Mayor Eric Garcetti's budget for next year has been called a “status quo” plan. There were some tweaks from his predecessor's last budget, including, most notably, a plan to hire 50 new officers to write parking tickets.

But even incremental change is difficult at L.A. City Hall. The plan drew criticism, and on Tuesday, the City Council budget committee scuttled it. Now it's a status quo budget.

Garcetti came into office vowing to radically overhaul the way the city did budgeting. But so far, reality hasn't kept up with the rhetoric.
Garcetti's idea is to introduce “performance-based” budgeting – a process of funding programs based on measurable outcomes.

 “You have to rank every program from most cost effective to least cost effective,” says David Osborne, who co-wrote the book on the subject, The Price of Government. “If you're short of money, you quit funding the stuff that's least cost effective.”

It's not a new idea. Performance-based budgeting has been used in cities across the country such as Dallas, Baltimore and Spokane. It's even been tried in Los Angeles, under Mayor Jim Hahn in 2004. (Antonio Villaraigosa scrapped it.)

In budget town halls across the city earlier this year, Garcetti and his budget director, Rick Cole, explained that performance-based budgeting was an innovative approach to managing the city's priorities.

“It's difficult work, because that means there's gonna be winners and losers,” Garcetti said at a forum in January. “The easiest thing for mayors and council members to do is just to repeat the previous year, and shave off a little bit here and there or add if it's a good year. I want to do something different.”

In a column in the magazine C-Suite Quarterly, Garcetti wrote, “Through performance based budgeting, we will start our budgets every year from scratch and ask ourselves: what do we want to achieve and how do we get there?”

But big changes like that are difficult. In fact, Garcetti used Villaraigosa's final budget as a template for his first budget. In a memo in October, he instructed department heads to develop a “starting point” budget based on a 5 percent cut from the previous year.

“[Y]ou can't actually start every year totally from scratch,” Cole said in an email.

The mayor's office also ran into trouble with the city's budget software, which makes it difficult to link the accounting to “performance.” In budget documents released last month, the mayor's office described the budget as a “modified program budget which will transition to performance-based budgeting in future years.” The budget allocates $2.7 million for new budget software to facilitate the transition.

In an email, Cole argued that the budget team was able to preserve the essential elements of performance-based budgeting, though in a somewhat “streamlined” form. New proposals were ranked based on a point system, and some were funded and some were not. However, the mayor's office could not identify any programs that were cut because they were not performing.

Additionally, some of Garcetti's professed priorities did not get much money. The mayor's office was able to find only $800,000 for the Great Streets program, which is a paltry sum when measured against the mayor's ambitions, and a mere $1.4 million for an “Innovation Fund,” which is supposed to spur innovative programs across all 35 city departments.

Osborne, the co-author of the book on performance-based budget, says that the process ultimately succeeds or fails based on the will of policy-makers to make tough decisions.

“It's really about the will of the executive and the budget director,” Osborne says.

Garcetti does appear to have made some headway on another of his goals – eliminating the city's business tax, which he believes is an impediment to job growth. The tax brings in about $460 million in revenues, or about 9 percent of the general fund. In January, Cole said that Garcetti would adopt the recommendations of the Business Tax Advisory Committee, which called for a 15-year phase-out of the tax, starting with a $29 million cut in the upcoming fiscal year.

But that proposal met resistance at the City Council. Paul Krekorian, the chair of the Budget and Finance Committee, expressed deep reservations about the idea, saying he preferred a targeted approach to reforming the tax, rather than a full phase-out.

In negotiations with Krekorian and Council President Herb Wesson, Garcetti's office agreed to scale back his proposal and postpone it for a year. Now, the plan will cut the tax by roughly $45 million – or about 10 percent – phased in over four years. (The original Business Tax Advisory Committee recommendation was to cut the tax by $129 million in the first five years, on the way to full repeal in 15 years.)

The scaled-down proposal has so far made it through the budget process without much discussion or controversy. But because it does not kick in until January 2016, it may yet be modified. Krekorian has suggested reducing the tax by the same amount, but in a way that targets particular industries.

Krekorian's spokesman, Ian Thompson, said that the council will debate the proposal again in a few months, once the city attorney has drafted an ordinance on the topic.

“Nothing substantive is going to happen right now,” Thompson said.

And that's the story of L.A. City Hall in a nutshell.

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