Deschutes County proposes fiscally restrained FY2026 budget, limited-growth plan aims to restore structural balance

County Administrator Nick Lelak on Monday presented a proposed fiscal year 2026 budget that the county says is balanced this year and designed to restore long-term structural balance by limiting expenditure growth and drawing on one-time resources for targeted priorities.

Lelak told the Deschutes County Budget Committee the proposed all-funds budget is $766,400,000 and that the county’s operating budget — the best reflection of ongoing spending — is $430,300,000, about $2.2 million (0.5 percent) lower than the revised FY2025 operating budget. He said the administration eliminated $2.5 million in ongoing general-fund spending and roughly $800,000 in internal service fund (ISF) costs as part of a new “limited growth” strategy that reduces baseline growth targets for departments and ISFs.

Why it matters: County financial staff say the general fund faced a looming structural imbalance driven by revenue slowing while personnel and other costs rose. The limited-growth approach is intended to slow general-fund expenditure growth so recurring revenues can more reliably cover recurring costs in future years.

Lelak summarized the proposal as “a balanced budget for fiscal year 2026 that continues to fund high-quality, efficient services for our growing and changing community in a fiscally responsible manner,” while acknowledging that the package includes service and staff impacts. “Many difficult decisions have been made in creating the proposed budget,” he said.

Key numbers and actions - All-funds proposed budget (FY2026): $766,400,000. - Proposed operating budget (excludes special districts, contingency, unappropriated balances and transfers): $430,300,000 (a $2.2M decrease from FY2025 revised). - Ongoing general-fund reductions implemented: $2.5M; internal-service savings about $800K. - Proposed net change in budgeted FTE: a reduction of about 8.62 FTE countywide noted by staff in presentations. - The county projects the limited-growth actions move the general-fund forecast to a structurally sustainable path for multiple years; staff modeled sustained structural balance through roughly 2035 under current assumptions.

What the plan does and does not do - The “limited growth” framework capped general-fund department growth at about 3.3 percent for FY2026 and limited most ISF charges to an 8 percent maximum during the budget-setting process; departments used a combination of trimming materials-and-services, suspending some projects and leaving vacant positions unfilled to meet targets. - The proposal does not eliminate the county’s capital-maintenance needs; staff said discretionary transient-room-tax (TRT) receipts — not general-fund dollars — will be the primary source of capital-reserve transfers in FY2026. County finance staff flagged that capital reserves remain constrained.

Public and committee response - Darryl Parrish, chair of the county’s audit committee, urged restoring the county’s internal-audit office to two full-time equivalent positions. “In our opinion, the audit office and the internal audit function operates at a much higher level and more efficiently when it is fully staffed at 2 FTEs,” Parrish told the committee during public comment. He asked the board and budget committee to consider returning internal audit staffing to two FTEs “as soon as better economic conditions return.” - The budget team and several elected leaders underscored the trade-offs: the proposal seeks to avoid deeper service cuts by prioritizing savings and asking departments to seek alternative funding and operational efficiencies.

Revenue assumptions and risk points - Assessed value growth used for property-tax revenue was budgeted at 4.58 percent for FY2026 (staff noted they try to be conservative). The finance team cautioned the county faces continued uncertainty in development activity, interest rates and federal/state funding that could affect both revenues and expenses. - Staff noted risks including continued high inflation on personnel costs, PERS (Public Employees Retirement System) rate increases, potential loss of some federal revenue streams and the uncertain future of state or federal grant programs.

Reserve and forecast notes - The county intends to preserve a contingency equal to several months of property-tax cash flows to meet obligations before property taxes are collected in November. Staff continues to model the general-fund outlook several years forward and said the limited-growth package delays the previously projected structural shortfall.

Next steps - The budget committee will continue line-item reviews over the week; the Board of County Commissioners will hold a public hearing and adopt a final budget in June. Staff said departments will return later in the week to answer specific line-item and departmental questions.

Sources and evidence: remarks and slides presented by County Administrator Nick Lelak, Chief Financial Officer Robert Tintle, Budget and Financial Planning Manager Cam Sparks, and public comments by Audit Committee Chair Darryl Parrish during the May 12, 2025 Deschutes County Budget Committee meeting. Topic introduction and closing remarks appear in the transcript at the meeting start and CFO/Budget-team presentations.