In a memo sent today to Los Angeles city departments, Mayor Eric Garcetti said general managers should be prepared to lay off employees due to the economic effects of the COVID-19 pandemic.
"Over the past six months, you have been asked to respond to unprecedented challenges resulting from the COVID-19 pandemic," Garcetti stated in the memo obtained by City News Service. "While we still navigate many unknowns, one thing is absolutely clear: the pandemic continues to have a devastating effect on city finances."
Los Angeles was already preparing to furlough employees or buy them out with early retirement plans, but layoffs were something Garcetti has said since the beginning of the pandemic that he hoped to avoid.
The Los Angeles City Council voted last week to declare a fiscal emergency and approved plans to furlough more than 15,000 city employees and carry out early retirement buyouts for another 1,280 employees to try to recoup as much anticipated lost revenue as possible due to the COVID-19 pandemic.
Revenues for the 2021 fiscal year are currently difficult to forecast due to the pandemic, with the City Administrative Officer's staff reporting they could come in anywhere between $45 million to $409 million below the estimate of $6.68 billion.
City Administrative Officer Richard Llewellyn estimated that Los Angeles has already lost more than $50 million, while noting that revenue projections were based on assumptions that the economy would reopen more fully by July than it did.
Garcetti said in his memo that within fewer than four months of the pandemic, revenues in Fiscal Year 2019-2020 fell $200 million short of the Los Angeles budget, and the city's reserve fund balance has diminished to $263 million, just 3.9% of general fund revenues and below the city's goal of 5%.
The mayor directed the general manager of the Personnel Department, in consultation with the City Administrative Officer's office, to establish an internal departmental team to begin the necessary preparations for a potential layoff scenario, including gathering and confirming employee work history to determine applicable displacement and reversion rights.
"Non-critical" service areas and positions may be proposed or removed as part of the layoffs, Garcetti said.
He also said the city's negotiators need to work with the city's unions to cut costs.
Garcetti asked all department general managers to "strictly adhere" to the hiring-freeze instructions and limit requests for exemption to emergency situations and positions required for continuity of critical operations.
General managers will also have to come up with a plan to reduce staff by 3% across all funding sources for the next fiscal year that could be reported in the city's next financial status report.