A recent warning about the state of city finances in Los Angeles struck a dire note.
“We will need to be vigilant in how we proceed,” cautioned Matt Szabo, the city administrative officer at a Budget and Finance Committee meeting last week. “Our reserves are getting dangerously close to the ... emergency level.”
The reasons why are detailed in a financial status report Szabo released late last month. It documents precarious city finances driven by a mix of dwindling revenues and some big unexpected expenses, including the costs of responding to the L.A. wildfires.
Another major over-expenditure: civil payouts.
The city of Los Angeles is expected to pay at least $320 million in settlements and judgments this fiscal year, which ends in June, according to the financial status report. That’s more than three and a half times the money budgeted for such risks.
Liability payouts — which settle claims and lawsuits against the city for wrongdoing, including internal staff harassment, police use of force and injuries — have been a considerable expense for many years. In the current fiscal year, the city has paid more than $37 million in just two cases — the LAPD bomb squad fireworks explosion that injured more than two dozen people and displaced residents for years, as well as a shooting in which an off-duty LAPD officer killed a mentally disabled man in another county.
LAist examined city checkbook data, made available online by the city controller’s office, to analyze all payments made for liability claims since fiscal year 2018.
Here’s what we found:
- The most recent yearly budget set aside $87 million to handle such payouts, an amount that has hardly changed in eight years.
- The city was over budget just two months into this fiscal year.
- Last fiscal year, payouts exceeded the budget within seven months.
Why it matters
This is the second year in a row the city’s overall budget has faced financial headwinds. Last year, for the first time since the peak of the COVID-19 pandemic, overspending and low revenue led to the city’s reserve funds falling below minimum levels required by city policy. This winter, legal settlements and deferred maintenance costs drove up the city’s spending further, and those costs have continued to rise.
When the city overspends on liability payouts, money is taken from other funds, such as the general fund and reserve accounts, to cover those costs.
Making those transfers has larger implications:
- City policy is to maintain reserve funds of at least 5% of budgeted general fund receipts, and if the reserve fund goes below 2.75%, the City Council must vote and declare an “urgent economic necessity” to use the remaining funds from the Emergency Reserve Account.
- Currently, the city’s reserve fund is at 3.28%, a level Szabo described this month as “dangerously close” to emergency levels.
- If additional cost-saving measures aren’t taken, using the reserves to solve remaining overspending would reduce levels to 2.22%.
What we know about liability claims
The Los Angeles Police Department has the highest liability payouts of any city department, with $100 million in claims in fiscal year 2024, according to an LAist analysis of city checkbook data. The department with the next highest amount in payouts was public works, with $45 million in claims across the street services, sanitation and engineering bureaus.
An additional $106 million in fiscal year 2024 liability payouts reviewed by LAist were not associated with any specific department in city data.
“At the end of the day, every dollar that we spend on lawsuits is a dollar that we're not spending on making our neighborhoods safer,” Councilmember Katy Yaroslavsky, chair of the Budget and Finance Committee, told LAist. “Whether it's LAPD or sidewalks or trip-and-falls, we really have to get ahead of the problem instead of paying for it much bigger on the back end.”
Yaroslavsky said the city needs to do more realistic and transparent budgeting while addressing the root causes of liability payouts. She said the city is “focused on solutions that reduce risk, improve public safety and protect city resources.” When it comes to the Police Department, Yaroslavsky said reforms include expanding the use of alternative response teams for mental health crises, as well as improving training and accountability practices.
City Controller Kenneth Mejia also shared concerns with LAist about addressing the root issues that lead to liability payouts, saying that if current trends continue, decreases in revenue combined with overspending could extend a citywide hiring freeze and cause service reductions. The city began its hiring freeze in January 2024, followed by cuts to over 1,700 positions last July, according to the controller’s office.
“This is the second year in a row where we budgeted high revenue amounts, and we're not reaching that amount,” Mejia said. “The city really needs to budget better, more conservatively and more realistically.”
L.A. Mayor Karen Bass, who proposes and signs the budget, did not respond to requests for comment.
Details of the payouts
The following accounts of the city's largest liability payments from fiscal year 2024 are based on court and federal documents.
United States ex rel. Mei Ling v. City of L.A. — $38,659,715.21
A settlement was reached between the city and Mei Ling after what she claims was years of discrimination because of her disability, preventing her from finding affordable, accessible housing.
Tammy Murillo v. City of Los Angeles, et al. — $25,097,461.25
A district court jury found the city and two police officers liable for excessive force and battery, civil rights violations and negligence in the killing of Jesse Murillo, who was a 32-year-old Navy veteran.
Ismael Soto Luna v. City of Los Angeles, et al. — $10,500,000 (An additional $10,500,000 was paid in 2025.)
A settlement was reached between the city and Ismael Soto Luna after an L.A. County jury found the city liable for a streetlight in dangerous condition causing harm to Soto. The jury also found that this risk was foreseeable by the city, and the city had enough time to protect against such an incident.
Ruben Martinez et al v. City of Los Angeles et al — $8,000,000
A settlement was reached between the city and Ruben Martinez after prosecutors agreed that Martinez was wrongfully imprisoned for 12 years for five robberies.
Malcolm Thomas v. City of Los Angeles, et al. — $7,885,000
A settlement was reached between the city and Malcolm Thomas after what he claims was discrimination based on disability and retaliation while he served as a police officer and instructor at the Los Angeles Police Academy.
And here are the notable payments so far in 2025.
BD Impotex, LLC v. City of Los Angeles — $20,000,000
A settlement was reached between the city and residents of South L.A. after the detonation of illegal fireworks by the LAPD bomb squad. The explosion injured 27 people, including 18 civilians, and caused severe damage to homes and vehicles, according to a federal Bureau of Alcohol, Tobacco, Firearms and Explosives report, causing some residents to be displaced.
Paula French, et al. v. City of Los Angeles, et al. — $17,700,000
A district court jury found that the city was liable for use of excessive force by an LAPD officer that caused the death of a mentally disabled man outside of a Costco in Corona and severely injured his parents.
How does approving the budget work?
Most city budget negotiations happen behind closed doors. Starting in the early fall, the L.A. mayor works with city department heads to figure out what the budget should look like. The mayor outlines her priorities, and department heads submit specific requests for consideration.
The mayor releases the official budget proposal in April. Then the City Council’s budget committee holds a series of hearings to discuss the proposal and listen to feedback from the public. The committee submits recommendations for changes.
The full City Council then has to vote on the proposed budget and the recommended changes. The approved budget takes effect on July 1, running through June 30 of the following year — this is what’s known as a “fiscal year.” Each fiscal year is referred to based on the year the budget ends. For example, the current budget year is 2025. It runs from July 1, 2024, to June 30, 2025.
Keep an eye on your local government
The best way to keep tabs on your local government is by attending public meetings for your city council or local boards. Here are a few tips to get you started.
- Find meeting schedules and agendas: City councils usually meet at least twice a month, although larger ones may meet weekly. Committees and boards tend to meet less often, typically once a month. You can find the schedule and meeting agenda on your local government’s website, or posted physically at your local city hall. Find more tips here.
- Learn the jargon: Closed session, consent calendars and more! We have definitions for commonly used terms here.
- How to give public comment: Every public meeting allows community members to give comment, whether or not it’s about something on the agenda. The meeting agenda will have specific instructions for giving public comment. Review more details here.
LAist’s Brianna Lee contributed to this report.
