L.A. Controller Estimates $231 Million Less City Revenue Than Expected This Fiscal Year; Deeper Plunge Likely Next Year
LOS ANGELES — Today, L.A. Controller Ron Galperin released a Revised Revenue Forecast for the City of Los Angeles, predicting a $231 million decline in revenue from his previous estimate this fiscal year and as much as a $598 million decline from his previous estimate next fiscal year. These projections, available online at lacontroller.org/revisedrevenue, are revisions of the estimates Galperin released at the beginning of March in his annual Revenue Forecast Report and were necessitated by the coronavirus’s colossal impact on the local — and global economy.
“The City is facing an unprecedented crisis due to the coronavirus pandemic, and our revenue outlook is much darker than it was even a month ago,” said Controller Ron Galperin. “While these struggles are not unique to Los Angeles, our City is in a better position than most municipalities because of the diversity of our revenue streams and healthy Reserve Fund balance.”
Galperin continued, “But reductions like we’re seeing will undoubtedly strain our ability to provide high quality services and require some very difficult budgeting decisions this year and in the future. Protecting the welfare of Angelenos always has to be our primary concern, but it’s also essential to ensure the City is fiscally responsible and secure.”
Galperin’s Revised Revenue Forecast features updated estimates to help promote sober and responsible City budget deliberations, which will begin after Mayor Garcetti releases his budget proposal on April 20. Here are some highlights from the Revised Revenue Forecast:
- The coronavirus shutdown has resulted in an overall decline in City revenue — down $231 million this fiscal year; between $194 million and $598 million next fiscal year. In just one month, there has been a significant decline in projected General Fund revenue:
- This fiscal year’s revenue estimate is now $6.38 billion, a $231 million — 3.5 percent — decrease from the previous March 1 estimate of $6.61 billion. Even with this revision, Los Angeles is not facing a cash flow crisis as Galperin is still projecting 2.3 percent growth over last year’s General Fund receipts and Los Angeles will likely receive state and federal funds due to the coronavirus pandemic.
- For fiscal year 2021, the revenue decline from the previous estimate is a range between $194 million and $598 million, depending on the length of the current shutdown and how long it takes for the economy to recover from this crisis.
- Travel and tourism revenue will fall by 70 percent in the final quarter of this fiscal year: The global pandemic has crushed the travel and tourism industry, cutting hotel and home sharing occupancy dramatically. Transient Occupancy Tax from hotels and home sharing will drop by $61 million this fiscal year and up to $80 million in 2021.
- Business and Sales Taxes are down, and will likely fall next year: While the revised projections for Business Tax and Sales Tax revenues will decline this fiscal year, they are lagging indicators that will be impacted much more heavily in the year to come as thousands of businesses, both large and small, have closed their doors in an attempt to slow the spread of COVID-19. For the next fiscal year, Business Tax revenue could drop by as much as $85 million, while Sales Tax could take a $67 million hit.
- Expenses will eclipse revenue growth this year due to the increased cost of employee salaries and benefits, with additional short-term expenses for the City’s response to COVID-19.
See the Revised Revenue Forecast online with interactive visualizations here: lacontroller.org/revisedrevenue or https://lacontroller.org/financial-reports/revised-revenue-forecast-2020-2021/.