Sacramento is running huge deficits. Will a change to the budget process help?
AI-generated summary reviewed by our newsroom.
- Sacramento weighs switch to a two-year budget to address a growing deficit
- City projects a $60M shortfall next year rising toward $90M by 2030
- Officials plan system upgrades before adopting biennial cycles
Sacramento is considering changes to its annual budget process that would provide a long-term outlook on its growing deficit but also demand tougher choices upfront from city leaders.
The proposed changes come as the city’s deficit continues to grow. The shortfall is projected at $60 million for the next fiscal year and could reach $90 million by 2030.
To confront that deficit, the city has recently begun exploring a two-year budget process. Under the system, budgets would be prepared, balanced and adopted for a two-year period rather than annually.
Several cities in California, including Oakland, Riverside and San Luis Obispo, use biennial budgeting. The approach allows for greater stability, though it would require Sacramento to implement more immediate budget cuts given that two fiscal years must be balanced.
“The trade off is flexibility versus long term budget stability,” said Sacramento Finance Director Pete Coletto on Tuesday.
For Sacramento, a two-year budget process could result in some particularly painful cuts, such as layoffs and reductions in city services. The city remains in a structural deficit, meaning expenses are outpacing revenues.
Earlier this year, Sacramento closed its budget gap with several fee increases and the elimination of more than 80 vacant positions. Unlike in previous proposals, balancing the $1.67 billion budget did not lead to employee layoffs, which continues a trend since 2013.
Some city leaders, including Councilmember Lisa Kaplan, have cautioned that future budget discussions could lead to layoffs or department reductions. Kaplan has encouraged the city to explore a version of a two-year budget process since she joined the City Council in 2022.
“When we just approve a one-year budget, and we start with a deficit, it doesn’t set certainty for our employees, for our community,” Kaplan said Tuesday at a City Council meeting.
Sacramento using biennial budgeting is likely years away, if at all.
Coletto said the city’s current financial management system is “antiquated” and not set up for a two-year process. The system will need to be replaced in the coming years and will cost the city about $25 million, said Interim City Manager Leyne Milstein last month.
Until then, the city may choose to use a deficit percentage threshold for the second-year budget. The strategy would limit the maximum allowable financial shortfall in the second year of the budget. A lower threshold would mean less flexibility, Coletto said.
At Tuesday’s City Council meeting, the elected body voted for staff to return with more information on the deficit threshold early next year.
Mayor Kevin McCarty called the vote “not a bad idea,” but warned about the potential effect of a two-year process.
“If you do the two years, ripping off the band aid verbally, and so it enables us to have a better long-term perspective, but there will be some tough questions and votes up here,” said Mayor Kevin McCarty. “So get ready.”
This story was originally published October 8, 2025 at 1:34 PM.
