After spending nearly two months to review the city’s finances, the City Council unanimously approved a $170.7-million General Fund budget for next fiscal year, which begins July 1, on Tuesday night.

But even as the city prepares to move forward with a balanced budget that required the least amount of cutting in years, the future will still present difficult hurdles, including the rising costs of employee benefits and pensions — expected to increase by as much as 50% in six years — and the need to shore up workers compensation and other internal service funds, according to a city report.

“We’re working toward structural balance,” said Finance Director Bob Elliot. “There’s a lot of unknowns as we move forward.”

The council had to close a $1.2 million gap this year, down from $15.4 million the year prior.

Most of the General Fund budget pays for employee salaries and benefits, said Councilman Ara Najarian, adding that although the public sentiment has soured on that regard, the council cannot unilaterally change those appropriations because they are negotiated with city unions.

“The problem is the solution is not easy and cannot be draconian,” Najarian said.

In addition to approving the General Fund budget, the council also approved an annual electricity revenue transfer of about $21 million that has riled residents, some of whom spoke out at electricity rate increase meetings this month. The practice also prompted the Los Angeles County Civil Grand Jury to recommend that city officials stop using the utility as “a piggy bank.”

Critics call the transfer a backdoor tax because it artificially inflates the need for rate increases. But city officials say it’s necessary to continue general services without asking residents to vote on a new tax.

Earlier this month, city officials said they don’t plan to follow the grand jury’s recommendations, which included a request to host a special election asking residents to vote on whether to continue the transfer.

“You want the services and we don’t have the taxation, what’s gonna give,” said Mayor Dave Weaver. “I don’t see the public backing large tax increases on themselves, not today.”

The council is expected to review a system average electricity rate hike of 24% over the next five years in August.

City Manager Scott Ochoa said if the city stopped the transfer, it may have to cut 131 positions. Last year, City Hall personnel was reduced by more than 150 positions through early retirements, layoffs and eliminating vacant positions. City Hall is at its lowest personnel count since the 1990s.

The cities of Burbank and Pasadena both have utility transfers of $23 million and $18 million, respectively, according to a city report. However, both cities transfer from electricity and water revenues, while Glendale stopped its water transfer years ago to protect itself from a possible legal challenge due to a state rule that constricts what water revenues can be used for.

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