As Los Angeles faces a shortfall of nearly $300 million caused by overspending, the City Council Friday approved recommendations aimed at reducing that deficit with possible cuts to services and the issuance of bonds.
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Council members voted 14-0 to approve the second financial status report and recommendations for restoring the reserve fund and reducing a budget deficit. Councilwoman Imelda Padilla was absent during the vote.
No major discussion was held prior to the vote.
While the report highlighted incoming revenue stood at $1.35 billion as of October, which is $54 million above plan, elected officials must address a $296.14 million shortfall in the current fiscal year.
Overspending can be attributed to the following categories, which represent the largest of expenditures, but not limited to:
-- $112 million in liability payouts;
-- $53.40 million in a recently approved labor agreement with the union representing firefighters;
-- $36.68 million by the Fire Department for retirement, sick time, payout liabilities, overtime and other categories;
-- $25.41 million by the City Attorney's Office for litigation and outside counsel contracts;
-- $19.65 million by the Police Department for salary and sworn overtime;
-- $13.95 million by the Transportation Department for salaries and the deployment of more crossing guards; and
-- $11.49 million by the General Services Department for higher costs in gas and fleet maintenance.
City Council will use $105 million from an account not tied to specific costs, to partially cover the $300 million shortfall. Additionally, elected officials will retain its prioritized critical hiring process, which was enacted at the start of the year.
The policy in essences serves as a hiring freeze for most positions, exempting key roles in public safety. Departments seeking to fill roles must submit a request to a city body, which vets the need and ultimately decides whether hiring for that position can move forward.
City departments will be tasked with absorbing overspending, retaining any surpluses, and working with limited resources.
A significant challenge that remains is replenishing the reserve fund, which has been used to cover liability payouts for settlements such as injuries caused by broken sidewalks, vehicle collisions involving city personnel or damages related to police misconduct.
To that effect, elected officials are moving forward with a plan to issue an estimated $15 million in bonds, called judicial obligation bonds. While elected officials have not formally approved such bonds, actions taken Friday will prepare the city to do so.
According to the CAO, the reserve fund stood at $320 million or 4% of general fund revenue.
The CAO has previously said the city has committed nearly $260 million for liability payouts, which could increase to $300 million by the end of the fiscal year.
Councilman Bob Blumenfield, chair of the council's Budget, Innovation and Finance Committee, has previously said settlements have increased over the years -- not just in L.A. but across the nation.
The city is also settling several cases going back to 2020 when L.A. residents protested the death of George Floyd, who was killed by a Minneapolis police officer.
In May, the city settled with one of these protesters for $1.5 million related to a testicle injury caused by a LAPD officer, who shot a hard-foam projectile and hit the individual in the groin.
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