Title
Adoption of the Fiscal Year (FY) 2025/26 Operating Budget and 2025-2030 Capital Improvement Plan
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FileID
File ID: 2025-00615
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Location
Location: Citywide
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Recommendation
Recommendation: Conduct a public hearing and upon conclusion, adopt a Resolution approving the Fiscal Year (FY) 2025/26 Operating Budget and 2025-2030 Capital Improvement Program (CIP).
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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-Supplemental Budget Information
3-Planning and Design Commission’s Finding of Consistency Memo
4-Resolution - Redline
5-Resolution
6-Exhibit A - Budget Changes
7-Exhibit B - Position Changes
8-Exhibit C - FY2025/26 Approved Budget
9-Exhibit D - 2025-2030 Approved CIP
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Description/Analysis
IssueDetail
Issue Detail: The City Charter, Article IX Section 111, requires the City Manager to deliver budget recommendations no later than 60 days prior to the start of the new fiscal year which begins July 1. The City Manager’s FY2025/26 Proposed Budget was released on April 30, 2025, and is available at http://www.cityofsacramento.org/finance/budget. The Final Budget (Budget) before Council incorporates budget adjustments reflecting Council consensus as articulated during Budget Hearings, Budget & Audit Committee (Committee) direction, and technical budget adjustments.
Budget Overview
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 Budget is balanced and closes a $62.2 million funding gap. The Budget totals approximately $1.67 billion from all funding sources and supports 4,984.83 full-time equivalent (FTE) positions. This includes $872 million for General Fund operations and capital projects, and $802 million for the City’s enterprise and other fund activities.
Budget Hearings and Supplemental Budget Information
Council held hearings on the Proposed Budget and Capital Improvement Plan on May 13, 2025 and May 20, 2025. Changes to the Proposed Budget which reflected the consensus of Council (as described below in the Budget Adjustment Recommendations subsection) were presented to the Committee on June 3, 2025. The committee passed a motion forwarding the budget adjustment recommendations listed below to Council for approval and specified that the ‘Reflect Current City Attorney Staffing’ budget balancing strategy be one-time instead of ongoing, which is reflected in the fiscal forecast included in this report.
Given the City is projected to continue to face deficits in FY2026/27 and beyond, on June 3, 2025, the Committee provided direction for staff to bring an analysis of all vacant positions over a certain age to Committee for review and discussion. The Committee will also consider policies regarding balancing fiscal years beyond the next year’s budget and forward policies to Council if appropriate.
During the Budget process, City staff received 18 questions or requests for information. All Supplemental Budget Information (SBI) requests have been answered and are included with this item (Attachment 2).
Budget Adjustment Recommendations:
Council Deliberations
On May 20, 2025, Council discussed potential budget restorations and financing options. Based on Council’s deliberation, the following adjustments reflect the consensus of Council:
• Fire Prevention Fee (Small Business Relief) - $175,513 - In accordance with Council’s action on May 20th, the increase in Fire Prevention Fees for A1 and A2 small assembly will be lowered by 25% versus what was included in the Budget, providing relief to many Sacramento small businesses.
• FUEL Network - $500,000 - This allocation will allow the Sacramento Family Unity, Education, and Legal Network to continue to provide legal assistance to immigrant and refugee populations.
• Office of Diversity & Equity Staffing - $112,831 - Restores funding for the Administrative Analyst in the Office of Diversity & Equity that was eliminated in the Budget. This position supports citywide diversity and equity programming and initiatives.
• Residential Parking Permit - $960,882 - The City will not institute a new fee for residential parking permits. This allows residents in neighborhoods with scarce parking to be able to continue to park on their streets with no charge.
• Youth Violence Prevention - $1,300,000 - This restoration, contingent on Council approving the recommended Measure L award for the library rehabilitation project, will allow community-based organizations to continue to provide summer youth programs across the City with the goal of reducing violence.
The funding options for the budget restorations are listed below.
• Federal Funding Contingency Reserve (FFCR) Contribution - $500,000 - The Budget establishes a FFCR as the City continues to receive indications the federal government will withhold or cancel funding for City programs. To address this risk, the Budget forgoes a contribution into the Economic Uncertainty Reserve and instead allocates $3.7 million to the FFCR.
• Measure L Library Funding - $1,500,000 - Approval of the Children’s Fund Commission’s recommendation to fund the North Sacramento Library renovation project will allow the City to utilize General Funds previously allocated to the project.
• Reflect Current City Attorney Staffing - $359,475 - Due to difficulties hiring into the Senior Deputy City Attorney classification, the City Attorney has hired into more junior classifications. Aligning the budget with current staffing provides savings but may impact the ability to hire Senior Deputy City Attorneys when opportunities become available. In the Budget and Audit Committee meeting on June 3, 2026, a Motion was passed to make this reduction one-time, and the positions will revert to the Senior Deputy City Attorney classification in FY2026/27.
• Treasurer’s Revenue - $200,000 - These revenues are based on current market conditions and the Treasurer’s sound investment of public funds.
• Use of Projected Fund Balance - $209,685 - The Budget forecast projects ending FY2025/26 with a sufficient positive fund balance to cover the remaining difference between restorations and identified financing.
• Vacant City Attorney Investigator Position Elimination - $110,806 - This vacant position has been difficult to fill, and the City Attorney’s Office indicated that this elimination will have minimal effects on operations.
• Vacant Clerk’s Office Receptionist Position Elimination - $76,873 - If filled, this vacancy would assist in reception and other administrative tasks. Currently those tasks are being performed by existing staff and utilizing technology.
• Vacant Treasurer’s Assistant Position Elimination - $92,387 - The Treasurer’s utilization of technological solutions has made this vacant position non-essential.
The following charts outline the budget adjustments reflecting Council consensus during deliberations.
Other Budget Adjustments, Position Changes and Reorganizations
After the Budget was released, there were several technical budget adjustments resulting in increases of $264,191 in the General Fund and $60,224 in Other Funds. These adjustments included the add/delete of positions in the City Treasurer’s Office, Human Resources and Youth, Parks and Community Enrichment (YPCE), the addition of a fully offset positions in YPCE, project reductions, Mayor/Council salary adjustments, continuation of streetscape maintenance, labor adjustments due to timing and other technical adjustments.
In addition, the Office of Emergency Management consisting of two positions (1.0 FTE - Director of Emergency Management and 1.0 FTE - Program Specialist) and its associated service and supplies budgets were moved from the City Manager’s Office to the Fire Department.
As identified in the General Fund Five-Year Forecast included in the Budget, there is a $22.2 million shortfall in homeless services programming that is proposed to be addressed with General Fund. While this funding need was already addressed in the forecast, this report includes the budgetary authority necessary to provide the funding in the budget year.
The following charts outline the other budget adjustments and reorganization. Attachment 6 provides a comprehensive list of all budgetary adjustments including the proposed changes from Council deliberations. Attachment 7 provides a comprehensive list of all position adjustments including the proposed changes from Council deliberations.
Resolution Additions and Amendments: Additional authority is required to allow the Interim City Manager to conduct necessary budgetary changes to implement the Budget. The following outlines the additions and changes, and the authority recommended to be included in the FY2025/26 Budget Resolution (Attachments 4 and 5).
Federal Funding Reserve: Based on the recommended budget changes from Council deliberations, the following section is recommended to be amended as shown below.
Current Section 5.3: The City Manager is authorized to maintain an EUR reserve below the minimum threshold prescribed in the Council-adopted EUR Policy in FY2025/26 and forgo $4.2 million in EUR contributions from the FY2025/26 General Fund and Measure U Fund to appropriate in a Federal Funding Reserve to protect the City against the federal government withholding or rescinding revenues.
Proposed Section 5.3: The City Manager is authorized to maintain an EUR reserve below the minimum threshold prescribed in the Council-adopted EUR Policy in FY2025/26 and forgo $3.7 million in EUR contributions from the FY2025/26 General Fund and Measure U Fund to appropriate in a Federal Funding Reserve to protect the City against the federal government withholding or rescinding revenues.
Expenditure Authority: The City’s Manager requires additional authority to adjust and/or transfer funds to ensure that budget and project adjustments are conducted in a timely manner. The following section is recommended to be added.
Section 13.5: Contingent on Council approving the Children’s Fund Commission’s recommendation to fund the North Sacramento Library renovation project totaling $1,500,000 from the Children’s Fund, authorize the City Manager to utilize FY2025/26 General Funds previously allocated to the project to conduct a one-time restoration of the Family & Youth Investments project (I11003100) totaling $1,300,000.
Financial Policies Changes: None.
Policy Considerations: The Budget maintains the direction provided by Council and prioritizes maintaining core City services and advancing Council priorities while closing the budget gap in FY2025/26. The Budget includes continued resources for Council priorities related to inclusive economic development, youth, public safety, transportation safety, homelessness and essential core services. The strategic approach to include specific revenue enhancements and expenditure reductions instead of simply pursuing across-the-board cuts minimizes program and service impacts to the community to the extent possible.
Economic Impacts: Not applicable.
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 FY2025/26 CIP Budget, has been or will be performed in conjunction with planning, design, and approval of each specific project as appropriate.
Sustainability: Not applicable.
Commission/Committee Action: The Committee reviewed the report on June 3, 2025. A motion was passed to only conduct a one-time realignment of City Attorney staffing, which is reflected in the Budget and the forecast in the Financial Consideration section.
Sacramento City Code Section 17.912.010 requires the Planning and Design Commission to review the City’s five-year CIP for consistency with the City’s General Plan and to report its findings to the Council. The Commission met on May 22, 2025, and determined that the 2025-2030 CIP is consistent with the City’s General Plan (Attachment 3).
The Budget and CIP was presented to the Measure U Commission on May 19, 2025.
Rationale for Recommendation: The actions recommended in this report address the structural budget gap by making strategic revenue enhancements and expenditure reductions and requesting the necessary authority to help close the budget gaps in FY2025/26 and future fiscal years.
Financial Considerations: The following forecast reflects the Budget as submitted with the adjustments listed in the Budget Adjustment Recommendation subsection.
Local Business Enterprise (LBE): Not applicable.
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