LA Mayor Proposes Deep Cuts and Layoffs to Address $1 Billion Budget Shortfall

Los Angeles Mayor Karen Bass unveiled a proposed $14 billion budget for the 2025-26 fiscal year on Monday, outlining significant cuts, including layoffs of roughly 5% of the city’s workforce, to stabilize finances amid a nearly $1 billion budget shortfall, Bloomberg reports.

The proposed measures come in the wake of January’s deadly wildfires and a decline in city revenue.

“Turmoil and uncertainty from Washington, and a slowing economy, are causing lower revenue projections to the tune of hundreds of millions of dollars,” Bass stated during her state of the city address. “Combined with personnel costs and, of course, the fires and rebuilding, altogether Los Angeles, we have a very difficult budget to balance.”

The mayor’s budget maintains general fund spending at the same level but redirects priorities and eliminates 1,647 jobs. The plan includes adding 227 new firefighting positions and increased funding for rapid response vehicles, a direct response to the Palisades Fire that claimed 12 lives and destroyed 7,000 structures.

Sworn police officers will be exempt from job cuts under the proposal. However, several commissions focused on health and climate will be eliminated, and departments for aging, youth, and workforce development will be consolidated into a single agency.

Los Angeles’s financial situation has deteriorated in recent years, with the downtown area struggling to fully recover from the pandemic’s impact. Additionally, the city’s film industry is facing increasing competition from locations offering more attractive tax incentives, leading to a decline in production.

According to researchers at the University of California at Los Angeles, a voter-approved “mansion tax” on high-value properties has also significantly reduced sales and tax revenue. Earlier this year, S&P Global Ratings and Fitch Ratings assigned negative outlooks to the city’s bond rating, indicating a higher probability of downgrades.

Surging legal settlements and liability claims, ranging from police conduct to sidewalk injuries, have further strained the city’s budget. At the same time, the Trump administration’s immigration policies are threatening the construction labor force needed to rebuild high-value neighborhoods that contribute significantly to the tax base.

To address the budget deficit, the City Council has approved an increase in trash collection fees – 54% for single-family homes and 130% for multifamily buildings. City officials are also actively seeking hundreds of millions of dollars in funding from state and federal lawmakers to cover wildfire reimbursements and grid upgrades.

Los Angeles joins other major cities facing similar budget challenges. San Francisco projects an $876 million shortfall by next year, and Chicago recently addressed a nearly $1 billion gap in its most recent budget.

Los Angeles lawmakers have until June 1 to adopt or amend Bass’s budget proposal.