For the first time since 2012, expenditures for the city of Los Angeles grew more than revenues, exacerbating the city’s “structural deficit,” according to an annual financial report released by Controller Ron Galperin Wednesday.
The report also found that after three years of strong revenue growth, general fund revenues only increased by 2.3 percent while personnel costs continue to drive expenditure increases.
Galperin’s office also said an increased emphasis on reducing homelessness, and new challenges like an aging workforce and a possible decline in federal funding will require “significant fiscal discipline from city leaders.”
“We must be prudent in our spending, and find new revenue sources that will allow the city to be financially stable into the future,” Galperin said. “If we don’t, we will not be able to consistently deliver the quality services our residents expect and deserve.”
The city’s Comprehensive Annual Financial Report found that general fund revenue in 2016 was $4.9 billion, an increase of $111 million, or 2.3 percent, over fiscal year 2015, while general fund expenditures were $4.7 billion, an increase of $225 million, or 5.1 percent, more than 2015.
The report also noted that while reserves are strong, they declined in 2016, from more than 7 percent in 2015 to just under 6 percent this past July.
“In the middle of the great recession, the city faced a projected deficit of more than $500 million. Cuts to staff and expenses, paired with relatively strong revenues, reduced the shortfall to less than $100 million in 2015, before increasing at the end of 2016. This annual projected deficit represents what is known as the structural deficit,” Galperin’s office said.
