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California Cities Warn Of 'Great Depression' From Looming $7 Billion Budget Chasm

City Hall from Grand Park on Tuesday March 24. (Chava Sanchez/ LAist)
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The 482 cities in the state of California have a mammoth looming budget gap that will force cuts to police, housing, parks and recreation, and other core services in most jurisdictions, according to new analysis from the League of California Cities.

All told, cities report an anticipated:

"$7 billion general revenue shortfall over the next two fiscal years. The shortfall will grow by billions of dollars if COVID-19 stay-at-home orders extend into the summer months and beyond."

Without a major fiscal shot in the arm from the federal government, nine in 10 California cities will be forced to lay off or furlough staff, decrease services or both, according to the report.
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"It's a new type of crisis that has touched nearly every corner of our communities," Yountville Mayor John Dunbar, League of California Cities President said on a conference call today.

The League of California Cities sent a letter to Gov. Gavin Newsom today asking for the state to establish a fund to help municipalities weather the COVID-19 budget calamity.

The cities face a one-two punch:

  1. Unexpected emergency spending to address the coronavirus, including disinfecting public facilities, purchasing personal protective equipment and standing up emergency operations.
  2. Collapsing revenue streams as sales, hotel, and other taxes shrink dramatically.

"What I worry about is not so much the immediate impact, but the possible cascading effects," said Fresno Mayor Lee Brand, citing the risk of renters falling hopelessly behind on payments and subsequent possible mortgage defaults in the residential and commercial sector. "Unless this is addressed by the federal government with substantial funding....this will be the Great Depression. Not the Great Recession."
Earlier this week, L.A. Mayor Eric Garcetti released a budget for the next fiscal year starting July 1 that included dramatic cuts to nearly every city department. L.A. County has already announced a $1 billion sales tax revenue shortfall, and CEO Sachi Hamai warned residents would feel the cuts in her new budget, set to be released Tuesday.

The coronavirus relief funding approved by Congress so far has allocated $150 billion in support for state and local governments. But only cities with populations over 500,000 are allowed to apply directly to the Treasury for these funds.

Read more in the infographic prepared by the League of California Cities: