The City of Long Beach is facing mounting financial pressure as officials project a deficit of up to $80 million by fiscal year 2027, raising growing concern about the city’s long-term fiscal stability and how its budget is being managed at the highest levels of city representation.
A newly released year-end financial report shows the city closed fiscal year 2025 about $40 million over budget, forcing officials to draw down reserve funds, including roughly $20 million in leftover pandemic-era funding, along with reserves previously set aside for disaster response, a cannabis tax relief pilot, and a police crime lab.
The warning comes as Long Beach adopted a $3.7 billion FY 26 budget, balanced largely through one-time funding sources. While the budget avoids immediate layoffs and service cuts, city documents acknowledge it does not fix the structural deficit. Long-term projections show a cumulative shortfall of more than $60 million between FY 27 and FY 31, with the FY 27 deficit alone now estimated between $60 million and $80 million, up from a prior projection of $39.3 million.
Officials cite declining revenues and rising costs, including a $26 million drop in combined sales, property, and utility tax revenues, along with flat or reduced state and federal funding. The city’s Health Department ended FY 25 with a $14 million deficit, including the loss of a $9 million federal health infrastructure grant. Additional pressures include rising payroll and benefit costs, workers’ compensation and liability payouts, declining oil revenues, vandalism and property damage, and costly infrastructure needs ahead of the 2028 Olympics.
Although the city’s total annual budget is about $3.7 billion, only about $750 million is General Fund money available for core services. The city currently holds about $68 million in reserves, according to the report.
City Manager Tom Modica said major service impacts and layoffs are not expected in 2025 or 2026, but warned that cuts are likely unavoidable in 2027 if the deficit is not resolved. He directed departments to save 3% of their budgets about $22 million after a prior effort saved roughly $7 million, instructing departments to delay spending and leave some positions unfilled.
Mayor Rex Richardson tied the city’s financial strain to broader economic uncertainty, including federal policy shifts and slowing regional economic confidence.
“We know the federal government, the state government and most jurisdictions are seeing the potential impacts of what’s happening in our economy; it’s a telltale sign of what’s to come,” said Mayor Rex Richardson. “We hope that the impacts of tariffs and all those things and spending and all of that turns around and confidence comes back.”
As deficit projections grow, so do questions about city budget management: Why were reserves repeatedly used to cover recurring budget gaps? Why does the city continue relying on one-time funds instead of building sustainable revenue streams? How did projections jump from $39.3 million to as much as $80 million in such a short time? Are city representatives preparing Long Beach for long-term financial stability or delaying the hardest decisions until deep cuts become unavoidable?
Councilmember Cindy Allen has called for the financial outlook to be presented publicly, saying residents deserve a full explanation of why the city can no longer fund projects and services the way it once did.
While the FY 26 budget avoids immediate cuts, city documents acknowledge one-time funding will likely be exhausted after FY 26, leaving Long Beach facing the strong possibility of deep service reductions, staffing cuts, and program eliminations in FY 27 if no long-term solutions are implemented.