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Los Angeles’ top financial advisor says the city is facing a nearly $1 billion budget shortfall heading into the 2025-2026 fiscal year.
The budget crisis means that the city already suffers Mayor Karen Bass needs to cut down the department and layoff city workers, Executive Matt Sabo told city council on Wednesday.
“We haven’t seen dozens or hundreds of layoffs, but there are thousands,” Szabo said. “Layoffs may be necessary, but that’s not the only solution. We’re facing these economic headwinds, so we can tell you that the mayor is absolutely committed to saving as much work and urban services as possible.”
Szabo shared a chart showing some of the city’s biggest concerns.
Revenue Gap – $315 million reserve recovery – $275 million debt claims (increase) – $100 million pension – $100 million solid waste fee subsidies (increase) – $80 million starting gap – $61 million Los Angeles budget breakdown shared at the City Council meeting on March 19, 2025.
Szabo attributed much of the crisis to increased spending on legal settlements, emergency response costs associated with the Palisades fire, and downward national economic trends.
“If immediate spending reductions are needed and revenues continue to decline, this agency needs to prepare for further reductions,” Szabo said.
The mayor responded to the news that he said everything was on the table when it came to potential cuts.
“We should not turn the stones over, and do not consider programs or departments that are too valuable to consider reductions or reorganizations,” Bass said.
The mayor will need to present her new budget until April 21st, and is expected to meet with city labor unions, including police and firefighters, to discuss the new contracts.
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