Eric's Blog

This year’s economic-stimulus package contained a huge range of ideas and programs in its many hundreds of pages and hundreds of billions of dollars of appropriations. Few of those ideas and programs have been as immediate a hit as the so-called “Cash for Clunkers” plan, which gives car-buyers vouchers worth up to $4,500 for trading in their low-mileage vehicle for one that’s significantly more fuel-efficient.

It’s been so big a hit, in fact, that in just one week, it exhausted the $1 billion Congress initially set aside, while depleting the supplies of available vehicles on at least some dealers’ lots here in California. Buyers loved it, the auto companies loved it, dealers loved it and the environment will love it.

I love it, too. It’s the sort of smart, pragmatic, market-aware approach to a set of thorny problems that leverages a modest amount of government money as a catalyst that achieves several important goals at once:

· Need to get the economy going? The government incentives were big enough to encourage a wide swathe of people to open their wallets in the still-stumbling economy and buy a new car.

· Need to stabilize a shaky domestic car industry? Nothing helps like a huge sale that doesn’t hurt your profit margins and clears out inventory. July was the best month of the year so far for carmakers, so good they may need to get those factories building more of the highly efficient vehicles that we need to have an internationally competitive auto industry.

· Need to improve the air? The eligibility requirements, tiered to provide some consumer choice and flexibility, required that older, high-emission cars would be exchanged for vehicles with significantly better fuel efficiency. In fact, U.S. Senators Dianne Feinstein and Susan Collins said federal data showed the 250,000 people who’ve already used the program bought cars with mileage improvements that averaged nearly 10 miles more per gallon, much higher than initially projected.

· Need to restart global conversations about controlling greenhouse gases? The Cash for Clunkers program will not only reduce the amount of vehicle-created greenhouse gases blamed for global warming, it sets a strong example for other countries as the Obama Administration lobbies for renewed talks on this complex but vital issue.

· Need to reduce dependence on overseas oil? Less fuel use equates to less need to import oil, and less need to incidentally finance the operations of so many problematic oil-rich but repressive governments.

· Need to help reeling local governments save jobs and provide vital services? The taxes generated by increased vehicle sales will boost the coffers of cities, counties, states and other local government entities.

So, with the lever of a comparatively modest amount of incentive money, the Cash for Clunkers program has been a huge hit, helping move the country a bit closer to achieving an array of important goals. I hope that Congress will quickly re-up the program to ensure continuity and certainty for consumers and dealers, to the benefit of the country.

Just as importantly, I hope we continue to look for other smart solutions. We need more programs that pragmatically achieve important goals by leveraging market forces with intelligent leadership and catalyzing investments. We have a lot to get done and need to be smart, and quick, about it.

As many of you know, L.A. is facing fiscal problems of unprecedented magnitudes and in planning our budget we faced a shortfall of $530 million. Several weeks ago in this space, I set out some principles that I intended to use in my work to build a balanced budget. They included sharing sacrifices without compromising our values, protecting our gains in public safety, and treating our employees humanely. I also noted that, because the majority of our budget is spent on payroll, the hard reality is that this cost must come down one way or another.

We have been making progress in this area through the Mayor’s negotiations with the leaders of the Coalition of City Unions (representing about 22,000 of the city’s 40,000 workers). In the spirit of shared sacrifice, Coalition Union members would defer any cost of living adjustment increases (COLA’s) to their salaries for the next 2 years. They would also be increasing their payroll contribution to the City pension fund, which will allow us to implement an early retirement incentive plan without increasing our pension fund liabilities. If approved by the members, these measures will save approximately $200 million and allow the City to avoid the vast majority of furloughs and layoffs at a time when the regional unemployment rate threatens to top 12%.

This agreement doesn’t quite get us over the finish line in terms of getting our budget deficit to zero, but combined with other cuts that have already been approved, our budget shortfall has shrunk from $530 million to $130 million. We are still in negotiations with other city unions, and I’m hopeful that they will follow the example set by the Coalition Union members to help us eliminate this remaining shortfall.

You may have heard that the early retirement program will put a greater strain on an already overburdened pension fund. I too am concerned about additional liabilities in our pension fund, and that’s why we are taking a data-driven approach. This agreement was based on two previous actuarial studies in addition to hundreds of hours of research and discussion. Further, we are awaiting a third actuarial report that we expect to receive in the next three weeks. This agreement will not take effect unless the third report supports the previous conclusions.

As I’ve said before, transparency in our governing process is important to me. This agreement has not received final approval, and will not receive final approval until the study been presented to the public and until 30 days for public comment has elapsed. The study will by posted on LACity.org when it is complete, and I encourage everyone to take a look.

Everyone should also be aware that there is currently a $600 million long-term shortfall in the city’s pension fund, which is largely a result of the significant stock market losses that have occurred in the past year. While this shortfall has no impact on this year’s budget, it will rapidly become a problem if we do nothing. However, we are actively working to address this issue with the implementation of tiered benefits for future employees. Stay tuned, as it will continue to be discussed in the coming months.

Last week, the LA Times ran an article detailing an ambiguity in our tax code that has had the ironic result of increasing taxes on some of the very types business the City of Los Angeles has been hoping to attract and keep. In 1997, the City adopted a tax code revision that provided relief from the business tax to multimedia companies. Perhaps because of the rapidly changing technology landscape (or just an inability to predict the future), the code was silent on definitions for certain internet-based companies, which allowed our Office of Finance the freedom to interpret the code in way that has increased the tax burden unexpectedly on some of our high-tech companies.

While the job of our city tax collectors is to collect tax revenue, it’s the job of elected representatives to assess the whole picture and make sure that the City isn’t being penny-wise, but pound foolish in our policies. That’s exactly what’s happening here, and in tough economic times, it makes no sense to be driving employers like these across city borders to places like Santa Monica, which denies L.A. any revenues from their successful business operations.

Fortunately, this is something we can fix. I, along with Councilmembers Rosendahl and Smith have already introduced a motion asking the City Attorney and the Office of Finance to create a new ordinance to amend the tax code so that tech businesses that represent the future of well-paying industry in our city will choose to open and maintain operations in L.A.

I recently sponsored a resolution in the Los Angeles City Council to express support for the Employee Free Choice Act (EFCA) and I am proud to report that last week, the resolution passed the council 13-1.

EFCA, when it becomes law, will make joining a union easier for millions of Americans, a necessity if we are to raise workers’ wages, ensure healthcare coverage for all and rebuild the middle class. The case for it is clear, which makes it all the more frustrating that the bill appears stalled in the US Senate.

As our resolution states:

WHEREAS, the free choice to join with others and bargain for better wages and benefits is essential to economic opportunity and good living standards; and

WHEREAS, unions benefit communities by strengthening living standards, stabilizing tax bases, promoting equal treatment and enhancing civic participation; and

WHEREAS, states in which more people are union members are states with higher wages, better benefits and better schools; and

WHEREAS, union workers receive better wages and benefits, with union workers earning 29 percent more than workers without a union, 35 percent more likely to have access to health insurance and four times more likely to have access to a guaranteed defined-benefit pension; and

WHEREAS, unions help raise workers’ pay and narrow the income gap for minorities and women by increasing median weekly earnings by 31 percent for union women workers, 31 percent for African-American workers, 50 percent for Latino workers and 9 percent for Asian American workers…

It concludes:

NOW, THEREFORE, BE IT RESOLVED, with the concurrence of the Mayor, that by the adoption of this Resolution, the City of Los Angeles hereby includes in its 2009-2010 Federal Legislative Program SUPPORT of HR 1409/S 560, the Employee Free Choice Act of 2009, which would restore workers’ freedom to join a union and, more specifically, amend the National Labor Relations Act to establish an efficient system to enable employees to form, join, or assist labor organizations, to provide for mandatory injunctions for unfair labor practices during organizing efforts, authorize the National Labor Relations Board to certify a union as the bargaining representative when a majority of employees-voluntarily sign authorizations designating that union to represent them, provide for first contract mediation and arbitration, and establish meaningful penalties for violations of a worker’s freedom to choose a union.

My grandfather on my mom’s side owned a union factory, and like Henry Ford, he understood the importance of decent wages and benefits for his employees. During my tenure on the Los Angeles City Council, time and time again, we’ve seen the widespread benefits of unionization. It’s true that a rising tide can lift all ships and unionization is that rising tide.

Take the fight to unionize L.A. security officers. While the business community was convinced they’d be irreparably harmed by the unionization of these workers, on the contrary, they are thriving, the security officers have better wages and benefits AND Los Angeles is a more secure city as a result. By paying a wage that allows workers to actually support a family, there is lower turnover, the applicants are better trained, emergency response times are faster and as a result our downtown highrises are safer and more secure.

I believe that it is incumbent upon cities — as centers of progressivism, as hubs of social change and, let’s face it, where the people live — to exert whatever pressure we can bring to bear on our leaders to do the right thing. While this resolution is strictly symbolic, I believe it sends a strong message not only to the elected leaders in California but to other local governing bodies around the country to step up and fight for progressive change. It’s like our president said during his historic run for the White House: real change can only come from the bottom up. Well here we are at the bottom urging those at the top to do what’s right and pass the Employee Free Choice Act.

As you know, the economic crisis has hit local governments all around the country extremely hard and Los Angeles is no exception. The city is currently facing an unprecedented $530M budget deficit this year, which will rise to over $1 billion in 2010. The City Council and the Mayor are working tirelessly to tackle this deficit in the coming weeks.

The key to solving this fiscal crisis is sharing the sacrifice broadly without compromising our common values. For instance, while the funding for some city programs will need to be cut, we must not sacrifice the gains in public safety we’ve made in recent years and we must not balance the budget on the backs of the most vulnerable among us. We are in for some difficult choices ahead. Do we pare back libraries and emergency services or anti-poverty programs when we need them most? There are no good answers, but all of America is being asked to make sacrifices. The more we can share that, the better everyone will weather this storm.

At the same time we must face the hard reality that the vast majority of the budget is devoted to salaries, which means that payroll must come down. But we must do it in a way that treats our employees decently and humanely. This means negotiating with unions to reduce workers’ hours and to encourage early retirements. Layoffs must be the absolute last resort.

This also means cutting city office budgets sharply. The Council has already agreed to cut its budget, including salaries, by 10% for next year and in fact has cut its own budget by more than $6 million over the past two fiscal years. I will cut my own salary by the same amount that City employees do. Additionally, we need to accept that, just as with the private sector, wage increases for city employees this year are simply not sustainable.

As we make these hard choices, it’s imperative that we maintain our fiscal strength and retain the highest bond rating in the nation. In addition, it’s extremely important to me that we boost our reserve fund to 4 ¼ % of budget, up from under 4 % to act as a yearly rainy day fund and to aggressively work to get additional federal stimulus funds to offset losses (most stimulus funds are for new programs rather than existing ones).

The Mayor submitted his budget proposal to the Council on April 20th and we now have until the end of May to review it and make changes. The Council has begun deliberations on the budget and over the coming weeks will carefully review all the proposals included. You can follow these deliberations online at lacity.org or on Channel 35. I will continue to update you on the difficult process we face; it’s important to me that the process be as transparent and accessible as possible since the solution to this crisis is going to require sacrifice from all of us.

Last week, I announced the formation of the Los Angeles City Council’s Ad Hoc Committee on Economic Recovery and Reinvestment. The goal of the committee is to develop strategies to help Los Angeles win the maximum amount of federal stimulus dollars for which we’re eligible and to create a plan for allocating the funding to most efficiently and effectively meet the needs of the city’s businesses and residents.

You may recall that in February, President Obama put local governments on notice, calling on us to “spend that money wisely, free from politics, free from personal agenda.” That’s precisely the spirit in which I convened the first meeting of the committee on Tuesday. At that meeting, we established a set of 9 guiding priorities by which we intend not only to fulfill the president’s vision for efficient allocation of the stimulus funds, but also to make Los Angeles the most accountable, transparent, and effective city in moving economic recovery programs forward. We’d like to see these priorities serve as a model for local governments all over the country, particularly in our nation’s cities where “urban acupuncture”, or the careful targeted allocation of funds to projects that have the most combined benefit, can be used to best effect.

Those priorities are as follows:

1. projects that are truly shovel-ready
2. projects that produce or protect jobs
3. projects that lessen the human impact of the economic downturn
4. projects that have the highest level of transparency and public involvement
5. projects that have the highest level of accountability, including internal city audits
6. projects that involve partnerships to better spend federal dollars
7. projects that have multiple benefits (green affordable housing could clean air, build affordable housing AND put people to work)
8. projects that promote adopted public policy goals of the city (clean port air, plant trees, promote transit-oriented development, etc.)
9. projects that promote strategic industries for long-term growth, such as green jobs in environmental technology

This committee will make sure we leave no stone unturned when it comes to identifying and winning federal stimulus dollars and will be working closely with the Mayor’s Office and City Departments to coordinate our efforts to bring badly needed federal money to Los Angeles. In fact, because we have already taken the lead on many of the policy areas where dollars are targeted (energy efficiency, green jobs, port and airport projects, etc.), I believe Los Angeles may be able to access as much as $1 billion.

As I work to make Los Angeles a model for quick, effective and accountable implementation of stimulus dollars, I’d welcome your input. What projects would you like to see us target? Where can we get the most bang for the buck and how else can cities lead the way toward economic recovery?

On Monday I traveled to Washington, D.C. with a delegation of Southern California elected and business leaders to meet with administration officials and members of congress and advocate for federal funding for our area. With 22 million people, Southern California alone is more populous than 48 states; 43% of all goods that enter through America’s ports come through Southern California; we have an unemployment rate over 11% and our homeless family population has increased by 28.3% in six months. My message to Washington leaders this week: investing in Southern California is crucial to the nation’s economic recovery.

It’s been an extremely rewarding trip and, I think, quite productive. Some highlights:

- Senator Boxer spoke to us about the job growth potential of clean technology and alternative energy.  We met with Energy Secretary Steven Chu as well and specifically made the case to him that Los Angeles is poised to be a market leader in green job training. We have a real opportunity to lead the nation in a green jobs revolution and I have no doubt that with Van Jones at the helm, California will be central to the administration’s green job investments. Chu challenged us to not just push for green-designed buildings, but to monitor energy use (and to push white roofs.)

- We talked to White House officials about the importance of an urban-based strategy for recovery, where a combination of public works projects, stalled private developments in need of public dollars, and strategic sector initiatives could help put people back to work in our urban centers. Cities are the economic drivers of our nation and for the last 8 years, we’ve seen investment dry up. I’m heartened to see the new administration’s commitment to the renewal of our cities. The stimulus dollars we’ll be getting over the coming months are extremely precious and can go further if properly directed to the right urban renewal projects.

- Yesterday we had a bipartisan lunch with 12 members of congress and Northern Californian counterparts like David Chiu, my equivalent at the SF Board of Supervisors. At the meeting, we discussed the importance of moving CA from a “donor state” (in taxes spent versus money we get back) to a more evenly-balanced state. For every dollar Los Angeles sends to Washington, we get 73 cents back. That’s got to change.

- We also spoke to Obama’s economic advisers about the importance of solving the housing crisis at the heart of the economic downturn. We discussed the need to focus on ways to write down mortgages on homes or promote short sales to forestall even more foreclosures. I had a great conversation with Rep. Maxine Waters about home foreclosure and eviction prevention.

Today we met with Secretary of Labor Hilda Solis about workers’ issues, Attorney General Eric Holder on public safety, Education Secretary Arne Duncan about education issues and Larry Summers to discuss the overall economic stabilization strategy. The access has been incredible. In fact, we appear to be among the few people having these meetings, getting this access, and helping shape policy early. I’ve just been really impressed with the amount and quality of time they’ve devoted to us and the very real commitment they’ve demonstrated to smart investment not only in California, but around the country to get us on the road to economic recovery.

Last week, President Obama laid out his administration’s Homeowner Affordability and Stability Plan to deal with the foreclosure crisis. I wanted to weigh in on it since, as President of the Los Angeles City Council, it’s been an issue my office has been working extremely hard on for months at the local level.

Obama’s plan would devote $75 billion from the TARP 2 funds as well as $200 billion in additional funding commitments to Fannie Mae and Freddie Mac to help between 7-9 million families avoid foreclosure and stay in their homes. This is particularly important here in California where, according to RealtyTrac, in 2008 alone California saw more than 520,000 of its homes receive foreclosure filings, a jump of 110% over 2007.

I was heartened by this plan because, while it’s not perfect, it does several things that I think are very important. 1. It provides incentives to servicers who lower interest rates and to borrowers for keeping current on their loans; 2. It helps restructure loans and reduce monthly payments for responsible homeowners who wish to stay in their homes; the plan does not reward speculators, house flippers or dishonest lenders; and 3. The plan reflects the reality that I’ve been dealing with on the ground here in Los Angeles for months now: that solving this crisis is not just about saving homeowners’ homes, this is about saving entire communities.

From The Treasury’s executive summary:

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. [...]

The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. In doing so, the plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs.

It goes on:

Protecting Neighborhoods: This plan will also help to stabilize home prices for all homeowners in a neighborhood. When a home goes into foreclosure, the entire neighborhood is hurt. The average homeowner could see his or her home value stabilized against declines in price by as much as $6,000 relative to what it would otherwise be absent the Homeowner Stability Initiative.

The impact of a foreclosed home on its neighborhood can be devastating. Not only does each foreclosed home reduce nearby property values by as much as 9 percent, but a boarded up house invites crime and leads to blight, a particular concern in the Los Angeles area.

While Los Angeles County was not among the hardest hit counties in California (in January, 1 out of every 249 housing units went into foreclosure, nothing compared to San Bernadino’s 1 out of every 87), stemming the tide of foreclosures and preventing the eviction of responsible renters have become priorities for my office. We have already seen more than 20,000 foreclosures in the City of Los Angeles alone (many of them multi-family apartment buildings), and their effect can devastate any street in Los Angeles, where potentially-abandoned homes reduce property values, attract crime, and bring about blight.

To this end, in October I called on Countrywide to cease and desist their illegal eviction practices after they attempted to evict a tenant in my district. Then in December, I authored a new law to stop evictions of tenants in foreclosed properties because we have to protect the innocent victims of the foreclosure crisis.

In addition, my office has worked closely with One-LA, a grassroots coalition of community organizers, religious congregations, and neighborhood groups who have been at the forefront of helping families renegotiate the terms of their loans with banks.

In many ways, President Obama’s plan represents the federal government catching up with what we’ve been doing at the local level for months now. I can’t tell you how nice it is to have a partner in the White House again and a President who really gets it. The thrust of this plan acknowledges that on a very real level, if our neighbor is in foreclosure, so are we and that saving my neighbor’s home saves mine. In other words, it reflects that progressive virtue that drives me in my work every day: that we’re all in this together.

[ED: Slightly edited]

The federal stimulus package, which passed the House today and will likely be signed by President Obama early next week, represents a bittersweet victory for our efforts to preserve funding for state and local governments after Senate Republicans forced drastic cuts to that portion of the bill.

The good news is that the final proposal is a definite improvement over the version that emerged from the Senate; especially the billions of dollars in education funding that were restored as part of the final compromise.

Thank you so much to our many supporters who contacted their Representatives in Washington and urged them to restore these critical funds!

While the education funding that was restored will help our schools, the fact remains that local education budgets are currently stretched incredibly thin and our students and teachers are paying the price. Many teachers have to dip into their own pockets to purchase supplies for even the most basic of projects.

Which is where you can make a difference.

If you’d like to help our local schools during this economic crisis, one of the best ways to do so is through DonorsChoose.org, an organization that allows you to make donations for projects and materials that have been specifically requested by teachers. You can see a description of the projects and supplies that are in need of funding locally at the Council District 13 Donors Choose page.

Where the federal government may have fallen short, I know that the generosity of private citizens can help make up the difference. Thank you so much for your support as we fight to make the best of these difficult economic times.

(cross-posted at Calitics)

As I write this, the House and Senate negotiators are meeting with the White House to hammer out a stimulus deal that can be delivered to the President’s desk by the end of the week. Unfortunately, by all accounts, the deal they’ve reached is an even smaller stimulus package than either the Senate or the House version, coming in at under $790 billion.

Watching the negotiations over the past week, I have to say I’ve been disturbed not only at the fact that at every turn more has been cut from an already inadequate stimulus package but also at where the cuts have been targeted. As the President of the Los Angeles City Council, I’ve been most concerned about the cuts — or should I say “adjustments downward?” — from aid to states and cities, namely the $40 billion that the Senate version cut from the state fiscal stabilization funds. This represented almost a 50% decrease in some of the most stimulative spending in the entire package including $25 billion in state block grants and $15 billion in education funding at the state level.

I was heartened to hear President Obama state during his press conference Monday night that he’d like to see some of the funding for states returned to the bill in conference. Unfortunately, as David Dayen writes at Calitics, it looks as though only $5 billion of the $40 billion will survive. This is disappointing, to say the least.

To me, these cuts are not just numbers, they are very real. These spending cuts represent very real jobs lost, very real infrastructure projects left undone and very real people unable to stay in their homes. I was glad to hear the President strike the same note on the road in Virginia today:

“What’s at stake here is not abstract numbers… We’re talking about real families,” Obama said. “We’re at the doorstep of getting this plan through Congress, but the work is not over.”

Precisely, Mr. President, which is why it is my hope that this much needed funding to our cities and states will find its way to us through other means if it does not survive the stimulus compromise today.

There is clearly much more to be said on the subject — especially as this story is constantly evolving — and I look forward to engaging on this as well as other issues over the next month leading up to the Los Angeles municipal elections on March 3 and beyond. To stay in touch with me, please join my campaign. I look forward to the ongoing conversation in the months and years ahead.