Los Angeles considering deferring payments to close $750 million budget gap

Los Angeles city officials urged city administrators to defer payments until the next fiscal year as the city struggles to balance their budget, according to a report issued Friday.

The city’s top budget official, City Administrative Officer Rich Llewellyn, said his office asked each city department to prepare a list of contracts with payments due in the last three months of the fiscal year to determine which ones could be deferred, according to the Los Angeles Times.

Llewellyn emphasized in his report, "If a department believes that they cannot defer all or part of the payment, we asked them to justify the need to make the payment at this time." Llewellyn’s 47-page report comes as city officials are looking for alternative measures to close the massive $750.7 million budget gap.

Los Angeles city departments have been asked to show why "contractual payments" must be paid on time. If they fail to show good reasoning, their payments will be automatically deferred until the next fiscal year. Some of the reasons that would exempt departments from having to defer payments include: if payment is needed to avoid late fees, preserve a financial discount or because nonpayment would cause "significant harm to a local small business," according to the report.

The coronavirus pandemic has swept the state of California into a financial crisis, with officials reporting the worst budget and financial crisis in state history.

Democrat Governor Gavin Newsom signed a 2020 Budget Act back in June of 2020, which attempted to close the $54.3 billion budget deficit caused by the COVID-19 recession through strengthening emergency response, protecting public health and safety, and promoting economic recovery with a $202.1 billion spending plan.

"The COVID-19 pandemic has impacted every sector of the state’s economy and has caused record high unemployment – almost 1 in 5 Californians who were employed in February were out of work in May – and further action from the federal government is needed given the magnitude of the crisis," according to the 2020 Budget Act press release.

"This is the most difficult budget year the City has ever faced, and the Mayor and the Council are leaving no stone unturned looking for savings," Press Secretary for the Mayor's office, Alex Comisar, told Fox News.

Budget officials are advising against the city’s decision to defer payments, saying it would simply result in the payment of two years of dues in 2021-22.