The Structural Deficit’s Annual Budget Crunch

LA WATCHDOG - The Mayor released her Fiscal Year 2027-28 Proposed Budget Letter to the Managers of all the General Fund Departments where she outlined her goals for the upcoming budget. This budget for the first time will include information for the following year (2028-29) in anticipation of the passage of Measure LA on November 3. 

She listed her administration’s core priorities. 

• Enhancing the cleanliness of the city and delivering basic city services like infrastructure improvements and maintenance; 

• Scaling the city’s capacity to support unhoused residents, maintaining our investments in homelessness services and programs and accelerating housing solutions;

• Ensuring that Angelenos are safe with investments in Community Safety and Public Safety, including Emergency Response & Recovery, and supporting services that enhance those functions; 

• Expanding opportunities for jobs and business development, including curbing runaway production and revitalizing centers of city life, like downtown; and

• Preparing for and realizing the potential of a Games for All by expanding our capacity to host neighborhood activations during the 2028 Olympic and Paralympic Games.

There are the usual instructions regarding cost containment and efficiency as well as limitations on new programs and expenditures.  But the budget message does not address the shortfalls outlined in the Four-Year General Fund Budget Outlook prepared by the City Administrative Officer. 

For the upcoming year (2027-28), the shortfall is projected to be $166 million. And in the following year, the shortfall “improves” to only $111 million.  But these projections are overly optimistic because they do not reflect the impact of new budget busting labor agreements that will exceed the assumed 2% annual increase that accounts for “natural salary growth.” 

Instead, the shortfall exceeds $200 million in the upcoming year (2028) and over $250 million in the following year (2029). Furthermore, the deficits in each of the following two years exceed $300 million.  On the other hand, the City is telling us there will be a surplus of over $100 million in the fiscal year ending on June 30, 2031, a swing of over $400 million. 

And these projections do not address the City’s Service Bankruptcy where the adequate repair and maintenance of our streets, sidewalks, parks, street lights, and the rest of our infrastructure continues to be neglected and where our Police and Fire Departments are underfunded and understaffed, jeopardizing public safety.

The City needs to develop a truly balanced budget for the upcoming two years. The CAO needs to develop an Outlook that relies on realistic assumptions.  At same time, the Budget and Finance Committee, headed by Katie Yaroslavsky, and the Ad Hoc on Charter Reform, headed by Tim McOskar, need to focus on eliminating the Structural Deficit so that the City can live within its means and provide the necessary services to four million Angelenos. 

Without real budget reform, why would we ever approve any more tax increases? 

(Jack Humphreville writes the LA Watchdog column for CityWatch, where he covers city finances, utilities, and accountability at City Hall. He is President of the DWP Advocacy Committee, serves as the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and is a longtime Neighborhood Council Budget Advocate. With a sharp focus on fiscal responsibility and transparency, Jack brings an informed and independent voice to Los Angeles civic affairs. He can be reached at [email protected].)