Los Angeles County unveiled a $35.5 billion proposed budget on Monday, April 27. But facing huge coronavirus-spurred revenue cuts, the plan is sure to change as the economic toll from the pandemic unfolds.
That toll was in plain sight on Monday, as the Chief Executive Office said the county will end the fiscal year with a cash balance of $196 million, a decrease of $950 million from the $1.146 billion projected before the pandemic hit the county.
Officials expect a $1 billion drop in revenues by the end of June, and another $1 billion-plus revenue hit in 2020-21. Much of it is from sales tax dollars that flowed to the county through voter-approved actions such as Measure H, which supports homeless services. Already, the county has spent more than $600 million on responding to the impact of the virus, officials said.
The budget unveiled on Monday was mapped out before the outbreak blanketed L.A. County. So while there are cuts, they represent only a decrease of $594.2 million, compared to the 2019-2020 budget, which officials close the books on in June.
But they likely won’t stop there. The recommended budget kicks into gear a months-long process that will shape a final spending plan, expected in September.
“We are hoping for the best but preparing for the worst as we chart the course ahead,” said county CEO Sachi A. Hamai. “As always, we will prioritize vital services to the public and our essential role as the safety net for our most vulnerable residents.”
Hamai noted that it will be a process like no other, given the need for physical distancing and the uncertainty of the outbreak, which has shut down the L.A.-area economy since late March. More than 9,000 small businesses have applied for loan assistance, a number that foreshadows the hit to vital sales tax revenue, which funds everything from homeless services to public safety to child welfare.
“This is a budget process unlike any we’ve ever faced before, even in previous downturns,” Hamai said in a statement announcing the spending plan. “Although the County has its strongest fiscal foundation ever, thanks to our long history of prudent budgeting and investments in our Rainy Day fund, we are in a profoundly challenging economic environment that may get worse before it gets better.
The recommended budget will go before the Board of Supervisors on Tuesday, April 28.
County officials played up what they could in the pre-COVID spending plan announced Monday.
For instance, nearly $92 million was proposed for mental, public health and health services.
Under the plan, $100 million had been pegged for affordable housing in “very low” and “extremely low” income and homeless households. That money would include rental assistance rapid re-housing, home-ownership, and move-in assistance.
Officials pointed to added opportunities for state funding for county homeless programs. But they also noted concern that because of the pandemic, Measure H sales tax revenue will take a hit, and will need to be “re-evaluated.”
So will funding from the state, most likely.
“Although the State is prepared for an economic downturn with reserves of $21.0 billion, managing a recession could be challenging as even a moderate recession could result in State revenue declines of nearly $70.0 billion and a budget deficit of over $40.0 billion over three years,” according to the county’s proposed plan, foreshadowing changes coming in the governor’s May budget revisions.
Throughout the pandemic, the county has fronted what it could, both from its own “rainy day” fund, while leveraging money from the federal government’s unprecedented $2 trillion disaster stimulus legislation — the CARES Act.
Federal money includes:
- $1 billion through the State and Local Stablization Fund
- $1 million through Ryan White HIV/AIDS Program
- $6.6 million through the Emergency Solutions Grants (to respond to those experiencing homelessness)
- $13.669 million in Community Development Block Grants
- $1.28 million for Child Welfare Services
But that money won’t ward off serious fiscal damage, unless the federal government injects billions more in another round of stimulus specific to local governments, officials said.
The county will hobble to the end of the fiscal year in June, and get through it, said Supervisor Kathryn Barger on Monday.
The looming deficits next year are requiring department heads to look at double-digit cuts that could be baked into the plan, said Barger, chairwoman of the board. And there’s a hiring freeze already in the works.
Already this year, to close out the current 2019-20 budget year on June 30, county officials have been forced to draw on one-time reserves.
“I’m disappointed because we’ve had a rainy day fund. We practically had to use all of it, which is for what it was for. But at the same time we have to recognize that this is going to be a challenge for us unless we can identify additional revenue from the either state or the federal government,” she said.
Faced with mounting pressure, Barger and Supervisor Hilda Solis have introduced a “roadmap to recovery” with hopes that physical distancing orders are eased and businesses can begin to open up. But when that day comes remained uncertain on Monday.
What was certain, that at the moment, the stay-at-home orders in L.A. County will remain in effect until at least May 15. The risk is too high for a resurgence in cases, L.A. County Public Health Director Barbara Ferrer said Monday.
“We are hopeful that as we get into the middle of May our numbers will actually start decreasing an then we can look at what makes sense for L.A. County,” Ferrer said.