The Bill Comes Due: Whoever Wins Los Angeles Inherits the Same Balance Sheet

THE NAVARRO REPORT - Ballots are already being cast in the Los Angeles mayoral runoff between Mayor Karen Bass and Councilmember Nithya Raman, with Tuesday the final day to vote. The candidates disagree on plenty. They will not disagree about the arithmetic, because the winner steps into the same fiscal inheritance on the first morning, and no campaign promise changes its size.

A city living on short-term fixes

The City Administrative Officer's four-year outlook projects a deficit of about $187 million in fiscal 2027-28, then a return to a surplus above $100 million by 2030-31. Critics note that figure assumes modest pay raises, and a more realistic compensation forecast would erase much of that recovery. City Controller Kenneth Mejia has warned that overtime, pensions and liability claims keep pushing costs upward, and that the city still lacks a credible capital improvement plan for its aging infrastructure. Councilmember Eunisses Hernandez put it plainly: the city cannot keep relying on short-term fixes while structural deficits grow.

The city's budget has already weathered a gap near $1 billion and a proposal for roughly 1,600 layoffs. The next mayor does not inherit a clean slate. The next mayor inherits a reserve fund that has been drawn down and a budget that balances only when revenue cooperates.

The lawsuit line nobody campaigns on

Liability claims are the quiet budget-breaker. The Controller reports the city paid a record $287 million in liability claims in a single year, exceeding its budget by $199 million, or 228%. Over two fiscal years, General Fund reserves fell from $648 million to $402 million, a $246 million decline tied largely to those payouts. The mayor's current proposal raises the liability budget to about $210 million, still below that record. Every dollar paid to settle a claim is a dollar unavailable for a library, a pothole or a police officer.

The fires and the street tell a similar story. City officials have attributed part of this year's overspending to Palisades fire costs, and homelessness remains stubbornly high, with the county's homeless services authority approving a $496 million budget for 2026-27 as federal funding disputes continue. The next mayor will manage recovery and encampments with less cushion than the last.

The county's bigger problem

The county's position is more precarious. Its adopted budget is $50.3 billion, and it carries $4.8 billion in abuse settlements, federal funding cuts, and rising demand for services. In June, County CEO Joseph Nicchitta delivered what Supervisor Kathryn Barger called a sobering assessment: projected deficits expected to grow in the years ahead. The Sheriff's Department alone projects a $148 million shortfall.

An earlier county report from Nicchitta observed that structural deficits have been managed through short-term solutions, and that the Board's flexibility to continue them is now limited. That is a careful way of saying the easy options are spent. The mayor does not control the county budget, but the city and county share the same residents, the same safety net, and the same federal exposure, so a county squeeze lands on city streets.

The Olympic backstop

Then come the Games. When Los Angeles bid for the 2024 Olympics in 2016, the organizing budget stood at $5.3 billion. In 2017 the city agreed to host in 2028 instead and became the financial backstop. According to the Controller's office, the budget has since grown to $7.263 billion. Most of that growth reflects inflation over a longer runway, plus a larger youth sports program and contract negotiations. Each time expenses rose, LA28 raised projected revenue by the same amount, so the budget balances on paper. It balances in reality only if sponsorships and ticket sales arrive. Mejia says the committee has met only two of nine reporting sections in its agreement with the city, and he has subpoenaed its financial records. Because the city is the guarantor, a shortfall becomes a taxpayer obligation without a stated ceiling.

Neither candidate caused any of this. But the winner will be the official who answers for it in 2028 with roughly 620 days left on the clock.

The electorate deciding it

The voters choosing who inherits this balance sheet are not the Los Angeles of a generation ago. Black residents, who approached 20 percent of the city in 1970, now make up about 8 percent. Latinos are the largest bloc, roughly 47 percent of residents, yet the latest Berkeley IGS/Los Angeles Times poll finds about a third of Latino voters undecided, with Raman ahead among those who have chosen. Nobody can say with confidence how that bloc will break. With a third of likely voters unsettled overall, turnout may matter more than any poll average.

What to watch after the votes are counted

Three tests will reveal how the next administration governs, whichever name is on the door. First, does the first budget confront the structural gap, or does it lean on reserves again? Second, does City Hall force LA28 to publish a detailed budget before the city's guarantee is tested? Third, does the city demand an accounting of what the county's settlement costs mean for shared services?

Voters have spent months weighing personalities, police chiefs and slogans. The less glamorous questions will define the next four years. A controller reads a balance sheet before a speech, and this balance sheet is clear: the bill is already written. Only the signature is left to be decided by Tuesday's voters.

(Jose E. Navarro, MBA, is a financial and operations professional and the publisher of The Navarro Report, which examines government spending and institutional accountability.)