Los Angeles teetering on the edge of a fiscal emergency, with finances in “dire” condition and no money to cover unplanned expenses after a series of lawsuit payments blew a hole in the city’s already-tight budget.
So if you’re hoping this will be the year that City Hall, in preparation for the 2028 Olympics, will move broken sidewalks, fix burned-out streetlights, trim trees or make other public investments to make the city better for residents and visitors alike – don’t. keep breathing.
LA is broken. Mayor Karen Bass and the City Council must get serious about developing a plan to stabilize the city’s finances this year and for the future.
It will not be an easy task. In just the first three months of the fiscal year that began July 1, the city is on the hook for $258 million in liability costs. The largest category of payments – 40% – related to the negligence of the police department or the use of force. About a third of the payouts involve personal injury cases from dangerous situations, such as broken sidewalks and street lights. About 15% of employment cases involve harassment and other workplace conditions.
While the cost of liability is a direct cause of the dire financial picture, the budget adopted by Bass and the council has been heavily burdened by expensive raises for police officers and civilian employees approved in the last fiscal year.
The city began this fiscal year violating its own financial policy to keep its reserve fund — where cash is kept to cover emergency or unexpected expenses — at least 5% of its $8 billion general fund budget. (The goal is 10%.) The reserve fund was 4.12% as of July 1, according to City Controller Kenneth Mejia. If all liability costs are paid from reserves, the fund will drop to 2.8%. And if funding falls below 2.75%, the board must declare a fiscal emergency.
To prevent it, city leaders are considering extreme measures, including borrowing money to pay for some courts and settlements, which means adding interest to the initial costs. The city will also continue to furlough or lay off some city employees, further reducing basic services such as road repair, park maintenance and code enforcement.
These measures may restore reserve funds but do not address the underlying problem: The city cannot survive within its means. LA leaders approved the increase of employees the city can not afford and then cut staffing and services while hoping for an economic boom to raise tax revenue.
It’s a feast-or-famine pattern that happens over and over again, making it harder for cities to keep up with long-term investments, such as maintaining public infrastructure, using technology to modernize service delivery and even providing staff and managerial training. This is an investment that can reduce lawsuit payments, and possibly prevent personal injury lawsuits from damaged sidewalks and dangerous road conditions and employee lawsuits for harassment and retaliation.
To fix LA’s budget, city leaders must transition to multiyear budgeting where spending commitments are planned ahead of time rather than the current annual scramble with priorities and programs changing every year.
The city must also be far away more transparent on the employee’s labor agreement, including an independent analysis of the impact.
Contracts are negotiated in secret, ratified by union members and quickly rubber-stamped by elected officials, many of whom rely on unions for campaign contributions. There was little discussion last year about how providing $1 billion in police raises over four years would affect the budget and how other unions would expect similar increases. Nor was there any public discussion of the agreement to have park rangers and some police officers convert their good pensions into large pensions at a one-time cost of $23 million to the public fund; Voters will decide on November 5 if the deal continues with Charter Amendment FF.
And city leaders must decide what core services LA can — or should — provide. Public safety is an important responsibility of local government, but what tasks can civilian employees perform more efficiently so that sworn police officers can focus on responding to and solving crime?
Easing homelessness is a top priority, but should the city continue to pay for social support, mental health and treatment services that are the responsibility of the district government? What programs and services should be cut because LA can’t do everything for everyone? And what about basic municipal responsibility that continues to diminish as cities are unwise in their spending decisions?
On Wednesday, Bass announced a public works department steering committee to better plan, coordinate and expedite the construction and maintenance of roads, sidewalks, parks and other public infrastructure. Having a long-term capital infrastructure plan is always better than the status quo where basic maintenance goes up and down depending on city budgets and political priorities.
But committees and efficiency won’t solve LA’s financial problems. It will take the mayor and the City Council to make tough choices over many years to put the city on a stable financial footing.
