In December, Los Angeles City Administrative Officer Matt Szabo issued a 99-page report on the current-year budget of the city, the reserve fund and “revenue trends for 2024-25.”
It revealed that Mayor Karen Bass and the City Council have run Los Angeles into the ground through overspending, liability and policies that have caused a decline in revenue from hotel, sales and business taxes.
The report was issued before the catastrophic fires in January. This was the cheerful Merry Christmas update.
Now, Szabo is warning that the city has a $1 billion deficit for the 2025-26 fiscal year.
Ever on the job, Mayor Karen Bass flew to Sacramento to ask for a state bailout. “We are fortunate to have the state legislature and governor that we do,” the mayor told KCRA’s Ashley Zavala, who asked what she would say to people in the rest of California about routing more state money to support Los Angeles.
“We” are not necessarily fortunate to have this governor and legislature, but on the specific issue of the bailout, it doesn’t appear that fortune is smiling upon the mayor at the moment.
Politico’s California Playbook reported that Bass did not receive any commitment of funding in response to her request for $1.9 billion to help close L.A.’s deficit. “We did not expect that we were going to come up here and get a check,” the mayor said in an interview between her meetings with state leaders, “I feel confident that we will get support.”
Moral support, certainly. Political support for her re-election, probably. Money? Not so fast.
The state of California is suffering from the same problems that plague Los Angeles. An orgy of raises for an army of government workers has burdened the taxpayers with structural cost increases, not only for salaries but also for higher payroll taxes and higher costs for current benefits, pension benefits and “other post-employment benefits” such as retiree health insurance.
“The more the merrier” is fine if you’re inviting people to a Christmas party, but it’s not a good policy if you’re adding to the civilian government workforce and to the open tab for paying those government workers in perpetuity.
Where’s the money to pay the bills for the overspending? Some of it is coming from the reserve funds that are supposed to protect essential services during a recession. Instead, those funds are protecting politicians from the consequences of their overspending decisions.
In addition, the state is doing some in-house bookkeeping magic to find billions of dollars needed to cover the shortfall in the Medi-Cal account. After mindlessly making every illegal immigrant in California eligible for full-scope Medi-Cal benefits at state expense, Gov. Gavin Newsom has initiated a series of “loans” from the state’s general fund to the account used to pay medical providers.
Other states provide undocumented residents with restricted-scope Medicaid coverage, which pays for emergency and pregnancy-related services. Don’t expect the taxpayers in those states to support a federal bailout for California.
And as Zavala’s question indicated, taxpayers in the rest of California can be expected to resist the call to bail out Los Angeles.
Szabo called the budget outlook “bleak,” citing “the severity of the revenue decline.” City Controller Kenneth Mejia said the problem was also caused by excessively rosy revenue projections.
Revenue from business taxes, sales taxes and hotel taxes just hasn’t come in as expected. Turns out that when your policies make your city a hellhole for businesses, and customers don’t shop in the stores because the streets are chaotic, and conventions and visitors go to other cities because Los Angeles is expensive and unsafe, tax revenue falls.
So, where will L.A. find the money to pay for the unaffordable multi-year raises Bass supported for the unionized civilian workforce, for the legal settlements with people who tripped on the city’s unrepaired sidewalks, and for the policy of spending billions to persuade people to come “Inside Safe” instead of camping on the streets and sidewalks?
The options are bailout (not happening), layoffs (we’ll see) and doubling the $75 bi-monthly trash fee paid by homeowners (coming soon).
At least L.A. can claim the title of Worst City Government in America. Maybe we can sell merch.
Write Susan@SusanShelley.com and follow her on X @Susan_Shelley