LAUSD Prepares for a $130 Million in Cuts

The Los Angeles Unified School District launched a fresh belt-tightening campaign today following the rejection by voters of ballot propositions designed to stabilize the state's finances.

"I believe our employees and parents need to understand that we have an inferno," Los Angeles schools Superintendent Ramon Cortines told NBC4 in an interview this morning, adding that the impact of further reductions in state funding resulting from Tuesday's vote would prove to be "devastating" for local schools at all levels.

Cortines said he would be holding an emergency meeting with LAUSD staff this morning to begin identifying another $130 million in budget cuts that will have to be made in the next six weeks. The 2009-10 budget already has a $48 million deficit, he said.

The superintendent said he would also be meeting this morning with United Teachers Los Angeles President A.J. Duffy to discuss money-saving measures. "...This is not a game we're playing," he said, adding that, absent additional budget cuts, the district will face the prospect of being unable to meet its payroll.

One thing he won't allow, Cortines said, is for the LAUSD to declare bankruptcy.

Voters on Tuesday soundly defeated Propositions 1A through 1E, which Gov. Arnold Schwarzenegger touted as critical tools to prevent the state's budget gap from growing even larger.

The only proposition to win on Tuesday was 1F, which prevents the governor, lawmakers and other state officials from getting pay raises any time the state has a budget deficit.

"Tonight we heard from the voters and I respect the will of the people who are frustrated with the dysfunction in our budget system," Schwarzenegger said. "Now we must move forward from this point to begin to address our fiscal crisis with constructive solutions.

"We face a staggering $21.3 billion deficit and in order to prevent a fiscal disaster, Democrats and Republicans must collaborate and work together to address this shortfall. The longer we wait, the worse the problem becomes and the more limited our choices will be."

Assembly Speaker Karen Bass, D-Los Angeles, said the propositions' failure meant some rough days ahead for the Legislature.

"I hope the bipartisan cooperation between the Legislature and the governor that went into this effort will continue as we move forward -- the people of California clearly expect us to work together to get the job done," Bass said. "And we will."

Los Angeles city officials also braced for the defeat of the measures and the anticipated further reductions in money coming from the state into Los Angeles' coffers. Los Angeles officials estimated that the city could take a $120 million hit from the propositions' defeat.

Mayor Antonio Villaraigosa will travel to Sacramento on Tuesday to meet with state lawmakers and urge them to borrow no more than the $68 million figure that has been floated. That amount of money would have to be repaid to Los Angeles with interest over the next three years.

"If Sacramento borrows money owed to Los Angeles, they must do it on terms that keep our city whole. The state simply cannot profit off of L.A.'s taxpayers and Los Angeles must not get the short end of the stick in California's endless quest to get its fiscal house in order," Villaraigosa said.

Because the $68 million would be repaid, the financial hit would not result in additional layoffs in the city, the mayor said.

City Councilman Jose Huizar introduced a resolution Tuesday calling for federal legislation that would guarantee loans for California cities or states that need to sell bonds to balance their budgets.

Councilman Bernard Parks, chair of the council's Budget and Finance Committee, introduced a motion to convene a special meeting of the panel to evaluate the city's options to resolve the potential deficit created by the outcome of the election.

Parks said the city will need to issue a bond if the state borrows more than $68 million.

Los Angeles' credit rating is high enough to sell a bond, but an increasing amount of debt and the lack of a "rainy day" fund may make the city's interest payments higher than on previous bonds, he said.

Without a bond, the city would need to lay off employees.

"The city and the state are going to have to do something structural in their budgets to begin to live on the money they have coming in versus the money that they're borrowing," he said. "Our city and state are both in jeopardy of putting us into bankruptcy because we cannot continue to live on this borrowed money and borrowed time."

The two most crucial propositions on Tuesday's ballot were considered to be 1A and 1B.

Proposition 1A, the "Rainy Day Budget Stabilization and Accountability Act," would have extended the state's temporary 1-cent sales tax increase for a year and prolong the vehicle license fee and personal income tax hikes for another two years, generating an estimated $16 billion.

The proposition would have also increased the size of the state's Budget Stabilization ("rainy day") Fund from 5 percent to 12.5 percent of the General Fund, and it would have given the governor the power to make midyear spending cuts when revenues fall short of projections.

Proposition 1B would have transferred 1.5 percent of the state's estimated revenues each year into a fund for schools and community colleges, until $9.3 billion has been deposited in that fund. The $9.3 billion represents funds previously withheld from local school districts and community colleges, and the state would not have started repaying the money until 2011-12.

Proposition 1C, which is called the Lottery Modernization Act, would have allowed the state to borrow $5 billion against future lottery revenue to address the current budget deficit.

Proposition 1D, the "Children's Services Funding" proposition, would have redirected money from the tobacco tax to children's health and social services, while Proposition 1E would have taken money from the Mental Health Services Act to pay for children's health programs and allowed other funds to be used for helping balance the state budget.

Schwarzenegger last week released two revised budget proposals -- based on whether or not the propositions pass. Even if the propositions were approved, the state would have still faced a roughly $15 billion budget deficit. With the propositions failing, the deficit is expected to balloon to more than $21 billion.

Both budgets called for cuts to education, social services and corrections, withholding money for local governments, layoffs for thousands of state workers and possibly selling off some state assets, including the Los Angeles Memorial Coliseum.