L.A. City Revenues Up, Pension Risks Remain
LOS ANGELES – L.A. Controller Ron Galperin today released the City’s Comprehensive Annual Financial Report (CAFR) for fiscal year 2018, which details the City’s bottom line and cautions about challenges on the horizon. The Controller also released an interactive, easy-to-read Popular Annual Financial Report illustrating in graphs and charts how taxpayer dollars are spent by the City. Explore both at lacontroller.org/cafr2018.
The City of Los Angeles has experienced relatively strong economic growth over the past six years, including a 4.6 percent uptick in overall revenues last year, a significant increase over the 1.9 percent growth in the year prior. Overall expenses in FY18 increased by less than one percent. However, Galperin noted that these positive economic indicators are tempered by ongoing challenges:
- Pensions: The City of L.A. spent $1.2 billion, or 13 percent of its $9.3 billion budget, on pensions in FY18. This compares to 11 percent spent 10 years ago and nine percent spent 20 years ago. For FY18, the City’s pension systems reported being 84 percent funded. In the months since, the stock market has been more volatile, which could impact investment earnings moving forward.
- Retiree health benefits: The report also notes that the City’s retiree health benefits are a net liability of $2.8 billion. While that represents a funding level of 68 percent of overall projected obligations, it places L.A. in better shape than most other large cities. New York has $98 billion in unfunded liability, and both Chicago and Houston are zero percent funded for retiree healthcare.
- Infrastructure & Debt: The City’s total debt load increased by $1.1 billion in FY18 – mostly due to modernization projects by the Dept. of Water and Power and the Los Angeles World Airports.
- Housing & Homelessness: Voters approved bond monies in November 2016 to build more housing for people experiencing homelessness. But the City has not yet made the most of Measure HHH dollars, spending only $4.5 million out of $86.4 million in available funds for homeless housing in FY18.
- Special funds: The City relies significantly on hundreds of special purpose funds. The overall balance of these funds has grown in recent years, but in contrast to General Fund revenues, these funds are each governed by rules limiting how they may be spent. L.A.’s many special funds need to be better managed by departments and more fully integrated into the City’s public budgeting process, said Galperin.
“Our City’s finances are stable at this time, but we need to make sure we are adequately prepared for any possible economic downturn that may come,” Controller Galperin said. “The City must remain disciplined in its budgeting, maintain and grow its reserves, and be more transparent and effective in managing its special funds. It’s crucial that we be prudent.”
A complement to the CAFR, the Popular Annual Financial Report charts the City’s General Fund, assets and liabilities and graphs departmental activity, with data about things like the number of small asphalt repairs completed, the tonnage of recyclables collected, per capita water usage, the number of library cards issued and much more.