LA will be forced to follow the Trump playbook and lay off employees
Los Angeles City Administrative Officer Matt Szabo shocked many on the Los Angeles City Council Wednesday by announcing that the city budget deficit was worse than they thought, coming in at just under $1 billion in the red.
In a presentation given to the City Council, Szabo broke down where $61 million of the deficit came from the existing budget gap from the last fiscal year. A decline in overall revenues brought on by “downward economic trends” led to a revenue gap of $315 million. Increased spending on legal payouts brought in another loss of $100 million because of liability claims.
Adding to this was $275 million that Szabo said was needed to replenish the city’s reserve fund as it had been depleted in recent months to balance the 2024-2025 budget, which was decimated by an estimated $282 million in wildfire expenses stemming from the Palisades fire in January. The city also stands to lose another $80 million in solid waste fee subsidies. On top of all that was an additional $250 million in scheduled pay raises for city employees.
Szabo said on Wednesday that the huge budget gap all but certainly means mass layoffs of city employees, likely in the thousands.
“The severity of the revenue decline, paired with rising costs, has created a budget gap that makes layoffs nearly inevitable,” said Szabo. “We’re not looking at dozens or even hundreds of layoffs, but thousands. However, thousands of layoffs cannot and will not be the only solution. The city is currently facing serious financial headwinds. Immediate spending reductions are required. And this body needs to prepare for further reductions if revenues continue to decline.”
“The closest this would compare to would be, I believe, it was the ’09,’10 budget, which was the first year that the city felt the full impact of the crash in 2008 and the subsequent recession. I can tell you that the mayor is absolutely committed to preserving as many jobs and city services as possible, as we face these economic headwinds. Because of the severity of the gap we are facing, the mayor has made it clear we need to take action now.”
In addition to city employee layoffs, City Council members have floated several ideas, including deferring all union-negotiated pay raises for a period of time and cutting all vacant positions, the latter of which was used during the budget crunch last year to eliminate 1,700 jobs.
Also being targeted is the $80 million in solid waste subsidies, with the city now deciding on getting rid of or reducing trash pick up subsidies for low-income Angelinos, as well as raising the trash pick up rate from $75 every two months to $155. Should those changes occur, the city could see as much as $200 million come in as a result. The $100 million in liabilities and lawsuit payouts was especially stressed by Szabo as an area in need of improvement, with City attorneys now likely to fight harder against those cases.
“Plaintiff attorneys are getting rich at the expense of taxpayers and city services,” added Szabo. “Every dollar that goes towards a liability payout due to a lawsuit is reducing a city service.”
Los Angeles City Administrative Officer Matt Szabo shocked many on the Los Angeles City Council Wednesday by announcing that the city budget deficit was worse than they thought, coming in at just under $1 billion in the red.
In a presentation given to the City Council, Szabo broke down where $61 million of the deficit came from the existing budget gap from the last fiscal year. A decline in overall revenues brought on by “downward economic trends” led to a revenue gap of $315 million. Increased spending on legal payouts brought in another loss of $100 million because of liability claims.
Adding to this was $275 million that Szabo said was needed to replenish the city’s reserve fund as it had been depleted in recent months to balance the 2024-2025 budget, which was decimated by an estimated $282 million in wildfire expenses stemming from the Palisades fire in January. The city also stands to lose another $80 million in solid waste fee subsidies. On top of all that was an additional $250 million in scheduled pay raises for city employees.
Szabo said on Wednesday that the huge budget gap all but certainly means mass layoffs of city employees, likely in the thousands.
“The severity of the revenue decline, paired with rising costs, has created a budget gap that makes layoffs nearly inevitable,” said Szabo. “We’re not looking at dozens or even hundreds of layoffs, but thousands. However, thousands of layoffs cannot and will not be the only solution. The city is currently facing serious financial headwinds. Immediate spending reductions are required. And this body needs to prepare for further reductions if revenues continue to decline.”
“The closest this would compare to would be, I believe, it was the ’09,’10 budget, which was the first year that the city felt the full impact of the crash in 2008 and the subsequent recession. I can tell you that the mayor is absolutely committed to preserving as many jobs and city services as possible, as we face these economic headwinds. Because of the severity of the gap we are facing, the mayor has made it clear we need to take action now.”
In addition to city employee layoffs, City Council members have floated several ideas, including deferring all union-negotiated pay raises for a period of time and cutting all vacant positions, the latter of which was used during the budget crunch last year to eliminate 1,700 jobs.
Also being targeted is the $80 million in solid waste subsidies, with the city now deciding on getting rid of or reducing trash pick up subsidies for low-income Angelinos, as well as raising the trash pick up rate from $75 every two months to $155. Should those changes occur, the city could see as much as $200 million come in as a result. The $100 million in liabilities and lawsuit payouts was especially stressed by Szabo as an area in need of improvement, with City attorneys now likely to fight harder against those cases.
“Plaintiff attorneys are getting rich at the expense of taxpayers and city services,” added Szabo. “Every dollar that goes towards a liability payout due to a lawsuit is reducing a city service.”
