Title
Adoption of the Fiscal Year 2026/27 Operating Budget and 2026-2031 Capital Improvement Plan [Published 05/29/2026]
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FileID
File ID: 2026-00783
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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) 2026/27 Operating Budget and 2026-2031 Capital Improvement Program (CIP).
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Contact
Contact: Peter Coletto, Director, (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, (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 - FY2026/27 Approved Budget
9-Exhibit D - 20256-2031 Approved CIP
10-Presentation (TBD) [Updated 6/5/2026 at 10:50 AM]
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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 FY2026/27 Proposed Budget was released on April 29, 2026, 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 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 $66.2 million funding gap. The Budget totals approximately $1.7 billion from all funding sources and supports 4,884.20 full-time equivalent (FTE) positions. This includes $898 million for General Fund operations and capital projects, and $837 million for the City’s enterprise and other fund activities.
Budget Hearings and Council Budget Adjustments
On May 5, 2026, staff presented the Proposed Budget (including the FY2026/27 Capital Improvement Program [CIP] Budget) to Council (File No. 2026-00777). After the presentation and further discussion with staff, Councilmembers were asked to submit budget amendment proposal memos for deliberation and staff direction on May 12, 2026. At the 2:00 pm May 12th Council meeting, Council received an analysis of the 2026-2031 CIP (File No. 2026-00778), City fees and charges (File No. 2026-00923), and the application of the Budget Equity Tool (File No. 2026-00943). At the 5:00 pm May 12th Council meeting, Council reviewed Councilmembers’ proposed budget amendment requests. A motion was passed to restore the following budget reductions on a one-time basis with the identified funding sources.
Council also directed staff to include the following one-time restorations below contingent upon a financing plan developed by staff for Council consideration.
Funding source options included:
• Parks maintenance contract savings
• Freezing Community Ambassador stipends
• Reducing Commission Meetings (except for the Planning Commission)
• Reduction of homeless services
• Reduced contribution to the Economic Uncertainty Reserve
Staff returned to Council on May 19th and recommended the following financing plan.
After Council reviewed the financing plan developed by staff, there were concerns about reducing the number of commission meetings without understanding the impact. A motion was passed to conduct a one-time restoration of the budget reductions using the identified funding sources with the direction that the City Manager will work with the City Clerk to do an assessment of the commission meetings to determine which commissions could be reduced.
Based on the motion, staff will increase the Economic Uncertainty Reserve reduction by $35,000, from $973,408 to $1,008,408, to cover the one-time restorations and include language in the Budget Resolution that the Economic Uncertainty Reserve will be reimbursed based on the results of the assessment of commission meetings.
Additional Restorations:
In addition to the restorations above, the following restorations will also be conducted on a one-time basis. This restoration is to allow the City Attorney to pilot bringing outside counsel costs down by handling more cases in house. A review of the pilot will be conducted in FY2026/27.
Staff will increase the Economic Uncertainty Reserve reduction by an additional $444,282, from $1,008,408 to $1,452,690, to cover the one-time CAO restoration.
The following charts outline the budget adjustments reflecting Council’s direction.
Other Budget Adjustments, Position Changes and Reorganizations
After the Budget was released, there were several technical budget adjustments detailed below:
• Labor adjustments included the add/delete of positions in the Information Technology and Finance Departments, the addition of fully offset positions in the Fire and the Youth, Parks and Community Enrichment Department, and other labor and technical adjustments (i.e. offsets, labor negotiations adjustments, labor system technical adjustments).
• There was a cost neutral adjustment related to increasing parking meter revenue budget to align with projections, adding corresponding services and supplies and offsetting three positions (1.0 FTE Administrative Analyst, 1.0 FTE Associate Planner and 1.0 Senior Planner) funded by the Gas Tax Fund or capital projects to meet the required SB1 maintenance of effort.
• Due to a reorganization, the Office of Innovation Economic Development consisting of 32 positions (10.00 FTE Administrative Analyst, 1.00 FTE Administrative Technician, 1.00 FTE Assistant Director, 1.00 FTE City Housing Manager, 1.00 FTE Community Engagement Manager, 8.00 FTE Development Project Manager, 3.00 FTE Economic Development Manager, 1.00 FTE Neighborhood Services Area Manager, 1.00 FTE Program Specialist, and 5.00 FTE Senior Development Project Manager) and its associated service and supplies budgets were moved from the City Manager’s Office to the new Economic Development Department.
• In the Utilities Department, 14 FTEs in the Drainage Engineering division were moved from the Storm Drainage Fund to the Storm Drainage Property Fee Fund to lessen the administrative burden of conducting fund reimbursements in the Proposed Budget. The corresponding services and supplies in the Drainage Engineering division were moved from the Storm Drainage Fund to the Storm Drainage Property Fee Fund.
• A position (1.00 FTE Director of Public Safety) in the Office of Public Safety Accountability (OPSA) was frozen, and its labor savings are used to create a new project for OPSA investigations and audits.
• Funding for Community Center/Clubhouse Fee Waiver project was removed. Funding for the project ended in FY2025/26 and ongoing funding was erroneously included in the FY2026/27 Proposed Budget.
• The Development Services fund, Fleet Management fund, 4th R fund and START fund revenues and/or expenses not included in Proposed Budget were updated.
• An increase to the Labor negotiations placeholder for Sacramento Area Firefighters, Local 522 along with an offset of FY2024/25 Year-End results have been included.
• Due to timing, other technical adjustments (department and/or fund changes) related to revenues, the cost plan and projects were also updated.
The following charts outline the other budget adjustments, position changes and reorganization. Attachment 6 provides a comprehensive list of all budgetary adjustments including the proposed changes from Council. Attachment 7 provides a comprehensive list of all position adjustments including the proposed changes from Council.
Supplemental Budget Information:
During the Budget process, City staff received 16 questions or requests for information. All Supplemental Budget Information (SBI) requests have been answered and are included with this item (Attachment 2).
Resolution Additions and Amendments: Additional authority is required to allow the 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 FY2026/27 Budget Resolution (Attachments 4 and 5).
Department Update: The following change is to add the Economic Development Department to the list of departments. The following section is recommended to be amended as shown below.
Current Section 3.4: “Department” means Mayor and City Council; City Manager; City Attorney; City Auditor; City Clerk; City Treasurer; Community Development; Community Response; Convention and Cultural Services; Finance; Fire; Human Resources; Information Technology; Police; Public Works; Utilities; Youth, Parks, and Community Enrichment; and Citywide and Community Support.
Proposed Section 3.4: “Department” means Mayor and City Council; City Manager; City Attorney; City Auditor; City Clerk; City Treasurer; Community Development; Community Response; Convention and Cultural Services; Economic Development; Finance; Fire; Human Resources; Information Technology; Police; Public Works; Utilities; Youth, Parks, and Community Enrichment; and Citywide and Community Support.
Economic Uncertainty Reserve (EUR) Updates: Based on the recommended budget changes from Council deliberations and direction, 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 FY2026/27. In the FY2024/25 and FY2025/26 Operating Budgets, General Fund and Measure U Fund EUR contributions were redirected to balance the FY2024/25 budget and create a Federal Funding Reserve in FY2025/26 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 FY2026/27. In the FY2024/25, FY2025/26 and FY2026/27 Operating Budgets, General Fund and Measure U Fund EUR contributions were redirected to balance the FY2024/25 and FY2026/27 budgets and create a Federal Funding Reserve in FY2025/26 to protect the City against the federal government withholding or rescinding revenues.
The following section is recommended to be added.
Section 5.9: A one-time reduction of $35,000 in commission meetings staffing and stipends will be funded by the EUR in FY2026/27 to allow the City Manager and City Clerk to conduct an assessment. The City Manager is authorized to reimburse the EUR once the assessment is finalized.
Project Name Change: The following change is to correct the name of the project. The following section is recommended to be amended as shown below.
Current Section 18.16: Each fiscal year, a portion of unspent appropriations in the Youth Sports Field Permit Program MYOP (I19143000) on June 30 may be transferred to the Measure U Park Improvements (L19706000), to be used to address the backlog of deferred maintenance for sports fields.
Proposed Section 18.16: Each fiscal year, a portion of unspent appropriations in the YPCE Youth Program Scholarship MYOP (I19143000) on June 30 may be transferred to the Measure U Park Improvements (L19706000), to be used to address the backlog of deferred maintenance for sports fields.
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PolicyConsiderations
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 FY2026/27. The Budget includes continued resources for essential core services and Council’s top three priorities, as identified on September 30, 2025, related to Economic Development, Homelessness, and Public Safety. 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 Council’s priorities and the community to the extent possible.
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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 FY2026/27 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: Not applicable.
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Commission/Committee Action: 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 April 23, 2026, and determined that the 2026-2031 CIP is consistent with the City’s General Plan (Attachment 3).
The Budget and CIP were presented to the Measure U Commission on May 18, 2026.
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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 FY2026/27 and future fiscal years.
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Financial Considerations: The following forecast reflects the Budget as submitted with the adjustments listed in the Budget Adjustments subsections.
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Local Business Enterprise (LBE): Not applicable.
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