Official: Long Beach faces $10M deficit

Long Beach's projected deficit for the current fiscal year is "devastating," totaling more than $10 million, or about 12 percent of the city's overall budget, City Manager Jack Schnirman said.

After starting the fiscal year in July with $107,000 in the general fund, the city predicts it will close 2011-12 $10.25 million in debt.

"This puts the idea that there's no fiscal crisis to bed," said Schnirman, who was hired in January by the new Democratic-majority city council.

A borrowing note from November covers $1.5 million of that, officials said, meaning the city will have to try to close the remaining $8.75 million gap in the 2012-13 budget, due in April.

"You see revenues declining and expenditures going up, and the space between them is really just deficit," Schnirman said, referring to a chart showing Long Beach's spending and revenue over the past four years.

As an example, Schnirman and Comptroller Jeff Nogid cited what they said was the city's underbudgeting for overtime and termination pay for its employees. Combined, those items account for around $2.8 million of the deficit.

The news came as Long Beach nears the 90-day review mark after Moody's Investors Service downgraded the city's debt rating by five levels in December.

A Moody's spokesman said the deficit news will be incorporated into a decision on whether to further downgrade the city's rating.

"They [Moody's] will want to look at our budget and see that we're approaching the situation responsibly and putting the city's finances on the road to recovery," Schnirman said, adding the city has cut overtime by 72 percent since he took office and is spending $252,000 less per year on management staff than the former administration.

But tough decisions lie ahead.

Schnirman said the city will set savings goals in each department and let department heads find ways to meet them.

"And if we don't, the city has to look at its options for closing the deficit unilaterally," he said. "That essentially means, what are the simple options: service cuts, personnel cuts and revenue increases."

Officials said it's unlikely they'll close the deficit in one budget cycle without borrowing again to help them bridge the gap.

"But it's not a solution," Schnirman said.

City Council president Fran Adelson called the deficit news a financial disaster.

"This is really an invoice on the cost of mismanagement," she said. "It's not political, it's reality."