Los Angeles Mayor Karen Bass has proposed a budget plan that includes increasing police spending while making significant cuts to her “Inside Safe” homelessness programs. This comes as the city is grappling with a $479 million deficit caused by overspending and lower-than-expected tax revenues.
An analysis conducted by The Center Square revealed that Inside Safe, a program aimed at addressing homelessness, incurs a cost of around $17,000 per homeless individual per month. Los Angeles City Controller Kenneth Meija has recently announced an audit of Inside Safe to assess its effectiveness and determine if the allocated funds are being utilized as intended.
Bass plans to implement significant changes to the budget, particularly in the allocation of funds for public safety initiatives. Inside Safe, which had received $250 million in funding last year, will face $65 million in budget cuts. On the other hand, the budget for police spending will see an increase from $1.9 billion to $2 billion for the upcoming fiscal year.
Bass has proposed a budget of $12.8 billion, which is 2.3% lower than the previous year’s budget of $13.1 billion.
“We need to seize this opportunity to assess the entire budget process and implement the necessary changes to ensure that City departments operate as effectively and efficiently as they can,” stated Bass in her budget proposal.
The budget includes a proposal to allocate $400 million of revenue from Measure ULA, a tax that was marketed to voters as a “mansion” tax with the potential to generate between $600 million and $1.1 billion annually.
The implementation of the 4% tax on real estate transactions over $5 million and 5.5% on transactions over $10 million is projected to generate only $270 million in the coming year. This tax has contributed to a decline in the sale and investment of real estate in Los Angeles, leading to a shortage in available housing. Since the introduction of the tax, the sales volume of multifamily real estate in the city has dropped by 38%.
The current 2023-2024 fiscal year is facing a deficit of $479 million. This deficit is primarily a result of $289 million in overspending, which can be largely attributed to overtime costs and lost lawsuits. Additionally, revenues have fallen short of projections by $187 million.
Bass’s budget for the upcoming year does not involve tapping into reserves. It ensures a cumulative reserve of 7.91% across the city’s three reserve funds, including the mandated 2.75% emergency reserve and 2.25% contingency reserve.
City Administrator Matthew Szabo has expressed concern about the revenue outlook for the upcoming fiscal year. According to him, there are potential risks to economically sensitive revenues due to the Federal Reserve’s ongoing battle against inflation. As a result, there is a possibility that the mayor’s revenue estimates may not be met, which could lead to additional budget cuts or withdrawals from reserves.
S&P Global Ratings has recently downgraded the bond outlook for the government of San Francisco from neutral to negative. This downgrade comes as a result of San Francisco’s weaker economic performance compared to Los Angeles.