-day decisions.

• The County must commit to a prefunding program, similar to the investment program for pensions, to help pay for health care liabilities. While such a program is in the planning stages at LACERA, it must be implemented and funding provided for it.

• As a Supervisor, I will exercise enhanced oversight of the investment practices and policies of LACERA to assure that they are socially responsible, prudent and assure maximum return at minimum risk. While I do not want to be prematurely critical, I must say that I was somewhat alarmed to find that LACERA’s single largest equity investment in 2006 lost 40% of its value in 2007. And if CalPERS at the State level and the LA City Employees’ Retirement System can make investments targeted to
  the inner city and the local economy without undue risk, I don’t see why LACERA cannot do the same.

• Enhanced Board oversight of health care program features and costs for county employees.

 

• As we all know, health care costs are completely out-of-control, outpacing inflation year after year and running far ahead of growth in annual income for individuals and annual revenue for local government, including the County. With 103,000 employees, the County is the largest employer in Southern California. The County provides health care benefits to those employees as well as to 52,000 retirees. Ultimately, we need a national and not state or local system of universal health care to provide not only for the currently uninsured, but to contain costs for those who already pay for coverage, including employers like the County of Los Angeles.

• In the meantime, the County must do what it can to rein in costs while providing quality coverage, by stressing preventive care services (80% of the costs are spent on 20% of the covered population). Even more importantly, the County is paying too much for health care coverage simply because it has not put out a competitive Request for Proposals in years. It simply bargains with the same group of health care providers it has. That practice must change, and as Supervisor, I will insist that the selection of managed care providers be done on a competitive basis at least every five years. I would also insist that selected health care provides include coverage for Wellness Programs, Disease Management Programs, Efficient Plan Design Options, Data Mining and E-mail Physician Diagnoses and Prescription Service. These are concepts being implemented by other jurisdictions to assure quality care at the best competitive price.

 

• Performance review of all county departments.

• Any organization and the constituency it serves can benefit from critical scrutiny, fine-tuning and periodic restructuring. Independent performance reviews can showcase strengths, weaknesses, and reveal where efficiencies are possible. While County departments do have in place a system of management and political accountability, they are not as a rule vetted by independent audits. To assure that County departments are structured as they should be for the respective services they provide, to assess whether the respective services of the departments are logically
  cross-fertilized and integrated, and to satisfy ourselves that taxpayers are getting good and efficient service for their money, I will work for an independent performance review of all County departments within the four-year time frame of my first term in office.