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Tucson updates FY26 budget outlook; health plans face near-$10 million shortfall
Summary
City staff told the mayor and council that rate-and-fee increases and federal grant uncertainty affect the FY26 budget, and projected medical plan costs for next year create nearly $10 million in funding pressure for two city health plans; staff proposed plan-design changes and an HSA incentive as options.
City of Tucson staff gave the mayor and council a sweeping FY26 budget update on Feb. 19 that paired routine rate-and-fee adjustments with warnings about federal-grant uncertainty and sharply rising city health-insurance costs.
Business Services Director Angel Ozomolam said fee changes already approved for planning and development services, fire and transportation will take fuller effect on July 1, FY26, and that the city expects the approved permit-fee increases to produce about $400,000 in additional revenues. Ozomolam also said a second-phase planning-and-development permit valuation assessment is expected to add about $133,000 in the first year.
Ozomolam warned the council that some fund-specific increases are restricted to their originating funds: “These are not revenues that are able to be reallocated to other needs of the city,” he said, explaining that water and permit fee revenues generally must remain in those utilities and programs.
On federal funding, staff said the city…
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