EDITORIAL CRUNCH TIME CITY HALL MUST ACT QUICK TO AVERT A BUDGET DISASTER.

AT City Hall, they're spending money like it's going out of style - and it is. With the economy cooling and tax revenues in the tank, the Treasury soon will be empty if city government keeps burning cash at its current rate.

The city's reserve fund, which totaled $100 million at the start of July when former Mayor Richard Riordan left office, is almost gone, evaporated at an incredible rate.

The situation almost certainly will get worse with the most optimistic projections showing zero growth in the economy. Massive - and unacceptable - budget deficits seem inevitable.

That places the burden on Mayor James Hahn and the City Council to decide now about how to prepare for the rockier times ahead.

In past economic slowdowns, City Hall opted for a combination of two knee-jerk responses: borrowing binges and slashing public services.

Neither ``solution'' is acceptable at this time.

It would be unconscionable to burden future generations of Angelenos with millions in debt because this generation's leaders couldn't balance their books. And reducing public services in Los Angeles, which are already laughably inadequate, would impose yet more hardship on the public at a time when hardship is already in plentiful supply.

There's a better alternative, and that's for City Hall to get serious about making tough decisions in its own budgeting. For decades, City Hall has generously transferred public funds to special interests, to underworked and overpaid bureaucrats, to armies of high-priced consultants and worst of all to make elected officials and top bureaucrats the most handsomely paid and indulged public servants in America.

Efforts to ferret out waste and inefficiencies have been laughable. Any business that operated like City Hall would have been bankrupt long ago.

Now that leaner times are upon us, it's time for City Hall to go back, and take a scalpel to its budgets and to the city bureaucracy. It's time to discontinue the patronage, cut out the bloat, eliminate the programs that don't work and get rid of the bureaucrats who don't produce.

The truth of how serious the looming crisis is seems to have registered with Hahn, who has taken a few symbolic steps, including creation of a task force of city officials to pay attention to the problem and freezing some open jobs. And the city's chief administrative officer, Bill Fujioka, plans to scrutinize department budgets to look for savings without reducing services.

But there still doesn't seem to be any sense of urgency. What's needed is strict financial discipline, applied consistently and over the long haul, to spare L.A. from a budget disaster that could deteriorate the quality of life in the city substantially and for years to come.

Hahn has previously said he planned to make fighting San Fernando Valley secession his top priority this year. It's time to rethink priorities. The only way to hold L.A. together is to make it work, and the time is now.