Download the Revenue Forecast Report here
Los Angeles -- Controller Ron Galperin today released the City's annual revenue forecast. The report highlighted modest increases in City revenues that aren't keeping up with increases in City spending -- and the need to exercise caution in new spending both for the current fiscal year and for the Mayor's soon-to-be proposed budget for 2017-18.
For the fiscal year that will end June 30, the Controller is projecting the City will close out the year with an increase in General Fund revenue of 4.0 percent -- 0.5 percent, or $28 million, short of the growth rate projected in the budget approved last year by the City Council. Special Fund revenue, which can be used only for certain restricted purposes, grew by a more robust 8.3 percent. An overall 5.4 percent in revenue growth, however, won't be enough to balance projected spending increases anticipated for this fiscal year.
For the 2017-2018 fiscal year set to begin July 1, the Controller is projecting General Fund revenue to increase by just 0.2 percent, while Special Fund revenue is projected to increase 3.5 percent, bringing the overall growth in revenues to just 1.25 percent.
Based on revenue estimates from City departments and updated information on certain revenue sources, Galperin estimated that General Fund revenues for the year ending June 30 will come to $5.549 billion. Galperin projected revenues of $5.566 billion for the fiscal year ending June 30, 2018.
Last month the City Controller released the City’s Comprehensive Annual Financial Report (CAFR) for fiscal year 2015-2016, which noted that for the first time since 2012, General Fund expenditures grew faster than General Fund revenues. Based on current and future year projections, the same problematic trend is anticipated for 2016-2017 and potentially 2017-2018.
In a report dated Jan. 6, 2017, the City Administrative Officer estimated a total 2016-17 deficit of as much as $245 million -- based on a revenue shortfall of up to $165 million and anticipated expenditures of $80 million in excess of those originally budgeted. Based on the Controller's most recent revenue estimates, the City is projected to have a 2016-2017 deficit of $108 million -- based on a revenue shortfall of $28 million, and the same higher-than- anticipated expenditures.
Standard economic models used for forecasting assume that changes in government policies on things like taxes, trade and grants are implemented "thoughtfully and gradually." Should that not be the case, the risks to City revenues are magnified, said the Controller. Accordingly, slower-than-expected revenue expansion, combined with uncertainty over possible policy changes in Washington, underscore the continued need for L.A. policymakers to be prudent as they begin to work on a budget for the coming year, Galperin said.
"Our City is fortunate to have a robust and diverse economy that continues to drive revenue growth for City services," Galperin said. "However, we must remain watchful stewards of taxpayer money, particularly with the uncertainty in both the economy and federal policymaking."
“The City must identify new and expanded revenue sources and find ways to curtail spending. If we don't, our efforts in recent years toward eliminating our structural deficit while restoring services will be undermined."
Controller Galperin recommended the City continue to improve collections and refrain from limiting General Fund revenues from such sources as short-term rentals, Gas Franchise fees and Multi-Family Trash Franchise fees to fund restricted purposes only, however worthy such set-asides may be.
Open data for City financials is available at ControlPanelLA: ControllerData.LaCity.org.
Since his election as City Controller in 2013, Controller Galperin has furthered transparency and accountability in City budgeting with open data initiatives providing taxpayers access to the City's financials -- including the City's open checkbook, payroll, assets, liabilities, revenues, and more. Through audits, Galperin has identified ways for the City to recover revenue by sharing tax data with other units of government, to recoup money from utilities for cutting into and excavating public streets, and to better collect and spend money from development impact fees.