The Sacramento City Council Tuesday voted to reduce the projected Fiscal Year 2025/26 budget deficit by $23.6 million, approving the use of prior year savings to help close the budget gap.
Council’s action helped offset a sharp reduction in homelessness funding from the State, announced on Feb. 24, which had increased the deficit by $5.4 million. The remaining budget gap that needs to be addressed is now $44.1 million.
Last year’s savings came from higher-than-expected major tax revenues (mainly property tax), departmental budget savings, and the recovery of unrealized investment losses caused by Federal Reserve rate hikes.
This follows last year’s efforts, where the City successfully closed a $66 million budget gap without major service cuts or job losses through a combination of one-time funds, year-end savings, fee increases, and ongoing program adjustments.
Despite these efforts, the City’s expenses continue to grow faster than its revenue, leaving a structural budget deficit.
“We are committed to transparency and thoughtful planning as we navigate this budget challenge,” said the City’s Finance Director Pete Coletto. “While we have successfully managed similar deficits in the past, we recognize the growing financial pressures and uncertainties ahead.”
To address the remaining deficit, City departments have been directed to propose budget-balancing strategies equal to 15% of their General Fund budget. This is to provide the City Council with a menu of balancing options versus pursuing across-the-board cuts. Strategies may include revenue increases and expense reductions with the goal of minimizing impacts on service delivery.
Details on additional proposed budget reduction strategies will be shared in March, with a balanced budget presented by April 30. Public hearings will be held in May, and the City Council will adopt a final budget in early June.
Those interested in participating in the budget development process can attend public meetings, submit e-comments, and contact the Mayor or their Councilmember.
