City Controller Kenneth Mejia reports lowered revenue forecasts for 2024 to 2026

Los Angeles City Controller Kenneth Mejia delivered a sobering revenue forecast during the Budget and Finance Committee meeting on March 18, 2025, revealing a significant decline in projected general fund revenues for the upcoming fiscal years. The forecast estimates a drop to $7.8 billion for fiscal year 2024-2025, a decrease of $73 million from the current year, primarily due to reduced federal grant receipts as COVID recovery funds wind down.

Mejia highlighted that inflationary pressures and decreased consumer spending are contributing to a projected shortfall of $140 million for the current fiscal year, with sales and business taxes taking the hardest hit. The report also noted that the bottom 50% of households are spending less, further dampening revenue expectations.

The Controller's office warned of a potential overspend of $300 million this fiscal year and a concerning drop in the city’s reserve fund, which is expected to fall below the 5% policy threshold. Mejia emphasized the need for more transparent budgeting practices and realistic revenue projections to address the city's structural deficit.

In response to questions about the potential impacts of a recession, Mejia indicated that economy-sensitive revenues, including business and sales taxes, would be most affected. He also discussed the importance of performance-based budgeting, advocating for a shift towards measuring the effectiveness of spending rather than merely focusing on expenditure.

The meeting underscored the urgent need for strategic fiscal planning as Los Angeles faces a challenging financial landscape, with calls for greater accountability and flexibility in departmental budgeting to navigate the upcoming fiscal hurdles.