L.A. Controller Calls on City to Untangle Web of Special Funds

LOS ANGELES- L.A. Controller Ron Galperin today released a report calling on the City to reform the way it handles more than 700 special funds that hold $4 billion. Special funds are used for particular projects or purposes, like creating parks, building bridges and constructing affordable housing. The balances of these funds make up roughly half of the City’s treasury, yet nearly 600 special funds are not included in the yearly budget.

Galperin points out that the City currently lacks standard rules on how to create or use special funds, resulting in tens of millions of dollars sitting unused that could pay for vital City services. For example, in FY18:

  • The City spent just 1.4 percent (or $254,000) of an $18.2 million special fund dedicated to improving parks and recreation centers;
  • Another fund for the City’s bicycle plan saw just 3.3 percent of its $1.7 million balance spent that year; and
  • There were zero expenditures from one $1.7 million fund to improve public safety.

“We need to untangle the web of special funds to determine how billions in taxpayer dollars can be better used to achieve the City’s priorities, like building more parks and investing in affordable housing,” Controller Galperin said. “This is an opportunity to be more transparent with our finances and allocate unspent money to meet neighborhood needs. The City has taken steps in this direction based on recommendations I’ve made in recent years, but we need a more comprehensive approach to address the magnitude of the issue.”

The Controller’s report also shows that 188 of the City’s special funds haven’t been touched for three or more years – so long they are considered idle. Idle funds hold more than $31 million in L.A. taxpayer dollars that could pay for essential City services.

Galperin has addressed the opportunities and challenges of special funds since 2014, including a 2018 report on idle funds. Since then, City departments have closed nine idle funds, freeing up $1.2 million, yet uniform procedures to close the funds do not exist. In fact, today’s report reveals that the total number of idle funds and the amount of cash tied up in them has increased over the last fiscal year, including:

  • $3.3 million sitting in a seven-year-old fund dedicated to alleviating neighborhood traffic;
  • $3.1 million earmarked to create affordable housing in a small geographic area that should be repurposed and used citywide; and
  • $1.2 million in a decade-old fund, called “Healthy Alternatives to Smoking,” which could be used to improve Angelenos’ health habits.

Controller Galperin’s report recommends that the L.A. City Council: (1) implement standard procedures to create and evaluate each special fund; (2) review revenue and spending plans for each fund yearly; and (3) adopt new procedures to repurpose and close out idle funds.

To illustrate the City’s special funds issue, Galperin has created a page on his website featuring easy-to-read charts and graphs that detail the function of each fund, which department controls them and the fund balances. Users can also browse special funds and review the Controller’s recommendations on what to do with each idle fund.

Follow L.A. Controller Ron Galperin at @LAController on Twitter, Facebook, LinkedIn and Instagram.