HAHN ACTS TO BLOCK PAY RAISES UNION WORKERS KEEP THEIRS.

Byline: Rick Orlov Staff Writer

With the city's financial condition getting worse, Mayor James Hahn blocked pay raises to 900 nonunion workers Wednesday and ordered department heads to prepare a list of spending cuts that can be made immediately.

During a rare meeting of all 33 department heads, Hahn lectured them for 35 minutes on the need to reduce spending because the city is facing a shortfall of $184 million to $300 million in the coming year.

As part of the cutback, Hahn said withholding the 3 percent cost-of- living salary increase to the 900 workers, including many of his own staff, would save only $1 million but was an important step.

``It doesn't sound like a lot of money when you look at the overall budget, but it will hurt workers who were counting on it, and it represents some savings,'' Hahn said. ``Every $1 million helps us.''

He said he opposes trying to renegotiate contracts that give 3 percent raises to the city's 35,000 union workers.

He blamed the weak national economy - and stock market losses that forced the city to put $80 million more into employee pension funds - for the city's troubles.

Added to that is $25 million in higher workers' compensation costs, $20 million in health and dental expenses, and $48 million in new contracts with city unions, particularly the Los Angeles Police Protective League.

Hahn told department heads to review their budgets to develop a list of priorities and to expect to see programs cut. No deadline was given for the revisions.

``None of us like to go through this, but it's something we have to do if we are to keep our top priorities,'' Hahn said. ``We still are working to make Los Angeles the safest big city in the nation, and we need to invest in jobs and neighborhoods and work with our school district to improve educational opportunities.

``Those are our long-term goals,'' he said, ``but we need to keep them in focus for the short term as well.''

Financial problems have dogged the city all year despite hikes in fees and reductions in city services.

At one point, the City Council took sharp criticism for rebuffing Hahn's plans to hire extra police officers because of the budget situation. Now, the mayor has raised concerns that Gov.-elect Arnold Schwarzenegger will repeal the tripling of the vehicle license tax without making up its revenue to local government.

City Council President Alex Padilla also has challenged Hahn's stance, saying renegotiating union contracts to achieve additional savings might be unavoidable.

``It is not something anyone wants to do, but it is something we might have to look at,'' Padilla said.

In all, Hahn said estimates are for city spending to increase by $212 million and for revenues to increase by $25 million, with no expansion of programs.

``Clearly, it means we have to make reductions somewhere,'' Hahn said.

To get to that, Hahn said he was asking the department heads to look at a variation of a zero-based budgeting approach.

``We want them to look at everything,'' Hahn said. ``There are some programs that can't be cut, but everything else should be looked at.''

Hahn said his own office would be looking for ways to make cuts, though he did not offer any specifics. Although the mayor's staff remained the same size as last year, his budget increased 12 percent, primarily because of a 13 percent increase in salaries.

Hahn told the department heads he also did not want to see any of them offering up politically untenable programs for elimination.

``I know that game, and it won't be tolerated,'' Hahn said.

None of the department heads made any comment during the 35-minute session.

Hahn said he was continuing the city's hiring freeze but looking at ways to change it and other regulations to give department heads more flexibility. City officials said that as of mid-September, there had been 48 exemptions granted.

Padilla said the council intends to tighten its resolve to not allow more exemptions.

``We will not tolerate anyone playing good cop-bad cop and pitting members against one another,'' Padilla said.

Hahn told the department heads he was also consolidating budget functions within his office by creating a new Office of Management and Budget.

It will take workers now assigned to the budget in his office and work more closely with City Administrative Officer Bill Fujioka in developing spending plans. It is more similar to the traditional relationship between the two offices that was changed under former Mayor Richard Riordan.

``We think this is a way to take advantage of our people, who work with the departments every day,'' Fujioka said.

Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said the city was taking the proper steps.

``We are living in an uncertain time, and the more that can be cut now means the less will have to be cut in the future,'' Kyser said. ``These all seem like prudent steps.''

Rick Orlov, [phone]

rick.orlov(at)dailynews.com

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