Liability Claims Surpassed the City’s Annual Budget by $10 Million Three Months into 2024
Kenneth Mejia, the Los Angeles City Controller has issued a new social media statement on the state of the city’s finances, stating that the city is in danger of going broke. According to Meija’s post, the City of Los Angeles has exceeded its annual liability claims budget just three months into the fiscal year. The city had allocated $87 million for liability claims, but so far, it has spent $97 million.
The bulk of the spending has come from three main areas:
- Police Department: $59.4 million
- Miscellaneous claims: $21.7 million
- Street Services: $6.1 million
Most recently, on September 30, the Los Angeles City Council approved $40 million in payouts to settle lawsuits with the family of Mely Corado, the unarmed Silverlake Trader Joe’s manager who was shot and killed by LAPD officers, for $9.5 million, $17.7 million to the family of Kenneth French, a mentally disabled man shot and killed by an off duty LAPD officer in a Costco, and $11.8 million to James Simpson, a 70-year-old pedestrian who sued the city after another driver swerved to avoid the LAPD officer who ran a red light in Chino and was hit by a traffic light pole.
Liability claim payouts are not deducted from the budgets of the individual departments responsible but are instead drawn from the city’s General Fund. This fund is primarily intended to support city services and resources for Los Angeles residents, raising concerns about potential impacts on those services moving forward.
The overrun in the liability claims budget suggests that more funds may need to be allocated as the fiscal year progresses, placing additional strain on the city’s financial resources.
In a previous alert, Meija said, “In the last year, the city has spent half its reserves. The city is supposed to save at least 5% of its general fund for “unanticipated expenditures & revenue shortfalls.”
However, the reserve fund started this fiscal year below 5% at 4.12%. Just one year ago, the reserve fund was historically strong, at $648 million. How did the city fall so far, so fast?
1. Lower revenues (Short $222 million)
2. Higher labor costs, starting w/ A $1 billion raise for LAPD over four years
3. Record-level liability payouts
Less than 3 months into this fiscal year, the city is again dipping into its reserves to pay for liability claims (Already $170M over budget). It’s getting close to going below the 2.75% mark and when that happens, the city council must make a finding of a fiscal emergency.”
