Expecting sharp reductions in federal grants and oil revenues, the Long Beach city manager has instructed most municipal departments to cut 0.5% to 1% of their discretionary budgets to save money ahead of next year’s budget.
In a May 6 memo, City Manager Tom Modica told 18 of Long Beach’s 23 departments — including fire, police, parks, health, public works and library services — to reduce non-essential spending in the remaining months of the 2025 Fiscal Year.
“The City is navigating a period of fiscal uncertainty, driven by national economic instability,” Modica wrote in the memo.
Officials are hesitant to call it cuts; instead, Modica phrased it as a “cost-savings strategy” first introduced in March to trim “non-essential” costs in the current fiscal year where each department can normally use the money as they see fit within their allocated budget. Suggestions Modica made to save money include deferring purchases, postponing or canceling contracts and projects, canceling travel or work conferences, and delaying new hires.
“By managing resources carefully now, we can support a less disruptive FY 26 and buy time for other revenue sources to catch up,” Modica wrote in a May 1 message to city departments.
“To the extent feasible, ” requested cuts are a half percent for the eight departments operating under $10 million and a one-percent cutback for the ten departments whose budgets are over $10 million. Each department by May 15 is expected to deliver a suggested list of maneuvers with a tally of how much money they expect to save.
The city is also ordering a 3% reduction in its 950-car fleet, which is included in the city’s general fund.
Modica assured that cuts will not “compromise critical public services” or core, day-to-day functions of the city. Layoffs, demotions, early retirement agreements and furloughs are not on the table, according to a city spokesperson.
Combined, officials hope to pool together $7 million in savings from the remaining months of the FY 2025 fiscal year budget that was approved last September, to prepare ahead of what they expect to be a tough upcoming year.
The proposed slimdown comes as the city faces a budget deficit borne from rising personnel costs, declining oil revenues and a slowdown in the economy. The city faces an expected $20 million budget shortfall in the 2026 fiscal year — $61.5 million over the next five years. Last year’s total budget was about $3.6 billion.
Long Beach has long relied on oil revenue, but that stream is beginning to run dry. According to a June 2024 report by City Auditor Laura Doud, the city is projected to lose 54% of its revenue from local oil production by 2035 — valued at between $278 million and $301 million — which could devastate its coffers.
There is also the matter of frozen federal aid, according to Modica’s memo. Chief among the city’s anxieties are a swathe of the 147 executive orders signed by President Donald Trump since his January inauguration.
These orders, Modica said, might lead to a “direct loss of funding” to Long Beach as well as monies sent to and dispensed by the state.
Federal funding covers a trove of city spending — $315 million last fiscal year — to include core services; it funds the majority — more than 80% — of the city’s Health Department, parts of its Police and Fire departments and sends millions of dollars into city welfare programs like shelters and affordable housing production. It also sends funds to the local education system and makes possible major improvements to the city’s airport and seaport.
It’s unclear how much those funding streams will be disrupted. A federal appeals court in late March ruled in favor of blocking the Trump Administration’s freeze of payments to states, though the White House has since seen some success in federal funding cuts elsewhere.
With these declines, and the city’s two new tax-generating measures being worked out in court or commission hearings, the city is looking to fatten its reserves ahead of some leaner years.
Despite fears over funding loss, the city by September must balance its books and approve a new budget. In a survey that ran Jan. 2 to Feb 4, a majority of the 1,145 respondents voted housing and homelessness, public safety and education to be their top priorities for the coming year, according to a March 15 memo.
Within those categories, people specifically asked the city to prioritize funding for emergency shelters, after-school and summer programs, library access, and maintaining police patrols, as well as nuisance abatement programs to address loitering, drug use and illegal dumping.
As the budget season progresses, the City Council will hold periodic public hearings on the budget proposals through September. For more information on the budget and future meetings, visit here.