Title
Overview of Fiscal Year 2026/27 Measure U Proposed Budget
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FileID
File ID: 2026-00780
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Location
Location: Citywide.
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Recommendation
Recommendation: Receive and comment.
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Contact
Contact: Peter Coletto, Director of Finance, (916) 808-5416, pcoletto@cityofsacramento.org; Mirthala Santizo, Budget Manager, (916) 808-5078, msantizo@cityofsacramento.org; Department of Finance
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Presenter
Presenter: Peter Coletto, Director of Finance, (916) 808-5416, pcoletto@cityofsacramento.org; Mirthala Santizo, Budget Manager, (916) 808-5078, msantizo@cityofsacramento.org; Department of Finance
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Attachments
Attachments:
1-Description/Analysis
2-FY2026/27 Proposed Measure U Programming
3-FY2026/27 Measure U Budget Reduction and Revenue Strategies
4-FY2026/27 Measure U Budget Modifications
5-FY2026/27 Measure U Budget Presentation
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Description/Analysis
IssueDetail
Issue Detail: This report provides the Measure U (MU) Community Advisory Committee (Committee) with an overview of the Fiscal Year (FY) 2026/27 Proposed MU Budget (MU Budget).
The City continues to face significant financial challenges as it works to resolve an ongoing imbalance between City operating costs and available resources, which is known as a structural deficit. The FY2026/27 Proposed Budget (Budget) addresses this structural deficit while maintaining core City services and advancing Council priorities. The Budget is balanced and closes a $66.2 million funding gap by taking a strategic approach to revenue enhancements and expenditure reductions instead of simply pursuing across-the-board cuts. Reduction strategies included in the Budget aim to minimize program and service impacts to the community to the extent possible.
FY2026/27 MU Budget Overview
The total MU budget for FY2026/27 is $145.0 million and supports 706.9 FTE positions. The MU Fund is projecting a deficit at the end of FY2026/27 as the growth in expenditures for ongoing programs is higher than revenue growth. The MU Fund is projected to generate approximately $137.3 million in revenues for FY2026/27.
As presented in Attachment 2, the MU Fund provides $145.0 million for ongoing programs and services for Affordable Housing, Arts/Creative Edge, Climate Action, Community Investment, Community Response, Homelessness, Inclusive Economic Development, Library, Public Safety, and Youth. Detailed information on each program is included in the Department sections in the Budget.
The following provides a general summary of the various MU Fund programs.
Affordable Housing - $3.6 million, 20.0 FTE
• Resources for Specific Plans, Zero-Dollar Fee program, Long Range Planning, and Zoning services in the Community Development Department, and for Housing in the City Manager’s Office to focus on planning and zoning a citywide housing policy and opportunities to promote development of additional housing.
Arts/Creative Edge - $3.6 million, 22.25 FTE
• Resources for nonprofit arts and cultural organizations through the Cultural Arts Award Program and for City programs that promote cultural and creative life including the Arts in Public Places, Arts Education and Outreach office, Arts and Culture, History, Arts Stabilization, Creative Economy and Grants, and the Entertainment Services Division.
Climate Action - $534,000, 4.00 FTE
• Resources for sustainability and cost-saving energy programs to reduce the City's greenhouse gas emissions as required by State law and staff for the City’s Climate Action and Sustainability Office.
Community Investment - $26.1 million, 141.37 FTE
• Resources for the Sacramento Utility Rate Assistance (SURA) Program as well as fleet acquisitions, park operations, older adult services, city cemetery, permitting and events, and fiscal & technological support for the Youth, Parks & Community Enrichment Department (YPCE).
Community Response - $50.1 million, 126.0 FTE
• Resources for the Department of Community Response to provide an alternative response to homelessness model through community outreach; and additional resources for fleet acquisitions and to address illegal dumping, neighborhood code compliance, public safety accountability, animal care/shelter, and the Sacramento City 311 Call Center activity.
Homelessness - $3.1 million, 7.0 FTE
• Resources for the Department of Community Response to coordinate with various Federal, State, local, nonprofit, and faith-based entities to end homelessness.
Inclusive Economic Development - $6.5 million, 31.0 FTE
• Resources for Community Programs, and City departments that promote inclusive economic and community development such as Community Engagement, Community Investment, Economic Development, Workforce Development and Office of Diversity and Equity.
Library - $14.7 million
• Resources for the support, maintenance, and capital needs of the City’s libraries.
Public Safety - $10.8 million, 78.5 FTE
• Resources to staff and support the hiring pipeline in Police, fire training and fire suppression in the Fire Department, park safety services in YPCE, and animal enforcement and field services in the Community Development Department.
Youth - $17.6 million, 276.78 FTE
• Resources for programs such as the Powerhouse Science Center, Fare Free Transit for Youth, and Office of Violence Prevention. Resources also include the operation of the City’s access leisure, aquatics, community centers, youth employment, Camp Sacramento, Office of Youth Development, and recreation programs.
Miscellaneous - $8.4 million
• Resources for commission stipends for various Commissions, expanded technology support, and Citywide employee services/benefits costs related to staffing funded by Measure U.
FY2026/27 Proposed MU Budget Reduction and Revenue Strategies
Departments under the purview of the City Manager were instructed to submit reduction plans that totaled 15% of their General/Measure U Fund (G/MU) discretionary funding and were given a framework designed to protect core services and Council priorities. In addition, staff analyzed “citywide” strategies to identify previously allocated funding for projects or citywide programs that could be redirected for budget balancing. A total of $15.8 million in MU reductions is included in the MU Budget. A summary of the MU program reductions and revenue strategies is provided below. Attachment 3 provides the details.
FY2026/27 Proposed MU Budget Modifications
There were approximately $814,000 in MU modifications for augmentations and position add/deletes. This also included a reduction of 3.58 FTEs. Most of the modifications had offsets in the General Fund, MU, or other funds to make them cost neutral. Attachment 4 provides the details of each of the modifications. A summary of the MU modifications included in the Budget is provided below.
Budget Hearings
The Council will consider the Budget during regularly scheduled meetings in May and June, with final budget adoption scheduled for June 9, 2026. The tentative hearing schedule is reflected below:
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PolicyConsiderations
Policy Considerations: This report is consistent with the Council’s policy direction and approval of the MU Budget.
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EconomicImpacts
Economic Impacts: Not applicable.
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EnvironmentalConsiderations
Environmental Considerations:
California Environmental Quality Act (CEQA): This report concerns administrative activities and government fiscal activities that do not constitute a “project” as defined by the CEQA Guidelines sections 15378 and California Public Resources Code section 21080 and are not subject to the provisions of CEQA (CEQA Guidelines section 15060(c)(3)). CEQA review for any project, which utilizes funds allocated under the FY2024/25 CIP Budget, has been or will be performed in conjunction with planning, design, and approval of each specific project as appropriate.
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Sustainability
Sustainability: None.
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Commission/Committee Action
Commission/Committee Action: Not applicable.
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RationaleforRecommendation
Rationale for Recommendation: This report is for informational purposes only and provides the financial information requested by the Committee.
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FinancialConsiderations
Financial Considerations: Consistent with Council direction and the ballot measure, the General Funds and Measure U Funds are combined and presented in a single forecast. The City’s Budget is balanced and reflects adopted Council policies, goals, and planning/programming guides. The following five-year forecast provides a multi-year view of revenues and expenditures, allowing an assessment of the fiscal consequences of both prior and current funding decisions in the context of forecasted revenues and expenditures. While the recommended reduction strategies help close the funding gap in FY2026/27, these efforts do not completely fill the gaps in future fiscal years. The current five-year forecast is presented below.
Additional challenges in the General Fund and Measure U forecast are detailed below:
• California Public Employees’ Retirement System (CalPERS) unfunded liability costs will increase by $16.6 million (14.7%) over the next four years.
• Liability insurance premiums are estimated to increase by $37.3 million (69%) over the next four years.
• Unknown future labor costs with Sacrament Police Officers Association (SPOA) and Sacramento Area Firefighters, Local 522 (L522). Although the Budget and the forecast include costs that have been proposed to SPOA and L522 to date, the final costs may differ.
• Approximately $2.0 billion in unfunded capital needs between 2026 and 2031 are not included in the forecast. Unfunded capital needs consist of the maintenance and repairs of existing City facilities and assets and the purchase of new assets required to maintain a consistent level of service to City residents.
• Homeless services will cost approximately $168 million over the next four years, and future State funding may not be allocated to the City as the Governor did not include an additional round of HHAP program funding in his January Budget proposal.
With the exception of unfunded capital needs and unknown final SPOA and L522 contract costs, estimates for the above challenges have been included in the forecast as presented.
MU Fund Forecast
To assist the Committee in their review of the proposed MU Fund revenue and expenditure budgets and to enhance transparency the following summary five-year forecast has been developed for the MU Fund. Additional information on the expenditures included in the forecast is available in the department sections of the Budget, the detailed forecast (Attachment 2), budget reduction and revenue strategies (Attachment 3), and the budget modifications details (Attachment 4).
Staff will continue to monitor and evaluate MU Fund revenues given the financial challenges from the structural deficit. As additional information becomes available, staff will inform Council and the Committee.
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LocalBusinessEnterprise
Local Business Enterprise (LBE): Not applicable.
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