Los Angeles city leaders approved a fiscal year 2025-26 budget that reduces some homelessness program funding while redirecting scarce dollars toward rising legal liabilities. The cuts hit services like mobile hygiene units and housing initiatives as officials also cite mounting legal costs and other mandated spending pressures in explaining the budget squeeze. The result is a fiscal crunch that forces elected officials to weigh required obligations against flexible, street-level programs that advocates say are critical for unsheltered residents.
A Nearly $1 Billion Gap Forces Hard Choices
The scale of the budget hole explains why the reductions feel so severe. Mayor Karen Bass released a balanced budget proposal for FY 2025-26 that acknowledged the City of Los Angeles faces a nearly $1 billion gap, driven in large part by rising liability payouts, pension costs, and the financial aftershocks of the January 2025 wildfires. In outlining this plan through the mayor’s budget office, her administration emphasized an intent to preserve and reshape homelessness-related spending while still closing the deficit, but the math left little room for generosity. Programs that do not carry a court mandate or contractual obligation became the first targets for reduction, even when those services have visible impacts on public health and safety.
The Los Angeles City Council then approved the new budget with a series of amendments that shuffled line items and attempted to soften some of the harshest reductions. During final deliberations, council members pointed to the need to maintain basic services while also protecting the city’s credit rating and legal standing. According to a summary released by a council district office, the adopted plan restores some homelessness and housing funds that had been slated for elimination in the mayor’s draft, but still results in a net cut to direct services such as outreach and hygiene. That account from the CD 13 budget update notes that mobile hygiene units, motel voucher programs, and certain encampment response teams will operate with fewer dollars than in previous years, signaling a leaner safety net on the streets.
Court Settlement Costs Crowd Out Direct Aid
City officials have pointed to rising legal costs and other mandated spending pressures as key drivers of the tradeoffs in the new budget. While the underlying legal matters are separate from the city’s budget documents, leaders have argued that growing liability exposure and compliance requirements reduce the amount of flexible funding available for neighborhood-level services such as outreach and hygiene, compared with spending that is more tightly defined in contracts and program rules.
Financial data published by Los Angeles City Controller Kenneth Mejia illustrates how liability payouts and General Fund pressures have been crowding out program spending for years. The controller’s office tracks how legal judgments against the city, from police misconduct settlements to infrastructure-related claims, consume a growing share of unrestricted revenue. In materials posted by the city controller, the office tracks liability payouts and other General Fund pressures that can limit room for discretionary programs. When court-ordered homelessness spending is layered on top of those existing obligations, the remaining pool of flexible dollars shrinks quickly. That is the context behind the “gut punch” language used in the CD 13 budget update: even as overall homelessness appropriations appear large on paper, the portion that can support low-barrier outreach, hygiene, and stabilization services is significantly smaller than advocates say is needed.
County Budget Faces Its Own Unprecedented Strain
The city is not alone in facing painful decisions. Los Angeles County’s recommended budget for 2025-26, which funds health, social services, and many regional homelessness initiatives, describes what officials call unprecedented financial challenges. In their public-facing materials, county leaders warn of softening revenues, higher labor and healthcare costs, and escalating demands from wildfire recovery and climate resilience projects. A detailed breakdown from the county’s budget office shows how Measure A and other voter-approved funding streams are already committed to existing homelessness and housing programs, leaving limited room to expand services even as encampments remain widespread. Much like the city, the county must juggle court settlement obligations with long-term contracts for shelter operations, supportive housing, and behavioral health care…