City budget office outlines adopted FY 26–27 budget, warns of near‑term deficits

Ben Ceja, an assistant city administrative officer, presented the City of Los Angeles’s adopted fiscal year 26–27 budget to the Budget and Finance Advisory Committee, saying the adopted numbers reflect a higher FY26 revised base and stronger than‑expected tax collections.

Ceja said the apparent jump in general fund revenues between adopted budgets largely reflects a conservative FY26 adopted estimate and a subsequent revised revenue estimate that raised the base for FY27. “Our business tax performed better than our conservative adopted estimates,” he said, and he attributed gains to business tax collections, roughly $30 million from tax‑discovery efforts, about $44 million in higher utility user receipts tied to peak electricity demand and an increase in sales tax. He also cited new automated bus‑lane enforcement as a contributor to higher parking fine receipts.

Why it matters: the office’s four‑year outlook, updated now that the convention center decision and its debt service are incorporated, projects deficits in FY27–FY29 and a return to surplus in FY30–FY31. Ceja cautioned the outlook excludes costs for decisions not yet finalized — notably open labor agreements — and therefore is sensitive to future council actions and negotiation outcomes.

Ceja described several balance and cash‑management tools. The city’s reserve fund policy requires a minimum 5% balance of general fund revenues; the adopted budget projects a July 1 reserve of $517,000,000 (about 6.01%). The administration also set a budget stabilization fund to start the year at $200,000,000 and maintains an unappropriated balance for midyear adjustments. For cash‑flow timing — notably property tax revenues that arrive in large installments later in the fiscal year — the city uses short‑term tax revenue anticipation notes (TRANs). Ceja said the city issued TRANs principally to cover pension payments this year and is also using some internal interfund borrowing to reduce external issuance.

On TRAN pricing, Ceja said he would provide precise issuance results after the meeting; elsewhere in the discussion he reported a TRAN issuance of $1,400,000,000 priced at a 2.75% yield to cover pension payments.

Committee members pressed Ceja on several topics, including how the convention center expansion’s projected economic benefits are treated in the outlook. Ceja said staff rely on industry and historical projections rather than project‑level microforecasts and that the outlook uses hotel‑industry projections for convention‑related revenue. Commissioners also questioned whether a proposed charter change to move to a two‑year budget would allow better alignment with labor agreements. Ceja said the charter amendment keeps the fiscal year intact but would shift the proposed budget release earlier and make the second year a procedural update that reflects financial status reports.

Ceja described three initiatives his office is advancing: (1) a charter amendment enabling a two‑year budget to improve capital planning, (2) liability‑mitigation work that includes four six‑month positions (two in the city attorney’s office and two in the CEO’s office) to centralize oversight of litigation and payouts, and (3) increased fiscal transparency for labor negotiations so decision‑makers and the public can see potential cost impacts of proposed terms before agreements are finalized.

Next steps: Ceja said labor negotiations and other council decisions that remain open will be incorporated into future outlooks when costs are known; the committee requested follow‑up materials on TRAN pricing, tax‑discovery revenues, and more detailed staffing and liabilities data. The presentation concluded with a question period during which members asked for additional briefings on pension timing, workers’ compensation trends and the use of special funds.