Sacramento’s budget deficit hurt by latest round of California homeless funding. Here’s why
State funding for homeless services came in lower than expected this week and further strained Sacramento’s upcoming budget deficit.
The city received the news Monday afternoon following the latest installment of Homeless Housing, Assistance and Prevention grants. City staff had estimated the funding, along with a previous year reallocation, would shrink the budget deficit to roughly $39 million.
Instead, Sacramento’s Finance Director Peter Coletto said the city received about $13 million — 40% less than the average of the previous five grants. The allocation results in a new projected deficit of $44 million.
Coletto said on Tuesday the allocation was affected by the county’s Point-in-Time Count, a biennial survey of sheltered and unsheltered people experiencing homelessness. The most recent report, which has been contested, estimated there were 29% fewer total homeless people compared to 2022.
“This is one of those where we are being penalized for the success of actually moving folks off the street and into sustainable housing,” said Councilmember Eric Guerra at Tuesday’s Budget and Audit Committee.
Future homelessness funding will be key to addressing the city’s structural deficit, which is projected to reach $130 million by the 2028-29 fiscal year. No state funding for homeless services is currently allocated for the coming years. Coletto expects cities and the Legislature to continue lobbying for such grants.
“If we do get continued state homelessness funding, it would make those deficits lower and make things better,” Coletto said.
Tuesday marked the official start of a monthslong process to balance the deficit for the upcoming fiscal year. It remains unclear if the shortfall will lead to layoffs, but the council is exploring potential reductions across all city departments.
Last year, the city’s total budget was about $1.6 billion. The council balanced its deficit by cutting back on city services and increasing fees for recreational programs.
“It’s a very difficult budget year before us,” said Councilmember Caity Maple. “But it’s not just about cuts. It’s also about how we use our revenues too.”
At its 2 p.m. meeting, the council received the first of its city department presentations from Public Works, Youth, Parks and Community Enrichment and Utilities. These biweekly reports are intended to highlight the duties of each department, revenue enhancement strategies, and potential reductions.
All city departments have been asked to explore 15% budget reduction. Such reductions are estimated to total $84 million.
Jackie Beecham, director of Youth, Parks and Community Enrichment, said the department has been exploring several budget strategies including a reduction in underutilized positions or existing vacancies and consolidating “city wide community center customer service operations.”
“We are focusing on core services, minimizing impacts to residents, minimizing impacts to our staff, as much as possible,” Beecham said.
The council met later in the day to approve reallocating nearly $27 million from last year’s budget to the upcoming 2025-26 fiscal year, which begins July 1. Mayor Kevin McCarty called Tuesday the “easy part,” and encouraged “eyes wide open” through the budget process.
“No matter how painful or easy it is because we all need to see everything,” McCarty said.
On March 18, the council is expected to receive its next set of presentations from the Sacramento Department of Community Response, police department and fire department.
Milstein will release a proposed budget for the upcoming fiscal year by April 30. Coletto said on Tuesday the city hopes to adopt the budget by June 10.
This story was originally published February 26, 2025 at 5:00 AM.
