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Los Angeles is facing a financial crisis as city officials warn about rapidly depleting reserves and fiscal challenges. The city is expected to pay $320 million in settlements and judgments by June, which is more than three times the budgeted amount for such expenses this fiscal year, according to Los Angeles Magazine.
The financial strain stems from dwindling revenues and unexpected expenses, including wildfire response costs and large civil payouts. The Los Angeles Police Department (LAPD) accounts for the largest share of liability payouts, with $100 million in claims during fiscal year 2024. Public works departments follow with $45 million, and an additional $106 million in liability payments are not linked to specific departments.
City Administrative Officer Matt Szabo warned that reserves are nearing the emergency level of 2.75%, which could trigger a declaration of "urgent economic necessity" by the City Council. Szabo emphasized the need for vigilance in managing the city's finances. Councilmember Katy Yaroslavsky echoed this concern, stating, "Every dollar that we spend on lawsuits is a dollar that we're not spending on making our neighborhoods safer."
City Controller Kenneth Mejia expressed concerns about the ongoing budget issues, noting that high revenue projections have not been met for the second consecutive year. If current trends continue, the citywide hiring freeze and service reductions could extend. The city has already cut over 1,700 positions since last July.
With budget negotiations for the next fiscal year approaching, city leaders face tough decisions on addressing the root causes of financial strain and massive liability settlements. The situation calls for more realistic and transparent budgeting to protect city resources and improve public safety.
