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Coronavirus Is Pushing LA County And City Budgets Off A Fiscal Cliff

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A woman walks past an empty City Hall on March 24. (Chava Sanchez/LAist)
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The economic shutdown to stop the spread of coronavirus is decimating many revenue streams that L.A.'s city and county governments rely on.

Los Angeles City Controller Ron Galperin released a revised revenue estimate on Wednesday predicting a $231 million hole in the 2019-20 budget and an even bigger gap next year.

The city's 2020-21 budget could have a revenue shortfall "between $194 million and $598 million, depending on the length of the current shutdown and the speed at which the economy begins to recover," Galperin said in a statement.

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Much of this is due to the loss of hotel occupancy taxes, since COVID-19 has stopped discretionary travel. It's also put a halt to the city's usual activity like licensing businesses, issuing permits, and collecting fines -- yep, including parking tickets -- that combine for a healthy chunk of General Fund revenue.

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"The City is facing an unprecedented crisis due to the coronavirus pandemic, and our revenue outlook is much darker than it was even a month ago," Galperin said. "While these struggles are not unique to Los Angeles, our City is in a better position than most municipalities because of the diversity of our revenue streams and healthy Reserve Fund balance."

His office also released these charts showing the forecast:




The full report is available on the controller's website.

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During his Tuesday evening briefing, Mayor Eric Garcetti said his team is writing a proposed budget "as we speak." It's due to be presented to the city council no later than next Monday, April 20.

"There's no question though, that we are going to have cuts," Garcetti added, before making a plea to Congress and the White House for more bailout money for local governments in the next round of COVID-19 relief spending.

"This crisis has had a profound economic impact on everybody, especially our workers and small business owners. Certainly that impact extends to our city budget," said spokesman Alex Comisar.

In the upcoming budget, Garcetti will prioritize protecting public health and safety, which includes core city services like police, EMTs and fire, according to Comisar. He also plans to maintain spending to address the homelessness crisis -- as well as services associated with L.A.'s COVID-19 response, like testing for the virus, Comisar said.

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"The mayor looks forward to discussing that in detail when he proposes the budget on Monday," Comisar added.

WHAT ABOUT THE COUNTY?

An L.A. County spokesperson said Wednesday that the CEO and Board of Supervisors is forecasting a $1 billion decline in sales tax revenue between March 1 and the end of the fiscal year on June 30. That sales tax shortfall could double next year, depending on how long the economic slowdown lasts.

"As we continue to collaboratively address the COVID-19 public health crisis, we remain committed to meeting the needs of residents across L.A. County," said Board Chair Kathryn Barger in a statement.

County CEO Sachi Hamai will present next year's proposed budget to the Board of Supervisors April 28. She said in a statement the revenue outlook included "significant losses which, unfortunately, will have a major effect on programs that the County administers on behalf of our 10 million residents."

Both the county and city have imposed hiring freezes in response to the financial impact of the coronavirus pandemic.

Congress included $150 billion in direct aid to states, counties and cities battling the virus in the CARES Act passed last month. Southern California leaders have appealed to federal lawmakers to further reimburse emergency COVID-19 spending, and they say they'll need additional help to cover the loss of revenue resulting from "stay at home" measures.