Karen Bass – Photo from Instagram
LOS ANGELES—With a $1 billion budget deficit looming over the 2025-2026 fiscal year, Los Angeles officials have warned that widespread staffing cuts and service reductions are now unavoidable.
During a Los Angeles City Council meeting on March 19, 2025, City Administrative Officer Matt Szabo delivered a stark financial outlook, stating that layoffs are “nearly inevitable.”
“We are not looking at dozens or even hundreds of layoffs, but thousands,” Szabo told the council.
The crisis could lead to drastic reductions in city services, delayed infrastructure projects, and job losses across multiple departments, affecting thousands of employees and their families.
What’s Causing LA’s Budget Shortfall?
The $1 billion deficit is driven by a combination of rising costs and declining revenue, according to city financial reports. The key contributors include:
1. Surging Legal Payouts
• City liability settlements and lawsuit judgments are projected to reach $320 million, up from $112 million the previous fiscal year.
• These increasing legal costs have drained city funds meant for essential services and staffing.
2. Declining Tax Revenues
• Lower-than-expected tax collections have worsened the financial outlook.
• The city’s tax base, largely dependent on property, sales, and business taxes, has not rebounded as anticipated, particularly after the pandemic’s economic downturn.
3. Rising Payroll Costs
• Scheduled salary increases for city employees will add $250 million in new costs for the upcoming fiscal year.
• Existing contracts with labor unions include higher wages and expanded benefits, further straining city finances.
4. Depleted Reserve Funds
• The city has spent a significant portion of its emergency reserves, leaving little flexibility to address the budget gap.
• City officials estimate hundreds of millions of dollars will be needed to rebuild reserves, adding further financial strain.
How the Budget Crisis Could Affect City Employees
With thousands of potential job cuts, Los Angeles’ municipal workforce—one of the most diverse in the nation—faces uncertainty.
• According to the Los Angeles Controller’s Office, Asian employees make up approximately 13% of the city’s workforce, with a significant number of Filipino employees in various city departments. The Los Angeles Filipino Association of City Employees (LAFACE), represents a substantial number of city workers, though exact membership numbers are undisclosed.
• People of color represent 73% of city employees, exceeding their proportion in the city’s overall population.
The budget cuts could impact city workers across departments, including administrative personnel, public safety staff, and service providers who keep the city running.
Mayor Karen Bass: “We Need Fundamental Change”
In response to the crisis, Mayor Karen Bass has directed budget officials to prepare cost-saving proposals ranging from $500 million to $900 million for the fiscal year beginning July 1, 2025.
“We need fundamental change in the way the city operates,” Bass said in a statement. “Our budget must be aligned to best serve the residents of Los Angeles while ensuring the responsible use of limited financial resources.”
Bass is expected to release her proposed budget by April 21, detailing how the city plans to address the deficit while minimizing the impact on essential services and workers.
How Will City Services Be Affected?
The anticipated budget cuts could lead to:
• Widespread layoffs affecting thousands of city employees.
• Reduced public safety services, potentially impacting police, fire, and emergency medical response times.
• Cuts to community programs, including after-school services, senior care, and homelessness initiatives.
• Delays in infrastructure projects, including road repairs, housing developments, and public transportation improvements.
Although city officials have not yet specified which departments will see the largest cuts, the scale of the deficit suggests major reductions across multiple agencies.
Could Tax Increases Help?
Some city officials have floated the idea of tax hikes to help address the budget gap, but these proposals face strong opposition.
• A sales tax increase or parcel tax could generate additional revenue, but would require voter approval.
• Business leaders warn that higher taxes could hurt economic recovery, especially for small businesses still struggling post-pandemic.
Given the political and economic risks associated with tax increases, budget cuts and efficiency measures are expected to be the city’s first approach before any tax proposals are seriously considered.
What to Expect in the Coming Weeks
Los Angeles city leaders are under pressure to finalize the budget in the coming weeks.
• Mayor Bass’ official budget proposal is due April 21, 2025.
• City Council budget hearings will follow, with debates on how to close the deficit while preserving essential services.
• Labor negotiations may take place, potentially leading to revised agreements with city unions.
For thousands of city employees, the next few months will be critical in determining job security and the future of city services.
For now, one thing is certain: without significant intervention, Los Angeles faces one of its most difficult financial challenges in years, with the livelihoods of thousands of workers hanging in the balance.
