LA County's Fiscal Health - CAO David Janssen

When we spoke last in March of 2004, Propositions 57 and 58 had just passed, the Vehicle License Fee had been repealed, and there was obviously great uncertainty about the revenue picture for the county. How is the County doing now?

Well it's like night and day from last year. Proposition 1A passed in November-with over 80 percent of the vote-to protect local revenues against state seizure and/or transfer. As a result, this year we are not going through the $300 million cut exercises that we did last year, because the state, though it still has an $8 to $9 billion deficit, cannot go after our money. That is a huge change in the relationship between state and local government, (our biggest problem since Prop. 13) and very positive for local government. We are pleased with the deal made with the governor: $1.3 billion in local revenues this year, and $1.3 billion next year to help the state balance its budget. There is $103 million from L.A. County alone each year that is part of our budget. So, with respect to the relationship with the state, we are much better off than we were before.

Is the budget that the Board of Supervisors just approved balanced?

Our budget is in reasonably good shape, except for the health department, which is a problem we've noted for at least ten years. Property taxes are strong. Sales tax and Prop. 172 realignment are doing very well. Deed transfer is up. Those are our primary revenue sources and they're doing okay. The budget's going up a little over 3 percent and it's allowing us to reopen all of the jails and to start investing more money in the unincorporated area, where about one million people live. With the Prop. 1A protection we feel more comfortable about spending the local revenues that we have.

In a recent Public Policy Institute survey of LA County, responders indicated a great deal of concern about both mobility and housing, and a full third indicated that they didn't think they'd be living in the county in 5 years. What is your response to PPIC's findings?

The findings of the survey may well be true, but I think we're still growing. The last numbers I saw indicate that we're growing at a rate of about 500,000 people a year. The numbers tend to up and down slightly, but California is still the place where people want to live. The housing prices will level off. Prices won't continue to grow at the rate that they have. Whether there is a bubble or not remains to be seen. I think that five years from now, LA is going to be bigger than it is now, even if some people are leaving. More people are always coming.

What is the County's role with regard to mobility and housing supply and affordability?

Transportation is essentially the responsibility of the MTA and the State of California, not really the county. Our transportation issues are in the unincorporated areas. The same goes for housing. Our responsibility is to the unincorporated area, not to the rest of the region. Water, transportation, housing, and land use are challenges that have faced California for as long as I can remember. They're not new issues. They may be harder to resolve, but they're not new.

The county not only is an agent of the state for the delivery of social services, it also is the municipal government for approximately 1 million residents in the unincorporated areas of the county. In light of the county's many responsibilities, Do you think the county should have an elected county executive, as Supervisor Yaroslavsky recently suggested? [See Metro Investment Report, April 2005].

The discussion about the health authority for the health system really is a discussion about LA County organization. The Board of Supervisors have both executive and legislative responsibilities. It is an organizational structure that is unique to county government in California. Obviously, both the federal and state levels of government have separated powers. Cities have very separated powers: usually with either a strong mayor or a strong city manager form of government. Almost all counties in California are similar to LA County. Why county government was designed this way, I have no idea, but it has its challenges. It is very hard for board members to differentiate between the two types of responsibilities as they face challenges.

The Brown Act is a great example of the difficulties. The Brown Act does not apply to the executive function of cities. The Mayor doesn't have Brown Act obligations. He can meet with his staff and department heads. However, the Board of Supervisors can't exercise its executive responsibilities other than as a Brown Act body, and that is very problematic. This means that they can only act every Tuesday (or however often they meet). This is a severe burden on executive responsibility.

Whether the county executive is elected or is strengthened by the charter, I think it could work. It would negate the need for the health authority in the Health Department. Whether the executive needs to be elected or not, I am not sure. I opposed the proposal for a nine-member board, but I think you would need an elected executive with a board that size. It is less clear to me whether an elected executive is necessary if the board has five members. I do think that there are advantages to separating the executive and legislative functions, and, as I have said a few times, I support Supervisor Yaroslavsky on the direction he is taking.

You spent several years in San Diego government. The problems there have been well documented in the news recently. Could you comment on the apparent meltdown of San Diego's city government?

First, I want to make sure to differentiate between the San Diego County and the City of San Diego. The county is not having those problems. In 1984, the county adopted by charter a strong CAO position, so they have separated the responsibilities of the legislature and the executive. The city, on the other hand, has been a strong city manager form of government, and up until the early 1990s was the model for city government in the United States. They were always ranked up at the top of the list of well-run cities. I don't personally know what it is that got them into such a mess.

And the November charter vote in San Diego to move from a city manager form of government to a strong Mayor on January 1st: your response to that reform?

It's like any other form of government really. It's as good or as bad as the people that are in it. There are many outstanding examples of strong city manager government. There are many examples of strong mayor governments-generally, large cities have a strong mayor instead of a strong city manager-but across the United States you have both forms and they work or don't work based on the quality of the key people you have in the positions.

Focusing now on the State, what advice would you give our Governor as he attempts to pursue having his budget adopted?

Well, balancing the budget isn't rocket science. You either cut programs or increase revenue. It's one or the other. You don't have any other choices, and the state has avoided that responsibility for several years now by using one-time funds, borrowing money, etc. If you're not willing to raise taxes, then you've got to cut programs. It's a real simple choice. They need to avoid using any of this one-time money for on-going expenditures. The have got to make decisions about cutting programs, or they've got to raise taxes or both. The repeal of the vehicle license fee, although wildly popular with the people, created a $4 billion hole in the state budget that is just about the size of the structural deficit that the state is facing. Not that they can reinstate the VLF at this point, but it has in large part caused the budget problems that they continue to face. The state has to make the tough expenditure decisions and cut programs if they will not raise revenue. It's as simple as that.

Do you have any words of advice to the Governor and the Republican Party on dealing with the predominantly Democratic legislature?

Sit down at the table and work it out. The same goes for the Democrats. Ideology is not the way our political system works ... is supposed to work anyway. The system is designed to force compromise, which means both sides have to give. I think the public expects the administration and the legislature to negotiate in order to fix the problems of the state, not for them to throw bombs at each other.

Could you comment on the County's budget priorities that our readers should be particularly aware of?

Reopening jails is absolutely our number one priority. We are funding about 4000 new jail beds over the next 14 months. The second priority is adding services like libraries, parks, and public safety in the unincorporated areas. Third, the county is setting aside $40 million as a down payment to deal with the problem of the health department. In fiscal year 2006-07, the health department runs out of its reserve, and we will be back where we were back in 1994 and again in 2002, with huge challenges in the health department-Martin Luther King notwithstanding-that are going to require us to make some serious decisions about expenditures and services.

All of these priorities are easy to track at the end of the year. In terms of opening the jails, the sheriff has scheduled the academies that he needs to operate the new beds. With regard to the Health Department – we track that quarterly in terms of the deficit. We'll know how we're doing there and we'll see what happens on the state waiver that's pending. We can track increased services in the unincorporated area fairly easily as well.

To close, it appears that some of the public employee unions that represent employees of LA County have decided to enter the political fray and challenge next election some of the sitting County Board of Supervisors. How might a contested political environment affect management of the county's business this year?

In my time with the county, we've had a number of difficult elections. The last being when Supervisor Burke was challenged by ALADS. There are rumors of supervisors being challenged next time around, but I have not detected in any of the board members a change in the way they approach the decisions of the county as a result of that.

They are fiscally conservative. They have held the line on general fund expenditures. They have held the line on retirement benefits and salary increases, which may be why some of the unions are upset, but not doing so is what got the state and other jurisdictions in trouble.