LA Signals Massive Budget Shortfall Is Coming Soon

With its iconic tourism industry crumbling and Hollywood shut down by the novel coronavirus pandemic, LA’s budget chief warned the coming funding gap could top a half billion dollars.

Los Angeles skyline at night. (Minh Thai for Courthouse News Service)

LOS ANGELES (CN) – Cities across the nation are bracing for budget shortfalls due to the global coronavirus pandemic, including the city of Los Angeles which on Wednesday forecast a $231 million gap coming this year and possibly a nearly $600 million gap next year.

LA’s forecast comes a day after the International Monetary Fund said the “Great Lockdown” of 2020 could be the worst recession since the Great Depression, even worse than the 2008 meltdown.

Sharp declines in tax revenues are expected as the global economy grinds to a halt due to local health orders for non-essential businesses to close. In the last month alone, nearly 17 million Americans applied for unemployment benefits.

LA Controller Ron Galperin reports the region’s travel and tourism industry shrank by 70% and the loss of hotel taxes and permit fees will be around $110 million — the largest decrease overall. LA could see a $231 million shortfall for the current fiscal year which ends June 30.

Meanwhile, the Los Angeles Times reported an internal LA Fire Department email summarizing a meeting with LA Mayor Eric Garcetti said it may be into 2021 before sporting events and large concerts are approved in the area.

The next fiscal year will be unpredictable, Galperin said, and depending on recovery efforts LA could see a wide budget gap between $194 million and $598 million. The lower and higher figures do not reflect a “best” or “worst” case scenario but instead estimate the severity of the recession.

“The revenue outlook for Los Angeles is much darker than it was even a month ago, but it is not unique to our municipality,” Galperin said in a statement Wednesday.

Property taxes could also take a dive if the recession lingers. “It is unclear exactly when and how our economy will rebound and return to a state of normalcy,” said Galperin.

The forecast comes the same day LA County Public Health Officials announced 42 new deaths from the Covid-19 infection in the region, a new daily record. On Tuesday, the county reported 40 new deaths.

So far, 402 people in LA County have died in the coronavirus outbreak. A third of those deaths involve people from nursing homes and assisted living facilities, said Public Health Director Barbara Ferrer.

“I know some people have lost loved ones, some people have been extraordinarily ill, some people have lost their jobs, some people had to temporarily close their businesses, some people are struggling with guiding their children through remote learning and all of us have had to live our day to day lives very differently than we’re used to,” said Ferrer. “I know we’re going to get to the other side of this together.”

LA County has seen 10,496 confirmed cases of the novel coronavirus. About 11% of all tests done have come back positive, according to Ferrer.

Across California, public health officials reported 61 new deaths overnight, bringing the state’s death toll to 821 deaths. Governor Gavin Newsom said hospitalizations jumped slightly but that the number of people in intensive care has dropped two days in a row.

“By no stretch of the imagination are we out of the woods,” Newsom said. “We need to maintain the path that we are on, a path that is producing results.”

One day after detailing a sobering reopening plan for the economy, Newsom used his daily briefing Wednesday to offer financial assistance to millions of Californians-including those undocumented- who have lost their jobs in recent weeks.

With the help of charitable groups, California will dedicate $125 million to assist undocumented workers. Newsom said he was proud to make California the first to create a stimulus package for immigrant workers and that it was the “start” of the state’s plan to aid its large undocumented workforce. 

“I’m not here to suggest that a $125 million is enough, but I am here to suggest it’s a good start and I’m very proud starting here in the state of California,” Newsom said. 

Under the “disaster relief assistance fund,” taxpayers will contribute $75 million with an additional $50 million from groups like Emerson Collective, The California Endowment and the Chan Zuckerberg Initiative. According to Newsom’s office, beginning in May approximately 150,000 undocumented adults will be eligible for a one-time $500 cash payment, with a $1,000 household cap.

Newsom highlighted the crucial role undocumented workers play in California’s economy, saying they represent an estimated 10% of the workforce and contributed $2.5 billion in local and state taxes last year. The relief will be distributed by regional nonprofits with experience “serving undocumented communities.”

Angelica Salas, executive director with the Coalition for Humane Immigrant Rights of Los Angeles, applauds Newsom’s “bold and much needed initiative.”

“This is a recognition of the fact that immigrant families are essential to our state. Their economic and labor contributions are keeping us going,” said Salas in a statement. “Immigrants are one-third of the workers in California who are in the front lines fighting Covid-19. Their loved ones are hurting from this pandemic, yet the federal government has ignored them. This is an important first step in California’s recognition of the humanity and contributions of immigrants.”

So far, more than 2.7 million Californians have filed for unemployment in the last four weeks. The crushing load has overwhelmed the state’s ability to process claims, leading Newsom to sign an executive order to boost staffing and extend hours at unemployment offices and call centers.

Newsom also offered assurance to the state’s gig economy and self-employed sector, saying the Golden State will extend federal Pandemic Unemployment Assistance to independent contractors. He says the goal is to expedite claims processing and issue benefits within 48 hours, quicker than the normal three-week timeframe.

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