L.A. Controller Reports $550M Revenue Shortfall, Forecasts Partial Economic Recovery Next FY
LOS ANGELES – Today, L.A. Controller Ron Galperin released the City’s revenue forecast, reporting a $550 million revenue shortfall this fiscal year and warning of continued budget woes. He also noted that revenues could begin to improve next fiscal year if the economy starts to recover. The annual Revenue Forecast Report, provides updated estimates of the current fiscal year’s General Fund and special fund revenues, and also estimates how much money the City will bring in over the next fiscal year.
“With a $550 million revenue shortfall, the end of this fiscal year is going to be a tough one,” said Controller Galperin. “Our ability to continue delivering the same level of services to Angelenos is imperiled by our financial situation. But because COVID-19 vaccines are becoming more available, it is quite possible that the economy could begin to turn the corner sometime this summer, resulting in an uptick in City revenues during the next fiscal year. There is reason to be cautiously optimistic, but it will be a long road to full recovery.”
The forecast features City revenue estimates to help inform the Mayor and City Council as they discuss the City’s Fiscal Year 2022 budget this spring. The current fiscal year, FY21, ends on June 30, 2021, and FY22 begins the next day on July 1.
THIS FISCAL YEAR WILL BE TOUGH
- General Fund revenues for the current fiscal year are projected to be 8.3% lower than the budgeted amount, coming in at $6.14 billion — 3.7% below the last fiscal year. This means the General Fund will have a nearly $550 million budget shortfall at the end of the fiscal year.
- Property tax revenues will increase 6.1% and cannabis business taxes will jump 79% ($139 million), but will be offset by dramatic shortfalls in transient occupancy tax (down 66%), parking occupancy tax (down 44%), telephone users tax (down 15%) receipts and others.
NEXT FISCAL YEAR COULD BE BETTER
- Based on available local and national economic and public health information, Galperin predicts some economic stabilization beginning in the middle of this summer. If that comes to pass, steady growth should happen over the course of FY22, leading to better revenues for the City.
- General Fund receipts for FY22 are projected to increase 4.4% to $6.4 billion.
- Property tax, sales tax, cannabis business tax and other revenues should increase, along with 5.8% growth in business tax receipts and a 6.7% increase in sales tax receipts.
- Transient occupancy tax receipts have fallen nearly 75% from their height last fiscal year. They are likely to increase in the second half of FY22, but will remain below pre-COVID levels.
- If the pandemic worsens in the coming months, next year’s revenues could come in lower than projected in the forecast.
FEDERAL AND STATE RELIEF WOULD HELP
The City’s revenue outlook would improve considerably with the infusion of additional federal and state relief funds. Under the plan before Congress, Los Angeles could receive more than $1.2 billion to replace lost revenue, pay for community services and assist with pandemic response efforts. Because the funds haven’t yet been secured, they aren’t included in Galperin’s revenue forecast.
View the Revenue Forecast Report, along with an interactive dashboard and charts, at lacontroller.org/revenueforecast2022.