EDITORIAL L.A.'S MONEY WOES IS THE MAYOR TOUGH ENOUGH TO FIX THE RUNAWAY COSTS OF CITY HALL SALARIES AND BENEFITS?

WITH his usual dramatic flair, Mayor Antonio Villaraigosa has issued a dire warning about the city's financial health as he prepares his first spending plan in the face of a massive budget deficit.

Money is pouring into the city's treasury so Los Angeles' financial outlook ought to be a vision of health and vitality. But that's far from the truth.

City Hall has been on a reckless spending spree for years, hiding the extent of its problems with accounting tricks that have covered up its destructive habits. Indeed, the structural deficit that Villaraigosa ``inherited'' from his predecessor is nearly $300 million, and he says it could balloon to $450 million in just four years unless drastic action is taking.

That means the city is consistently spending more money than it takes in each year, cloaking that reality by stealing funds from the Department of Water and Power and using one- time funds for ongoing costs.

It's a positive sign that the mayor has awakened to what critics of City Hall have been saying for years. But the measure of leadership is not just identifying the problem, but fixing it as well.

Villaraigosa vows he will do just that and close the structural deficit gap in five years. He said he's going to do so by making the tough choices, leaving open the possibility that city services will be cut further, that fees might rise and - unthinkable as it might seem - there might be layoffs at City Hall.

Those are the wrong options. Taxpayers didn't spend the city into a financial hole. They got stuck with the bill for the nation's costliest and least efficient municipal government. Taxpayers by and large don't get pensions of 75 to 90 percent of their last salary or lifetime health care or all the other benefits of being a public employee these days.

The answer to reining in the growing structural deficits isn't about cutting services, but cutting spending. And the vast majority of the Los Angeles' $4 billion general fund budget is tied up in employee-related costs.

Villaraigosa said unequivocably that he won't renegotiate existing employee contracts. If so, then he's going to have to be extra aggressive as the next round of contracts come up for negotiation this year, taking note of his own charge that city payroll costs have been rising at twice the rate of inflation in recent years.

If Villaraigosa truly wants to be the hero of the city's revival, he will have to do more than identify a few ``efficiencies'' and cut already lean city services. He knows what needs to be done. He has the political capital to do it.

The question is will he stand up to the unions and cut a new social contract for Los Angeles that balances out the competing interests and delivers on his promises to improve the schools, save kids from gangs, build a better transportation system and make the streets safer?