CITY'S BUDGET OUTLOOK GROWS WORSE $156 MILLION DEFICIT MEANS STILL MORE CUTS, OFFICIAL SAYS.

Byline: Rick Orlov Staff Writer

The city of Los Angeles faces a $156 million shortfall this year, a new report released Friday says, nearly double what was projected only a week ago.

City Administrative Officer William Fujioka, in the first of a series of financial status reports his office is developing, wants up to a 10 percent savings in current budgets to cover the potential losses.

``We want to meet with everyone to see what can be done without affecting programs and public services,'' Fujioka said. ``Some large departments should be able to meet the goals easily, while smaller departments might have less in savings.''

Mayor James Hahn's aides said the report confirms and justifies steps the mayor is taking now.

``This will help us find savings to prevent harsher cuts next year,'' Deputy Mayor Matt Middlebrook said. ``The whole idea is to deal with this now before it becomes even more of a problem.''

Fujioka's report comes a day after Hahn issued a letter saying he was seeking a modified hiring freeze - exempting police, fire and sanitation - and asking for additional savings.

Fujioka said his new report confirms Hahn's findings and also voices concern over the impact of state budget problems.

``We are concerned the state will begin looking at local sources of revenue like vehicle license fees to balance its budget,'' Fujioka said. ``That could be a $200 million hit on us.''

Gov. Gray Davis has been grappling with a projected state budget deficit of $14 billion as a result of the economic slowdown since the first of the year, higher energy prices and the impact of the Sept. 11 attacks.

Fujioka, as he has in the past, said the city's problems began before Sept. 11, with sales and hotel bed taxes about half of what had been anticipated. His latest figures do not take into account the increased security costs since then - estimated at $1.5 million a month.

``That's why we have to act now to protect the city. We aren't in as bad a shape as we were, say eight years ago. Right now, it's still a fiscal management issue,'' he said.

Coming into this fiscal year on July 1, the city was in good financial shape with a reserve fund of more than $100 million.

However, Fujioka now says the city could lose all those funds because of revenue shortfalls and projected spending.

``Last year, the city saw the strongest revenue growth in more than a decade,'' Fujioka said. ``However, receipts for the first three months of this fiscal year are $28 million below plan.

``It's important to note that due to a number of uncertainties receipts could be considerably less.''

The city is faced with $40 million in committed expenses, Fujioka said. Those include $22.8 million to refund tax overpayments by WorldCom Inc., $3.6 million for the City Attorney's Office, $3.79 million to the Fire Department, $3.5 million to the Police Department, $2.1 million for Recreation and Parks, and $1.9 million for workers' compensation costs.

At the same time, there has been a sharp drop in tax revenue.

For example, with a cool summer the city received $20 million less than expected from the utility users tax. The slowdown in tourism and local travel saw the parking users tax drop by $6 million and there was an $8 million loss in parking ticket revenue as officers have been assigned to other duties.

Councilman Nick Pacheco, who chairs the council's Budget and Finance Committee, has voiced concern over the past several weeks about the city's finances and has asked department heads to look for areas to save.

Jack Kyser, chief economist of the Los Angeles County Economic Development Corp., said the figures confirm what his studies have shown for the past several months.

``This is prudent on the part of the city to begin to take steps,'' Kyser said. ``You have to say the economic hard times have become real for the city.''