Los Angeles Mayor-elect Nithya Raman will inherit a city facing nearly $322 million in projected overspending when she takes office next month — leaving her to tackle mounting financial problems while preparing her first budget.
A November 4 report from City Administrative Officer Matt Szabo projects $321.8 million in overspending for the fiscal year ending June 30 2027, a 22% increase from the $263.2 million projected at the same point last year.
The report comes as LA operates on a roughly $15 billion annual budget, including an $8.6 billion general fund supporting police, fire and other city services.
The Los Angeles Fire Department accounts for the largest projected overrun at $140.9 million, driven by staffing expenses, employee bonuses, wildfire-related costs and changes in deployment policies.
The city’s bills are also mounting.
The City Administrative Office projects $62.4 million in excess liability payouts, while the City Attorney’s Office faces another $33.8 million in overspending, largely because of litigation and outside attorneys.
The City Clerk is also projecting $19.4 million in additional expenses, including election-related costs.
The financial troubles stretch back several years.
Under Mayor Karen Bass, Los Angeles confronted a projected $476 million budget deficit in 2024.
During the 2024-25 fiscal year, revenue finished $160 million below budget, while legal liability payouts exceeded their budget by nearly $200 million.
LA operates on a fiscal year running July 1 through June 30, meaning Raman will inherit a budget approved under Bass with more than six months remaining before the next fiscal year begins.
Raman, who takes office on December 14, must also prepare her own spending plan.
Under the existing budget process, the mayor must submit a proposed budget to City Council by April 20, giving Raman just over four months to review departmental requests and establish her priorities.
City officials have identified ways to reduce current overspending.
Szabo recommended $6.85 million in immediate adjustments and identified another $131.05 million in potential solutions, leaving $183.9 million unresolved if those measures are implemented.
The report also identified $28.8 million in pending funding requests that could increase costs.
Meanwhile, Measure FD, a proposed half-cent sales tax increase leading in election returns as of Friday, could generate approximately $345 million annually for fire services. The revenue would be restricted to supplementing existing LAFD spending.
The financial pressures extend into Raman’s first budget.
Szabo projects a $166 million general fund shortfall for 2027-28, with changes to employee pension assumptions potentially adding another $183 million in retirement costs.
Although city revenue was running $102.2 million ahead of expectations through September, Szabo said it was too early to count on that money.
