CITY LOOKS FOR WAYS TO CLOSE BUDGET GAP.

Byline: Rick Orlov Staff Writer

The city of Los Angeles faces a $47 million budget shortfall this year, and might cut spending in all agencies by 1 percent and continue its hiring freeze, officials said Wednesday.

And with the state's financial problems likely to lead to reduced funding to local government in the future, city officials said they are preparing for even more cuts in the 2004-05 financial year.

``No matter what happens, we will have fewer employees this year and even less next year,'' Chief Legislative Analyst Ron Deaton told the City Council.

Despite the city's wobbly financial situation, officials have continued to grant raises of 3 percent to 4 percent to city workers annually while raising fees in many areas and reducing services.

Deaton and City Administrative Officer Bill Fujioka said exact numbers will not be available for some time and that much will depend on the outcome of the recall election of Gov. Gray Davis on Oct. 7.

``We have never seen anything like this,'' Fujioka said. ``Right now, it's completely crazy. No one has ever seen a situation like this.''

One of the key factors, the two officials said, is what happens to the vehicle license fee, which was tripled by Davis to head off substantial cuts to local government. The governor now supports reducing the cost of registering a vehicle but hiking taxes on alcohol and tobacco.

Mayor James Hahn has been closely following the state's financial situation and working with Deaton and Fujioka, Deputy Mayor Matt Middlebrook said.

``We have been developing some options to look at to make sure we are able to carry out the programs this year and not have a major impact on next year's budget,'' Middlebrook said.

Deaton agreed the major problem could occur next year.

Rick Orlov, [phone]

rick.orlov(at)dailynews.com