Facing a nearly $1 billion budget hole, LA officials warn city staffing cuts are inevitable

Los Angeles is facing a budget deficit of nearly $1 billion, which will likely lead to cuts in staffing and affect some city services, officials warned on Wednesday.

L.A. Mayor Karen Bass directed the city administrative officer to develop a proposal to save between $500 million and $900 million for the fiscal year that starts July 1.

And Councilmember Bob Blumenfield, who serves as vice-chair of the city’s Budget Committee, told LAist that layoffs or compensation deferrals for city workers are inevitable.

"It's hard to imagine the math without involving serious labor concessions of some sort," Blumenfield said. "And I don't say that because I want that. Certainly that's the last thing I want.

"But 80% of the city’s expenditures are labor costs — are people.”

How we got here

L.A. is “in a particularly challenging financial position,” according to the city administrative officer. The city has overspent this fiscal year by about $300 million, in part because of rising liability costs, generous labor contracts with city workers, and spending associated with the Palisades Fire.

In addition, general fund revenues are $13 million below their projection, and an uncertain economic outlook means revenues could drop significantly next year.

“The real question at hand now is by how much will revenue fall short of budget?” Chief Administrative Officer Matt Szabo wrote in his mid-year financial status report.

Szabo also said he expects the Palisades Fire “to have a notable impact on city receipts due to a decline in economic activity as well as from the tax relief or deferrals for business, sales and property tax payments currently being considered by the city and county.”

Federal actions

Recent actions by the federal government have added to uncertainty in the city’s financial outlook, according to the chief administrative officer.

“These include executive orders aimed at de-funding established programs and initiatives as well as increasing enforcement actions against our immigrant communities. In some cases, these actions have been rescinded or legally challenged, making it impossible for the city to predict the magnitude, timing and likelihood of any impacts.”

Requests from Bass

Bass has asked for proposals to reduce liability costs, which soared to $320 million or three times what was budgeted for the fiscal year 2024-25.

Read more: LA is on the hook for more than half a billion in liability payouts in just 2 years. 4 of the costliest cases

The mayor has also asked for proposals to change the number, structure and responsibilities of departments and reassign city services to refocus the city’s work on its most critical services.

In addition, Bass asked the chief administrative officer to come up with ways to “realize payroll and benefit savings.”

What's next and how does approving the budget work?

The mayor is expected to release her proposed 2025-26 budget April 21.

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.

After the mayor releases the official budget proposal in April, 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.