Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the City Budget topic
No spam. Unsubscribe anytime.
City administrative officer warns of widening budget gap and possible layoffs in midyear financial report
Summary
The City Administrative Officer briefed the council on a deteriorating fiscal picture: revenues lagging, expenditures rising, reserves shrinking and a projected multi-hundred-million-dollar to near‑billion-dollar gap for next fiscal year that will require immediate reductions and structural changes.
The City Administrative Officer briefed the Los Angeles City Council on March 19 about a sharply worsening fiscal outlook, telling members the city faces large revenue shortfalls and rising expenditures that could necessitate difficult cuts and possible layoffs.
The CAO reported revenue was about $13 million below plan in January but that more recent data had widened the projected shortfall to roughly $141 million year to date; he said continued softening in economy-sensitive revenue streams could deepen the gap. The report showed expenditures running about $300 million over budget, driven largely by liability claims and the costs of responding to recent wildfires. The CAO projected the combination of revenue declines and rising costs could leave a structural gap of nearly $1 billion for fiscal year 2025–26 unless the city takes corrective action.
The CAO advised the council that the reserve fund stood at about 3.22% and could fall to roughly 2.2% if the city used reserves to cover the full unresolved overspending. The CAO said maintaining a healthy reserve — the administration’s minimum is 5% — is essential; he recommended immediate spending reductions and structural reforms to align recurring expenditures with projected revenues.
The presentation also noted several specific pressure points: a likely increase in liability claims spending (the CAO projected liability payouts could be north of $300 million compared with the $100 million budgeted), continuing subsidies to the city’s solid waste collection program if rates are not adjusted (an estimated $200 million subsidy next year if unaddressed) and a one-time pension-related cost increase of about $22 million tied to recent labor actions. The CAO said the mayor will present a proposed budget in roughly one month that will need to address these gaps through reductions, revenue changes or other structural reforms.
Councilmembers asked for additional detail about options for department consolidations, two-year budgeting and the implications of lower reserves for borrowing and credit ratings. The CAO said strategic, not across-the-board, reductions would be needed and urged restoring the reserve to the 5% minimum when feasible. The council had already voted to accept the midyear report earlier in the meeting (item 28 as amended) by a 13-0 vote.
