A Non-Politician’s Guide To LA’s Next City Budget

This week, Los Angeles city council members will kick off a series of public hearings about the city’s $12.8 billion budget proposal.

The budget is essential for city operations and decisions made over the next few weeks will have a big impact on L.A.

Public budget hearings begin Tuesday at City Hall in Downtown L.A. The documents and discussions, which give you a peek into how the city’s planning for the future, are incredibly dense.

To make sense of it all — and to explain what the budget means for you — we’ve compiled this guide to understanding the budget.

What the budget covers

The overall budget is the way city leaders know what they can spend for the next year, which is mostly determined by the projected health of our funds. As my colleague Brianna Lee recently explained, the mayor proposes the budget and then a series of hearings take place to discuss the details and issue recommendations. Then the budget will go on to the full City Council for a vote.

The budget is made of multiple funds. Here are the main categories:

• The General Fund: This is the primary bank account that L.A. works out of. Unrestricted money is put into it, and it’s used to pay for a wide variety of services.
• The Reserve Fund: This is where unrestricted cash is set aside for unexpected needs and emergencies, like a savings account.
• The Budget Stabilization Fund: This is where cash from prosperous years is set aside to help offset lean financial years.
• Special funds: These are funds created for a special purpose and the money in them is restricted to that. An example is the special gas tax fund, which can only be used for our streets system. L.A. has more than 600 special purpose funds.

Former city controller Ron Galperin said to think of these funds like a trip to the grocery store where you have to pay separately for most of what’s in your basket.

“You can only use one account to buy tomatoes, and you can only use another account to buy cucumbers, and yet another account to buy your milk,” Galperin said. “Imagine how complicated that would be to just get out of the checkout line.”

Beyond these categories, things get a bit more complicated.

There are three entities that you’ll see listed on the city’s budget as an FYI, but their budgets are independent and get approved by a commission. Those are the department of water and power, the harbor, and L.A. World Airports (which includes LAX).

Chief deputy controller Rick Cole said certain other department budgets, like the library, are sheltered under the city’s charter from overall budget cuts. They’re still subject to City Council approval as more of a formality.

These financials are included in the mayor’s budget but in a different chapter than the rest of the proposed department budgets.

How the budget is calculated

Where your tax dollars go (and don’t go) each year can tell you where city leaders’ priorities are, but money is also a finite resource that has to be balanced against competing needs.

The city of L.A. uses a “modified program budget” system to make calculations. In simple terms, this means factoring in service needs for different departments, historical reviews of their past budgets, and performance metrics.

If you want to know how a department is measuring up to its goals, the budget documents include metrics that can help you compare programs and evaluate progress.

Where to begin exploring the budget

Jacky Guerrero is the director of equity in community investments for the nonprofit Catalyst California in L.A. She works to make the city’s budget process and documents easy to understand for community organizations.

The mayor’s proposed budget is comprised of these documents:

• Mayor’s budget summary
• Proposed budget
• Detail of department programs in two volumes (also known as the Blue Book)
• Revenue Outlook
• Supporting Information

You probably don’t have time to sift through hundreds of pages of financial reports, but that’s OK. The first document may be right up your alley.

“The mayor’s budget summary is … their way of trying to produce a more digestible sense of what is in these very dense documents,” Guerrero said. “It’s more focused on issues that resonate with people, not departments.”

The budget documents are a bit like nesting dolls. The proposed budget is a longer version of the summary. And the Blue Book is a longer version of that and it gets much more technical. Then out of the supporting documents, Guerrero said the revenue outlook is important to look over.

“It is giving you a sense of projections of sales tax revenues [and] how that money is generated,” Guerrero said. “These are actually important details because these are things that we pay into.”

Guerrero said she trains her staff to first look over the table of contents of the budget documents. To understand where to look, it’s a good idea to get comfortable with knowing what’s in there. The Mayor’s Message in the first section can help you get a sense of the city’s priorities. In this case, the 2024-2025 budget focuses a lot on housing.

Then once you have an overview, look at the departments that interest you.

How much can the budget change year to year?

One thing to understand is that city budgets typically don't change quickly. While there have been movements to realign the city’s financial priorities overall, such as investing more into community programs and less into police, you won’t see a big difference year over year.

The vast majority of the budget proposed by L.A. Mayor Karen Bass last week, will not be changed during the budget hearing review process.

Some of that is by design. The city’s process has a very short turnover. Almost as soon as the budget is put into action, leaders begin planning for the following year. Cole, from the city controller’s office, said this is why they’re advocating for L.A. to move to a two-year budget term.

“The budget process takes 11 months,” Cole said. “So just cranking through the process eats up an enormous amount of time, energy, paper, and angst, which leaves actually very little time to think deeply about how we're spending the money.”

It’s an economic thing too. Making sharp changes to the budget, Cole said, could create tough layoff issues for city staff, which is why changes happen incrementally. The city of L.A. is among the largest employers in L.A. County.

Another thing to consider is that while the budget documents were only made public in April, the likelihood of them changing much at this stage is rather low. That means public input, and the incoming back-and-forth between the mayor and City Council on finances likely won’t lead to drastic differences in what gets adopted.

But it may not be small peanuts either.

“It’s what insiders at City Hall call budget dust,” Cole said. “For the average person, $750,000 is a lot of money, but it’s less than one hundredth of a percent of the budget. The budget hearings do have an impact — probably the most in the 1% range, but 99% of the budget that the mayor proposes will be adopted.”

The city’s first budget hearing begins on Tuesday at 1 p.m. If you’re interested in participating, note that there’s only one official opportunity listed for in-person public comment during the May 1 hearing.