The Riverside City Council voted 6-1 to approve a $1.57 billion biennial budget Tuesday night amid mounting financial pressures—rising personnel costs, pension obligations and slowing revenue growth that have opened tens of millions of dollars in projected shortfalls since the city's last budget was adopted in 2024.
Finance officials told the council the city faces projected general fund deficits of $27.1 million in fiscal year 2026-27 and $34 million in fiscal year 2027-28 compared with forecasts from the previous biennial budget cycle. Measure Z, the city's voter-approved 1 percent sales tax fund, is projected to fall short by an additional $9.9 million and $12.4 million in those same years.
Deputy Finance Director Sergio Aguilar, who presented the budget to the city council Tuesday, said the shift has been significant.
"When you compare the balanced multi-year forecast from the last biennial budget to what our projection is for this next biennial budget, revenues are projected to be lower by $8 million in the first year and $9 million in the second year," he told the council.
To close the gap, city staff proposed nearly $18 million in combined general fund and Measure Z reductions in fiscal year 2026-27 and more than $22 million in reductions the following year. The city also plans to draw from its unassigned fund balance, increase fees based on inflation, tap pension stabilization funds and make a one-time adjustment to its liability trust fund.
Despite the shortfalls, officials said Riverside's financial footing remains solid. The city maintains approximately $76.4 million in general fund policy reserves, which will remain untouched under the adopted budget. Aguilar said the city still holds "a strong position with record level reserves, most of which remain untouched as part of this proposal."
The approved plan balances general fund operations through fiscal year 2030-31 while continuing a planned drawdown of Measure Z reserves until revenues are expected to exceed expenditures later in the decade.
The move comes as unofficial election results show the June ballot measure asking voters to raise Measure Z sales tax from 1 percent to 1.25 percent—and extend the tax indefinitely—appears headed for defeat, with 58.65 percent of voters voting against it as of June 23.
The budget's operating component totals approximately $1.41 billion in fiscal year 2026-27 and $1.43 billion in fiscal year 2027-28, according to the budget report.
One of the most notable shifts in the budget is the public works cost reductions of $3.45 million in fiscal year 2026-27 and $4.48 million in fiscal year 2027-28.
Aguilar explained that public works is experiencing a decline in FY 2026-27 primarily because the city is "either not continuing or partially continuing some of the one-time investments that were provided in this last biennial budget."
Public Works reductions include savings from leaving vacant positions unfilled, adjustments to construction material spending, lower-than-expected crossing guard contract costs and reductions to pavement rehabilitation projects. City officials said the changes are not expected to result in layoffs or affect crossing guard services.
Despite this, public safety remains the largest spending category within the combined general fund and Measure Z budget, with police and fire departments expected to see the largest funding increases—roughly $15.7 million combined in the first year of the budget cycle and $5 million in the second year, according to Aguilar on Tuesday.
City officials said many reductions were designed to minimize impacts on core services and, in some cases, simply return programs to funding levels that existed before increases approved in the previous budget.
The council also approved a two-year Capital Improvement Plan totaling about $167.1 million in fiscal year 2026-27 and $161.2 million in fiscal year 2027-28. Roughly 75 percent of capital spending is dedicated to electric and water infrastructure through Riverside Public Utilities, with transportation projects accounting for about 20 percent.
The budget follows months of public outreach that included six community forums and an online survey completed by 227 residents. Participants consistently ranked public safety among their highest priorities, and also identified pavement improvements, children's library programs, park maintenance and recurring museum programming as important spending categories.
The budget did not pass without friction.
Council member Philip Falcone cast the lone dissenting vote, saying he had been opposed since February over cuts to public works.
"Any cut to Public Works or General Services is an absolute non-negotiable," Falcone said. "So I won't be supporting it."
Councilmember Clarissa Cervantes acknowledged the challenges of crafting a budget during the current economic environment.
"Being on the council, this has definitely been the most concerning [economy] as we look to the future," she said. "But I am always hopeful and I think that where we have seen and we're moving forward…some of these cuts are important and critical and we're still providing excellent service to get our community to our constituents across the wards the best that we can."
However, Cervantes emphasized that future revenue measures like a renewed Measure Z would need clearer, voter-driven earmarks—such as a dedicated percentage to fire services—to gain support.
Councilmember Steven Robillard defended the reductions, arguing the city's situation reflects a nationwide trend. "If you look at every municipal government across the nation, we're all making cuts right now," he said.
Councilmember Chuck Conder also defended the approach, clarifying that the decline in public works funding "is not really a cut, it's just not getting as much as they did before," and noted that "the budget is actually higher than [2024] for these [departments]."
Several residents used public comment to challenge the city's spending priorities.
Resident Dan Hoxworth argued that investments such as the Museum of Riverside renovation and a planned downtown police headquarters had contributed to the city's financial challenges while fire service needs go unmet.
"We need to make hard choices," Hoxworth said. "Priority needs to go to address those fire needs."
Resident Jason Hunter focused on employee compensation, noting that nearly 90 percent of city employees earn more than the city's median private-sector income.
"Our personnel costs are getting to the level of insanity," Hunter said. "We've got an employee compensation bubble in the state of California, and Riverside is no exception."
Robillard acknowledged that salaries represent the largest cost for any organization but noted that many city employees live—and spend—in Riverside.
"They are paying taxes, buying things in our city and contributing to our own budget," he said.
During Tuesday's city council meeting, the council also approved on consent calendar the City's 2025 Urban Water Management Plan and Water Shortage Contingency Plan, which outlines long-term water supply strategy and drought response protocols for Riverside residents.
Also approved on consent Tuesday was the adoption of a Transit Oriented Development Action Plan to guide future growth and housing near the Downtown Metrolink Station on Vine Street.
