Los Angeles leaders ask state for fire recovery funding

Los Angeles Mayor Karen Bass and several councilmembers traveled to Sacramento this week to ask state lawmakers for wildfire recovery aid and funding to close a budget gap.

The group's Monday meeting with Assemblymember Tina McKinnor, D-Inglewood, who chairs the Los Angeles County legislative delegation, resulted in the 23-member delegation penning a letter to state budget leaders requesting $1.9 billion in city aid be added to the 2025-26 budget.

"Los Angeles is facing a budget crisis while recovering from devastating and unprecedented wildfires, and it's important that we advocate directly to state leaders for support," Bass said in a statement.

The letter requested a mix of direct funding and loans comprised of $638 million to protect city services under budgetary strain, a $310 million loan for disaster recovery and clean-up pending Federal Emergency Management Agency reimbursement, a $750 million loan to support upgrades to Pacific Palisades electric power grid, $56.6 million for fire suppression equipment, $72.8 million for clean-up and rebuilding efforts and $75.5 million to expedite state processing of public assistance.

"These amounts reflect the city's ongoing need for support in the areas of cleanup, housing assistance, public safety, infrastructures and economic support for impacted communities," the McKinnor-led Los Angeles delegation wrote. "These investments are essential not only for immediate relief, but also for fostering the city's long-term stability and preparedness."

The city was already facing problems from increased labor costs, reduced revenues and increased liability costs from lawsuits prior to the destruction of heavily populated neighborhoods by wildfires, which spun out of control when 80- to 100-mile Santa Ana winds hit the tinder-dry region Jan. 7.

Los Angeles City Administrative Officer Matt Szabos told the city council — as part of his midyear financial report last week — the city needs to make cuts to cover a $1 billion budget gap and layoffs are inevitable. Bass is slated to release her proposed budget on April 21.

"Los Angeles is facing a nearly billion-dollar budget gap, driven by the recent wildfires, rising liability costs, declining revenues and years of short-term budgeting," said Council Budget Chairwoman Katy Yaroslavsky. "But this trip to Sacramento wasn't about a one-time fix, it was about laying the foundation for a stronger, more resilient city. With the Olympic and Paralympic Games on the horizon, the urgency is real, and so is the opportunity to shape a future where Los Angeles doesn't just recover, but thrives."

News reports on the city's budget deficit have attracted investor attention, "putting pressure on what had been recovering post-wildfire credit spreads," Municipal Market Analytics wrote Tuesday in its weekly outlook.

The fire made the current balance more difficult and forced the city to depend on a fast rebound in tax assessments and aid from state and federal governments, MMA wrote, but "MMA sees no reasonable potential for the state to not financially support the city (i.e., its economic core) if things become dire."

Bond holders should worry about the city's credit profile, MMA said, "but this is a downgrade, not a default-related matter."

MMA also noted that multiple cities — Baltimore, Houston, Oakland, Phoenix, Portland, Sacramento, San Diego and Chicago — are facing near term budget deficits that "absent an unexpected economic turnaround" may affect credits and widen spreads.