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LA WATCHDOG - While Bob Blumenfield, the Chair of the City Council’s Budget and Finance Committee and the person most responsible for the City’s financial tribulations, and his fellow members of the Committee wrestle with this year’s over expenditures of $300 million and the depleted Reserve Fund, they, along with Mayor Bass, another budget culprit, also need to focus on the next year’s budget (2025-26) and a projected shortfall of at least $350 million.
According to the City Administrative Officer’s Four-Year Budget Outlook, the City is projecting a budget shortfall of $61 million. There are other components to the budget that will increase the shortfall.
Revenues will most likely be lower than projected because they were based on prior year revenues which will not be achieved. For this year, revenues from the seven economically sensitive taxes (in order of importance, property, business, sales, utility, hotel, documentary transfer, and parking) will probably be off by $50 million, a trend that will most likely continue to next year.
Personnel expenditures will increase over the projected budget, probably in the range of $50 million, thanks to a $40 million raise for the firefighters. There are other agreements that are being negotiated, but the impact of any new agreement is unknown to the public.
The City will need to increase its budget for liability claims from this year’s $87 million to at least $200 million, a hit of $113 million. This may be light given recent settlements and judgements.
The City will also be required to restore the Reserve Fund and the Budget Stabilization Fund that have been raided to cover the $300 million in over expenditures. This will require at least $80 million, an amount equal to 1% of General Fund revenue.
When taking into consideration the prospect of lower revenues, increased personnel expenditures, more realistic liability claims, and the need to replenish reserves, the shortfall for next fiscal year that begins on July 1, 2025, is in the range of $350 million. And this assumes no departmental overruns which are common occurrence.
The City will address this shortfall by selected measures, including a $100 million (or more) increase in our Solid Waste Recovery Fee, the issuance of a Judgement Obligation Bond, probably in the range of $100 million, and a significant cut in services to be determined.
There may be a demand for additional funds to prepare the City for the 2026 World Cup and the 2028 Olympics.
The budget process is not transparent. To date, all departments have submitted their preliminary budgets to the Mayor and the CAO, who, in turn, are reviewing, analyzing, and adjusting these requests in their attempt to develop a “balanced” budget. But we will have no clue as to the status of the next year’s budget until April 20, 2025, when the Mayor presents her Proposed Budget to the City Council for its review.
To increase transparency, the CAO should prepare an updated Four-Year Budget Outlook to reflect the prospect of lower revenues and higher expenditures, and at the same time, make reasonable assumptions regarding the impact of future labor agreements. At the same time, the Mayor should bring us up to date on her plans for the upcoming budget, including any future tax increases to fund the Olympics.
Will Mayor Bass and Councilman Blumenfield (aka Budget Busting Bobby B) have an open and transparent budget process or will they continue to treat Angelenos like mushrooms, keeping us in the dark and dumping tons of manure on us.
(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. He can be reached at: [email protected].)
