'Fiscal Emergency' Eyed As LA Sees Decreased Revenue, Rising Costs

LOS ANGELES, CA — The Los Angeles City Council Tuesday approved a resolution declaring a state of fiscal emergency in response to decreased revenue and rising liabilities.

In a 14-0 vote, council members signed off on the resolution, which is subject to the approval of Mayor Karen Bass. The declaration authorizes the city to move forward with actions for fiscal year 2025-26 to address a roughly $1 billion deficit. That includes plans to lay off about 614 city employees and reduce an allocation of about $4.2 million to the Public Matching Campaign Trust Fund, among other things.

Councilwoman Monica Rodriguez was absent during the vote.

Council members did not comment on the matter prior to their vote.

Amid economic challenges, the City Council and Bass approved an approximately $14 billion budget for the upcoming fiscal year, which begins July 1. The spending plan reduced expenditures in some areas and included cost- saving measures to address a $1 billion deficit, but is larger than the $12.9 billion budget for the 2024-25 fiscal year.

The budget calls for slightly more than 600 layoffs. Elected officials have discussed a proposal to further reduce layoffs by transferring such workers to the Port of Los Angeles, Los Angeles World Airports and the Department of Water and Power. These three proprietary departments are not impacted by changes in the General Fund because they operate on revenue from their respective services.

The deficit was partially caused by overspending, new labor contracts and rising liability costs in connection with complaints filed against the Los Angeles Police Department, among other issues. These settlements have prompted elected officials to dip into the reserve fund, a rainy day account for emergencies.

January's wildfires exacerbated the city's financial condition, further reducing business and property taxes. Travel and tourism have also taken a hit, leading to lower revenue being collected from hotel taxes.

A representative from Council President Marqueece Harris-Dawson's office did not immediately respond to an inquiry about the resolution, as well as questions about the proposal to transfer workers.

On Monday night, L.A. City Controller Kenneth Mejia shared a post on social media noting that the city would be declaring a fiscal emergency as a result of massive liability payouts, spending over budget and revenue shortfalls. In order to balance the budget, 614 layoffs are on the table, according to his post.

Of that figure, about 248 LAPD civilian employees are expected to lose their jobs, as well as 57 workers from the Personnel Department, 44 sanitation workers, 41 Fire Department workers, 34 workers from information technology, 33 general services workers, 29 transportation employees, among others.

"It's unfortunate that the City has to declare a Fiscal Emergency but as we warned and expected this would happen, we are not surprised," Mejia said in statement. "The City needs to declare a Fiscal Emergency in order to go through with the layoffs. Our message for LA residents is to push your elected officials to be more honest and transparent about the City's budget and finances, and talk about the tough financial decisions that need to be made and why."

City News Service