The Los Angeles City Budget and Finance Committee on Dec. 2025 approved the second Financial Status Report for fiscal year 2025–26, including multiple departmental amendments and directions to the City Administrative Officer (CAO).

The CAO’s presentation said the city remains in a “manageable” fiscal position but faces significant downside risks, including wildfire recovery costs and federal‑level uncertainties. The report shows year‑to‑date receipts through October about $118 million above plan (excluding special‑fund interest), but projects a citywide overspending of approximately $243,000,000 — roughly $196,000,000 in departmental overspending and $47,000,000 in non‑departmental budgets — and a $71,000,000 year‑end budget gap. Cumulative reserves stand at 8.5%, with the reserve fund itself slightly above 5% of policy target. The CAO warned that drawing reserves could worsen the city’s negative rating outlook and raise borrowing costs.

Council members focused questions on the fiscal risks and on police hiring. CAO staff described several scenarios in the FSR and cautioned that hiring above the budgeted 240 sworn positions would generate ongoing costs the city must fund beyond one‑time reserves. The report projected that expanding recruitment to 480 sworn officers would cost about $6.5 million in the current year and roughly $33 million in ongoing costs the following fiscal year. CAO staff advised that the reserve fund should not be treated as a regular funding source for ongoing personnel expenses.

The committee adopted a motion directing the CAO, with assistance from LAPD, to return as early as January with options for offsets that could support additional police hiring and to report on whether attrition or recruit‑class dropouts could be held and applied to new classes. Chairwoman (Madam Chair) and several council members emphasized that any funding identified must be ongoing and not drawn from the reserve fund.

The committee approved the FSR as amended, including direction to the CAO to identify $7,647,986 in funding for outside counsel amendments requested by the City Attorney (to be located in the unappropriated balance per the adopted motion), Office of Finance amendments to support LA Tax transformation project overtime and project management, and other departmental instructions. The motion carried on a roll call of 5 ayes.

The committee also read into the record an amendment recommended by the CAO to transfer $22,458,232.51 from the Homelessness Emergency Account to LAHSA and various homelessness service and administrative items; the chair said $846,000 earmarked for a Weingart Center site would not move until operational commitments were codified.

What happens next: the CAO was directed to return with funding options and feasibility analyses — particularly on police hiring offsets and attrition savings — so council can evaluate sustainable funding options in advance of the next budget cycle.