The City of Sacramento has released its proposed budget for fiscal year 2025/26, outlining its financial plan for the year beginning July 1. The $1.65 billion budget supports City operations and capital improvement projects and includes approximately 5,000 full-time-equivalent positions.
The City is currently facing a structural budget deficit, with operating expenses growing faster than revenues. This fiscal challenge is not the result of an economic downturn, but rather the result of expanded services, inflation, and increasing fixed costs that outpace our ongoing revenues.
Reflecting input from the City Council, City departments, and the public, the proposed budget closes a $62.2 million funding gap through a combination of one-time and ongoing strategies, including prior-year savings, revenue enhancements and targeted expenditure reductions.
“The City continues to make important progress toward closing its structural deficit,” said Interim City Manager Leyne Milstein. “This year’s proposed budget takes a strategic approach to balancing the budget, ensuring long-term sustainability while protecting essential services for residents and advancing the City Council’s priorities.”
The budget reflects the City Council’s adopted financial policies by utilizing prior year savings to close future projected budget deficits. The proposed budget addresses a $62.2 million budget gap, along with a reduction in State homelessness funds, by utilizing approximately $34.6 million in ongoing solutions and $35.2 million in one-time strategies.
As in past years, City departments were asked to propose reductions totaling 15% of their discretionary funding, categorized by their impact on public services. The proposed budget eliminates 70.5 vacant positions, 12.8 filled positions, and shifts 2.0 filled positions to other funds while seeking to limit service disruptions and retain core programs. The City will work with impacted employees to help place them in other available City positions where possible.
The proposed budget maintains funding for key City Council priorities, including:
- Continued operation of 1,350 shelter beds for people experiencing homelessness
- Investment in affordable housing initiatives
- Support for housing development through the Streamline Sacramento initiative
- Infrastructure improvements in the Old Sacramento Waterfront and Railyards
- Expansion of youth-serving programs through the Children’s Fund
- Development of new library facilities in North and South Sacramento
- Establishment of a Transportation Safety Team to enhance road and pedestrian safety
While the budget is balanced, the City continues to face serious fiscal challenges, including potential federal funding cuts and a possible recession. In response, a new reserve has been created to help offset federal funding delays.
Long-term pressures remain, including approximately $1.5 billion in unfunded pension liabilities and $1.8 billion of unfunded capital and deferred maintenance needs.
New labor agreements could also add costs, with each 1% salary increase totaling $4.8 million in additional General Fund expenses.
The proposed budget overview is scheduled for the May 13 City Council meeting. Budget hearing meetings will continue throughout May. The Council is expected to adopt the 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.
For more information on the proposed budget, visit the City’s website here.
