As the city gears up for the 2026 World Cup and the 2028 Olympics, it also faces the pressing need to cut spending to address the budget shortfall.
Los Angeles is projected to have a $1 billion budget deficit for the 2025–2026 fiscal year, prompting an urgent call from Mayor Karen Bass to lay off 1,647 city workers as part of her $13.95 billion
budget proposal unveiled on Monday.
The city is facing
multiple challenges, such as declining revenue, increasing liability claims, and rising payroll expenses. The impact of the January fires, which devastated parts of Los Angeles, has also escalated city expenditures.
“This budget includes investments to advance our efforts in tackling critical issues like homelessness and crime reduction while aligning the City’s finances and implementing sensible consolidations of similar departments,” Bass stated. “Homelessness is decreasing. Crime is down. These challenges are significant, and our accomplishments indicate that we can achieve anything in this city of limitless potential.”
City Administrative Officer Matt Szabo
alerted the City Council about the financial shortfall on March 19, noting a $315 million revenue shortfall.
In her State of the City speech on April 21, Bass addressed the city workforce, emphasizing that the layoffs are a last resort.
“Make no mistake—you are the city’s most valuable asset. Each day, you come to work in dedicated service to the people of Los Angeles, often under difficult conditions—you support Angelenos and improve our city daily. However, I must be candid—the proposed budget unfortunately includes layoffs, a decision made only when absolutely necessary.”
The mayor’s budget also
suggests eliminating 1,047 vacant city positions, as indicated by City Controller Kenneth Mejia. Bass highlighted that she and the Los Angeles City Attorney are scheduled to visit Sacramento this week to engage with legislative leaders and seek additional resources.
Mejia pointed out that among the
affected positions are 403 civilian roles within the Los Angeles Police Department, 262 in the Department of Transportation, and 159 at the Bureau of Sanitation, among others.
Mejia noted that legal payouts
amounted to nearly $472 million between 2020 and 2023. He also mentioned that the proposed budget allocates around $6.45 billion in discretionary funds, which are unrestricted and can be utilized for various purposes.
Moreover, city employees are slated for an agreed-upon $250 million pay increase in 2025-2026, as stated by Szabo.
At the same time, the city’s reserve fund has been utilized to balance the budget by hundreds of millions. Mejia estimates that general fund revenue will
decline by $73 million, a figure he later
revised to nearly $300 million.
Mejia has been vocal about the city’s financial management issues. In 2024, he brought attention to these concerns.
“As we are all acutely aware, revenue shortfalls, liability claims, and overspending by departments compelled the city to conclude the year in a deficit, necessitating the withdrawal of nearly half of the City’s General Fund Reserves,” he
stated in a 2024 financial report.
Bass’s budget includes a
merger of four city departments into a new Community and Investment for Families Department, while eliminating the Departments of Aging, Economic and Workforce Development, and Youth Development.
The proposal allocates $103.7 million for 227 new hires in the Fire Department, half of whom will be firefighters.
Los Angeles is set to host the
2026 World Cup and the
2028 Olympics. Although the Olympics are seen as a potential revenue source for the city, research from the University of Southern California (USC) indicates that the costs associated with new developments for the games will surpass the anticipated revenue.
Additionally, USC has noted that the upcoming games will escalate living expenses in Los Angeles.
Studies
indicate that cities hosting the Olympics typically incur financial losses. The city’s organizing committee’s annual
report for the 2028 Olympics and Paralympics suggests that the games could cost the city nearly $7 billion. If successful in avoiding budget overruns, Los Angeles would be the first host city since 1984 to achieve this feat.
Residents will have the opportunity to provide public feedback to the Budget and Finance Committee on April 25 at 1 p.m. at Van Nuys City Hall and on April 28 at 4 p.m. at City Hall in Downtown Los Angeles.
The City Council is tasked with reviewing and finalizing a budget by June 1.
