Sacramento’s latest budget deficit is $62 million. Here’s how officials want to lower it
Sacramento finance officials have proposed a strategy to reduce the city’s looming $62 million budget deficit by nearly half.
The proposal will be part of the city’s latest budget update this week, which shows a slight improvement from the previous estimated shortfall of $77 million. The forecast was helped by recent homeless services funding from the California Department of Housing and Community Development.
Further action presented at Tuesday’s Budget and Audit Committee meeting could shrink the deficit even further. City staff will recommend reallocating nearly $27 million from last year’s budget to the upcoming 2025-26 fiscal year, which begins July 1. That would lower the projected deficit to roughly $39 million.
The committee is expected to approve the action, which will then move to the City Council for a final vote.
“It makes total sense and is consistent with my experience with governmental budgets,” said Councilmember Roger Dickinson, who is chair of the committee.
The city remains in a “structural deficit,” meaning its expenses are growing faster than its revenues. This stems from several factors including inflation, expanded services over the last few years and voter-approved initiatives that redirected funds, said Sacramento’s Finance Director Peter Coletto.
City staff projected the deficit could increase to $130 million by the 2028-29 fiscal year in its latest update.
“The city can’t continue to do business the way it has done it in the past,” Dickinson said. “There are going to have to be changes made to the city’s operations.”
Last year, the city balanced its $66 million budget deficit without layoffs. The council relied on cutting back on some city services and increasing fees for community center rental costs and recreational programs.
The council will receive bi-weekly presentations from every department in the city starting at its 2 p.m. meeting Tuesday. These reports will highlight the duties of each department, revenue enhancement strategies, potential reductions and the effects of those cutbacks.
A 15% reduction in all city departments is estimated to be about $84 million.
Council members, including Eric Guerra, Karina Talamantes and Dickinson, said these presentations will be crucial to determining strategic cutbacks that have minimal impacts on city services and residents. None of the council members could immediately identify specific departments that they believed could best handle a reduction in funding.
“There isn’t a department that is more or less better than others,” Guerra said. “It’s how can each department manage efficiency better.”
Both Guerra and Talamantes could not commit to preventing layoffs this year.
“It’s too soon to say, but we do have a structural deficit, and that’s something that’s not going to go away this year or next year or the year after that,” Talamantes said.
Interim City Manager Leyne Milstein will release a proposed budget for the 2025-26 fiscal year by the last week of April.
