The Sacramento City Council on March 3 began Early Budget Work Sessions for the fiscal year 2026-27 budget, launching a month of public discussions focused on closing a projected $66.2 million deficit.
“These are not easy conversations,” City Manager Maraskeshia Smith said. “The options in front of the council carry real impacts to services and to our employees. We must be transparent about the challenge and align our spending with ongoing revenues.”
City officials explained during the presentations that the shortfall reflects a structural imbalance with ongoing expenses growing faster than revenues. The deficit is not caused by a recession but by a combination of rising costs, increased investments in priorities such as homelessness services, and voter-approved reallocation of General Fund resources outpacing revenue growth.
The March 3 meeting provided an overview of the City’s budget context and several balancing scenarios. Staff also presented a comprehensive menu of potential budget-balancing strategies, including both expenditure reductions and ongoing revenue enhancements. The options were developed to exceed the projected deficit, giving the City Council flexibility as it weighs priorities.
During the presentation, Finance Director Pete Colletto said closing the gap will require a combination of strategies, not just cuts. Options under discussion include expense reductions, potential fee adjustments and other ongoing revenue increases that would require additional public review.
“It’s early in the budget process,” said Mayor Kevin McCarty. “Right now, we’re evaluating all our options. We’re looking to conclude our budget with the fewest detrimental impacts on the city. More importantly, we are zeroing in on economic development to find ways to grow our budget so we can avoid making cuts in the future.”
Throughout March, departments will present proposed strategies during the Early Budget Council Work Sessions. Departments were directed to model reductions of 15 percent of their net General Fund use and to outline impacts on service levels. These presentations are intended to inform discussion and provide a baseline for future deliberations. No final decisions have been made.
What happens next
Early Budget Council Work Sessions will continue throughout March. The City Manager will release a balanced proposed budget by the end of April. The City Council will hold formal budget discussions in May, with final adoption scheduled for early June.
Residents are encouraged to attend public meetings, submit e-comments and contact the Mayor or their City Council representative to share priorities and feedback.
More information about the budget process, meeting dates and opportunities for public engagement is available on the City’s budget website.
