Los Angeles County is facing a mounting financial crisis, its top manager said on Monday, as expected cuts in federal funding, a record $4 billion settlement for sex-abuse allegations and the destructive wildfires in January threaten Southern California’s economy.
Fire-related costs are expected to approach $2 billion, Fesia Davenport, the county’s chief executive, said at a news briefing. The figure includes about $500 million in immediate costs plus lost revenue and recovery spending, and illustrates the lingering toll of the wildfires that began on Jan. 7, killing 30 people and destroying thousands of homes.
One fire all but leveled the Pacific Palisades neighborhood in the City of Los Angeles’s jurisdiction, and another destroyed much of Altadena, also in the county’s jurisdiction. Last month, city officials projected a $1 billion budget shortfall for next year that stemmed from fire costs, legal liabilities and federal policy disruptions. City leaders said they were weighing steep budget cuts and possible layoffs.
Los Angeles County is bigger than some states, with a population of nearly 10 million and more than 100,000 mostly unionized public employees. Ms. Davenport said that layoffs of county workers were so far unlikely, but that the region’s financial challenges had rapidly intensified.
“The closest thing I can think of is Covid,” she told reporters, comparing the current budget woes to the coronavirus pandemic, which continues to impact the regional economy.
Besides the costs of the wildfires, she said, the county also stood to lose hundreds of millions of dollars or more in federal funds from policy changes in the Trump administration.
She cited the administration’s decision last month to cancel more than $12 billion in federal health grants, which were allocated to states during the pandemic. The move led to an abrupt loss of $45 million in funding for the county’s Department of Public Health. Those funds had helped support disease surveillance, outbreak investigations, infection control and more. A coalition of states is challenging the decision, which has been blocked by a temporary restraining order for now.
Adding to the pressure is a legal settlement of nearly 7,000 sexual-assault claims brought under a state law by adults who were in the county’s juvenile detention and foster care systems as children. The law, known as AB 218, dramatically expanded the vulnerability of public agencies to lawsuits filed by adult survivors of sexual abuses, and has generated a wave of legal claims that has threatened the finances of municipalities and school districts across California. The tentative settlement is expected to be approved by the county’s Board of Supervisors in the coming weeks.
Officials said the county would most likely have to make budget cuts, dip into reserves and borrow to pay for the settlement. “Unprecedented” in scope, the settlement will require annual payments totaling hundreds of millions of dollars through 2030, with further annual payouts of millions of dollars more into 2051, Ms. Davenport said.
And, she said, global economic uncertainty has profoundly constrained a key source of county revenue — property taxes — as the county has endured a 41 percent net decline over the past four years in home sales amid high interest rates.
“We are in uncharted territory with these simultaneous pressures on our budget,” Ms. Davenport said in a statement. “Any of these alone would be daunting, but taken together, these challenges — the wildfires, the AB 218 settlement, the threat of deep cuts in federal funding — are cause for great concern.”
County supervisors are scheduled to take up the budget recommendations and a proposed spending plan on Tuesday, with public hearings to begin next month and a final budget to be adopted in September. The proposed $47.9 billion budget includes about $1.3 billion less in spending than the prior year.
She said county officials had already begun tightening, initiating a 3 percent cut that is expected to trim nearly $89 million in spending. The county’s social safety net functions, which include homeless services and health care for low-income residents, will be largely left intact, she said.
