The Long Beach City Council declared a fiscal emergency for the city Tuesday as it faces a $48.3 million debt with low cash reserves.

The 5-0 vote gives newly appointed City Manager Jack Schnirman more authority to rein in and veto spending items, even if those are already in the budget.

"The fiscal emergency first and foremost displays to the rating agencies that we're serious about straightening out our finances and creating a real working financial plan for the city," Democratic Councilman Michael Fagen said after the meeting.

The room was packed with about 150 residents, many bashing the previous administration and cheering the decision.

Scott Oling, a partner with O'Connor Davies Munns & Dobbins, the accounting firm that audited Long Beach's finances, said that the city overestimated revenue while underestimating expenses. That and borrowing from the general fund shriveled reserves from $7.5 million in 2008 to $107,000 in the 2011-12 fiscal year that started in July.

Resident Karen Adamo said: "There are people in the street claiming that the current administration is exaggerating the current state of the city's finances. I would say you heard it tonight from the auditor that was hired by the old administration. This is not coming from the current administration. These are facts."

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The new Democratic-majority council inherited a city mired in financial problems. Long Beach has $48.3 million in general obligation debt and late last year had to borrow $1 million to make payroll. In December, Moody's Investors Services downgraded the city's credit rating from A1 to bAA3 and put Long Beach on its watch list. Schnirman said the fiscal situation meant that Moody's would need to see a corrective action plan for the budget by spring.

"If that line of trust is not reopened and that info doesn't flow directly from us to Wall Street, they'll consider a more drastic option of withdrawing the city's ratings altogether, meaning eliminating our access to capital markets and eliminating our ability to borrow funds," Schnirman said.

Thomas Sofield Jr., council president before his defeat in November, and former City Manager Charles Theofan didn't return a call to their homes last night.