EDITORIAL FISCAL RESTRAINT NEIGHBORHOOD COUNCILS SHOULDN'T HAVE TO USE IT OR LOSE IT.

HERE'S a problem rarely encountered in modern times: government not spending money fast enough. Yet that's exactly what's vexing many at Los Angeles City Hall.

The city's neighborhood councils are the best hope that someday democratic institutions will actually flourish in the city. And many of the 88 citizen advisory panels actually are showing respect for taxpayers' money.

The Daily News reported Sunday that many of the neighborhood councils have not spent all their allocated funds from the city, and might actually lose the grants. Of the $11 million that has been doled out to certified neighborhood councils in $50,000-a-year increments, only $2 million has been spent.

Yet, this fiscal restraint isn't winning the councils any awards. Indeed, the councils lose their grants unless they spend the cash in three years.

The unspent bonanza is irksome to City Councilman Greig Smith who, like any politician worth his salt, is loath to see public funds not get spent. ``That's what's bothersome ... it's just sitting there,'' Smith said.

To be sure, this is not typical bureaucratic behavior. But that doesn't mean the councils ought to be punished for saving their funds. The money shouldn't have any strings attached. If the councils want to spend it now or save up for a big-ticket item, that's their business, not the city's.

Officials at the Department of Neighborhood Empowerment note that the disbursement of budgets is relatively new, as are the certification of many individual councils. Considering this, it's no wonder then that the movement of citizens might use more caution with the public's money.

City officials should lose the time limit for neighborhood councils to spend their allocated budgets. It's a paltry enough sum -- considering the tens of millions routinely squandered at City Hall without public benefit -- so forcing them to use it or lose it is tantamount to incentivizing wasteful spending.