A City Council committee Wednesday will continue discussing Los Angeles Mayor Karen Bass’ proposed $12.8 billion budget for fiscal year 2024-25, which is meant to help ensure fiscal stability through 2029.
The five-member Budget, Innovation and Finance Committee will hear from commissioners and staff members regarding the city’s employees’ retirement system, fire and police pensions, and the Port of Los Angeles. Additionally, the committee is expected to take public comment from residents about the spending plan — the only day they’ve scheduled to do so.
On Tuesday, the committee heard from high-ranking city officials, who echoed Bass’ message that the proposed budget will serve as a “reset” for the city. They said it would guide the city toward financial stability amid a lower-than-projected revenue outlook, new labor contract costs and other concerns in the coming years.
While there was agreement among committee members that the spending plan was a step in the right direction, but there was worry about how efforts to address a $467 million deficit would impact city services.
Councilman Bob Blumenfield, chair of the committee, opened the meeting by saying that decisions this year are “somewhat limited,” recognizing that the City Council and Bass made big decisions when they signed off on various labor contracts, providing higher wages and benefits for most city workers, as well as Los Angeles Police Department sworn officers.
While defending those “right choices,” he said the consequences are reflected in the 2024-25 budget.
“I don’t want to sugarcoat what we’re facing — except for the potential budget we were going to face during COVID-19, which was avoided because of federal funding — this is the worst budget I’ve had to face in my time as a council member in terms of real reductions.”
The mayor’s office and City Administrative Officer Matt Szabo also provided an overview of the budget, which will go to the City Council for revisions and must be adopted before the fiscal year begins July 1.
Representatives for Bass said the spending plan represents a $323.3 million, or 2.46%, decrease compared to the 2023-24 budget of $13.1 billion. They also said the proposal meets the city’s policy of maintaining the reserve fund at a 5% minimum.
In the current fiscal year, the city faces a $467 million deficit, composed of a revenue shortfall of $180 million below projected and unexpected spending of about $289 million, mainly from liability payouts related to the LAPD, among other costs.
The city faces an increase in expenditures to cover new labor contracts, which represents a $412 million increase just in the 2024-25 fiscal year. The cost associated with contracts for city employees is expected to reach more than $1 billion by 2028, on top of another contract with the union representing LAPD officers that is also expected to cost $1 billion by that same year.
While Szabo noted an expected 1% growth in projected revenue in the 2024-25 budget, it wouldn’t be enough to cover ongoing costs.
In a bid to address the $467 million deficit, city officials have taken steps including dipping into the reserve fund, increasing fees for city services, reducing capital spending, and implementing a priority hiring plan with the intention of eliminating 2,139 vacant positions from the city’s books.
Szabo has estimated the city could save almost $180 million for eliminating those vacant positions. He said if they were to adopt the mayor’s budget with all of the reductions, the city would still face a $56 million deficit in 2025-26, which would increase by $294 million in fiscal year 2026-27, but by 2028-29 the city would be able to “turn it around.”
He noted the city was faced with a choice — pay more employees less or fewer employees more. The savings from cutting vacant positions will also compound over the following years, helping the city cover costs related to the new labor agreements.
Looking ahead to the next couple of years, city officials said they would focus on three primary objectives, including de-duplicating functions that are currently repeated across many departments, identifying strategic investments in technology or efficiency solutions, and designing programs to measure their effectiveness and make refinements.
Szabo also said the city should make itself more competitive for outside investments from grants and have shovel-ready projects that would attract outside capital.