Los Angeles Controller Warns of Proposed Drastic Measures to Address Budget Crisis

Los Angeles Controller Kenneth Mejia recently issued a sobering budget update, warning that the city may be forced to take drastic measures to address a projected budget deficit of up to $418 million for the upcoming fiscal year, which begins on July 1, 2023. The controller's office presented this grim forecast in a report titled "2023-24 Comprehensive Annual Financial Report (CAFR) Preliminary Budget and Economic & Fiscal Update."

The primary reasons for this significant shortfall include the ongoing economic uncertainty caused by the COVID-19 pandemic, rising labor and pension costs, and declining revenue from sources such as sales taxes and parking fees. The controller's office also cited the city's reliance on one-time revenues and the lack of a long-term financial plan as contributing factors to the looming deficit.

To address this crisis, the city is reportedly considering several drastic measures, including:

1. Layoffs and Furloughs: The city may be forced to reduce its workforce through layoffs and furloughs, which could save an estimated $100 million annually.

2. Service Reductions: The city may need to cut back on services, such as library hours, park maintenance, and community programs, which could save approximately $100 million annually.

3. Increasing Fees and Taxes: The city could consider raising fees and taxes, such as water and sewer rates, parking fees, and business taxes, to generate additional revenue.

4. Tapping into Reserves: The city may need to dip into its reserves, which currently stand at around $500 million, to help bridge the gap.

5. Refinancing Debt: The city could explore refinancing its debt to secure lower interest rates and save money on debt payments.

6. Implementing Cost-Saving Measures: The city may also consider implementing cost-saving measures, such as energy efficiency projects, technology upgrades, and consolidating services, which could save an estimated $50 million annually.

It is important to note that these measures are still under consideration and have not yet been officially adopted by the city. The controller's office emphasized the need for the city to adopt a long-term financial plan and make difficult decisions to address the structural issues contributing to the budget crisis.

The potential impact of these proposed measures on the residents and businesses of Los Angeles remains to be seen, and the situation is likely to be closely watched by city officials, labor unions, and community organizations in the coming months.