(The Center Square) – With the City of Los Angeles facing a $479 million deficit due to overspending and lower than anticipated tax revenues, Mayor Karen Bass has proposed increasing police spending while cutting millions from her signature “Inside Safe” homelessness programs.
According to an earlier analysis of Inside Safe by The Center Square, the program costs approximately $17,000 per homeless individual each month. Los Angeles City Controller Kenneth Meija recently announced he is auditing Inside Safe to see if it functions and whether money is being spent as promised.
Bass’s budget includes $65 million in cuts for Inside Safe, which received $250 million last year, and increasing police spending from $1.9 billion for 2023-2024 to $2 billion for 2024-2025.
Bass’s requested $12.8 billion budget is 2.3% lower than last year’s $13.1 billion budget.
“We must take advantage of this current opportunity to evaluate the entire budget process and make the changes necessary to ensure City departments are functioning as effectively and efficiently as possible,” said Bass in her budget proposal.
Included in the budget is a request to spend $400 million of revenue from Measure ULA, a tax sold to voters as a “mansion” tax that would raise between $600 million and $1.1 billion per year.
That tax, a 4% tax on every real estate transaction over $5 million and 5.5% over $10 million, is expected to raise just $270 million next year as real estate sale and investment tumble in the city, further constraining the available supply of housing; sales volume of Los Angeles multifamily real estate has declined 38% since ULA took effect.
The $479 million deficit is for the current 2023-2024 fiscal year, and is driven by $289 million in overspending, largely attributable to overtime and lost lawsuits, and revenues coming in $187 million below projections.
Bass’s budget for next year does not include any withdrawals from reserves, and maintains a 7.91% cumulative reserve across the city’s three reserve funds, including the required 2.75% emergency reserve and 2.25% contingency reserve.
Given City Administrator Matthew Szabo’s assessment that the “revenue outlook going into next fiscal year also seems dim as we continue to identify downside risk to many economically sensitive revenues due to the Federal Reserve’s ongoing battle against inflation,” there is a possibility that the mayor’s revenue estimates may fall short, leading to further budget cuts and/or reserve withdrawals.
S&P Global Ratings recently downgraded its bond outlook for the government of San Francisco, which has had a weaker economic performance than Los Angeles, from neutral to negative.
