Two months ago, the Los Angeles City Council drew up a plan to deal with the recent financial crisis: give thousands of city workers up to $ 80,000 to retire and hope the savings will be enough to avoid wage cuts for other city workers.
Now with the budget outlook still bleak and interest in hiring lags behind initial hopes, the city's elected leaders have chosen to pursue both strategies: paying workers to leave their jobs and wages for many that are left to decrease by 10%.
The council is due to vote on Wednesday to grant takeovers to an estimated 1,277 employees and clear the way for vacation days or an unpaid day off every two weeks for more than 15,000 workers.
In order to spend the vacation days, the council must approve a tax emergency statement showing that the city has a significant influence on its sales taxes, hotel taxes and other revenue. This kind of statement is LA's first since 2012, when the city clawed its way out of the last recession.
The city's negotiating committee, made up of Mayor Eric Garcetti and four council members, recommended cost-cutting measures last week. Councilor Paul Krekorian, who sits on that body, said the emergency statement will allow the city to respond immediately to "much needed" cuts, including vacations.
Alderman Bob Blumenfield is also inclined to approve the cuts. Both vacation days and takeovers will be "terrible" for the city, he said, evicting seasoned workers and making it more difficult to provide services to the public.
"But we can't spend money that we don't have," he said. "We have to figure out how to keep our city and our finances going through these terrible, dark times."
The vacation days due to go into effect on October 11th do not apply to police officers, firefighters, nurses, plumbing workers, librarians, or employees of the Department of Construction and Security who are processing permits for new construction projects. Even if these workers are excluded, vacations between October and June are expected to save more than $ 100 million.
Josh Geller, president of the Los Angeles City Attorneys Assn., Said the city lacks the legal authority to unilaterally impose a reduction in wages and hours for the roughly 500 members of its union. Such wage changes need to be negotiated, he said.
"We have a contract that doesn't allow for vacation days," said Geller, whose union sued the city over vacation a decade ago and eventually reached an agreement.
Bob Schoonover, president of Service Employees International Union Local 721, called vacation days under existing payroll agreements "illegal" and irresponsible in the midst of a pandemic. "The last thing the city of LA needs is more working families struggling to have a roof over their heads or food on the table," he said.
Garcetti spokesman Alex Comisar said the crisis caused by COVID-19 has simultaneously increased the city's costs and lowered the taxes required to pay for public services. As a result, the city is facing its worst year since the depths of the 2008 financial crisis.
"The mayor will continue to work with labor to find alternative cost savings. However, given the loss of revenue due to COVID, vacation days may be required to balance the budget," Comisar said.
Geller and Schoonover have argued that the city would make significant savings through purchases and say they want to negotiate a better alternative. On the other hand, city budget analysts claim that the buyout program fell far short of its original promise.
When councilors backed the buyout initiative in June, they had hoped that up to 2,850 employees – about 8% of the workforce – would participate, which would translate into savings of around $ 56 million in the program's first year. Instead, only 1,277 employees below the minimum number set by the council applied for further development.
Krekorian, chairman of the council's budget committee, said the city's financial analysts now believe the acquisitions will save only $ 13 million this fiscal year. He still supports the initiative and calls it “one small step among many” to reduce costs.
Meanwhile, critics have warned the acquisitions could pose additional financial risk as they come with a late balloon payment.
According to the city's plan, retired workers would get $ 10,000 this fiscal year, followed by another, much larger payment – up to $ 70,000 – in 2021-22.
If the city's finances deteriorate, these payments could become a significant drain.