Today’s budget presentation made clear that the City faces a financial challenge that is without precedent in our lifetime. The COVID-19 crisis has caused massive economic disruption, and with it a drastic decline in city revenues. Rapidly spiking unemployment, the shuttering of thousands of businesses and the virtually complete shutdown of tourism have led to a sudden and dramatic decline in city revenues from taxes on sales, business gross receipts, utility use, and hotel occupancy, among other things, that would have been unimaginable three months ago.
In a typical year, the Budget & Finance Committee would have spent most of April and May analyzing the Mayor’s budget proposal through weeks of public hearings in which committee members would question every department head, challenge every revenue assumption and propose hundreds of potential changes in expenditures. The result of that work would have been a lengthy budget resolution that would have been voted on by the entire Council. Obviously, this is not a typical year.
First, the Committee realistically could not conduct its normal review process, which requires the participation of hundreds of people, at the exact time of the worst of the COVID crisis and necessary distancing mandates.
Second, the coming year’s budget is fraught with more uncertainty than at any time in history. No one can yet know the degree of the economic downturn nor the timing of the recovery. No one can yet know the full cost of the required emergency response to the pandemic, which is ongoing. No one can yet know the degree to which the City will be reimbursed for its emergency costs by the federal or state government, or whether the City will receive other relief. It would be a pointless exercise to ask the Council to revise and vote on the budget proposal when we know with certainty that it will require wholesale changes in the coming months as the City’s economic outlook becomes clearer.
The Mayor's proposed budget technically will be considered approved on June 1 and go into effect on July 1 pursuant to the Charter, but the Council will certainly make significant changes in that budget both before and after that date. The Committee’s work on the Mayor’s proposed budget is not ending today, it is just beginning. We will meet throughout June to consider budget changes that may be applied as of the beginning of the fiscal year on July 1. We will continue our work throughout the fiscal year, with full knowledge that the City’s financial circumstances are likely to continue to change dramatically. Our Committee and the Council will need to be nimble, and we will constantly need to reassess those changed circumstances forthrightly and with discipline in order to maintain the basic city services that the people of Los Angeles depend upon.