As the city prepares for the 2026 World Cup and the 2028 Olympics, it must also slash spending to close the city’s budget shortfall.
The City of Los Angeles faces a projected $1 billion budget deficit for the 2025–2026 fiscal year, leading embattled Mayor Karen Bass to call for laying off 1,647 city workers in her $13.95 billion
spending plan released on Monday.
Los Angeles is grappling with
several issues, including declining revenues, rising liability claims, and increased payroll costs. The toll of the January fires, which ravaged Los Angeles, has also added to increased city costs.
“This budget makes investments to continue our progress on critical challenges like decreasing homelessness and crime while bringing the City’s finances into balance and driving change including common sense consolidations of related departments,” Bass said in a statement. “Homelessness is down. Crime is down. These are tough challenges, and our progress shows we can do anything in this city of limitless potential.”
City Administrative Officer Matt Szabo
warned the City Council on March 19 about the shortfall. He noted the city faces a $315 million revenue gap.
In her State of the City address on April 21, Bass spoke to the city workforce directly, saying the layoffs were a last resort.
“Make no mistake—you are this city’s greatest asset. Every single day, you come to work in dedicated service to the people of Los Angeles, often in challenging working conditions—you help Angelenos and you make our city better every day. But I want to be straight with you—my proposed budget unfortunately includes layoffs, which is a decision of absolute last resort.”
The mayor’s budget also
proposes eliminating 1,047 currently unfilled city positions, according to City Controller Kenneth Mejia. Bass said she and the Los Angeles City attorney would be in Sacramento this week to meet with legislative leaders and advocate for resources.
According to Mejia, on the
chopping block are 403 civilian positions at the Los Angeles Police Department, 262 at the Department of Transportation, and 159 at the Bureau of Sanitation, in addition to others.
Mejia has noted that legal payouts
reached almost $472 million from 2020-2023. He also noted that the proposed budget entails approximately $6.45 billion in discretionary funds, or unrestricted funds that can be used for anything.
Moreover, city employees are due for an agreed-upon $250 million pay raise in 2025-2026, according to Szabo.
Meanwhile, the city’s reserve fund has been tapped to balance the budget to the tune of hundreds of millions. Mejia predicts the general fund revenue to
decrease by $73 million. He later
revised that number to nearly $300 million.
Mejia has been a critic of the city’s financial management. In 2024, he highlighted the problem.
“As we are all painfully aware, revenue shortfalls, liability payouts, and departmental over-expenditures caused the City to end the year in deficit, requiring drawing down nearly half the City’s General Fund Reserves,” he
said in a 2024 financial report.
Bass’s budget entails the
consolidation of four city departments into a Community and Investment for Families Department. The departments to be eliminated include the Departments of Aging, Economic and Workforce Development, and Youth Development.
The plan does earmark $103.7 million for 227 new Fire Department hires, half of which will be firefighters.
Los Angeles will host the
2026 World Cup and the
2028 Olympics. While the Olympics have been touted as a revenue generator for the city, the University of Southern California (USC) said that the costs of new development ahead of the games outpace the projected revenue.
USC also said that the games will increase living costs in Los Angeles.
Studies
show that cities hosting the Olympics generally lose money. According to the 2024 annual
report by the city’s organizing committee for the 2028 Olympics and Paralympics, the games will cost the city nearly $7 billion. If it doesn’t overrun these costs, it will be the first host to not have done so since 1984, when it last hosted the Olympics.
Angelenos will have an opportunity to offer public comment to the Budget and Finance Committee on April 25 at 1 p.m. at Van Nuys City Hall and April 28 at 4 p.m. at City Hall in Downtown Los Angeles.
The City Council must review and approve a budget by June 1.
