Los Angeles is facing mounting fiscal pressure as liability payouts continue to surge beyond expectations, according to the city’s FY2025 Annual Comprehensive Financial Report.

In the fiscal year for 2025, liability claims totaled $287 million, exceeding the city’s $87 million budget by $199 million, a 228% overrun in the city’s budget. 

The Los Angeles Police Department accounted for $152 million, representing 53% of all liability payouts, with additional costs coming from Street Services ($44 million) and Transportation ($20 million).

At the same time, the city faced a $160 million revenue shortfall, forcing officials to tap reserves. Over two fiscal years, General Fund reserves dropped from $648 million to $402 million, a $246 million decline due to high liability payouts.

City Controller Kenneth Mejia warned the trend could have serious consequences:

“Of more concern, unchecked overspending and liability claims continue to be a major cause of financial troubles. While departments are expected to absorb or manage remaining costs, many departments are unlikely to be able to. This could result in the use of the Reserve Fund and in future fiscal years, more furlough days and the risk of more layoffs.”

Los Angeles leaders must address the drivers behind rising liability payouts before they further drain taxpayer resources and force cuts to essential city services. Without reform, escalating legal costs will continue to threaten the city’s financial stability.