LOS ANGELES — The Los Angeles City Council is exploring shifting to a two-year budget cycle Wednesday, a move aimed at alleviating fiscal concerns caused by lower-than-expected revenue, overspending and increasing wildfire recovery costs.

In a 12-0 vote Tuesday, the City Council approved a motion introduced by members Eunisses Hernandez, Bob Blumenfield and Imelda Padilla in June 2024.

Council members directed staff to analyze the potential impacts of adopting a biennial budget cycle. Departments would also outline a proposed timeline with key deadlines and strategies to bolster public participation.

Council members Bob Blumenfield, John Lee and Monica Rodriguez were absent during the vote.

By moving to a two-year budget, the council members also aim to address existing barriers to public participation on the city's spending plan.

"Los Angeles is a world-class city, but our ability to remain as one depends on how effectively we can do more with less, not just in terms of funding, but also within an arbitrary one-year budget cycle that literally undermines our capacity to plan for the future," Hernandez said.

According to the motion, the current budget cycle "does not allow for adequate time for the council to thoroughly review the proposed budget or the public sufficient opportunities to engage in the budget process."

Each year, the mayor releases a proposed budget, and Mayor Karen Bass is set to share her priorities on April 21 for fiscal year 2025-26.The proposed budget then undergoes review in a series of public hearings led by the City Council. Department managers, the Mayor's Office and the City Administrative Officer share their goals and needs for the fiscal year.

The budget must be approved by June 30, and the fiscal year begins July 1.

"A city of our scale should not be forced to make multi-million dollar decisions on rushed timelines when the challenges before us -- like skyrocketing housing costs, homelessness and climate change -- demand strategic long-term solutions," Hernandez said.

She added, "...the (current) budget process fails the very people we serve."

In a similar vote, the City Council also approved a separate motion calling for the modernization of the city's digital tools that detail information of the budget.

Cities such as Sacramento and Oakland implemented interactive, data- driven tools that show a clear understanding of where money is being allocated. It also allows for residents to have a "greater voice" in the process, Hernandez said.

"It's time to give Angelenos what they need to know about where their tax dollars are going and the power to influence where they go next," the councilwoman added.

The motions come as the city faces a multi-year deficit, among other fiscal challenges.

In early March, City Controller Kenneth Mejia released the annual revenue forecast report, which projected year-end revenues will fall below $140 million. Sales and business taxes combined are projected to be $92 million below the FY 2024-25 budget.

Projections also showed revenues will fall short $320 million in FY 2025-26 as a result of stressors with federal trade, immigration policies and the impact of January's wildfires to local taxes, among other challenges. Additionally, general fund revenue is likely to decrease by $73 million due to a loss of $198.5 million in federal grants.

The City Administrative Officer Matt Szabo also warned of a potential $400 million shortfall in FY 2025-26.

In a report published Feb. 28, the CAO identified $300.54 million in overspending in FY 2024-25, as well as $190.29 million in potential solutions and another $30.23 million in future actions that could further reduce the cost.

If approved, part of these solutions would authorize further use of the reserve fund, a pending transfer of $5.23 million for settlements and judgments. The fund is a "rainy day" account for emergencies, which has been reduced from a record $648 million two years ago to $263 million. City officials may need to declare a fiscal emergency if the reserve fund falls below 2.75%, requiring a majority vote prior to the use of reserve funds.

The city faces a multi-year deficit as a result of new contracts with the unions representing Los Angeles Police Department officers and for civilian workers — totaling $1 billion each.

The city is also dealing with overspending due to liability payouts. A majority of these settlements stem from LAPD negligence or abuse, as well as injuries caused by aging infrastructure including sidewalks and street lights, and in some cases fallen tree limbs. The CAO previously reported $112 million in payouts, and most recently projected that by the end of FY 2024-25 that expense will increase to $320 million.

City officials may consider a judicial obligation bond of $80 million to replenish the reserve fund and cover a portion of the liability payouts.

Another significant budgetary strain comes from increasing costs for outside counsel by the City Attorney's Office.

As elected officials consider ways to increase revenues, some options may lead to higher taxes, fees and other costs for taxpayers.