City Budget Plan Trims Spending, Taps Reserves to Cover $27M Shortfall
The fiscal years 2026-28 biennial budget relies on cost reductions, reserve draws and one-time fixes to address General Fund and Measure Z gaps.
The fiscal years 2026-28 biennial budget relies on cost reductions, reserve draws and one-time fixes to address General Fund and Measure Z gaps.
City staff on Thursday, May 14, presented a proposed two-year budget that trims spending, taps reserves and leans on one-time solutions to help close projected deficits in the General Fund and Measure Z.
City staff told the Budget Engagement Commission that the plan is meant to preserve core services even as the city faces slower revenue growth and higher personnel, pension and inflation costs.
The proposed fiscal years 2026-28 biennial budget totals about $1.57 billion in 2026-27 and $1.59 billion in 2027-28, including operating and capital spending. The operating budget alone is about $1.41 billion in the first year and $1.43 billion in the second.
The staff report says the General Fund faces projected deficits of $27.1 million in 2026-27 and $34.0 million in 2027-28 compared with the prior adopted budget. Staff also said Measure Z is projected to fall short by $9.8 million in 2026-27 and $12.4 million in 2027-28.
Deputy Finance Director Sergio Aguilar said the city is trying to address "potential multi-year deficits" with a "multi-pronged approach" that protects services, phases in reductions and minimizes reserve use.
For residents, the biggest impact is likely to be fewer new services and more pressure on existing ones rather than sweeping cuts.
The budget includes reduced Sunday library hours at some branches, lower spending in some parks programs and maintenance, and targeted staffing changes meant to avoid larger disruptions to police, fire and other core functions.
Commissioners focused on what the plan means for public safety.
Vice Chair Rich Vandenberg – who is also running for City Council's Ward 4 seat – asked whether staff had addressed Fire Chief Steve McKinster's request for about $28 million in additional annual fire funding.
Aguilar said the budget includes some fire funding, but the larger request — including 84 positions and two new stations — is "not funded within this budget."
Aguilar told commissioners that if the city wanted to add more fire funding, it would need to identify "a corresponding decrease" elsewhere because the budget is already balanced. He also said the city is trying to grow revenue through economic development and fee updates, rather than relying only on cuts.
Commissioner Aram Ayra – who is also running for City Council's Ward 2 seat – also pressed staff on whether the city had explored new revenue options instead of spending cuts, including a possible transient occupancy tax increase.
Aguilar said the city is pursuing long-term revenue growth through new development and business activity, and noted that updated development impact fees could help support capital projects, but not police staffing or other general operating costs.
Aguilar told commissioners that even after the proposed reductions, "most of these programs still receive budgets that are higher than historical levels."
The commission forwarded its recommendations to the City Council for budget review, with final adoption expected in June.
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