The coming nightmare: The 1 billion deficit will bring thousands of layoffs and cuts to services

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A top financial advisor to the city of Los Angeles shared a grim outlook Wednesday for fiscal year 2025-26, saying elected officials need to address a projected $1 billion gap that will require tough financial decisions and could lead to thousands of layoffs.

City Administrative Officer Matt Szabo said Mayor Karen Bass’ proposed budget, which will be released April 21, will close that gap, but it will require difficult “cost-cutting decisions.” He has warned that the severity of revenue declines and rising costs has created a budget gap that makes layoffs “nearly inevitable.”

“We are not looking at dozens or even hundreds of layoffs, but thousands,” Szabo said. “While layoffs may be necessary, it cannot and will not be the only solution.”

“I can tell you that the mayor is absolutely committed to preserving as many jobs and city services as possible as we face these economic head winds,” he added.

Among areas of concern highlighted by Szabo is a $61 million starting gap, which will be exacerbated by $315 million in lower-than-anticipated revenue from taxes, $100 million in liability payouts that are expected to increase, $275 million needed to restore the reserve fund, $80 million related to solid waste fees and $100 million to cover pensions for members of the Los Angeles police and fire departments.