L.A. Controller Cautions City Against Dipping Into Reserves to Cover Rising Costs

Posted on October 11, 2017

Los Angeles -- City Controller Ron Galperin today released a report summarizing the City of L.A.’s finances for the fiscal year that ended June 30, 2017.

 

The Preliminary Financial Report, which provides a snapshot of the recently concluded fiscal year, showed that overall, the City’s revenues increased by 4 percent over the prior fiscal year as expenses ticked up 5.2 percent. The City balanced its books, in part, by dipping into reserves -- with the City’s reserve funds totaling $450 million as of July 1, 2017,  just under 8 percent of the 2017-18 General Fund budget. While that percentage exceeds the City’s own minimal guidelines for reserves, it represents a decline from the more robust peak of 10 percent in 2015.

“This is a time for the City to take stock and make sure to not overextend itself,” L.A. Controller Ron Galperin said. “The City needs a budget that is based on actual revenues and that builds rather than depletes hard-earned reserves. Otherwise, we risk being unable to weather an economic downturn without cuts in services.”

The General Fund component of overall revenues grew by a healthy 6 percent over the prior year, totaling $5.6 billion. General Fund spending grew by 6.4 percent. In contrast, Special Fund revenues totaling $2.5 billion were up just 3.6 percent, while spending from these accounts increased by 2.8 percent over the prior year.

The Controller’s financial review showed that many categories of tax revenue, including property, business, sales and hotel taxes, along with building permit fees, reached all-time highs. However, liability claims payouts exceeded $200 million, driven by the settlement of a large class-action lawsuit and a number of sizable liability cases.

Along with the financial report, the Controller’s Office created and posted an online interactive tool at pfr.controlpanel.la for exploring revenues and expenditures with ten years of data including exhibits and schedules.

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