Rising costs and weaker tax revenue are putting Long Beach, California, finances under strain

Long Beach, California, feels the squeeze

Long Beach, California, has reached a point where everyday bills are eating into money set aside for emergencies. Revenue is coming in below expectations, while payroll, health services, insurance, and other expenses are rising faster than city leaders planned.

To close the current gap, officials expect to draw from several reserve accounts. Using reserve funds can keep city services funded in the short term, but it leaves less money available for disasters and other unexpected costs. Long Beach will also need a longer-term plan that brings recurring expenses closer to dependable annual revenue.

Long Beach, California, misses revenue

Long Beach, California, expects city revenue to finish about $21 million below its budget target. Utility users’ tax revenue is nearly $14.7 million below expectations, while airport revenue has remained flat despite declining passenger traffic. Measure LB, which applies the city’s gas utility users tax to two power plants, has also produced less revenue than the city originally projected.

Lower revenue can quickly create problems because many city costs continue whether tax collections rise or fall. Police patrols, fire response, street repairs, libraries, parks, and public health programs still need workers, equipment, fuel, and maintenance every single day, year-round.

Long Beach, California, costs climb

Long Beach, California, is also dealing with expenses projected to run about $20.8 million above budget. Major pressures include labor agreements, higher insurance costs, Health Department funding needs, and the loss of expected vacancy savings as police and firefighter positions were filled.

A budget can fall out of balance even when spending increases to support useful services. Once salaries, benefits, contracts, and required payments become ongoing obligations, officials cannot easily remove them permanently. That makes temporary reserve money a limited fix rather than a lasting solution.

Emergency savings enter the picture

The city plans to use funds normally set aside for disasters and other emergencies. Long Beach plans to use about $27 million from four reserve accounts, including $16.5 million from its $50.1 million emergency reserve. The remaining emergency reserve would be approximately $33.6 million before any later deposits or financial adjustments.

The planned withdrawal does not mean the city is unable to meet its current obligations. It would, however, reduce the amount available for disasters, economic disruptions, or other unexpected expenses.

Utility taxes bring a surprise

Utility users’ tax revenue is projected to finish nearly $14.7 million below budget. Lower electricity and natural gas use contributed to the decline, while collections also remained sensitive to energy prices and customer consumption. Conservation can help households and the environment, but lower usage also means less tax revenue for city services.

Because the tax is tied to utility prices and use, collections can fall when consumption or energy costs decline. The city can respond by revising its forecasts, finding dependable replacement revenue, or reducing recurring expenses.

Measure LB falls short of hopes

Voters approved Measure LB in 2024 to end a gas utility tax exemption for two power plants. The city’s fiscal year 2026 budget expected the measure to bring in about $15 million, supporting services and helping close an existing gap.

Revenue from the measure depends on the amount and price of natural gas used by the two power plants, so actual collections can differ from the original forecast.

Little-known fact: Measure LB received 133,092 yes votes, representing 81.68% of ballots cast on the proposal.

Public health loses federal support

Long Beach’s Health Department needs about $11 million in General Fund support after federal grant funding fell by roughly $18 million. The department’s responsibilities include communicable disease response, community health, environmental health, clinical services, and emergency preparedness.

When time-limited grants expire or are reduced, the city must decide whether to replace the funding, scale back affected programs, or redesign services. Any ongoing replacement from the General Fund would put pressure on future city budgets.

Filled jobs erase vacancy savings

Long Beach reduced some police and firefighter vacancies, placing more employees in important public safety roles. However, the city had counted on savings from unfilled positions, so hiring workers increased actual spending above the earlier estimate.

This contributed to an estimated $10.6 million underestimate in the Citywide Activities budget. The situation shows why vacancy savings can be risky in long-term budgets: they reduce spending only while positions remain unfilled, and once employees are hired, the city must cover salaries, benefits, training, and equipment.

Departments already trimmed spending

City departments began reducing costs in the fall of 2025 after the city manager asked them to identify savings of approximately 3%. Most departments reported savings between 2% and 7%, using measures such as hiring delays and paused capital projects.

The reductions narrowed the gap but did not eliminate the need for reserve withdrawals. Delayed hiring and postponed projects can lower current-year spending without permanently reducing recurring costs in future budgets.

Police savings offer temporary relief

The Long Beach Police Department reportedly reduced spending by almost $11 million. Savings came from lower overtime, a delayed recruit academy, hiring freezes, and fewer non-critical purchases.

The reductions lower current-year expenses, but some represent delayed rather than permanent savings. Future budgets may again need to fund recruit academies, equipment purchases, staffing, and overtime.

Vehicle financing shifts the burden

Long Beach identified about $16 million in current-year savings by leasing or financing vehicles instead of purchasing them outright. The approach spreads the cost across future budgets rather than requiring the full purchase price to be paid immediately.

Future budgets will cover the related payments, and city officials said Long Beach may eventually need to rebuild cash reserves for future fleet purchases. Financing changes the timing of the expense but does not eliminate the long-term cost.

Residents may notice the next cuts

City Manager Tom Modica has warned that the proposed fiscal year 2027 budget will include difficult changes for residents and city employees. As of July 27, the city had not released the detailed proposal, so specific service reductions had not yet been confirmed.

The city planned to release the proposed budget on July 30 and hold budget hearings and community meetings in August. The final effects on services will depend on the proposal and any changes adopted by the City Council.

For another city budget update tied to tax revenue, public services, and local spending, see why Kansas collections are sending mixed signals.

The next budget is the real test

Mayor Rex Richardson is expected to release the proposed fiscal year 2027 budget on July 30. City Manager Tom Modica is scheduled to formally present it to the City Council during an August 4 budget hearing.

Under the city charter, the council must adopt the budget by September 15. The mayor then has five days to approve it or use a line-item veto, and the council may address any vetoes before the fiscal year ends on September 30.

For another data center tax update tied to parish revenue, project costs, and local budgets, see why Louisiana’s new valuation rules could matter statewide.

Can Long Beach protect public services if costs keep rising faster than city revenue? Share your thoughts and drop a comment.

This slideshow was made with AI assistance and human editing.

Read More From This Brand:

• Utah city property tax proposal shows pressure from flat local revenue
• Idaho revenue gap sharpens questions over tax cuts and agency budgets
• NYC’s next ‘tax the rich’ debate turns to private jets as Mamdani looks for revenue