SACRAMENTO — California local governments of every size are crying poor mouth as they struggle with budget shortfalls amid what many officials predictably call a “perfect storm” of troubling economic news, including the end of COVID-19 funds that had propped up their budgets for a few years. As ABC News reported, “From rising costs to slowing revenue, local governments are now being forced to make difficult financial decisions as they work to balance their budgets.”
The “difficult financial decisions” caused me to laugh out loud given that, well, local government officials’ idea of a tough decision always comes down to one or all of three easy, go-to choices: Raise taxes on their residents, cut public services (especially ones the public relies on the most), or lobby Sacramento for a bailout. If one traces the history of local government spending, one sees the same story playing every few years.
Back in 2019, before the feds sent $600 billion in pandemic relief funds to California’s state and local governments, our governments were likewise sounding the fiscal alarms. The California State Auditor that year explained that “more than half of California’s cities were listed as being at a moderate to high risk of experiencing fiscal distress,” per a summary from Reason. In 2013, commentators suggested that myriad California cities were facing a financial crisis due to some combination of apparently never-before imagined economic travails.
California has the nation’s highest tax burden, yet no matter how much taxpayers send to Sacramento or City Hall, it’s really never enough. But it doesn’t take much digging to get a handle on the real source of the problem. For instance, in May the city of Los Angeles passed a $15-billion budget. In 2020-2021, the city’s budget was $10.65 billion. That’s more than a 40% boost. Have public services gotten that much better in a few years? See, now you’re laughing out loud.
It’s easy to mock big, incompetent cities. Their officials deserve all the scorn sent their way, of course. But smaller cities and placid suburbs aren’t really any better, even in supposedly conservative Orange County. Last July, financial consultants for the city of Orange warned that the city could be facing a municipal bankruptcy in a few years. Not surprisingly, the city is asking voters to increase taxes: a hotel tax and a “temporary” sales tax.
I don’t even know why local officials go through this temporary pretense, as we all know tax increases never go away. Santa Ana, for instance, will ask voters in November to make its temporary 1.5% sales tax permanent. “Elected leaders publicly said Tuesday it will be up to voters to decide if they want to continue to enjoy services and programs like graffiti removal, fixing parks and keeping emergency response times at the same level by weighing in on the ballot measure,” according to the VoiceofOC.
That’s the classic shakedown: Either give us more money to provide the public services that you pay us to provide or we won’t be able to provide those public services. Santa Ana, by the way, has the nasty habit of dramatically boosting spending at the behest of its public-employee unions even when it doesn’t have the money to do so. Then it threatens residents with cuts in public safety, and then residents reliably agree to higher taxes.
Where did those billions of dollars in COVID funds go? We’ve all read about many unnecessary and wasteful projects, and occasional corruption, but lots of cash funded law-enforcement budgets rather than programs that were meant to help people navigate an economic shutdown. Police spending is naturally popular given concerns about crime, but policing is a nuts-and-bolts function that should be sustainably funded from normal revenues. This shell game provides a clue to the fundamental problem.
City officials are incapable of saying no to public-employee unions. Those unions, especially the police and firefighting variety, are typically the most politically powerful lobbies at the local level. All these other discussions — tax measures, cuts to arts and transportation programs, calls for additional monies from Sacramento and Washington, D.C. — obscure the central fact that cities are basically jobs and pension providers rather than public-service providers. Employee lobbies are so powerful that officials can never make one particular hard choice.
After the 2025 Los Angeles wildfires, the media and elected officials focused on the need for stepped-up firefighting efforts and related budget constraints. Yet no one mentioned this tidbit: Of the top 10 best-paid Los Angeles city officials, seven of them worked in the fire department with total compensation packages ranging from $598,000 to $802,000, per the Transparent California database. Los Angeles isn’t that much of an outlier.
I don’t know, but could these numbers help explain why the city never has enough cash? Consider that simple question before you believe that local officials couldn’t see the latest budget crisis coming.
Steven Greenhut is Western region director for the R Street Institute and a member of the Southern California News Group editorial board. Write to him at sgreenhut@rstreet.org.