Editorial: Los Angeles’ financial good times are coming to an end

By Jacky On Mar 10, 2023

It’s not really accurate to call the pandemic “good times,” but when it comes to the city of Los Angeles’ budget, the past few years have turned out to be quite generous.

More than billion dollars in feds and state aid flowed into the city, giving former Mayor Eric Garcetti and the City Council a cushion of cash to experiment with programs and policies and still pay their bills. los angeles could buy hotels for homeless housinglaunch pilot programs dispatch social workers and mental health experts to non-violent 911 calls involving the homeless, give small business grants and restaurants, and send monthly payments of $1,000 to 2,000 low-income families for one year.

The financial outlook has changed, which means Mayor Karen Bass and the City Council will have to get used to saying “no” to many funding requests. The federal government has turned off the pandemic relief spigot (although the city is online for infrastructure and climate finance from President Biden’s two major spending bills). With declining tax revenues and the possibility of a recession, the state is facing a deficit for the first time in several years.

Los Angeles is in the same boat. He city controller expects revenue to grow less than 1% in the fiscal year beginning July 1, and that’s assuming no recession. City spending is likely to rise significantly due to inflation, increases in employee compensation, increased pension obligations and the cost of Inside Safe, Bass’s ambitious new program to move the homeless out of the camps to hotels and then to permanent housing.

Low wrote to department heads in February by making your expectations clear: Do not expect budget increases. Alleviating the homelessness crisis is his top priority and his budget, which will be released next month, will reflect that. What if there is extra money next year? Bass wants to spend it to address homelessness and make the city safer and more affordable.

Bass is right to laser-focus on homelessness. It is the most pressing issue in Los Angeles, and addressing the causes and effects of homelessness will ultimately make the city better for everyone. But there has been no steady funding or political will for decades to make a lasting dent in the city’s homeless population.

The next budget will be a test of Bass’s priorities, and the City Council’s willingness to accept it. How much will it cost to move 17,000 homeless people off the streets into housing, as Bass promised during the mayoral campaign? Inside Safe is an important, if expensive, strategy with the city spend more than $100 per night per hotel room. More than 400 people have moved into temporary housing since the program began in late December. As more campsites are cleared, more people will move into hotel rooms. The goal is to transition people into permanent homes within two months, but the lack of affordable housing could lengthen hotel stays, increasing the cost of the program.

The City Council approved $50 million to jump-start the effort, but the price tag for continuing the program will be high. The mayor has lobbied President Biden for more funding, which could help. So could Measure ULA, the voter-approved tax on high-value real estate transactions, which will help speed the purchase and construction of permanent affordable homes, if it survives a legal challenge.

What are city leaders willing to sacrifice to pay for this unprecedented effort? How will solving homelessness compare with other priorities, including hiring more police officers (a new officer costs about $175,000 per year in salaries and benefits) and expanding non-public safety programs of law enforcement? And when will the city be able to make longer-term investments like hiring and training new city workers in every department (the city has a 20% vacancy rate due to retirements), modernizing its buildings, sidewalks, and other aging infrastructure and upgrading technology to deliver services more efficiently? These are not easy questions. Bass is wise to make homelessness her top priority, but she and the City Council also need to lay the groundwork now to ensure the financial stability and success of Los Angeles in the future.