As the city’s budget crisis worsens, layoffs are inevitable, according to the city’s budget chief. With next year’s budget deficit approaching $1 billion, City Manager Matt Szabo has urged the Los Angeles City Council to focus on cost-cutting measures, including staff reductions, to balance the 2025-26 budget. In a presentation to the council, Szabo attributed the city’s financial woes to skyrocketing spending on civil lawsuit settlements in recent years. Additionally, falling tax revenues are expected to continue declining, further exacerbating the city’s financial situation.
The next budget year, which begins July 1, will also see an additional $250 million allocated for pay raises for city employees. As a result, the city faces a difficult decision, with layoffs looming. The city is considering not just a handful of layoffs, but possibly thousands of positions being cut. Mayor Karen Bass is set to present the 2025-26 budget by July 21 and will need to develop a strategy to eliminate the $1 billion deficit.
Following Szabo’s presentation, city council members held a closed-door meeting to review contracts with various unionized employees, including police officers, firefighters, garbage truck drivers, librarians, and park maintenance workers. Councilwoman Katie Yaroslavsky, who leads the budget committee, suggested that the council consider options such as asking city employee unions to delay scheduled pay raises.
The mayor emphasized that the city’s budget situation requires a fundamental change in operations and that no program or department is safe from potential cuts or restructuring. She pointed to various contributing factors, including large civil lawsuit settlements, the cost of responding to the Palisades wildfires, and broader economic trends like volatile stock markets and national fiscal policies.
Since the coronavirus pandemic, city leaders have persuaded public employee unions to forgo scheduled pay raises, allowing more than 1,000 employees to take early retirement for up to $80,000. In the past two years, Mayor Bass and the Los Angeles City Council have provided raises to police officers, city employees, and firefighters. However, despite these cuts, the proposed pay raises for 2025-26 will still be a major part of the budget. LA City Council President Harris Dawson has urged city officials to find ways to increase revenue, such as raising utility service fees.