Los Angeles Outlines Budget Cuts

By TAMARA AUDI

LOS ANGELES—In an effort to close a $485 million budget hole projected in the next fiscal year, Los Angeles Mayor Antonio Villaraigosa Tuesday afternoon proposed eliminating 3,546 city jobs and slashing city services—from patching fewer pot holes to cutting library hours.

Most of the positions slated for elimination have already been vacated by early retirements or transfers to other city departments that do not draw from the city's main fund. But the mayor's plan would require 750 fresh layoffs in the next fiscal year, which starts July 1.

"We can't allow this economic storm to blow us off course," Mr. Villaraigosa said in his state of the city address Tuesday. "One year of cost-cutting won't solve this crisis. We must make lasting structural changes....this budget provides a beginning path."

The mayor's $4.34 billion budget proposal comes after weeks of political and financial drama that had the city's departments and leaders at odds as the city inched toward bankruptcy and saw its credit ratings drop.

The city's Department of Water & Power had refused to transfer a planned $73.5 million to the city's general fund after the city council blocked a rate hike. That prompted city controller Wendy Gruel to warn that the nation's second largest city could run out of money by May 5, unless the transfer was made. Mr. Villaraigosa named a new interim chief for the Department of Water & Power; city officials said Tuesday they expected the utility to transfer the funds.

"We cannot allow our city family to stand divided against itself," Mr. Villaraigosa said in his speech Tuesday night.

The City Council must approve Mr. Villaraigosa's proposed budget.

The city's financial planners said the city was given a small boost when their forecasts about a drop in property taxes turned out not to be as dire as initially believed. The city also expects to take in $53 million in one-time revenues by leasing parking garages and upgrading and fixing meters.

But most of the city's savings—around $239 million— depends on job cuts and salary reductions through furloughs. Many of the city's 22,000 union-represented workers will be required to take between 16 and 26 furlough days in the next year, according to the budget proposal.

The budget could change considerably in the next few weeks if Mr. Villaraigosa has his way. The mayor called on union leaders to consider pay cuts and greater contributions to their health care in order to avoid layoffs and service cuts.

"These cuts will be severe. These cuts will be painful," Mr. Villaraigosa said. "We can do better. We can avoid many of these cuts. The mayor's office, city council, labor leaders, we can prevent further layoffs. We must all be willing to take cuts in our pay."

Union leaders have said their members have already agreed to early retirements and a 6% pay cut this fiscal year in order to save the city money. Last week, a coalition that represents the bulk of city workers released its own budget plan that included $400 million in savings, union officials said.

"We have come up with alternatives to cutting city services. We've put our ideas on the table time and time again," said Barbara Maynard, spokeswoman for the coalition of unions that represents the bulk of city workers. "It's not necessary to continue to hurt families and the economy of our region through these cuts."

Write to Tamara Audi at tammy.audi@wsj.com