FAT L.A. NEEDS A DIET MAYOR VOWS CUTS IN BLOATED BUDGET.

Byline: Beth Barrett Staff Writer

Mayor Antonio Villaraigosa will launch a sweeping restructuring of city government in an effort to streamline a bureaucracy that has swollen to more than 34,000 staffers and whose salaries and benefits have ballooned to nearly 70 percent of the city's annual $4 billion operating budget, the Daily News has learned.

Vowing to wipe out a nearly $300 million structural budget deficit that jeopardizes Los Angeles' future, Villaraigosa has issued a dire warning on the potential for cuts in services, more hikes in fees to the public and even staff layoffs.

Pressed to explain his position in the face of other more optimistic projections, Villaraigosa stood by his position, saying in an interview Friday that he is directing city officials to aggressively dissect all department staffing, eliminate redundancies, transfer workers to more important tasks if necessary, target fraud and waste, and rein in the growth in wages and benefits.

``We have to demonstrate to the public we're a leaner and more efficient government ... living within our limits,'' Villaraigosa told the Daily News. ``We have to engage every effort to enhance performance and eliminate bureaucracy.''

In the past five years, the city's work force has grown from 34,406 authorized positions to 35,758 (of which 34,142 are currently filled), and the drain on the general fund for employees salaries has leaped from $2 billion to nearly $2.8 billion. Pension costs for city workers are projected to reach $600 million this coming year.

Villaraigosa has warned that the city's growing structural deficit - the difference between revenue and spending - represents a ``crisis'' and he has vowed to eliminate the massive shortfall in five years even if it means drastic measures.

Still, he hopes efficiencies and efforts to limit cost-of-living adjustment will avoid the ``catastrophic'' situation facing the city.

``We want to be as fair to employees as we can without bankrupting the city,'' he said.

The Mayor's Office, working with Controller Laura Chick, has begun meeting with general managers who will be responsible for finding efficiencies and reducing costs - without resorting to the ``shotgun way'' of freezing positions.

``We will hold them accountable,'' Villaraigosa said, adding that if managers don't respond, ``We'll do it for them.'''

Villaraigosa said he's determined to take the ``gimmicks'' out of city budgeting, which for years have masked the structural deficit by patching it with one-time funds such as raids on Department of Water and Power revenue, selling property or dipping into surpluses.

In a detailed Friday briefing, Karen Sisson, deputy mayor of Finance & Performance Innovation, said efforts to staunch the city's deficit spending will intensify over the summer.

``It's a whole anatomy of things, not all of which will be done at once, (including) through attrition and active management,'' Sisson said.

While it could take months, Sisson said it's the best method to avoid more drastic measures such as cutting services, layoffs, or raising fees.

``It's all about managing the city. It's not a sexy or visual thing,'' said Sisson, who orchestrated Los Angeles World Airports' financial turnaround after the Sept. 11, 2001, terrorist attacks.

Some general managers already have been given specific goals: Office of Finance Manager Antoinette Christovale is being asked to more aggressively audit business tax payments in an effort to boost revenue.

Treasurer Joya C. De Foor is being asked to look at enhancing the city's portfolio.

Some city sources familiar with the process said the mayor is intent on putting fiscal discipline into the city's budget and bureaucracy.

``He's sending a message to city staff and departments, 'Guess what folks, we're going to step it up; we also have some very tough negotiations coming up,''' one source said.

But union representatives - several used to negotiating lucrative contracts in the past and now pointing to a recent one with Department of Water and Power workers - have charged Villaraigosa with painting an overly dire scenario even as the real estate market is generating higher than anticipated revenues in documentary transfer taxes.

But Jack Kyser, chief economist with the private, nonprofit Los Angeles County Economic Development Corp., said city budget analysts' assumptions for the future appear sound.

Kyser suggested Villaraigosa is taking a cautionary stance as other labor negotiations loom.

``He's probably holding up the worst of all possible worlds,'' Kyser said. ``The city budget is a wondrous thing; it's very complex. It can be a wondrous thing politically, too.''

But Kyser also said prudence is called for as residential home sales slow, and that Villaraigosa is acting, ``to keep things from getting out of control.''

Sisson said the city budget remains vulnerable to state revenue grabs, a downturn in the economy, and current litigation that could cost the city about $200 million a year in cell phone user taxes.

``Actually, it could be much worse than we laid out,'' she said.

Recalling how budgets under former Mayor Richard Riordan were undermined by the unforeseen collapse of the dotcom industry, Councilman Bernard Parks said Villaraigosa isn't hyping the gravity of the current risks.

``Any one of many things can throw the five-year plan off its pedestal,'' said Parks, who chairs the Budget and Finance Committee.

``We've identified (the issues), but what makes it difficult is the will in moving forward on them.''

Beth Barrett, [phone]

beth.barrett(at)dailynews.com