CLAIMS VS. CITY BATTER BUDGET.

Byline: Rick Orlov Staff Writer

Heightening concern over Los Angeles' long-term financial health, City Controller Rick Tuttle warned Monday that lawsuits, settlements and employee injury claims have sent the city's liability soaring passed $1 billion - a quarter of the annual budget.

``The danger is that as long as the city's overall liability continues to grow, the yearly bills that come due will continue to rise and need to be paid, even if the city's budget flattens out or takes a downturn,'' Tuttle said.

The report shows an overall 52 percent increase during the past six years for claims due to workers' compensation and all other lawsuits, including an estimated $125 million for the Rampart Division corruption case.

``But we should not overstate Rampart's role in our current situation,'' Tuttle said in his report to Mayor Richard Riordan and the City Council. ``Even if Rampart had not occurred, the city's total reported liabilities today would still be larger than ever before.''

Tuttle suggested creating a task force to find ways to reduce the city's liabilities. Those costs include wages and payments due on long-term debt, in addition to the workers' comp and lawsuit settlement costs that have spiked in recent years.

Riordan spokesman Peter Hidalgo praised the Tuttle report as focusing attention on a weakness in the city budget.

``We think this is an important management tool and that we now have the ability to more closely manage liability,'' Hidalgo said. ``Working to control liability and risk management is something that will begin to get more special attention.''

Even though the city has begun a new program to trim workers' compensation costs - now running at about $100 million a year - Tuttle cited recent statistics showing Los Angeles with the highest costs compared with other cities.

``Los Angeles has the highest number of claims incidents per 100 employees,'' Tuttle said. ``Even worse, on the all-important category of actual losses, the city of Los Angeles has the highest rate loss of $4.60 per $100 in payroll. Until these numbers improve, the city is likely to continue to face high total liabilities in this area.''

Councilwoman Laura Chick, who chairs the City Council's Government Efficiency Committee that has been looking at workers' compensation, said the report doesn't reflect recent changes that have reduced liabilities.

``I'm glad to see the controller focus on this issue, because it's something we could have been doing for five years,'' said Chick, a candidate for city controller in the April election. ``This certainly sounds an echo of what I've been pleading for - to have attention paid to a very serious problem.''

Julie Butcher, general manager of Service Employees International Union Local 347, which represents most city workers, said the new program was developed by a labor-management task force, emphasizing safety procedures and getting people back to work.

``We think there will be a $500,000 savings this year alone,'' Butcher said. ``We think we are beginning to make some headway by getting people back to work earlier, which reduces the overall costs and helps people recover.''

Tuttle's study reflects new actuarial accounting methods put into effect this year as required by the City Charter. Those accounting methods produced increases in some categories and decreases in others.

Tuttle said the new accounting procedures are part of a City Charter change requiring his office to do an actuarial analysis of the city's liability. Also, he added, it has to be determined whether the study reflects what has been going on for years and was not known.