When Mejia released the city’s June 30, 2024, annual comprehensive financial report (ACFR) last month on Feb. 6, he used it as a tool to communicate the fiscal activities reflected in the last fiscal year’s required publication.
His press release stated that the audit “found that the City ended the year in deficit.” Why? Because the “General Fund revenues lagged while expenditures jumped exponentially, prompting unsustainable short-term fixes and bringing the City to the brink of needing to officially declare a ‘fiscal emergency.’”
Mejia said in a statement, “As we are all painfully aware, revenue shortfalls, liability payouts, and departmental over-expenditures caused the City to draw down nearly half the City’s General Fund Reserves. Because of the City’s revenue shortfall and overspending, this led to austerity measures that adversely impacted City departments and City services including in critical areas related to infrastructure, public works, animal services, accounting, and payroll.”
- General fund revenues were short by $222.1 million compared to the adopted budget.
- Various expenditures that were larger than the adopted budget, including liability claims, which were $153 million higher than anticipated (with the largest areas being police, at $75.1 million, and the miscellaneous category at $71.6 million).
- The police department was over budget by $127 million.
- General services were over by $105 million.
- With the above and more, resulting in the reserve fund balance being depleted down to $330.6 million, which is below the city’s 5% of general fund revenues reserve fund policy target and $317.7 million less than the year before.
“In addition, the recent devastating damage and disruptions from the firestorm disaster has the City estimating initial damages at $358 million related to emergency response, infrastructure/structural damages and debris removal through January 10, 2025.
“The City’s credit ratings are at risk. In January 2025, three rating agencies, S&P, Fitch, and Kroll, placed the City’s ratings on negative watch status, indicating that the City’s ratings are under review and that there is meaningful potential for a negative rating change. Additionally, Moody’s Ratings revised the outlooks on the City’s issuer rating for wastewater revenue bonds from stable to negative. The actions reflect the risk and potential exposure of the City’s General Fund to wildfire liability claims and the potential impact of recovery and response on the City’s unbudgeted expenditures and available liquidity.”
“We continue to advocate for the Mayor and Council to develop a strategic five-year plan to fix our City’s finances. Without a long-term approach to putting our fiscal house in order, short-term decisions will doom Los Angeles to an inexorable decline in public services, undermining our quality of life and the economic prospects of our residents.
“I strongly commend the Mayor’s capital infrastructure vision outlined in her Executive Directive No. 9. It’s the kind of strategic approach we need to the City’s overall fiscal challenges.
“Our Office is eager to collaborate with the Mayor, Council and greater community to reform the City’s budgeting process and priorities. This must be a long-term commitment because the problems are long-standing and will require a phased approach to solving. Budget reform and accountability are vital to minimizing abrupt service cuts, which disproportionately hurt our most vulnerable.”
It should be noted that Mejia is only 34 years old. This young accountant is shaking things up in the city of Los Angeles and is offering logical solutions. One can only hope that the mayor and city council get more proactive as they move forward from another rough fiscal year. They should accept Mejia’s extension of assistance, as they all need to work together to take control of the ship of state by creating an achievable roadmap to get L.A.’s finances back on course.
