Los Angeles County’s chief executive officer presented a $38.5 billion fiscal 2022-23 budget to county supervisors Tuesday that she said represents a step forward in the county’s efforts to move safely through the pandemic and into a broad-based, equity-focused economic recovery.
The spending blueprint, the first step in the county’s annual budget process, makes full use of federal and state funds to jumpstart the county’s recovery, CEO Fesia Davenport said. The budget will next go to public hearings, deliberations by the five-member Board of Supervisors, and could be adopted in October.
This budget “sets a course for the county to strengthen the programs and services we provide to millions of residents each and every day,” Davenport said. “That means continuing to respond vigilantly to an evolving pandemic, while also ramping up to launch new departments focused on key populations and driving major changes in how we deliver services.”
Two priorities in the budget were funding to tackle the county’s homeless crisis and to increase the number of healthcare workers.
The budget proposal allocates $493 million in Measure H dollars — a 1/4 cent sales tax increase approved by voters in 2017 to combat homelessness — and money from the state’s Mental Health Service Act to fund supportive housing for mentally ill unhoused people. The county will add 116 public health positions, 196 critical care unit nurses and 41 workers for its mobile clinics with $22.6 million in grant funding to support operational needs that have arisen as a result of the pandemic.
The county hasn’t announced debt plans related to the project, but expects to begin a $1 billion to $2 billion remodel of Harbor-UCLA Medical Center over the next year or two. It’s expected to tap commercial paper, before issuing long-term debt for that project. The budget also allocated $1.6 billion for capital projects.
It was expecting it would have to draw on reserves in the general fund as well as in the Department of Health Services fund as it wrestled with COVID-19 related financial pressures in 2020, which earned it a negative outlook from S&P Global Ratings in June 2020. S&P has since affirmed the county’s AAA issuer credit rating and revised its outlook back to stable.
The proposed budget reflects a decrease of $807 million from the 2021-22 final adopted budget, but is likely to grow in upcoming phases to reflect anticipated one-time federal and state funding, according to the CEO. The county has an assessed value of $1.8 trillion and a population of nearly 10.2 million, according to Moody’s Investors Service.
The county has received $1.1 billion in Coronavirus Aid, Relief and Economic Security Act funding, followed by an expected $1.9 billion in American Rescue Plan Act funding, of which the county has received the first $975 million, with the balance expected in May 2022.
It has an Aa1 issuer rating from Moody’s and a AA-plus underlying rating from Fitch Ratings. Both assign a stable outlook.
Despite the COVID-related concerns, DHS increased its fund balance to over $987 million in fiscal 2021 and to a projected $1.25 billion in fiscal 2022 as the number of people vaccinated grew, easing pressure on the health department, according to S&P.
The improved outlook reflects S&P’s view that the “county has been able to weather the COVID pandemic and resulting recession without the use of reserves and in fact has been able to add to reserves due to prudent financial management and federal stimulus dollars,” S&P analyst Jen Hansen said in a release.
“The decrease in COVID-19 transmission has led to the easing of public health restrictions, and as a result, we expect sustained moderate growth in our economic outlook,” Davenport wrote in her budget letter to county supervisors.
Gross domestic product has rebounded to pre-pandemic levels and continues to grow steadily, according to the budget. A 6% increase to the 2022 tax assessment roll is expected, which will result in a $381.2 million increase in property tax revenue.
Unemployment had spiked to 17.2% unemployment rating when S&P assigned the negative outlook, but fell to 4.9% in March, according to the Bureau of Labor Statistics.
