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Los Angeles controller warns of structural deficit, urges two‑year budget and clearer performance measures
Summary
City Controller Kenneth Mejía presented the office—s projections showing a shrinking general fund balance, lower receipts and increased debt-service needs, recommending a two‑year budget, performance-based measures and a realignment of reserve policies.
City Controller Kenneth Mejía told the Budget and Finance Committee the city faces a structural shortfall, urging a two-year budget, a capital infrastructure plan and more realistic revenue projections.
Mejía and staff said they estimate the general fund will end the current year with about $7.9 million — roughly $140 million below the adopted budget forecast — and project even lower reserves next year at $7.8 million, driven primarily by reduced receipts and the fading of pandemic-era federal funding.
Why it matters: The controller warned the committee that the city may need $350 million to $525 million in short-term borrowing between July and December to meet payment obligations and that debt‑service requirements total about $553 million. Reserves could fall to roughly 3.22 percent of general fund policy levels without corrective action, the controller said.
Key points from the presentation - Projected general fund closing: $7.9 million (controller—s estimate), described as about $140 million below the adopted budget forecast. - Drivers: reduced sales and business receipts, continued consumer cost pressures, lower federal/state reimbursements and insurance‑related costs from wildfire impacts. - Short-term borrowing need: $350 million to $525 million anticipated between July and December to cover timing mismatches and large pension payments. - Debt-service and obligations: roughly $553 million in additional servicing costs identified. - Recommendation: move toward a two‑year budget cycle, align budgetary expectations with performance measures, and create a capital infrastructure plan to address structural imbalance.
Mejía said parts of the fiscal gap stem from internally driven spending patterns and recommended giving departments more flexibility to reallocate within budgets while holding departments accountable for clear performance outcomes. He described past examples where process changes at the department level produced efficiencies without added funding.
Committee reaction and outcome Committee members asked detailed questions about revenue assumptions, parking fines and fee recovery, and how performance-based budgeting would work in practice. The committee voted to approve the controller—s report as presented; the transcript records a five‑to‑zero vote in favor of the controller—s agenda item.
Actions The committee approved the controller report for fiscal planning as presented (tally: 5 yes, 0 no).
Ending: The controller offered to work with departments and the council to develop measurable, department-level performance tracking and to provide independent analysis as the council considers a multi-year budget approach.
