Columbia projects general fund shortfall beginning 2026; staff asked to find 3% in savings

Columbia finance staff warned council members at the April 21 pre‑council meeting that a slowdown in sales tax growth and lower investment returns leave the city on a path toward a general‑fund deficit beginning in fiscal year 2026.

Finance Director Matthew Lou presented the revenue forecast and said the city expects to collect about $30.1 million in sales tax in fiscal 2025, roughly $1.7 million less than in 2024. ‘‘This is our…forecast for the fiscal year,’’ Lou said. City economist Deep Dev added that staff are using Oxford Economics projections and a 3.5% near‑term decline in historical monthly receipts to inform the outlook.

The forecast shows an expected ending cash balance of about $38 million in 2025 compared with a cash‑reserve target of about $25.7 million; at the presented trajectory staff said the reserve would be drawn down in later years and the city would fall below the reserve target by 2028. Lou and Dev attributed most of the near‑term uncertainty to sales and use taxes, which they described as the city’s most volatile revenue streams; property tax was described as much more stable.

Staff also noted other revenue drivers: use tax (on out‑of‑state purchases) has continued to grow year‑to‑date but is not expected to continue at the same accelerated pace; investment income is expected to decline from recent peaks as interest rates fall; and grant revenue is recorded with offsetting expenses so loss of grant funding reduces both revenue and the related expenditure. Lou told the council that some onetime 2025 expenses (for example, construction materials) were removed from the baseline when projecting out‑years.

Budget director Carlin (listed in the transcript as Carlin/D'Carlin) told council members the city is asking departments to analyze reductions and consider delaying long‑unfunded positions. ‘‘The first thing that we're looking at is actually trying to reduce our current budget…I've actually talked to the department partners about doing an analysis to look at reducing their budget by 3%,’’ Carlin said. She said the city’s general fund is heavily personnel‑driven, so reductions will be difficult and will require “a really hard look” at priorities.

Council members asked staff to clarify assumptions on annexation, pooled cash and reserves. Staff said the forecast uses a simple 1% population growth assumption rather than modeling specific annexation scenarios because development from annexation can take many years to produce receipts. Finance staff described the pooled cash process (all city receipts invested together) and said the city keeps roughly $40 million in liquid cash now; most operating funds use a 20% expense reserve target while some internal insurance and benefit funds use higher targets (75%).

Lou and Dev said the forecast is not a budget but a path—if current revenue trends continue, deficits will grow over time. Carlin said the goal for the fiscal‑year 2026 budget is to present a balanced proposal and avoid deficit spending. Departments were asked to return with analyses of potential reductions and position‑pausing options ahead of the formal budget process.

The council heard no ordinance or motion on the forecast at the pre‑council meeting; staff framed the presentation as information and direction‑seeking for budget preparations.

Looking ahead, staff said they will incorporate department responses into the formal FY‑26 budget process and return to council with recommended adjustments and options for balancing the budget.