CAO presents year-end FSR showing $68.3M gap; council approves amendments and pauses some decarbonization funding

At a meeting of the Los Angeles City Council Budget and Finance Committee, the City Administrative Officer's office presented the year-end Financial Status Report for fiscal year 2024–25 and the committee approved the CAO's recommended technical amendments and related budget transactions as amended.

The CAO presentation, led by Nick Campbell, said the city faces a remaining budget gap of $68.3 million consisting of $51.7 million in projected departmental overspending and $16.6 million in non‑departmental and special fund overspending. Campbell said the report's recommendations address $52.7 million of that overspending and identified actions to close the remaining $15.6 million by year end. "This year the city has had to make many difficult decisions to address fiscal challenges," Campbell said, citing the January windstorm and wildfires and lower-than-expected revenues.

The report said April receipts were about $39 million below the revised plan but, after adjusting for certain accounting items and unrecorded LA tax receipts, were about $16 million below plan. The most significant negative variances were in sales tax, transient occupancy tax and documentary transfer tax; business tax receipts may offset some of the shortfall, the CAO said. The CAO reported cumulative reserves at 6.56 percent and the reserve fund itself at 3.98 percent after accounting for recent transactions and the report's recommendations.

Committee members and CAO staff discussed department-level drivers of overspending. The largest departmental pressures identified were in the City Clerk, Fire, General Services, Police, and the Human Resources benefits fund. Personnel and CAO staff said higher workers' compensation and medical costs, increased overtime, and recently negotiated labor agreements contributed to overspending. Paula Days of the Personnel Department said workers' compensation claims are unpredictable and that staffing shortages can increase costs and fines.

Council members pressed staff on layoff-avoidance and implementation measures. Ben Saha'uuta, City Administrative Officer, detailed several procedural steps to limit layoffs, including a transfer portal for employees, suspension of some hiring authorities, substitute authorities to use vacant positions for layoff avoidance, and expedited transfer procedures. Saha'uuta said those measures could reduce the roughly 500–600 positions initially identified as potentially affected.

The committee also heard CAO staff on FEMA reimbursements related to the January windstorm and wildfires. Patty Huber (CAO) said the city is finalizing its damage inventory list and expects to submit claims for emergency protective measures and debris removal after the list is finalized on June 16; reimbursements for reconstruction projects will follow as work is completed.

Councilmember requests and technical amendments: the committee approved a set of technical CAO and CLA amendments read into the record, including transfers and temporary reappropriations across multiple funds (examples in attachments included a $150,000 CLA transfer for a windstorm and wildfire after-action report and several CAO amendments to El Pueblo, leasing, and Department of Aging grant appropriations). The committee approved the item as amended by a roll-call vote of four ayes (Councilmembers Yaroslavsky, Blumenfeld, Hutt and Hernandez; McCosker absent).

During discussion on item 1 Councilmember Blumenfield asked the Bureau of Engineering to explain implications of budget reductions to the municipal building decarbonization program. Zohra Akhtar of the Bureau of Engineering said the municipal existing building decarbonization work plan is a multiyear master plan to reduce operational greenhouse gases from roughly 980 municipal buildings through energy efficiency, electrification, solar and battery storage. Akhtar said the work plan and a year‑1 workbook had identified 47 electrification projects and nine solar projects with an estimated combined budget of about $61 million; the program had projected annual utility savings, DWP rebates, and local job creation. She said three decarbonization projects remain in construction and that the bureau will revisit the program's pace under the new budget.

Votes and actions: the committee approved the FSR item as amended and several related technical transfers. Council instructions attached to the approvals included directing LADOT and the CAO to report before acceptance of certain grant awards on staffing/overtime needs and whether new positions are required. The committee also approved other consent items and later approved three contracts in open session that required action.

Why it matters: the FSR frames the city's near-term finances, informs the adopted 2025–26 budget assumptions, and sets conditions for departmental operations and potential layoffs. The committee's amendments and follow-up reporting requirements aim to limit hiring and spending until awards and staffing needs are clearer.

The committee concluded item 1 after approving the CAO and CLA technical amendments and other specified transfers; the item passed with four ayes. Less critical details, supporting tables, and the CAO attachments are available in the city's committee files and the CAO report referenced during the meeting.